This cause of action arose under the following facts and circumstances: On the 15th day of May 1947, Alabama Naval Stores Company, a corporation, organized under the laws of the State of Alabama; Continental Turpentine and Rosin Corporation, a corporation organized under the laws of the State of Mississippi; Delta Pine Products Corporation, ' a corporation organized under the laws of the State of Louisiana; Dixie Pine Products Company, a corporation organized under the laivs of the State of Mississippi; Southern Naval Stores Division of Leach Brothers, Inc., a corporation organized under the laws of the State of Wisconsin, and the defendant Gulf Navаl Stores Company,' a partnership of' Gulfport, Mississippi, entered into a contract for the purpose of forming an export association, undér the procedure set out in an Act of Congress,' commonly called .the “Webb-Pomerene Act”, and is Title ■ 15 U. S. C. A., Secs. 61-65. .
One of the provisions set out in the Articles of Association required each member to maintain a deposit of $5,000. with the association to insure the- faithful performance of the contract by its members. Under Article 8 of the contract, it was agreed by the members that the board of directors could impose a fine, in its discretion, upon any member of the Association who exported any naval stores produced by it, other than through the Association. It was agreed -under Sec. 8 of the contract that the fine should not exceed $5 per drum for wood rosin, and $.25 per gallon for wood turpentine or pine oil or dipentene.
After having begun business, the Association entered into a contract with Newport Industries, Inc. of New York, appointing the New York corporation exclusive agent for the sale of products of the Association. It was understood, however, that the New York corporation reserved the right to sell naval stores obtained through other sources, in addition to the naval stores sold for the Association. In accordance with the contract made with the Newport Industries, it began placing orders with the Association, which were in turn allocated to the members of the Association, including the Gulf Naval Stores Company.
■ On May 31, 1950, the assets of the partnership of Gulf' Naval Stores Company, were conveyed to John T. Latimer and Mrs. Julia Latimer, who continued business under- the' trade name of the original partnership. A new partnership was ■ organized on January 1, 1951, and assets of . the partnership (including the $5,000 on deposit with- Wood- Naval Stores Association) were conveyed defendants, John-T. Latimer, Mrs. Julia Lati
On July 3, 1952, the partners filed suit in the Circuit Court of Harrison County, Mississippi. They alleged that the partnership was no longer a member of the Wood Naval Stores Export Association, and sought a judgment against the Association for the $5,000 deposit, held by it, belonging to the partnership, and for the sum of $3,668.13 alleged to be due to the partnership by the Association as a result of the sale of FF wood rosin by the Gulf Naval Stores Company through the Association. The suit was removed to the U. S. District Court, and later remanded to the Circuit Court of Harrison County, Mississippi. The Association filed its answer to the declaration denying- that the partnership had withdrawn from the Association and asserted a claim to the funds held by it belonging to the partnership. The Association charged that the partnership had violated the Articles of Association, by shipping in export naval stores through agents other than the Association and Newport Industries, Inc. A judgment was entered in the Circuit Court of Harrison County in favor of the partnership; whereupon defendant, Wood Naval Stores Export Association appealed to this Court.. The case is reported in
Thereafter, on January 7, 1955, suit (the present suit) was filed by the Wood Naval Stores Export Association, against the partners of the Gulf Naval Stores Company, in the Chancery Court of Harrison County, Mississippi. The original bill of complaint alleged that sometime after the defendant Gulf Naval Stores Company became a member of the Association, the partnership set about deliberately violating the Articles оf the Association by shipping in export trade, other than through the Association and its agent, Newport Industries, Inc., naval stores, namely, FF wood - rosin. The bill of complaint alleged that the violation of the contract had caused irreparable damages to the members of the Association, that the number of drums shipped, the names of the purchasers, and the dates of shipment, were unknown to the complainant and that such information was wholly within the knowledge of the partners of the Gulf Naval Stores Company. The bill of complaint charged that request had been made upon the defendant partnership for the information and for an inspection of the books of the partnership, but that the Gulf Naval Stores Company had failed to comply with the request of the complainant and had refused to permit inspection of its books. The complainant further charged that the defendant partnership would continue to violate the Association agreement unless prevented from so doing by an injunction from the chancery court.
■ It was alleged that the continued • and deliberate vióv lation on the part of the'Gulf Naval' Stores Company damaged the complainant in the sum of $5 per' drum of FF wood rosin shipped in violation of the contract, and that this violation already amounted to more than $100,000, but the exact amount, dates of shipments, to whom shipped, etc. were not within the possession of the complainant or any of its members except the defendants. It also alleged that the violation would continue so that the defendant would be unable to respond -in damages unless the defendant was enjoined by the court.
