Gottschall v. Kapp, 47 Pa. Super. 102

47 Pa. Super. 102 | Pa. Super. Ct. | 1911

Opinion by

Porter, J.,

The plaintiff is a manufacturer of medicinal remedies which are marketed through agents appointed by him for that purpose. To each of said agents an exclusive territory is allotted. The method adopted by the plaintiff for the purpose of marketing his output placed the responsibility for all sales and collections upon the agent in charge of each allotted territory, and gave to that agent the entire control of such business, subject only to the regulations provided by the contract between the plaintiff and the agent. The agent thus obtained knowledge of every purchaser of the products of plaintiff within his territory, had in his possession the route books of plaintiff, containing the names, addresses and accounts of all such purchasers within the district of which he had control. The plaintiff entered into a contract for the sale of his products through the defendant, which gave the latter exclusive control of such sales in territory of considerable extent in the states of Pennsylvania and New Jersey, including several cities, for the period of five years. Under the provisions of this contract the defendant entered into covenants to engage faithfully in the sale of plaintiff’s remedies for five years unless otherwise mutually agreed upon between the parties; to always sell the remedies at a price specified in the contract and sell only in the territory designated; that he would not sell any interest in said route or good will or employ any other person to transact the business in the territory allotted to him without the written permission of the plaintiff; that promptly upon the date of the expiration of the agreement or its termination at an earlier date by agreement of the parties he would secure a person acceptable to the said party of the first part, to work the route and turn over to said party the route books and good will of the business; and in case he violated any of the provisions of this contract he authorized the plaintiff "to enter upon the route and so claim or take possession, and to this end the said party of the second part agrees to deliver, on demand, all the books pertaining to the route to the said party of the first part for that purpose.” The contract contained this covenant upon the part of the defendant, "And for. the true and faithful performance of each and all the covenants and agreements herein mentioned on the part of the party of the second part, he binds himself unto the said party of the first part in the sum of one thousand dollars as liquidated damages to be paid to him, the said A. H. Gottschall, in case the said party of the second part violates any of the provisions of this agreement, and further, he hereby confesses judgment for the above sum, and authorizes and empowers any attorney of any court of record of Pennsylvania, or elsewhere, to appear for and enter judgment against him for the above sum,” etc. The defendant acted as the agent of the plaintiff, in accordance with the provisions of the contract, during the period of five years provided for by the instrument, but having failed upon the expiration of the agreement to provide a person acceptable t'o the plaintiff to take charge of and work the route, the plaintiff demanded of him all the books pertaining to the route, which the defendant refused to deliver. The plaintiff thereupon caused judgment to be entered against the defendant in the sum of $1,000, under the warrant of attorney contained in the contract. The defendant moved to open this judgment and by agreement of the parties the judgment was opened and the case tried before the judge of the court below, without the intervention of a jury. The court below held that the stipulation in the contract that the defendant should pay to the plaintiff the sum of $1,000 in case of a breach of his covenants must be treated as a liquidation of the damages and accordingly entered judgment against the defendant, who appeals from that judgment.

The contention of the defendant is that the stipulation by him for the payment of $1,000, in case of a violation of his covenants, must be treated as a penalty. Where a lump sum is named by the parties to a contract as damages to be paid in case of its breach, the court will always look into the question whether it is really liquidated damages or only a penalty, the presumption being that it is the latter. The name by which it is called is not conclusive, the controlling elements being the intention of the parties and the special circumstances of the case. “The question .... iá to be determined by the intention of the parties, drawn from the words of the whole contract, examined in the light of its subject-matter and its whole surroundings; and in the examination we must consider the relation which the sum stipulated bears to the extent of the injury which may be caused by the several breaches provided against, the ease or difficulty of measuring a breach in damages and such other matters as are legally or necessarily inherent in the transaction:” March v. Allabough, 103 Pa. 335; Keck v. Bieber, 148 Pa. 645. “The difficulty of measuring the damages which would result from a breach of contract is always an important element, if not a controlling one, in determining whether the intention of the parties was to fix a certain sum as the just amount to be recovered instead of leaving the question to the uncertain estimate of a jury. Generally, where the covenant is for the performance or the nonperformance of a single act or of several acts, damages for the breach of which cannot be measured by any fixed standard, the sum named if reasonable in amount will be considered as liquidated damages:” Emery v. Boyle, 200 Pa. 249; York v. York Rys. Co., 229 Pa. 236.

The covenants contained in the agreement into which the defendant entered were sustained by sufficient consideration; the defendant obtained an absolute control of the sales of the plaintiff’s product within a large territory. The plaintiff not only agreed that he would not himself sell within that territory, but stipulated that none of his agents should sell therein, and the control of defendant over this territory was to continue, and did continue, for five years. The covenant that the defendant should sell only at a price fixed and within the territory designated was intended to preserve to each agent his exclusive rights within his own territory, and to prevent the agents of the plaintiff from injuring his business by competition with each other. The covenant not to sell any interest in the route or good will or employ another person to transact the business without the permission of the plaintiff, was to secure the plaintiff against the intrusion into his business of any person not to him acceptable, such as one who might be seeking knowledge of the business for the purpose of assisting a competitor. The covenant to procure a person acceptable to the plaintiff to take up and carry on the work upon the expiration of the contract of cthe defendant, or upon failure to do so to deliver up the route books in order that the plaintiff might take possession of the route, was intended to preserve to the plaintiff the advantage of the good-will of his own business. These route books were the only source from which exact information could be obtained as to the addresses of the purchasers of the plaintiff’s products. From the nature of this case the actual damages which would result from a breach of the contract would not readily be susceptible of ascertainment; this was no doubt the reason why the parties by express agreement liquidated a fixed sum as damages for the breach of the covenants and did not leave them to the uncertain estimate of a jury. Under these circumstances the parties contracted and their agreement leaves no room for doubt as to its meaning. There is nothing ambiguous about it. It is clear and distinct in all its provisions and the sum for which judgment was to be confessed in case of violation is “One thousand dollars, as liquidated damages to be paid to him, the said A. H. Gottschall.” We cannot say that the damages named for the breach were disproportionate to the loss which would probably result to the plaintiff from the failure of the defendant to perform his covenants, and must, therefore, construe the contract as having liquidated the damages arising from its breach: Kunkel & Jordan v. Wherry, 189 Pa. 198.

The fact that there are a number of stipulations of different degrees of importance does not vary the rule, if the measure of damages for all of them is uncertain. “Where a contract consists of several important stipulations, and damages 'cannot be adequately assessed for a breach of any of the stipulations, the court (except no doubt, in case of great, disproportion between the stipulated sum and the actual loss) will enforce the payment of the stipulated sum as liquidated damages:” Sedgwick on Damages, sec. 413. This statement of the rule was quoted with approval in Emery v. Boyle, 200 Pa. 249. The authorities above cited fully sustain the action of the court below in holding the sum stipulated in the agreement to be liquidated damages. The specifications of error are overruled.

The judgment is affirmed.