AUTRY v. REPUBLIC PRODUCTIONS (1946)

This is an action for a declaration of the rights and obligations of the parties under a contract of employment.

Plaintiff is by profession an actor in photoplays. Defendant engaged his services by contract entered into September 22, 1938, and by separate supplemental agreement made in May, 1942. For convenience, the contracts will be referred to in the singular. Under the original contract and certain options therein contained, and as extended by agreement, the combined terms of plaintiff's employment would have extended to March 6, 1945. Plaintiff rendered services as agreed until July, 1942. He entered the Army July 26, 1942, and at the time of trial of the action was still serving in the armed forces of the United States. He has rendered no services to defendant and has received no compensation since July, 1942. On June 17, 1944, he served notice upon defendant that the contract was terminated and that he was no longer in its employ, basing his action upon the stated grounds that further performance of the agreement had been rendered impossible and that the purposes of the agreement had been frustrated by reason of his military service. Defendant has at all times denied that the employment has been termined.

Plaintiff opens his brief with the statement: ‘The fundamental contention of appellant is that the contractual relationship between Autry, the employee, and Republic, his employer, was terminated by operation of law because performance of personal services by Autry after his enlistment in the United States Army became impossible and illegal.’ Defendant replies that it ‘recognizes that Autry has a legal excuse for failure to perform under the contracts during the period of his Army service (except as pointed out hereinafter), but contends that after such service ends, Autry is legally bound to resume and continue performance under the contracts.’ It is conceded that performance of the contract will be possible after plaintiff's release from the service. The precise question then is whether plaintiff's entering the service terminated the contract or only suspended its operation, so as to excuse both parties from performing during the time plaintiff remains in the service. Plaintiff maintains throughout his argument that his act of entering the Army ipso facto rendered impossible further performance under the contract, not only during the term of his military service but permanently. He does not claim that there exists an actual impossibility of performance but one which arises out of some rule of law or equity. The briefs, after a discussion of the doctrine of impossibility of performance, pass to those pertaining to cases of failure of consideration and frustration. We shall take up first the matter of claimed impossibility of performance.

This presents a simple question, as it is narrowed by the findings and by the concessions of the parties. The salient facts are the following: (1) It has been and will continue to be impossible for the parties to perform their contract, according to its terms, during the period of plaintiff's service in the Army (it is conceded that the contracts were not and will not be operative or enforceable during this period); (2) it will be possible, in fact, for both parties to fully perform the contract according to its terms (except, of course, as to time of performance) after plaintiff has been released from military service; (3) no substantial burden has been or will be imposed upon plaintiff in connection with the performance of the services by him as an actor in photoplays produced by defendant, by reason of his service in the armed forces of the United States (there was a finding to this effect); (4) defendant has not claimed and does not claim the right to discharge plaintiff or terminate the contract by reason of his inability to continue his work during the term of his military service.