The complainant attached interrogatories to be propounded to the defendant, asking information as to the number of barrels shipped in export in violation of the agreement and other information with reference to entering into an exclusive agency contract with Whit
' A special demurrer was filed to the bill of complaint and later overruled by the trial court. The defendants filed an answer denying that the partners of the new partnership were parties to the Articles of Association, and stated they had done no business with Wood Naval Stores Export Association since they had withdrawn from it on January 1, 1951. They admitted that they were shipping naval goods in export but denied that they were violating the Articles of Association. They did not answer the interrogatories attached to the original bill; whereupon the complainant moved the court for a decree pro confesso, or, in the alternative, an order to require defendants to answer the interrogatories. The Chancellor overruled the motion to • require defendants to answer the interrogatories, and entered an order permitting an appeal to the Supreme Court. On appeal, this Court directed the trial court to require defendants to answer the interrogatories attached to the bill of complaint.
When the mandate of the Supreme Court was returned- to the Chancery Court, the Chancellor entered an order requiring defendants, partners in Gulf Naval Stores Company, to answer the interrogatories. The defendants answered the interrogatories and set up several affirmative defenses. They denied that the complainant Wood Naval Stores Export Association was
The complainants then amended the bill of complaint to show that during the period from March 1952 to May 10, 1957, the defendants had not paid their assessment of $200 per month due for their pro rata part of the expenses of the Association, totaling $12,400 for a period of sixty-two months. It was alleged that the Board of Directors credited defendants with $5,000 on deposit and $250 accrued interest, plus $40, alleged to be defendants’ part of the appraised value of the office furniture.
Defendants amended their answer so as to deny that Wood Naval Stores Export Association was a legal entity and denied it could transfer the interest in the property of the Association to members, and stated that defendants had no notice of the meeting of the board of directors at the time the transfer was alleged to have been made. The amended answer of the defendants again denies that the members of the Association were damaged by the sale of FF wood rosin in export by the partnership. They allege that after having answered that the amount of the fines and penalties allеged to-be liquidated damages due to the Association was $487,-
Defendants, members of the partnership, Gulf Naval Stores Company, filed a cross bill demanding judgment of the members of the Wood Naval Stores Export Association for the $5,000 held on deposit by the Association belonging to the partnership, together with accrued interest. Defendants filed interrogatories to be propounded to each member of the Association.
Complainants, after having failed to obtain an order of the court to strike the interrogatories, answered the cross bill, and denied that the cross-complainants were entitled to the return of the $5,000 deposit, and denied that the Articles of Association were void as being against public policy. Cross-defendants plead res judicata and stated that the matter of the $5,000 had been litigated in a former opinion of the Supreme Court.
When the pleadings had been joined, and before the evidence was submitted to the Chancellor, the complainants filed-a motion requesting judgment for the complainants in which it was asserted that the answers and amended answers presented no genuine issue of facts and that they were entitled to a judgment, as a matter of law; that the law of the case had been decided by the Supreme Court; that defendants had disclosed the
The testimony showed that a fine of $31,150 had been imposed upon Dixie Pine Products Company, one of the members of the • Association, which represented a fine of $5 per drum for PP wood rosin sold in export in violation of the contract.
Defendant Louis Latimer testified that from January 7, 1953, through January 7, 1955, defendants shipped 628,500 pounds, or approximately 5,000 drums, of hot PP wood rosin in tank cars to Whitney and Oettler. Defendants admitted that they were shipping PP wood rosin in export, sometimes at a loss, and stated that shipments were not made through Newport Industries, Inc. beсause it was exporting PP wood rosin in competition with defendants. It was admitted that defendants had shipped $1,071,690 worth of rosin in export during the time it had attempted to withdraw from the Association. Testimony showed that the books of the defendants had been destroyed and that they could not inform complainants the number of .drums of PP wood rosin exported. Defendant Louis Latimer admitted that as soon as he got a chance.to break the contract he did
When complainants rested their case, defendants made a motion for a directed verdict, on the grounds that nо damages were shown by complainants and that assessment of $5 per drum for FF wood rosin by the board of directors under Sec. 8 of the Articles of Association was a “fine”, a “penalty” or a “forfeiture”, and was unenforceable; that the question of injunction was now moot, and a judgment should, be rendered in favor of defendants. The Chancellor overruled this motion and defendants introduced the interrogatories propounded by defendants and answers made thereto by each of the complainants. The answers of complainants to the interrogatories of the defendants show that they were making a net profit of less than $1.22 per drum for FF wood rosin at the time they entered into the Articles оf Association. It was shown by the testimony that the production potential of the Association was believed to be approximately twenty percent of the U. S. Market, and that in 1947 the market was approximately one million two hundred thousand drums of FF wood rosin. There was no testimony to show that the export of naval stores by the defendants caused any purchasers to divert from the Newport Industries, Inc. to purchase naval stores from defendants. The testimony shows that during the time complainants shipped through Newport Industries, Inc. they realized a net profit of $2.76 per drum. Witnesses introduced as. expert witnesses for complainants gave their opinions that complainants had a loss of $8.96 to $10.00 per drum for their proportionate part of the FF wood rosin on additional business that complainants might have gotten during. this. particular period. At the conclusion of the case the Chancellor rendered a written opinion, and
The Chancellor denied recovery for the alleged liquidated damages assessed hy the board of directors of Wood Naval Stores Export Association of $5 per drum against defendants, and held that the fine mentioned in Sec. 8 of the Articles of Association was a “penalty” and not a genuine pre-estimate of damages at the time of making the contract.
