132 A. 12 | N.H. | 1926
Lead Opinion
1. The defendant's motion to dismiss challenges the power of the court to grant equitable relief. Jurisdiction over the subject matter of a controversy cannot be created or conferred by the agreement of the parties. Robinson v. Potter,
It is true that equity does not ordinarily enforce specific performance of a contract respecting personal property; but this is not because the subject matter is personalty, but because the remedy at law is adequate. Where chattels or personal services have a unique and peculiar value, contracts relating thereto, comprising the same element of irreparable damages as exists where land is the subject matter of the contract, like contracts as to realty, may be specifically enforced. Kann v. Company,
The contract is one of a series of contracts, all identical in terms, which together constitute a single agreement by which all member subscribers became obligated mutually and individually to the association and to each other to the same extent as if all had signed one contract. Each bound himself to sell and deliver to the association all the dairy products which he should produce during the period of his membership; while the association, in turn, bound itself to resell the same, together with the products of the other members, at the best market price obtainable. It was a condition of the multi-party compact that the association could not, by purchase in the open market, replace milk which any member might fail to deliver. The entire proceeds of the resale, less the costs of handling and operation and a moderate contribution to a reserve fund, were to be distributed ratably to, or for the benefit of, members according to the provisions of the contract. The members promised cooperative action during the several-months of the year in order that an adequate supply for consumers at all seasons of the year might be assured. The contract did not become operative until at least 75 per cent of the nearby milk supply had been contracted for. In other words, the plaintiff is a cooperative marketing association, composed exclusively of producers of dairy products, operating solely for their benefit and without profit to itself. Its declared purpose was to minimize speculation and waste in disposing of the products of its members.
It is found as a fact that much time had been given by some of the members to the establishment and operation of the enterprise. Manifestly, in order to do business, such an association must maintain an organization for receiving, handling and marketing the products. It must employ officials and servants. Expenses must be incurred. Capital, and therefore credit, must be secured for the conduct of its business and the discharge of its current obligations. Contracts must be made for the transportation and disposal of the products of its members. In order to make advantageous contracts the officers of the association must be able, in advance and with *200 reasonable certainty, to make estimates of the volume of its business, and must have assurance of the supply of the products contracted for. While the contract bound the defendant only to sell and deliver such products as he produced, and contained no stipulation that he should continue in the dairy business, it appears that at the time of the contract all members were producers. It cannot be presumed that the probability of changes in the vocation of members would introduce any considerable element of uncertainty. The fact that milk was obtainable in the open market is immaterial since by the terms of the contracts with its members the association could not purchase. As shortages could not be supplied from non-members the fulfilment of member contracts was essential to the fulfilment of the contracts of the association. It must be assumed that the work of organization and preparation had been performed, and that obligations of the character indicated had been incurred, on the faith and expectation of receiving the products of the members in compliance with their contracts.
Judgment for the loss of the profits which would have accrued to the association solely from the resale of the products withheld by a breaching member would not necessarily measure the damages to the association. If one member may breach his contract with impunity so might others. With each withdrawal a larger proportionate share of the expenses would fall upon the remaining members. It would be impossible to compute the losses which would thus progressively accrue to the association and its remaining members. Nor would this diminution of the proportionate returns, if they could be computed, measure the full extent of the wrong to the association. The influence of the conduct of the breaching member would inevitably tend to promote further withdrawals and impair the ability of the association to secure new members. If indulged in by a sufficient number it would impair the effective existence of the association if, in fact, it did not bring about a dissolution. It is plain that an unrestrained breach of member contracts would produce irreparable injury to the association, and, through it, to each of the remaining members.
"The society could not obtain proper and adequate relief in an action at law for damages, or, indeed, in any other way than by restraining defendant from disposing of the property that he had pledged to it. . . . The injury to the society could not be measured in dollars and cents. Organized for the mutual protection and advantage of each of its members, receiving no gain and making no *201
profit from the transaction, it would be wholly impracticable to estimate what damage it would sustain if the members could dispose of their crops. The life and usefulness of the society depends entirely upon the fidelity of the members in observing the agreement, and their failure to comply with it would necessarily work a dissolution of the society and consequently have the effect of depriving the members of the benefit and advantages they might expect to derive from its existence." Owen County Burley Tobacco Society v. Brumback,
As in these cases, so in the instant case, the injury to the plaintiff is of a character which would seriously tend to defeat the very purpose of its organization. It could not be measured in dollars and cents. It follows that the plaintiff's remedy by an action at law is inadequate, and the case falls within the field of equitable jurisdiction.