The contention that entering the military service terminates a contract of employment, no matter what its terms may be, does not find support in any of the texts on the subject or in any decisions while have been cited to us or which have come to our attention. The only semblance of support for it consists of broad statements, contained in several cases cited by plaintiff, which were unnecessary to a decision of the points involved. In Marshall v. Glanvill (1917), 2 K.B. 87, 7 B.R.C. 621, the plaintiff, a salesman, entered the Army and was thereupon discharged from his employment, without the six months' notice required by his contract. He sued for, and was denied, damages which he claimed to have suffered by reason of his summary dismissal. In Horlock v. Beal, 1 App.Cas. 486, Ann.Cas.1916D, 670, suit had been brought on a note representing a seaman's wages payable to his wife while he was at sea. The ship and the seaman had been interned in Germany following the declaration of war. The employer was held to be not liable on the note. A recovery was likewise denied in Havens v. Rochester Rope Co., 267 App.Div. 394, 46 N.Y.S.2d 534, in a suit by an employee for damages following his discharge by his employer because of his having entered the Navy. State Realty Company v. Greenfield, 110 Misc. 270, 181 N.Y.S. 511, also relied upon by plaintiff, was a case in which a lessee of offices used for the conduct of a brokerage business was held to be released from liability for rent during the term of his military service. The premises in question had been sublet by the lessor and the suit was for damages consisting of the less sustained in the subletting. Plaintiff quotes from a concurring opinion of one of the justices in Marshall v. Glanvill, supra, as follows: “The plaintiff was engaged under two contracts requiring the performance of personal services by him. The effect of his enlistment under the Military Service Act of 1916 was to sweep away the basis of the arrangement between the parties. From the middle of July, 1916, the plaintiff could not fulfill any of his duties and the defendants could not accept any of his services under the contracts. The contracts, therefore, came to an end. * * * Here, the parties clearly made their bargain on the footing that it would continue lawful for the plaintiff to continue to render and for the defendants to accept his services. The rendering and acceptance of these services ceased to be lawful in July, 1916, and thereupon the bargain came to an end. A state of war is assumed to be of such prolonged duration as prima facie to put an end to contracts which are conditional upon the continuance of a particular state of things which is only consistent with peace. * * * In the present case, the plaintiff labors under a prolonged inability to perform any of his obligations under the contracts.' (Emphasis ours.)' Observations to the same effect may be found in the other mentioned cases. In three of the cases the question was whether the promisor, who was an employer, should be required to pay the employee compensation during the term of the employee's malitary service, when the employee could render no services in return. In the remaining case the question was whether the lessee was bound by his lease during the term of his military service when he could not make use of the demised promises. In all of these cases the court was considering only the obligation of the defendants, promisors, during the period when the promisees could not render performance, or the promisors receive other consideration, and the real ground of the decision was, in each case, that there was a failure of consideration to the promisor and that he should not be compelled to pay for something he did not receive. The statements upon which plaintiff relies and which concerned employment contracts, must be considered in the light of the fact that the employer in each case had elected to declare a termination of the employment contract. It may be correctly said that a contract, under which continuous performance is of the essence, is terminated where unanticipated developments cause a prolonged period of inability of the promisee to perform, and the promisor elects to terminate it upon the ground of failure of consideration. Mr. McElroy in in his work on Impossibility of Performance (1941), pp. 92 and 93, mentions Marshall v. Glanvill and he says: ‘Analogous to the illness of a servant is the calling up of a servant for war service. This results in the temporary illegality of the contract of service (i. e. illegality during the period of the war), and in addition the master may be completely discharged, even in respect of the period after the war, on the principle of failure of consideration.¹ So also where the servant (or, of course, other agent) becomes an alien enemy and is interned.’

The cases upon which plaintiff relies are not authority for the proposition that the act of an employee in entering the military service, of itself, terminates his contract of employment. Interruption of performance of plaintiff's personal services did not end his employment. There was only a temporary inability, of indefinite duration, to carry on his work. Although conditions resulting from prolonged interruption may furnish grounds for termination of a contract, the question whether such grounds exist is one which must be decided upon the facts of the particular case, under equitable doctrines which deal not with impossibility, but with hardship, of performance. The case is to be viewed, first, as one where plaintiff's military duties have made it temporarily impossible for him to render performance but have not deprived him of the ability to fulfill his engagements after his discharge from the service.

The temporary impossibility which has prevented performance by plaintiff will end in due time and the judgment of the court anticipates the occurrence of that event. The rule which governs in cases of temporary impossibility is found in the Restatement of the Law of Contracts: ‘Section 462. Temporary Impossibility. Temporary impossibility of such character that if permanent it would discharge a promisor's entire contractual duty, has that operation if rendering performance after the impossibility ceases would impose a burden on the promisor substantially greater than would have been imposed upon him had there been no impossibility; but otherwise such temporary impossibility suspends the duty of the promisor to render the performance promised only while the impossibility exists.’

Mr. Williston states the rule as follows (6 Williston on Contracts (1938 Rev. Ed.), sec. 1957, pp. 5489, 5490): ‘* * * If the delay caused by impossibility is excusable and is of short duration, the promisor is still held bound by his promises, except to the extent of such delay. If the impossibility persists for a length of time sufficient to go to the essence of the contract (and only in that case) the temporary non-performance on one side will justify the other party in rescinding the contract altogether. But may the promisee in spite of long delay refuse to take advantage of his excuse and demand performance of the contract as soon as it becomes possible? This depends on whether the promisor would thereby be compelled to render performance substantially different from what he contracted for. If so, he is permanently excused.’

And, again, Mrs. Williston says (section 1931, pp. 5410, 5411, supra): ‘The true distinction is not between difficulty and impossibility. A man may contract to do what is impossible, as well as what is difficult, and be liable for failure to perform. The important question is whether an unanticipated circumstance has made performance of the promise vitally different from what should reasonably have been within the contemplation of both parties when they entered into the contract. If so, the risk should not fairly be thrown upon the promisor.’

