This is an appeal by the plaintiffs from a judgment in favor of the defendant J.W. Pew and from an order denying the plaintiffs' motion for a new trial.
The plaintiffs were the owners of a tract of land in Mendocino County, containing about eleven hundred and sixty acres, and on October 16, 1899, they and the defendant Pew executed an agreement whereby they granted to Pew the option during the ensuing twelve months to acquire from the plaintiffs the land in question for himself or his assigns for the sum of fifteen dollars per acre. At the time of the making of the agreement Pew was not acting in his own interest solely, but for others associated with him, and the agreement was made in his name for the benefit of himself and of these other persons. These persons contemplated the building of an extension of the San Francisco and North Pacific Railroad into the vicinity of the lands in question, and their purpose in obtaining the option was to get the control of the timber upon *Page 301 the land so that they could realize the increased value thereof in case the railroad was built, and so that the timber when manufactured into lumber would furnish freight for the railroad when completed. This purpose was known to the plaintiffs when the option was given. Between the date of the making of the agreement and October 11, 1900, the plaintiffs cut and removed from about ten acres of the land in question a large quantity of redwood, pine, and oak timber, the value of which, and the particular time at which its value is to be determined, is the principal issue in this case. On October 11, 1900, Pew, having received information of the cutting of the timber in question, gave notice in writing to the plaintiffs that he elected to exercise the right to acquire the land covered by the agreement, and offered, upon receiving a good title to the land, to pay for the same at the rate of fifteen dollars per acre, less the loss in value of the land occasioned by the removal of the timber by the plaintiffs. There were certain encumbrances upon the title which constituted defects in the title, which were not removed until some time in December following, or about the first of January, 1901. The parties could not agree upon the amount to be deducted from the price on account of the removal of the timber, but, subject to the settlement of that question, the plaintiffs were ready to perform their agreement and convey a good title on the 6th of December, 1900. Not being able to agree upon the amount of compensation to be allowed for the timber removed, the plaintiffs claimed that the agreement had been forfeited, and in March, 1901, brought the present action against the defendant Pew to quiet title. Pew filed a cross-complaint, setting out the agreement aforesaid, averring the election to acquire title thereunder by himself and those associated with him, and their purpose in acquiring the lands as aforesaid, and asking that the court enforce the specific performance of the contract according to its terms, and allow a deduction from the price, as compensation for the loss to him by reason of the timber removed by the plaintiffs prior to the time he gave notice of his election to exercise the option, and alleging that the sum of four thousand dollars would be necessary to reimburse him for the loss occasioned by the removal of the said timber.
The court found in favor of the allegations of the *Page 302 cross-complaint, and determined that the amount of compensation to be allowed on account of the timber removed was $3,787.36, and thereupon judgment was given for the specific performance of the agreement upon the payment by Pew of the sum of $13,537.04, being the purchase price of the land according to the agreement, less the amount of compensation allowed by way of abatement of the price.
Upon the trial it appeared that the railroad contemplated by the parties when the agreement was made was then about completed, and the defendant introduced evidence of the value of the timber removed if it had been at that time standing upon the land, and upon this evidence the court found the amount as above stated. The plaintiffs on their behalf introduced evidence to prove the value of the timber on October 11, 1900, at the time the defendant Pew gave notice of his election to exercise the option. This evidence was taken subject to the objection of the defendant that it was incompetent, irrelevant, and immaterial, and subject to a motion to strike it out. Subsequently during the trial the motion to strike out was granted, to which the plaintiffs excepted, and this presents the controlling question in the case.