So far we have discussed the question of jurisdiction without regard to the agreement for damages. Does the stipulation of the defendant to pay five dollars per cow as liquidated damages in case of his failure to comply with the terms of his contract afford the plaintiff an adequate remedy at law, and thus deprive the court of equitable jurisdiction by removing the ground upon which it rests? It is clear, *202 for the reasons already expressed, that this sum does not necessarily measure the wrong to the plaintiff of the defendant's breach of his contract. It must be conceded, however, that it was in the power of the plaintiff by agreement to release the defendant from performance of his contract by the payment of stipulated damages notwithstanding the same should in fact be wholly inadequate to recompense the plaintiff for the resulting injury. The answer to the question, therefore, is to be found in the intention of the parties, which must be deduced from the whole contract and the surrounding circumstances. Did the parties intend to provide for the payment of liquidated damages as an exclusive remedy at the option of the defendant, which should be accepted in lieu of performance?
"It is often stated that a court of equity will not interfere to prevent a party from doing an act which he has agreed not to do, when liquidated damages are provided in case he does the act. But this must be taken with some qualifications; for it must appear, from the whole contract, that the stipulated sum was to be paid in lieu of the strict performance of the agreement, and was an alternative which the party making the covenant had the right or option to adopt; . . . it is said, in all the cases on this subject, that the question in every case is, What is the real meaning of the contract? And if the substance of the agreement is, that the party shall not do a particular act, and that is the evident object and purpose of the agreement, and it is provided that, if there is a breach of this agreement, the party shall pay a stated sum, which does not clearly appear to be an alternative which he has the right to adopt instead of performing his contract, there would seem to be no reason why a court of equity shall not restrain him from doing the act, and thus carry out the intention of the parties. If such appears to be the purpose of the agreement, the fact that the sum to be paid is a stated or stipulated amount, in the nature of liquidated damages, should not oust a court of equity of its jurisdiction to compel the party to carry out his agreement." Ropes v. Upton,
Construing the contract here in the light of the purpose of the association and its plan of operation we are of opinion that it was not the intention of the parties by the clause in question to give the defendant an option to pay the stipulated sum as the price of nonperformance of his contract. The success of the association and the benefit to its members are wholly dependent upon a strict compliance by all parties with the terms of their respective contracts. The damages stipulated were of small value to the association. Performance was of the very gist of the contract. The association must have the milk produced by its members or go out of business. It had no other source of supply, and without this supply it had no excuse for existence. If, however, there were doubt as to the intention of the parties the uncertainty would seem to be cleared up by the "further" express agreement that the plaintiff in case of breach shall be entitled to injunctive relief or to a decree of specific performance. While ineffective to confer jurisdiction this stipulation is persuasive evidence that the association did not intend to waive its right to equitable relief by the stipulation as to damages immediately preceding. The language clearly carries the idea of an additional rather than an alternative remedy. The ruling of the *204
presiding justice that the agreement for liquidated damages was not intended as an option for the termination of the contract is sustained. This provision of the contract, therefore, neither deprives the court of equitable jurisdiction nor precludes the plaintiff from its right, if otherwise established, to equitable relief. Like conclusions have recently been reached in construing cooperative marketing contracts containing similar stipulations. Pierce County Dairymen's Ass'n v. Templin,
The defendant's exception to the denial of his motion to dismiss the plaintiff's bill is overruled.
2. The question next presented by the record is upon the plaintiff's exception to the denial of its prayer "that the defendant be permanently enjoined from marketing, consigning or withholding the milk or other dairy products produced on farms owned or controlled by the defendant in any other manner than in accordance with the terms of said contract."