Appellants, members of the Wood Naval Stores Export Association, have apрealed from the decree of the chancery court to this Court and seek a reversal of the judgment of the trial court on the grounds that the law of the case was settled in a former opinion of this Court; that the principle of res judicata and the doctrine of collateral estoppel applies to the interpretation of Sec. 8 of Articles of Association, and therefore it is now settled that Sec. 8 provides for “liquidated damages” and is not a “penalty.” It is claimed that appellants have met the burden of proof, and have shown' the amount of liquidated damages due by appellees at $5 per drum for FF wood rosin exported by appellees in violation of the contract, and were entitled to a judgment in the trial court.
After judgment was entered in the first case, it was paid off, settled and closed. Appellants now argue that since this Court held, under the evidence in the first case, that the “fine” there assessed was “liquidated damages” rather than a “penalty”, that opinion became the “law of the case” in the present action and appellees are now estopped to again litigate the meaning of Sec. 8 of the Articles of Association. We must therefore in the outset deal with whether or not the first case is the “law of the case” in the present suit.
The doctrine of “law of the case” is a rule of practice adopted by the courts and rests upon principles of res judicata. The rule is distinct from the rule of stare decisis and it is not a limitation upon the power of the court. In Re Wecker’s Estate,
The law of the case rule applies only to one case, and does not, like res judicata, foreclose parties or privies in one case by what has been done in another case. United States v. Davis,
‘ ‘ The doctrine of the law of the case has been frequently recognized as a harsh doctrine. Some courts have expressed their intention not to extend the application of the doctrine of the law of the case beyond the cases in which it has heretofore been held to apply. And in some jurisdictions the rule of the law of the case has been abolished, or at least modified by express statutory or constitutional provisions.”
This Court said in the case of Brewer v. Browning,
The opinion of this Court in the first case was correct under the facts as shown by the evidence introduced in that trial. Moreover, it was a separate and distinct action from the present case. If, however, the first case were a branch of the present action, as is contended by appellants, the Supreme Court would not be bound by the opinion rendered on the first appeal, because, where the evidence on the second trial is materially different on essential elements, the decision on the first appeal will not be taken as the “law of the case.” Nedela v. Mares Auto Co.,
After the present case was filed, it was also appealed to this Court, and is reported as Wood Naval Stores Export Association v. Latimer, et al., d. b. a. Gulf Naval Stores Co.,
It is apparent, that the “law of the case” is found in the directions of this Court to the trial court, in Wood Naval Stores Export Association v. Gulf Naval Stores Company,
We do not agree with the contention of appellants that the doctrine of collateral estoppel is applicable to the facts in the present case. There was no evidence in the first case to show that the fine of $5 per drum imposed on the partners of Gulf Naval Stores Company was disproportionate to the pre-estimated liquidated damages. Sec. 8 of the Articles of Association states that: ‘ ‘ Such fine may be in an amount not to exceed five dollars ($5.00) per drum of wood rosin * * * thus exported.” The board of directors was not required to fine the full amount set out under Sec. 8. They could have fined a member of the Association, one sum at one time, and another sum at anоther time, so long as the fine was in keeping with the intended pre-estimated damages. When it was made to appear from the testimony, that the action of the board of directors was so disproportionate to a genuine pre-estimate of liquidated damages as to show that Sec. 8 of the Articles of Association, was originally intended to be a penalty and a forfeiture rather than liquidated damages, this Court would not be precluded from holding such a fine to be a penalty and unenforceable. This is true although this Court has heretofore held that such a “fine” under Sec. 8 was liquidated damages. See Dolores Garraway v. Retail Credit Company, et al.,
The testimony in the present case shows that at the time the Articles of Association were signed by the parties, they were getting from $.26 to $1.22 per drum net profit. A fine of $5 per drum was not a realistic pre-assessment of damages at the time the contract was made. They fixed a fine payable to the Association in a sum “not to exceed $5”, and it is now apparent that this fine is a penalty. The record discloses that the members of the Association considered Sec. 8 of the Articles of Association to be a “penalty”, because, the Association actually fined another of its members $5 per drum under Sec. 8, and so stated in the minutes of the Association. Onе of the witnesses for appellants testified after being asked: “Now Mr. Reasor, why was this $5.00 per drum placed in the Articles of Association in 1947? I want your frank and honest answer.” He answered: “* * * We did not expect anyone would ever go out and violate it intentionally but we did think that unintentionally some of my production or somebody else’s production might be sold to someone domestically who in turn would export and that it was up to us to police that matter to see that it did not happen * * “By Mr. Morse continuing: Q. If you shipped to some domestic person and it had gotten into foreign trade without your knowledge or some other member, you certainly wouldn’t have imposed a fine or penalty on them, would you? A. I would. Q. You would have imposed a fine or penalty on them? A. I would have imposed a penalty, yes.”
