Case ID: ky_55/html/0377-01.html
Source: Caselaw Access Project
Author: {"author": "Chief Justice Marshall", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Foster vs. Watson, &c.
    APPEAL FROM FRANKLIN CIRCUIT.
    1. Where one undertakes to perform a contract of a specific character in services, upon which he is to receive a fixed compensation, he cannot claim such fixed compensation under the contract until performance, unless prevented by the other party to the contract, without cause, in which event the party is entitled t> a ratable compensation, according to the terms of the contract; but if the other party have just cause for obstructing performance of the condition precedent, nothing can be claimed for the part performance but a reasonable compensation commensurate with the service rendered.
    2. Though a party may have failed to fulfill a contract by the performance of service which would entitle him to a fixed compensation, if he has performed service for the benefit of the other party he may be entitled to compensation for the value of such services.
    3. If a party in his hill in chancery fail to show that he is entitled to the specific relief which he asks, yet if he show a right to any relief, even in a court of law, a demurrer to the bill should not be sustained as to the whole claim, but the case transferred to the common law docket.
    Thomas S. Page purchased of Gray & Todd a confectionery store in Frankfort, at a cost of about $-, and engaged Lewis Foster to take charge of it, agreeing that when, by the profits arising from the business, it should be paid for, or Page otherwise released from responsibility, to convey the establishment to Mrs. James R. Watson and Foster, or to any one else they might direct. Foster having been before occasionally intemperate gave Page a verbal promise to keep sober, and attend faithfully to the business, which he did for about five months, when he took a drinking frolic. When about recovering from it he was presented with a paper bj' some one on behalf of Page, which he signed, acknowledging, in substance, that he had broken bis promise to Page, and promising, if admitted again into the store under the contract, to keep sober, or on failing to do so to leave it and forfeit all interest therein. At the end of about two and a half months he again took a drinking frolic, when he was ejected from the establishment. Foster brought this bill for compensation for his services according to the contract, and for such other relief as might be just. The bill was demurred to, and the demurrer sustained, and Foster has appealed to this court.
    