The plaintiff's prayer for an affirmative decree of specific performance of the contract was denied for the sufficient reason that it would be a cumbersome and expensive process and could be accomplished only by placing the defendant's milk-producing operations in charge of the officers of the court. The correctness of this conclusion is conceded. In so far as the plaintiff's alternative prayer for negative relief calls for an order enjoining the defendant from "withholding" his products from the plaintiff, it is but another way of requesting 'that he be ordered to deliver his products to it. It calls for action, not non-action. Affirmative relief having been denied without exception, because of the difficulty of direct enforcement, it follows that, to the extent that the plaintiff's second prayer calls for affirmative relief, it must also be denied. 3 Williston, Contracts, s. 1423, note; Welty v. Jacobs,
No objection, however, appears to be offered to the negative form of the order contemplated by the plaintiff's alternative prayer if the plaintiff is found to be entitled to equitable relief. It seems to be settled that where obstacles are encountered in the direct enforcement *205
of contracts by an order for affirmative relief, indirect enforcement may often be accomplished by a decree enjoining acts in breach thereof. Kann v. Company,
The presiding justice has found and ruled that the plaintiff's prayer for remedy by injunction could not reasonably be granted. This was the determination of a question of fact. Norris v. Clark,
The ground upon which the conclusion that the injunctive order could not reasonably be granted is expressly stated, viz., "because the defendant's persistence in his breach of duty, were an injunction issued, would result in punishment by fine or imprisonment for him; that such punishments would be neither merited, nor a reasonable remedy for the breach." Hardship may be a sufficient ground for withholding specific relief. Hunter v. Carroll,
Under the plaintiff's exception to the refusal of the court to grant injunctive relief the question then remains whether or not on the facts of record it conclusively appears that the plaintiff is entitled an enjoining order. A decree for specific relief is not a matter of right to which a party is entitled upon the proof of his contract, but rests in the sound discretion of the court, which grants or withholds the relief according to the circumstances of the case. Norris v. Clark,
In view of the fact that a further hearing must be had, the question raised in argument whether the contract is opposed to public policy has been considered. Cooperative marketing agreements containing the essential features of the contract here considered have been recognized in many of our states as a legitimate means of protecting members against oppression, of avoiding the waste incident to the dumping of produce upon the market with the consequent wide fluctuations in prices, and of securing to the producer a larger share of the price paid by the consumer for his products. Associations of this character exist in practically all of our states and deal in nearly every form of agricultural product. From year to year the cooperative idea in marketing has been assuming wider scope and greater economic importance. Public approval of such cooperative organizations is evidenced by the adoption of enabling legislation in more than two-thirds of the states, including our own (Laws 1925, c. 33), as well as by the Congress (U.S. Comp. St. Ann. Supp. 1923, ss. 8716 1/2, 8716 1/2a). See Columbia Law Review, February, 1923, p. 91; Co-op. Ass'n v. Jones,
3. The question presented by the defendant's exception to the order that he pay expenses of five hundred dollars involves a further construction of the contract. After stipulating for liquidated damages and for equitable relief in case of the defendant's breach, section 7 of the contract then provides that: "If the Association brings any action whatsoever by reason of a breach or threatened breach hereof the Member is to pay the Association all costs of court, costs for bonding and otherwise, expenses arising out of or caused by litigation, including any reasonable attorney's fee expended or incurred by the Association in such procedure, and all such costs and expenses shall be included in the judgment and shall be entitled to the benefit of any lien securing any judgment hereunder." By this language it was intended that the defendant member should be charged with the enumerated costs and expenses in case the plaintiff should prevail either upon a suit to recover the stipulated damages or upon a petition to compel compliance with the contract, or upon both.
The plaintiff's bill is brought to compel specific performance of the contract. In view of the defendant's expressed readiness at all times to pay the amount of the stipulated damages it could have had no other justifiable purpose. A court of equity having taken jurisdiction of a controversy administers all relief which the nature of the case and the facts demand. Manchester Amusement Co. v. Conn,
Decree set aside.
All concurred.
Addendum
Upon motion for rehearing it is alleged by the plaintiff that the contract, instead of expiring on March 1, 1926, as indicated by the record, does not in fact expire until March 1, 1927, and that this fact is admitted in the pleadings. As the case is returned to the trial court for further hearing, it seems unnecessary to amend the record here. While the fact may have an important bearing upon the discretionary action of the trial court there seems to be no reason why it cannot be given due weight under the principles here announced.
Motion denied.
All concurred.
