170 Wis. 389 | Wis. | 1920
Lead Opinion
Some doubt exists as to whether or not the answer raises any issue. Giving, to the allegations of the answer every reasonable intendment and the most liberal construction, we are constrained to hold that the allegation that there was no damage suffered by the plaintiff is equivalent to an allegation that the agreed measure of damages is unreasonable, and bears no relation to the actual damages suffered by the plaintiff, and the question of whether or not the agreed damages are in the nature of liquidated damages or a penalty is presented. This is a most liberal construction, and one which we adopt the more readily for the reason that without objection the case has been argued and presented upon both sides upon that theory. While the plaintiff in its brief stated that it contends that the simple allegation in the answer that respondent has in fact suffered no damage is not sufficient to put in issue the question of whether or not the contract is valid as providing for liquidated damages, or invalid as providing for a penalty, it assumes for the purpose of argument that that is the question before the court, and no other question is argued.
The defendant contends that the sum of $894.83 cannot be considered otherwise than as a penalty and cites Hath
The courts of this and other states have gone a long way in protecting parties from their own contracts, and this upon the theory that a harsh and unreasonable contract will not be enforced when a party may be relieved therefrom within the established rules of law; but a party asking relief from a contract freely entered into, in the absence of fraud or overreaching, must bring himself within the field of judicial relief; and the fact that, as in this case, the result is harsh and burdensome, is not by itself sufficient to do that.
Courts will ascertain for themselves the real intent of the parties to the contract, and are not bound by the assertions of the parties themselves as to that intent, and the stipulated damages must appear to be grossly in excess of the actual damages, or have no relation thereto, before the court can say within established principles that the damages stipulated are a penalty. We take it that these fundamental principles are well established, and certainly are recognized in the Wisconsin cases above cited. See, also, 1 Sutherland, Damages (4th ed.) § 283 and cases cited.
The intent of the parties in this case is made clear by the recitals of the contract itself, and particularly so when they are considered in relation to the complicated and complex situation with which the contract deals. The contract is not one for the sale and delivery of an article to be procured in the open market and delivered to the purchaser. It is a contract for the manufacture of a commodity from a basic raw material. Actual damages could not therefore be established by showing the difference between the contract price of Gold Mine flour and the market price, assuming
While, as this court has said, “in determining whether an amount agreed upon as damages was intended as liquidated damages or as a penalty, rules of language are ignored, and the expressed intent of parties is made to give way to the equity of the particular case, having due regard to precedents,” nevertheless, such a rule is applied only where damages may be readily computed and the “stipulated damages, so called, are largely in excess of the actual damages.” Seeman v. Biemann, 108 Wis. 365, 374, 84 N. W. 490; 1 Sutherland, Damages (4th ed.) § 283. In a case such as this, which is clearly one where the damages are difficult, if not almost impossible, to ascertain, to require a party to establish the actual damages as a condition precedent to his right to recover stipulated damages is in practical effect to refuse legal effect to his contract. The courts are now strongly “inclined to allow parties to make their own contracts and to carry out their intentions even where it would result in the recovery of an amount stated as liquidated damages, upon proof of violation of the contract, and without proof of the damages actually sustained.” U. S. v. Bethlehem S. Co. 205 U. S. 105, 27 Sup. Ct. 450.
It is argued that in the absence of an allegation in the complaint that the plaintiff had purchased No. 1 Northern wheat, and in the absence of an allegation that the article to be delivered was to be manufactured from No. 1 Northern wheat, the contract is speculative and ought not to be enforced. Reference to the daily market reports, ás well as to the proclamations of the President of the United States, issued February 21, 1918, and September 2, 1918, shows that No. 1 Northern wheat is one of the standard grades of wheat, to which in the primary markets of the country the prices of other grades of wheat bear a direct relation, and
It is because of the fact that a manufacturer may not be able to trace into the manufactured product agreed to be delivered, specific purchases of material, that proof of actual damages becomes difficult and the stipulation of parties as to damages is permitted to stand in cases of this kind. The difficulties of the situation are well illustrated in the case of Erie B. Co. v. Hubbard M. Co. 217 Fed. 759; Russell Miller M. Co. v. Bastasch, 70 Oreg. 475, 142 Pac. 355; River S. Co. v. Atlantic Mills, 155 Fed. 466.