      J. Monroe for appellant—
    Argued — 1. That the court below erred in sustaining the demurrer to the bill. Foster entered upon the performance of the contract and labored faithfully for five months; during all that time he had, by his contract, an interest in the profits which were made.
    2. That at the time Foster was ousted from the concern the credits and debts due the concern were more than sufficient to pay the original cost which had not been actually paid, when added to the individual account of the other partner; and he had then an equitable right to a transfer of the store, and the chancellor should require the adjustment to be made as if the transfer had been made.
    3. The chancellor will not enforce a forfeiture, but will relieve against it. The paper C provides for the infliction of a penalty, which the chancellor will not carry into effect. That paper provides for the forfeiture of a vested right, as well as a right to be vested. A court of equity will never enforce a penalty, or allow a forfeiture, when compensation can be made in damages. (Story's Equity, sections 1313, 1314, 1315, 1316, 1320; Newland on Contracts, 307, 317; 1 Atkins, 449; 12 Vcscy, 284; Fonb. Equity, B. 1, chap. C, sec. 4, note H; 1 Vernon, 449 ; 1 Chancery Cases, 190; Brown’s Chancery Reports, 343; 2 Pothicr, note pages 341 to 345; Hardy vs. Martin, 1 Brown’s Chancery Cases, 419; Ib., J90; 1 Vescy, 279; 17 lb., 126 ; Pothicr on Obligation, note 345.)
    Where a penalty is inserted merely to secure the performance of some collateral object this object is considered the principal intent of the deed, and the penalty only accessional, and to secure the damages really incurred. (1 Maddox Chancery, 32; 1 Cox, 126; Keating vs. Sparrow, 1 Boll c)- Beatty, 374.) If to secure the party against the real loss that might accrue was the intent of the paper C, then it was in the nature of a penalty to secure a forfeiture, and a court of equity will not suffer it to be effectual for such unconsciencious purpose. (2 Story's Equity, sees. 331, 750, 775; Kcrchcval vs. Swope, 6 Monroe, 866: 1 Peters, 376; Hardin, 602; Eastland vs. Vanarsdalc, 3 Bibb, 374; Butt vs. Bondurant, 7 Mon., 423; 1 Cdl, 353 )
    There is no distinction between a penalty and a forfeiture, especially when the forfeiture can be compensated in damages, or arises upon the breach of a condition precedent. (2 Story's Equity, sections 1322, 1323, and note 1, page 688; 2 Johnson's Chancery Reports, 535 ; 4 lb., 431 ; Eden on Injunctions, chapter 1, pa?cs 21 — 26 ; 2 Com. Dig-, 2, 3, 5, 8, 9 ; 1 Chancery Cases, 90 ; 1 Vernon, 222.) Lord Chancellor Thur-low said, in the case of Solomon vs. Walter, that relief in equity may be granted where a penalty is named in the bond not merely to secure the payment of damages in fact, arising from a breach, but to secure the performance of an act. (See the whole case, American Leading Cases, 72dv-il. Law Lib., side page 786, which is a leading case ; Benson vs. Gibson, 8 Atk., 395 ; Errinston vs. Aynrsby, 2 Bro. Cli. Ca., 841 ; Easton vs. Lyon. 3 Vesey, 393.)
    The principle involved is analogous to the cases frequently arising in England of forfeiting leases for failing to perform a variety of acts done, or not done, in violation of stipulations in written leases. (See Nash vs. Lord Derby. 2 Vcm., 537 ; Ih., 664.) And’no-principle is better settled than that the chancellor will restrain a party from enforcing a penalty or forfeiture, where he can be fairly compensated in damages. Thus, in Mays vs. Alcnrk. 5 Mumlord, a bond was conditioned for the payment of $7,000 in two years, with a pro\iso that if interest was not paid regularly, the principal should be due at once. The proviso was held a penalty against which equity would relieve. on payment of the interest. The principle is clear, that where the object of the party is fulfillment of the contract, not the infliction of a penalty, or the acquisition of a collateral advantage, that it cannot be enforced.
    It is clear that the object of Page was to secure the services of Foster, and hence the procuring the paper C. Foster, if he is deprived of any compensation, is loser to the extent of all his services, and when according to the showing of the bill he had well nigh fulfilled his entire undertaking, and is turned off without any thing. What has Page parted with, and what has Foster received if he is thus turned oil'? Page, &c., will have received the services of Foster, by which he is profited near $1,000, and Foster i'cceives nothing; by his failing to keep at all times in such condition as he agreed to do, he is made to forfeit all his services. It cannot be that Page looked to such a result. It cannot be that the law will sanction such a result. The object was to secure the faithful care and attention of Foster.— Foster, through weakness and want of self-government, forfeited the letter of the bond, but no serious injury resulted. And the forfeiture should not be ■enforced, but compensation should be made to Foster commensurate with the value of his services: though he may not claim it by the terms of the contract, yet he is equitably entitled to it. And the judgment of the court should be reversed.
    
      J. Harlan for appellee—
    The facts as presented by Foster, in bis petition, did not entitle him to any relief at the hands of the chancellor.
    1. He admits that when the original agreement was made, he promised Mr. Page he would keep sober and attend to his business. He admits he violated that pledge by taking a spree as he calls it, but which was doubtless a drunken frolic, which continued for several days, perhaps a week.
    2. In order to reinstate himself and be placed in statu quo, he executed the paper marked C, in which he stipulates ‘‘that should I hereafter get to drinking, or otherwise become inattentive to my duties, as agent aforesaid, then I am at once to surrender all connection with the establishment named in this contract, and will forfeit all and every kind of interest whatever in said establishment, and will also forfeit all claims to wages, &c., it being expressly understood that the conditions of my remaining any longer as agent as before stated, that I am not to drink any sort of intoxicating liquors, or do any thing else that may interfere with my duties as agent as aforesaid. And I do hereby pledge myself to use all duo diligence in my power to promote the interest of said establishment for the purposes named in the contract, it being understood that by my strictly complying with this additional requisition, my interest is to be as stated in the foregoing contract.”
    Foster admits he violated this last agreement by getting drunk, and so continued for several days.
    3. It was argued there was no consideration for the last agreement. Does it require any money consideration for an agent to promise bis principal he will keep sober and always be in a condition to attend to business? Foster admits he made such a promise in parol at the outset; and it may be inferred it was a stiong inducement to Page to engage Foster as his agent.
    4. Is a party entitled to relief who shows that by the terms of his agreement he is not entitled to any? He made his own bargain and he should abide it. There is no hardship in compelling him to do it. He was in the store about seven months and a half, and received about $75 or $100 lor his services. The presumption is he has been paid to the extent of the value of his services.
    
