Bomberger v. McKelvey
35 Cal. 2d 607 (1950)
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Rule of Law:
A party to an executory contract may continue performance despite the other party's repudiation and recover the full contract price if damages for the breach would be inadequate and specific performance would be an appropriate remedy.
Facts:
- Plaintiffs sold several lots of land to D. P. McKelvey, which included a business structure occupied by tenants, the Hills.
- The parties orally agreed that McKelvey would pay Plaintiffs $3,500 to demolish and remove the building on the property.
- Plaintiffs informed McKelvey that they intended to use salvaged materials, specifically scarce plate glass and skylights, from the old building to construct a new building for the Hills.
- In reliance on this agreement, Plaintiffs altered the plans for the new building to incorporate the salvaged materials, which were difficult to obtain and would cause a 90-120 day delay if ordered new.
- McKelvey's own construction project was delayed, and he subsequently notified Plaintiffs in writing not to proceed with the demolition and forbade them from entering the property.
- At the time of McKelvey's notice, Plaintiffs needed the salvage materials to complete the new building for the Hills, which was otherwise finished but exposed to the elements.
Procedural Posture:
- McKelvey filed an action for declaratory relief and sought a preliminary injunction to prevent Plaintiffs from dismantling the building.
- The trial court denied the preliminary injunction, and later sustained a demurrer to McKelvey's complaint, after which no further action was taken in that proceeding.
- Plaintiffs sued D. P. McKelvey in the trial court to recover the $3,500 promised for demolition and an assigned claim of $2,500 owed to the Hills.
- McKelvey filed a counterclaim and cross-complaint against Plaintiffs and the Hills for trespass and waste.
- The trial court entered a judgment for Plaintiffs for the full amount sought, finding they had a legal right to demolish the building.
- Defendants (the McKelveys) appealed the trial court's judgment to the Supreme Court of California.
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Issue:
Does a party to a contract have the right to continue performance and recover the full contract price after the other party has repudiated the agreement, when damages for breach would be inadequate and the performing party has a special interest in obtaining unique goods through the performance?
Opinions:
Majority - Gibson, C. J.
Yes. A party may continue to perform a contract after repudiation if damages would not provide adequate compensation. The general rule is that upon receiving notice of repudiation, a party must stop performance to mitigate damages. However, that rule does not apply when the reasons for it are absent. Here, Plaintiffs were not interested solely in the profit from the contract; they had a critical interest in obtaining the scarce salvage materials to fulfill their separate contractual obligation to the Hills. Because the materials were not readily available and were necessary to complete another project, money damages would be inadequate, and a court could have granted specific performance. This right to specific performance meant the contract was not merely executory in the typical sense. Furthermore, the agreement created an irrevocable license coupled with an interest, giving Plaintiffs the right to enter McKelvey's land to remove the building, thus their actions did not constitute trespass.
Analysis:
This decision carves out a significant exception to the general duty to mitigate damages following an anticipatory repudiation of a contract. By linking the right to continue performance to the availability of specific performance, the court broadens the circumstances under which a non-breaching party can ignore a repudiation. The ruling establishes that a unique, non-monetary interest in performance, such as securing scarce goods unavailable elsewhere, can render money damages inadequate. This precedent requires future courts to look beyond mere profit and loss, analyzing whether continued performance is justified to protect a substantial and irreplaceable interest of the non-breaching party.
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