While tlie complaint does not allege that the parties have purchased any particular lot of wheat for the manufacture of the flour agreed to be delivered to the defendant, it does allege that the plaintiff was ready, able, and willing to perform and carry out its part of the contract, and that it had performed the same except in so far as performance thereof had been prevented by' the conduct of the defendant. This must be taken to mean/as it certainly does mean, that the plaintiff had on hand the raw materials out of which the flour was to be manufactured and delivered.
It will not do for the defendant to enter into a contract such as the one set out in the complaint, wait until time of delivery, and, when performance is tendered, refuse to accept it, and in the light of subsequent developments violate the terms of his contract and then take that position which is most advantageous to himself. The validity of
While the damages recoverable under the contract in this case are large and appear grossly disproportionate to the actual damages which the plaintiff may have suffered, we cannot, especially upon the facts set out in the record in this case, say that they are so as a matter of law. The contract was entered into on May 7, 1917, about one month after this country had declared war against the Central empires. No one knew or could foresee what the condition of the grain market would be a month, much less six months, in the future. The general situation must have been in the contemplation of the parties at the time this contract was entered into. It was well known that wheat is a basic, essential commodity. The food and fuel control act was passed by Congress August 10, 1917, and on August 30, 1917, a little more than two weeks before the defendant had a right to require delivery under the contract, the President, by proclamation, fixed the price of the 1917 crop on the basis of $2.20 a bushel for No. 1 Northern spring wheat at Chicago. No doubt this action of the government had a great influence, if it was not in fact directly controlling, as to the price of wheat. See War Industries Board Bulletin No. 9. As was said in Sheffield-King M. Co. v. Domestic Science B. Co. 95 Ohio St. 180, 115 N. E. 1014, having under consideration a contract similar to the contract involved here,
“The parties agreed that wheat, the thing from which the flour was to be made, should be the basis upon which to calculate damages. They could, of course, have agreed that the flour should be such basis, but they did not do so.*402 That was a matter for them to agree about. They did not fix an arbitrary lump sum which might turn out to be wholly inequitable, but fixed a method, the chief element of which was the price of wheat from which the flour was to be made, a matter not within the control of either.”
While in that case it was said that “when the plaintiff proved it had performed the terms of the contract on its part, had purchased the necessary wheat, and showed the damages that had accrued on the basis agreed on, it was entitled to recover,” we think the allegation in the complaint in this case, that the plaintiff was prepared, able, ready, and willing to perform the contract, is an allegation that it had on hand the materials out of which the flour to be delivered to the defendant in this case was to be manufactured ; at least no issue in that respect is tendered by the pleadings in this case.
The inherent difficulties of proving the actual damages in a case such as this are such as in practical effect to preclude a manufacturer from recovering damages because of the consequent expense and the disorganization of his business. The removal of auditors, accountants, managers, and foremen from the business of a large highly organized concern during the time necessarily consumed in a trial entails an expense, in excess of recoverable costs, so' great as to prevent in many cases any reimbursement to a manufacturer. Any one who has attempted to establish the amount of actual damages in a case will fully .realize this. Garton Toy Co. v. Buswell L. & M. Co. 150 Wis. 341, 136 N. W. 147, illustrates the difficulty in a comparatively simple case.