      Here is the case of a young man, a printer by trade, who engages to perform certain services, and upon the faithful performance thereof, and the whole establishment paid for, and Page released from all responsibility, he is to be an equal owner thereof. — ■ He admits he failed to perform his duties, and asks the chancellor to reform the contract and pay him pro tanto. Is there any equity, or morality, in such an application? The party voluntarily gets drunk and endangers the whole establishment by permitting it to be burnt or robbed, and is not entitled to the favorable consideration of the chancellor.
    There is nothing in the agreement that would authorize Foster to receive any benefit except by a strict compliance. I refer the court to the case of Jeioetl vs. Thompson,2Lit., 52, and the authorities therein referred to by the court. The performance of the condition precedent is necessary to enable the party to recover on a contract. The non-performance by the plaintiff in that case was not his fault, but in consequence of the act of the government in making peace with Great Britain. In the English case cited by the court, the sailor who had shipped at Jamaica for Liverpool, and was to receive thirty guineas on his arrival at the latter port, died on the passage, and the court decided his administrator could not recover on a quantum, meruit, although the sailor had performed his services faithfully to the time he was attacked with the disease that caused his death. In the other case, the plaintiff was to receive £100 for one years’ services, but died three quarters of a year after-wards, the court said no recovery could be had for three quarters’ services. The principle of these cases is, that a contract is an entirety and cannot be split up.
    In the case at bar, the failure of the plaintiff was his voluntary act. His love of liquor overpowered him, and he claims compensation for services outside of his contract; a contingency not provided for by the parties.
    
      Page would not have employed Foster if he had supposed he would get drunk and neglect his business, and he cannot call on the court to change the contract, and pay him in a manner not contemplated by the parties.
    It seems to me it is a case destitute of merit, and the judgment of the circuit court should be affirmed.
    December 17.
   Chief Justice Marshall

delivered the opinion of the Court.

It is manifest from the statements of the petition that the primary object of the entire transaction to which it refers, was, so far as Page and the Watsons were concerned, to benefit Mrs. Watson by securing for her use the net profits, or a certain portion of the profits, of a confectionery store, which was expected, under proper management, to yield a large profit. It was for the promotion of this object that Page incurred the responsibility of purchasing the store, and it was for the purpose of securing at once an indemnity against that responsibility, and the intended benefit to Mrs. Watson, that the services of Foster for conducting and managing the business were engaged, by the promise of a joint and equal interest with Mrs. Watson in the entire establishment, so soon as it should be paid for, or when Page should be otherwise released from responsibility. To earn this extraordinary compensation was of course the motive of Foster for undertaking the service required, and was with him the primary object of his engagement. But with the other parties the object was to secure an indemnity to Page, and the intended benefit to Mrs. Watson, by the proper management of the business in which she was to be interested. It was to effect this object that the services of Foster were sought for and engaged; and that as a means of securing the requisite attention, skill and fidelity on his part, this prospect of extraordinary compensation, which according to the statements of the petition might be easily and speedily realized, was held out to him by the covenant of Page, that when the establishment should be paid for, (as it was expected to be out of its own profits.) or when Page should be otherwise released from responsibility for it, he would convey it to Mrs. Watson and Foster, or as they should direct. It was in that event only' that the establishment was to become the property of Foster and Mrs. Watson; until then it was to remain the property of Page, who expressly reserved the right of employing another agent for its management.

1, Where one undertakes to perform a contract of a specific character in services upon which he is to receive a fixed com ponsution, he cannot claim Biu-h fixed compensation under the contract until performance, unless prevented by the other party to the contract without cause; in which event the party is entitled to a rateable com pensation, ac cording to the •terms of the contract. But if the other party have just cause for obstructing performance of the condition precedent, nothing cm be claimed for the part performance, hut a reasonable compensation commensurate with the service rendered.

It is evident that the expected services of Foster constituted the sole consideration of any benefit intended to be secured to him by the covenant, and if its language imports anything more, it is to that extent wholly gratuitous and unenforceable. If this be not the case, then although Page might have to pay for the store himself, without any aid from its profits, or although Foster should withhold his services entirely, or should render such slight service, and in such a negligent manner as was manifestly inconsistent with his duty and inadequate to the attainment of the object of the contract; and if in consequence of this, another agent should be necessarily employed, and by his services the store should be made to pay for itself, Foster might still claim the promised compensation, however little he might have contributed by his services to the end and objects of the arrangement.— And as this would most obviously violate the intention of the parties, the covenant must be understood as being based upon the consideration and condition of a faithful and continued discharge on the part of Foster of the duties implied, not only in his undertaking to manage this concern for the purposes which his employers had in view, but also in the extraordinary compensation promised, and which evinces the importance of the object in view, and also and especially the importance attached to his services as the chosen means of its accomplishment.