The foregoing statements from the Restatement and from Williston are not mentioned in plaintiff's briefs, and this, obviously, for the reason that he contends that the rules pertaining to temporary impossibility have no application. But under the findings we think they are controlling. So far as the rules which pertain to impossibility of performance are concerned, the facts that performance, after plaintiff's release from military duty, will be possible, and will impose no greater burden upon him than he originally assumed, leave him under the obligation to render full performance when it becomes possible.

The briefs have a great deal to say about the doctrine of frustration. Plaintiff's argument again is that his entering the Army completely and permanently defeated the purposes of the contracting parties. We have held against him upon that point because his inability to perform was only temporary. If completion of his services under the contract would impose upon him substantially greater burdens because of the long interruption due to the military service or, in other words, if such performance would work extreme hardship upon him, he would have a case for equitable relief under the rule quoted from the Restatement. Mr. McElroy points out, pp. xxxiii-xxxv, that the rule as stated recognizes the doctrine of frustration in cases of only temporary impossibility, in that full performance will not be required later if it would be unreasonably burdensome. He says: ‘The rule here is that in certain circumstances, if the delay fundamentally changes the character of performance required, having regard to the known commercial object of the promisor, the contract is ‘frustrated’ by the delay and the obligation to perform is therefore discharged even though the impossibility ultimately ceases. This is the proper statement of the doctrine of frustration, and, so stated, it is evidently not a mode of discharge for physical impossibility of performance but a mode of discharge for undue delay caused by impossibility. In short, it may be said with some measure of truth that frustration begins where impossibility ends.'

Upon the point of alleged frustration, plaintiff's argument discusses the conditions due to his military service, as if they will obtain when his term of service has expired. As long as that period lasts, performance will be impossible and to that extent the purposes of the parties will have been defeated. Plaintiff says they have been ‘frustrated,’ and so they have, for the time being. But the doctrine of commercial frustration is a principle, not a mere word. It is not applicable to conditions in which performance is rendered impossible, either temporarily or permanently. In relying upon the doctrine plaintiff must, and he does, concede that performance may yet be had, but he failed to prove that he will suffer any detriment in carrying out his contract. As stated in Lloyd v. Murphy, 1944, 25 Cal.2d 48, 153 P.2d 47, 50, the doctrine of frustration applies where ‘performance remains possible but the expected value of performance to the party seeking to be excused has been destroyed by a fortuitous event, which supervenes to cause an actual but not literal failure of consideration.’ Even where there has been an interruption of performance due to wholly unanticipated events, the purposes of the contracting parties cannot be said to have been frustrated if performance may be rendered thereafter under conditions which will give to each of the parties substantially the same benefits and advantages they would have received except for the interruption. The interference with the plans of plaintiff and defendant, due to suspension of performance of the agreement for some three and a half years, no doubt has resulted in detriment to both parties, but it does not appear that either party has suffered more than the other. Nor is that the question. The judgment is a declaration of the rights and duties of the parties under the conditions which will exist when it will be possible for plaintiff to resume his services. Each of the parties then will receive the full agreed consideration; the contract as to each will be of no less value than it was in the beginning; full performance will cause no hardship, and although accomplishment of the original purposes will have been delayed, it will not have been defeated or frustrated.

Plaintiff cites section 1511 of the Civil Code and section 2920 of the Labor Code, St.1937, p. 260, as enactments under which his contract was terminated by his entering the military service. The Civil Code section provides that performance ‘is excused by the following causes, to the extent to which they operate: * * * 2. When it is prevented or delayed by an irresistible, super-human cause, or by the act of public enemies of this state or of the United States, unless the parties have expressly agreed to the contrary;’ etc. The judgment herein gives effect to this provision of the section, in that the parties have been excused from performance to the extent that the preventing cause, namely, plaintiff's military service, prevented performance. The Labor Code section, which was taken from section 1997 of the Civil Code, provides that ‘Every employment is terminated by any of the following: * * * (d) The employee's legal incapacity to act as such.’ This provision, so far as we are advised, has not been the subject of judicial interpretation. We cannot believe that the legislature, in using the term ‘legal incapacity,’ intended that it should have the effect of terminating the employment contract of every man or woman who entered the armed forces. Such a construction of that term would be unreasonable and directly contrary to the well-nigh universal sentiment and policy that those who serve in the armed forces should not be penalized as the result of such services by the loss of their positions. The interpretation of the section sought by plaintiff might convenience him, but the law, as so construed, could not fail to result in great injustice and harm. Plaintiff's employment was not terminated nor is further performance excused by virtue of either of these sections.