As was said by Judge Christiancy, this is a case “where, from the nature of the contract and the subject matter of the stipulation, for the breach of which the sum is provided, it is apparent to the court that the actual damages for a breach are uncertain in their nature, difficult to be ascertained, or impossible to be estimated with certainty, by feference to any pecuniary standard, and where the parties
Modern business is so managed as to avoid litigation; the tendency is away from litigation — a tendency which should be encouraged in all fair and legitimate ways because it is conducive to the general welfare. Time and effort consumed in litigating questions of damages generally result in substantial financial loss to both sides. Stipulations of parties, therefore, which establish a plain, simple rule of damages, having a just and fair relation to the subject matter of the contract, in cases where the ascertainment of actual damages is difficult, ought, in the public interest, to be given legal effect. U. S. v. Bethlehem S. Co. 205 U. S. 105, 27 Sup. Ct. 450.
Where such contracts are entered into, which are fairly within established legal principles, it is not the business of the courts to interfere and attempt to set aside such stipulations, as has often been done with the result that while theoretical legal justice may be attained, as a practical matter justice is denied. There is no reason why courts ..should regard with paternalistic solicitude the situation of a party who has deliberately broken his contract. Contracts- are not made to be broken but to be lived up to, and the loss, if any, in the event of breach, ought to fall on the wrongdoer rather than upon the innocent party. A litigant who is compelled to expend two hundred dollars to recover one hundred dollars damage, no question of fundamental principles being involved, does not feel that he has received justice, but rather that an injustice has been done him.
Parties to contracts are, as a rule, very much more familiar with, the subject matter with which the contract deals, the conditions under which the contract is ,to be performed,
It is suggested thát, because the market price of No. 1 Northern wheat at Minneapolis is made thé basis for computing the' plaintiff’s damages, the contract is therefore void as a gaming contract. Atwater v. Manville, 106 Wis. 64, 81 N. W. 985; Lowry v. Dillman, 59 Wis. 197, 18 N. W. 4; Barnard v. Backhaus, 52 Wis. 593, 6 N. W. 252, 9 N. W. 595. There is, however, not the slightest intimation in the record that the parties at the time of making this contract did not intend to carry it out in accordance with its terms. In fact, every inference to be drawn from the conduct of the parties, both at the time of the inception of the contract and down to the time of its breach, indicates clearly and definitely that it was the intention of the parties to perform it. It is therefore a valid contract. Wall v. Schneider, 59 Wis. 352, 18 N. W. 443. The fact that the great market places of the world are made use of by gamblers in the conduct of an illegitimate and unlawful business does not alter the fact that organized markets are not only proper but necessary under modern conditions. They perform a valuable and serviceable function in the process of distribution, and there is no reason why prices established there may not be made the basis for adjusting contract rights.
It is apparent that at the inception of the contract the probable damages which the plaintiff- might suffer in the event of a breach by the defendant would be difficult of ascertainment and uncertain. The parties agreed upon a fair basis of computation, and, while the amount recovered
By the Court. — Judgment affirmed.
Dissenting Opinion
(dissenting). By the affirmance of the judgment of the court below judicial sanction and thereby judicial approval is given .to the allowance as stipulated damages of an amount of not less than $4 per barrel for breach of a contract to buy such a staple necessary essential as flour, sold at the agreed price of $12.10 per barrel.
This item of so-called damages necessarily includes the profits of the transaction, and under the facts here can be reasonably construed to include nothing but profits.
If this is a legitimate, reasonable, and lawful profit between miller and wholesaler, it would have to be held to be such in a similar contract for the further sale of this same flour from the wholesaler to the retailer, and then again between the retailer and consumer. It presents a vista of hope for him who wishes to profit in the necessaries of life, but a rather hopeless horizon for the producer and the consumer.
This contact was made May 7, 1917, for delivery between September 15th and January 1st following. The United States Food Administration, by a regulation published August 24, 1917, declared that the maximum average profit of twenty-five cents per barrel of flour was reasonable and any profits in excess “unjust and unreasonable.” This twenty-five cents per barrel profit, although of course not controlling as to this contract of an earlier date, is cited here in contrast with the $4 per barrel allowed by this judgment.