The contention of the appellants is, that the amount of the compensation to be allowed to the defendant Pew for the want of entire performance of the contract of sale by the plaintiffs is to be determined in the same manner as damages recoverable upon the breach of a contract to sell real estate. They say that the case in substance is a simple breach of an agreement to sell real property; that they had agreed to sell the land, including the timber, and that when the time for performance came they had, so far as the timber is concerned, violated their agreement by removing it from the land. They concede that this must be construed to be a breach made in bad faith within the meaning of that phrase as used in section 3306 of the Civil Code, and claim that the measure of compensation is the same as the measure of damages would be in case of a simple suit for damages for the breach of the agreement, — namely, "the difference between the price agreed to be paid and the value of the estate agreed to be conveyed at the time of the breach"; or, in other words, the market value of the trees at the time of the breach upon October 11, 1900, if they had been at that time growing upon the land. *Page 303
The defendant contends that this suit is not an action for a breach of contract, but for specific performance, with compensation for the want of entire performance, as provided in section 3386 of the Civil Code, and, according to the well-established rule of equity concerning specific performance with compensation, a court of equity "will adjust the equities of the parties by placing them, as far as possible, in the same position they would have occupied had the agreement been completed at the prescribed day" (Pomeroy on Contracts, sec. 429), and that as, if the agreement had been fully performed, they would have had possession of the timber, they could then have selected their own time for cutting and removing it, and would have secured all the profits contemplated by them at the time they made the agreement, by holding the timber until the completion of the railroad, and then selling it at the advanced price then obtainable, according to the evidence. It is apparent that the defendant had full notice of the breach of the agreement at the time he made his offer to take the property. There is evidence indicating that he could at that time have restored himself to the same position he would have occupied if the contract had been fully performed, by purchasing other land in the vicinity, of the same character, and having thereon an equal quantity of timber of the same quality, according to the evidence introduced, for about the price of six hundred dollars. It would appear fully as equitable to require the defendant to take this course, and thereby replace his loss, as to require the plaintiffs, now that the value of the property had been enhanced, to make good the defendant's loss by paying the sum which could now be obtained for the property. We think the court erred in granting the motion to strike out the testimony as to the value at the time of the election by the defendant to take the property.
The true rule must be that in so far as specific performance is impossible and it becomes necessary to give compensation for the want of entire performance, the measure of damages is to be computed according to the legal rule, and the case is to be treated as to that extent an action for a breach of the contract. If the situation were such that there could not be a specific performance as to any part of the contract, there could be no question as to this. The sole remedy *Page 304 of the vendee would be his action for the damages given by the law. The fact that partial specific performance is still possible cannot logically justify the application of a different rule as to the part not capable of specific performance. So far as the vendee seeks compensation for the failure of the vendor to wholly perform, his action is simply one for the partial breach of contract. The fact that he is in a court of equity seeking specific performance as to the part of the contract capable thereof does not alter his situation as to the remaining part. A court of equity having jurisdiction of the cause for the purpose of granting the equitable relief of specific performance will in the same action, in addition to granting such relief, award such damages as may have been caused by the partial breach, but in so doing it is simply enforcing a legal remedy and must follow the law, and is therefore bound by the rules of law as to the measure of damages for the partial breach. Another consideration against the adoption of the rule contended for by the respondents is that it would tend to encourage the maintenance of speculative actions. Where there had been a partial breach of the contract for the sale of real estate and lapse of time had demonstrated that the property was very much enhanced in value there would be a great temptation on the part of the vendee to make the attempt to show that he made the purchase for the very purpose of obtaining this enhanced value, and that such purpose was communicated to the vendor, and thereby obtain the benefit of the operation of time and circumstances in his favor. The compensation to be allowed to the vendee in this case for the want of entire performance should be determined by ascertaining the value of the timber cut and removed at the time when the vendors were ready to complete the contract by making a deed sufficient to convey good title to the vendees. It is proper to say that according to the evidence given upon the trial the vendors were not ready to convey on October 11, 1900. Some defects in the title existed which were not removed until several months thereafter, and the time was extended by consent. The proper time for ascertaining the value of the property was the time when the vendors were ready to perform.
The judgment and order are reversed and the cause remanded for a new trial. *Page 305