The evidence in this case shows' that the export prices for FF wood rosin fluctuated, and the damages to the Association for the breach of the contract would have been different sums at different times. The fines were always the same. The testimony of Mr. Reasor is as follows: “Q. * * * Have you ever imposed a fine of
•It is said in 15 Am. Jur., Damages, Sec. 245, p. 676, that: "As a general rule, unless it is clear that the parties intended otherwise, the tendency of the courts is to regard stipulations in contracts purporting to fix advancе sums to be paid in the event of breach as of the nature of penalties, rather than as liquidated damages, because then they may be apportioned to the loss actually sustained. This is particularly true in doubtful cases or where the language used is ambiguous * # * J }
It is also pointed out by the same text in Sec. 249 on page 681, that: "In the determination of whether the amount stipulated for is to be regarded as a ‘penalty’ or as ‘liquidated damages’, the court will generally take into consideration its reasonableness — that is, whether it bears some reasonable proportion to the loss actually suffered. * * * But agreements to pay fixed sums plainly without reasonable relation to any prоbable damage which may follow a breach will not be enforced as agreements for liquidated damages. Moreover, if the sum stipulated is so large as to be out of all proportion to the probable or presumptive loss, and is therefore not a fair measure of the damage actually sustained, it will generally be regarded as a penalty, especially where the actual damage resulting from the breach may be readily ascertained or where the contract discloses no intention to fix the sum as liquidated damages or leaves the intention in this regard in doubt. In other words, the damages stipulated for must be such as to amount to compensation only, and if the principle or compensation has been lost sight of, the sum named will be treated as a penalty.”
This Court said in the case of Shields v. Early,
We have come to the conclusion that the “fine” imposed under Sec. 8 of the Articles of Association — in the light of the testimony now introduced in this case —■ is a “penalty”, and its enforcement at $5 per drum against the partnership Gulf Naval Stores Company, would be harsh, oppressive, and unconscionable. The testimony introduced in this case shows that Sec. 8 of the Articles of Association was not a genuine — pre-estimate of liquidated damages, but was in fact a measure to “police” and terrorize the members so that they would not violate the agreement, and is disproportionate to the actual damages.
Ordinarily, the intention of the parties will control as to whether a provision in a contract is for a penalty or for liquidated damages, and we are of the opinion that the testimony shows that the parties to the Articles of Association in this case, intended Sec. 8 of the contract to be a “penalty”, and we therefore hold that it is a penalty, and as such is unenforcible. See 25 C. J. S., Damages, Sec. 103, p. 659.
The original bill filed by the Wood Naval Stores Export Association charges that the complainant was damaged by the defendants because of their breach of the Articles of Association, and prays for general relief. The members of the Association having been permitted to intervene in place of the Wood Naval Stores Export Association are entitled to general relief and damages therein sought against appellees, — partners in the partnership, Gulf Naval Storеs Company, — for
We are therefore of the opinion, and so hold, that the decree of the Chancery Court of Harrison County should he affirmed insofar as it refused to award the penalty of $5 per drum for PP wood rosin shipped in export by the appellees, and should be affirmed insofar as it awarded damages to appellants in the sum of $7,110. We are, however, of the opinion that this case should be reversed for a new trial on the question of damages alone, so that the chancery court may determine the actual damages due appellants from appellees for the violation of the contract without regard to the penalty mentioned in Sec. 8 of the Articles of Association. -
Affirmed in part; reversed in part; and remanded for a new trial on the issue of damages only.