’ In the same bulletin appears the following:
“In order to prevent hoarding and speculation in contracts for futures, no miller shall make, or have outstand*406 ing at any time, any contract for the sale of flour or feed, except such contracts as require shipment of such produce within thirty days after the making of such contracts.”
This quotation speaks for itself as to the view taken by the federal food administration on the possibility of just such contracts as are here involved being aids or instruments for hoarding and for speculation in contracts for futures, which is but another expression for gambling.
In the absence of evidence showing such a state of facts or circumstances surrounding this particular contract as would overthrow the prima facie showing of grossness, exorbitance, and swollen profits, I think the court should declare that such a stipulation resulting in such damages, whether it was therein definitely fixed at $4 per barrel or the same result reached by the agreed application of the multiplication table, is prima facie for a penalty and not for legal recoverable damages; leaving open to the plaintiff, however, the right of showing the court upon evidence that the facts and circumstances in this case warrant the allowance of these amounts as within the field of reasonable damages.
' From these elements of exorbitance and the apparent absence of any reasonable connection between the method of computation and the actual performance of the contract, it meets all the requirements so repeatedly recognized under the general rule, and particularly by this cqgrt, as distinguishing a penalty from liquidated damages. Seeman v. Biemann, 108 Wis. 365, 374, 84 N. W. 490; Davis v. La Crosse H. Asso. 121 Wis. 579, 589, 99 N. W. 351; J. G. Wagner Co. v. Cawker, 112 Wis. 532, 541, 88 N. W. 599; Grant M. Co. v. Marshall & Ilsley Bank, 166 Wis. 547, 555, 165 N. W. 14. See, also, Joeckel v. Johnson, 178 Iowa, 231, 159 N. W. 673, 676.
Both of the elements of extraordinary disproportion between the agreed damages and the damages which might result, or of exorbitance, are always recognized as throw
And such penalties are not enforced not from any desire to — quoting now from the majority opinion herein — “regard with paternalistic solicitude the situation of a party who has deliberately broken his contract,” but because a court refuses to be the third and enforcing party to an unconscionable agreement which for that reason is against public policy. Richmond v. Conservative L. Ins. Co. 166 Wis. 334, 341, 165 N. W. 286. Neither is he who speculates in food entitled to sympathy or solicitude.
It has long stood as a definitely declared principle recognized by this court that in executory contracts of sale the right to break such a contract, subject of course to respond in damages, is on substantially the same footing as the right to malee just such a contract. Haueter v. Marty, 156 Wis. 208, 212, 145 N. W. 775; Woodman v. Blue Grass L. Co. 125 Wis. 489, 494, 103 N. W. 236, 104 N. W. 920; Badger State L. Co. v. G. W. Jones L. Co. 140 Wis. 73, 79, 80, 121 N. W. 933. And again in Malueg v. Hatten L. Co. 140 Wis. 381, 384, 122 N. W. 1057, where this court adds that such breach of contract, without proof of legal damages, gives to the other party no right of recovery. Page 386.
There being no element of tort involved here, the general rule of liability for breach of contract is as was stated in McLennan v. Church, 163 Wis. 411, 422, 158 N. W. 73, “the limit of recovery is such damages as may be reasonably considered to have been in contemplation by the parties at the time of making the contract as the probable result of a
Conceding for the purposes of this case that although parties to such a contract have the legal right to breach it as to the conditions therein contained as to performance, but must nevertheless be held as to the conditions therein expressed as to the damages, yet such damages must nevertheless be such as were within the field of legal, reasonable anticipation of the parties at the time of making. If the final result savors of a penalty rather than legal damages, then such result was not within the' reasonablé anticipation of the parties and ought not to be enforced by the court.
Merely because the plaintiff asserts in its contract and defendant acquiesces that the milling business is so complicated and mysterious that its profits cannot be ascertained, ought not to deter a court from examining into its business, any more than a similar suggestion to the tax assessor should bind him to accept what is offered rather than to insist on what is due. Joint declarations of the parties that the unconscionable is conscionable, or that their ways of doing business are beyond ken, should neither blind nor bind the court.