Plaintiff further contends that defendant lost its right to demand the making of five additional pictures during the year 1942 by reason of its failure to exercise the option upon his services for the year commencing March 6, 1942. Under agreement of September 22, 1938, plaintiff's services were engaged for the period of the year July 1, 1938, to June 30, 1939, during which time he was to make ten pictures. Defendant was given four options, a, b, c, and d, to extend the contract by successive yearly periods, and plaintiff in each such extended period was to make eight additional photoplays. Each option was to be exercised by notice in writing given during each current yearly term. Option a was exercised by defendant and by agreement the term of that period was extended from June 30, 1940, to March 6, 1941. The findings were that options b, c, and d also were exercised, but that defendant did not give plaintiff written notice of its exercise of option c. The two findings mean that option c was exercised, but not by the giving of the required written notice. It was further found that during the period when option c was operative, and which commenced March 6, 1942, plaintiff made three photoplays, which were finished respectively in April, June, and July, 1942. The making of these three photoplays constituted a waiver by plaintiff of his right to receive written notice of the exercise of the option. His contention that the failure to give written notice excused him from making the five remaining photoplays within that option period is not well founded. The findings and judgment declare that plaintiff is obligated to make twenty-one additional photoplays. Thirteen of these are the five that were not made under option c, and eight which were to be made under option d. On May 11, 1942, defendant was given an additional option under which eight more photoplays were to be made, and the finding was that defendant exercised this option.

The contract of May 11, 1942, followed the elaborate form of the first one but it contained the following clause: ‘24. In the event that the artist shall be required to serve in the armed forces of the United States pursuant to the Selective Service Act, or shall volunteer for such service, the parties hereto will agree upon their mutual rights and obligations hereunder in view of such military service.’ Plaintiff unsuccessfully argued to the trial court, and he now contends, that the clause effected a cancellation of the existing contracts without substituting anything in their place except a promise that the parties would agree upon their mutual rights and obligations in view of plaintiff's military service. If this were a proper construction of the clause, there would exist now no enforceable agreement; the promise to agree upon the terms of another contract would be void for uncertainty. But the clause cannot be given the interpretation contended for. The court found that in negotiating the May 11, 1942, agreement, ‘Plaintiff requested that a provision be so drawn that in case he should be inducted into the armed forces of the United States his employment by defendant would be thereby terminated and the agreements between plaintiff and defendant would thereupon become absolutely null and void. Defendant refused to agree to the inclusion in said agreement of May 11, 1942, of said provision requested by plaintiff, whereupon the parties agreed upon and there was included in said agreement paragraph 24 as set forth hereinabove.’ This finding, based upon evidence which tended to prove that the parties did not intend the clause to operate so as to terminate the contract, supports the construction which the court placed upon it. Even without this finding the clause could not reasonably be understood as intended to effect a cancellation of the existing agreements. It does not say anything of the sort. A reasonable interpretation would be that the parties understood that it would be impossible to carry out the terms of the agreements while plaintiff was serving in the armed forces, but that they would endeavor to agree upon a plan of procedure that would be possible during that period. There were negotiations after plaintiff entered the service and, according to the finding, an oral agreement for plaintiff to make additional photoplays with the consent of the Army, but plaintiff refused to make said photoplays unless modifications of the existing contracts were agreed to by defendant. Defendant did not agree to the modifications requested and no pictures were made.

Defendant alleged facts upon which it relies as the basis of an estoppel against plaintiff to claim that the contracts have been terminated, and the court found as a conclusion of law that plaintiff had waived all right to claim any discharge from the duties and obligations imposed upon him by said employment contracts and by each of them. It is unnecessary to discuss these matters. The points already decided furnish support for the judgment. No other matters of controversy over the contract are presented for decision.

The judgment is affirmed.

FOOTNOTES

1.  ‘Marshall v. Glanvill (1917), 2 K.B. 87, where, however, the decision is not expressly rested on the ground of failure of consideration.’

SHINN, Justice.

DESMOND, P. J., and WOOD, J., concur.