It was evidently the expectation of the parties that the store should pay for itself, and that in this way the price for which Page had become responsible should either be paid to, him, or paid to his vendors in discharge of his responsibility. To effect this object the services of Foster were engaged, and upon its being effected they were to be compensated by the promised transfer to himself and Mrs. Watson. If a payment by or for the benefit of these parties, which should release or remunerate Page, might entitle them to the transfer, though the means of payment were not derived from the store, such an event does not appear to have been contemplated, and as it has not happened, it may be regarded as wholly out of the case.

Then the essence and substance of the transaction was, a contract on the one side to employ and permit, and on the other to render service as the manager and conductor of the store for the purpose of paying for it out of the profits or proceeds of the business, and of thus entitling Mrs. Watson and the agent by whose services this object was to be effected, to the joint proprietorship of the store. And as the services of Foster were the only consideration for the interest which he was to have, so the continuation of those services until the object should be accomplished, was the sole condition on which he was to become entitled to the promised compensation, or any part of it. The contract on his part was a continuing contract, to terminate only with the accomplishment of its object, and as its performance was the consideration and condition of the stipulated reward, and could not be complete until the object of his undertaking was accomplished, he could not until that event be entitled to anything under the contract, because he could not until then have performed the condition precedent on which his entire right would depend. The prevention of his performance by the act of the other party, without his default, would take the case out of this rule, so far only as to entitle him to a rateable compensation according to the terms of the contract. But without such excuse for nonperformance, he would be entitled to nothing under the express contract, and could at most claim compensation only for the value of his services actually rendered.

2. Though a party may have failed to fulfill a contract by the performance of service which ■would entitle .him to a fixed c ojmp ensation, if he has performed service for the benefit of the other party, he may bo entitled to compensation ior the valueof such services.

The petition discloses the fact, that in about five months after the making of this contract, and at a time when its object had not been either literally or substantially accomplished, he was by his own voluntary act, viz., by becoming and remaining intoxicated, rendered unfit, and in fact unable to attend to the business of the store, and that his services therein were in fact discontinued or suspended for some days. This was not only inconsistent with the duties implied in his undertaking to manage the store, and a violation of that engagement, but it was a breach of the express promise made by him on the requisition of Page when the covenant was delivered to him. But it was not merely a violation of duty and of contract, by failing to perform the proper services in the store, and by the breach of his verbal promise to abstain from intoxication; it was in itself gross misconduct, which proved, or tended to prove, that he was not to be confided in for the proper management of the business which had been entrusted to him, and which, although it might have been overlooked if the other parties had chosen, justified them in excluding him from future service and from all interest under the contract, unless under new stipulations which they might deem sufficient to secure that faithful attention and prudent management which the original contract certainly, though not expressly, required. And as he did actually enter into new stipulations, by which he agreed that if he should afterwards get to drinking, or otherwise become inattentive to his duties as agent, &c., he would at once surrender his connection with the establishment and forfeit all interest in it, and all claim to wages, we are of opinion that by his subsequently becoming and remaining intoxicated, and unfit for some days to attend to the business, he again put it in the power of the other parties to displace him from his employment, and to divest him of any interest under the contract, and that he has no right to complain on account of their having done so. He has by his own conduct violated his original as well as his subsequent engagement and duty, and having by his own fault failed in his part of the contract, and given to the other party the right to prevent his future action under it, he has lost the right to claim anything by virtue of its provisions in his favor. So far, therefore, his claim, as presented in the petition, is without foundation in equity, and the demurrer was properly sustained to that extent.

3. If a party in his bill in chancery fail to show that he ig entitled to the specific relief which he asks, yet if he shows a right to any relief, even in a court of law, a demurrer to the bill should not be sustained as to the whole claim, but the case transí erred to the common law docket.

But we are of opinion that he still has a right to a just compensation for his services actually rendered, and that the court, instead of dismissing the petition, should have directed or allowed such amendment as would have presented the plaintiff’s claim for his services independently of the contract, and on the principles of a quantum meruit, and should have transferred the case to the common law side of the court. The agreement to surrender the claim to compensation, was in effect a forfeiture, or penalty, from which the petition shows a right to be relieved, on account of the pressure of circumstances under which it was made, and to this extent the plaintiff showed himself entitled to such relief as would prevent the agreed forfeiture from operating against his claim to a reasonable compensation.

Wherefore the judgment is reversed, and the cause remanded with directions to overrule the demurrer, except to the extent above indicated, and for further proceedings.