Furthermore, the provision of the contract now offered, fixing the measure of damages by the fluctuation in the price of No. 1 Northern wheat on the Minneapolis market, is, from what appears in this record, a gamble and therefore void. When the principal contract is so tainted or a subsidiary contract is, with knowledge qf the party seeking to recover thereon, based upon such a tainted transaction, there can be no recovery. Kassuba C. Co. v. Blodgett, 155 Wis. 529, 531, 143 N. W. 1060, 145 N. W. 177; Carson v. Milwaukee P. Co. 133 Wis. 85, 91, 93, 113 N. W. 393; Olson v. Sawyer-Goodman Co. 110 Wis. 149, 85 N. W. 640; Atwater v. Manville, 106 Wis. 64, 81 N. W. 985.
There is here evidently no attempt at a compliance with
First, there is no provision in the contract for such purchase or use and no allegations of such in the complaint; there was therefore nothing in that regard for the defendant to deny.
’ Second, at no time could either defendant or plaintiff successfully have maintained under this contract that plaintiff was holding or obliged to hold for defendant any quantity of wheat of any grade.
Third, the idea of a wheat contract is expressly negatived by the language of the contract itself, in paragraph 10, “this contract is for the purchase of goods to be manufactured,” and in paragraph 5, “goods shall not be deemed manufactured until shipped;” plaintiff thereby expressly excluding the idea of any obligation on its part to manufacture flour for this contract prior to an order for shipment, and therefore is really binding itself to ship from a stock of flour only and not from a stock of wheat, and that is all that its allegations of readiness and compliance with the contract on its part should reasonably be extended to cover.
Under the method of computation provided’ for of four and one-half bushels of wheat to the barrel of flour, there is a resulting surplus of seventy-four pounds in weight, certainly of some value to plaintiff but not accounted for to defendant in assessing the damages, and yet upon which he is charged. If this contract contemplated the purchase for
If, as a matter of fact, plaintiff bought no wheat for this particular sale of flour or bought none until it was ready to deliver upon order of defendant pursuant to the contract, it could then have bought, to make good its depletion in its stock of flour, wheat at the then market price, and there would have been no actual damage, and it would have paid no actual carrying charges, although it has been allowed that also as damages in this case in addition to the $4 per barrel.
If it did manufacture this order of flour it was its duty to minimize damages arising from the breach of defendant in refusing to buy by disposing of this flour at the best market price then obtainable. Centennial E. Co. v. Morse, 227 Mass. 486, 490, 116 N. E. 336. If such price was not below the contract price there was no recoverable damage; if lower, the difference measured the legal damage and is the proper measure thereof. Stock v. Snell, 213 Mass. 449, 100 N. E. 830; Hall v. Paine, 224 Mass. 62, 65, 112 N. E. 153.
This case was disposed of in the court below on the case quoted in the majority opinion of Sheffield-King M. Co. (this plaintiff) v. Domestic S. B. Co. 95 Ohio St. 180, 115 N. E. 1014. There must be noted, however: The contract there was made in 1912 and the price was $4.75 per barrel as against the $12.10 here; there is nothing to show what proportion the amount recovered as damages bore to the contract price there, or that the question of grossness of profits was before the court. And there, by implication at least, the court recognized the necessity of plaintiff’s doing in that case what, it appeals to me, the plaintiff should be required to do here, namely, show that it purchased the wheat for that contract, if it desires to recover damages for any depreciation in wheat price, when that opinion says: “In this situation, when the plaintiff proved it had per
If the answer herein was not sufficient to properly present the issues that should be tried between these parties, then, under sec. 2405m, Stats., it is the duty of this court to direct that they shall be tried.
I think the judgment should be reversed and the plaintiff put to its proof to show that what on its face appears to be illegitimate was legitimate, and what stares- out from this measure of damages as an element of extortion and speculation was nevertheless an actual, substantial, and legal element of damage.