Case ID: la_153/html/0303-01.html
Source: Caselaw Access Project
Author: {"author": "DAWKINS, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

(95 South. 777)
    No. 25558.
    SHERER-GILLETT CO. v. BENNETT. In re SHERER-GILLETT CO.
    (Jan. 27, 1923.
    Rehearing Denied Feb. 26, 1923.)
    
      (Syllabus by Editorial Staff.)
    
    1. Contracts <S&wkey;l — Parties bound reciprocally and each entitled to' recover for other’s breach.
    In a commutative contract, the parties are reciprocally bound to perform, and, upon failure, the one in whose favor the breached stipulatiqn runs has an action for such damages as may have been suffered and were within the legal contemplation of the parties.
    2. Contracts <s&wkey;l0(1)— Stipulation of lease relieving lessor of liability held to render it not binding.
    Where lease of store counter with privilege of purchasing provided lessors were not to be liable for delay or failure in delivery due to any cause whatever, the lessor was not bound, and hence neither was the lessee under Rev. Civ. Code, arts. 1799 and 1893.
    3. Set-off and counterclaim &wkey;>56 — Compensation and reconvention; reconventional demand on contract held to defeat claim that it was nudum pactum.
    Where defendant admitted the contract sued on and asked judgment in reconvention for amount paid thereunder and damages for plaintiff’s nonperformance without pleading that the contract was a nudum pactum, such question dropped out of the case, though defendant attempted to reserve its rights under an overruled exception.
    4. Estoppel <®=»92(l) — Party cannot claim benefits and escape obligations of undertaking.
    One will not be allowed to claim the benefits, and at the same time escape the obligations, of an undertaking.
    
      On the Merits.
    5. Usury &wkey;>61— Provision for liquidated damages not usurious.
    Provision, in lease of store counter with privilege of purchasing, for recovery, as 'liquidated damages, of 40 per cent, of the total rent in case of wrongful refusal to accept delivery, was not usurious, as such stipulated payment was not interest.
    6. -Damages <&wkey;85 — Stipulation for liquidated damages permissible.
    Parties to lease of store counter had right to stipulate for payment of 40 per cent, of total rent as liquidated damages in ease of wrongful refusal to accept delivery under the express provisions of Rev. Civ. Code, art. 1934, par. 5.
    7. Bailment <&wkey;31 (3) — Evidence held to show lessee at fault in not accepting delivery.
    Correspondence and other evidence held to show that the reason a store counter was rot delivered and accepted nnder a lease was because the .lessee changed his mind and determined not to perform the agreement, and not because of any delay in delivery.
    O’Niell, C. J., and Overton, J., dissenting.
    Action by the Sherer-Gillett Company against William J. Bennett. A judgment for plaintiff was reversed by the Court of Appeal, and it applies for a writ of review.
    Judgment annulled and set aside, and judgment of the district court reinstated.
    Dart, Kernan & Dart and Leo L. Dubourg, all of New Orleans, for applicant.
    J. A. Morales, of New Orleans, for respondent.
   DAWKINS, J.

Plaintiff and defendant signed a document purporting on its face to be a lease of a store counter, upon which defendant (the purported lessee) paid the sum of $12 cash, and executed a note for $306, payable in installments of $17 each on the first of» every month for a period of 18 months. It was further stipulated that; if, at the end of said lease, defendant had fully performed its terms, that is, had paid the monthly installments, he should have, for the period of 30 days, the privilege of purchasing the counter for $10.

Thereafter, and before the counter had been delivered, circumstances- arose (which we shall hereafter discuss) which resulted in this suit — not for specific performance and the purchase price, but upon a certain clause or stipulation of tbe instrument for liquidated damages because of the refusal to accept delivery of the counter.

Defendant first excepted that the petition disclosed no cause of action. This was overruled, and he then answered admitting the contract, averring its violation by plaintiff, and reconvening for damages for said alleged breach.

The district court gave judgment for plaintiff for the stipulated damages, and rejected the reconventional demand. The Court of Appeal reversed this judgment and rejected plaintiff’s demand, upon the ground that the claim was for disguised usurious interest and its recovery prohibited by statute.

The case is now before us for review upon certiorari.

Opinion.

The Court of Appeal did not discuss the exception of no cause of action, but after stating the issues, immediately tools up and considered the claim as one for usurious interest, citing at length authorities to sustain that view.

Exception of No Cause of Action.

The exception of no c^use of action did not, of course, set forth the particulars in which it was contended no cause -of action was shown; but, from the briefs, it appears that it was based upon the theory that' the alleged lease was a nudum pactum. In support of that proposition, it is pointed out that, while the document was signed by both parties, it imposed no obligation upon plaintiff (lessor) because of tbe following clause, to wit:

“It is further agreed that- the Sherer-Gillett Company does not undertake to deliver said counter within any specified time, but only as promptly as prior orders and shipping facilities reasonably permit, and that they are not to be liable for any delay or failure in the delivery thereof due to any cause whatsoever, either within their control or otherwise.”

In a commutative contract, the parties are reciprocally bound to perform, and for failure to do so, the one in whose favor the breached stipulation runs has (in some cases an action for specific performance at his option) an action to recover damages, such as may have been suffered and as were within the legal contemplation of the parties at the time of signing the agreement. R. 0. O. 1926 et seq. It is this legal tie, backed by the force of the law, which makes a contract binding. However, in the present ease, plaintiff sought to escape from that situation, by having defendant agree that no such damages might be recovered, no matter how gross its fault might be. The result was that it was at liberty to perform or not as it saw fit, without running any risk; it was not bound, and neither was the defendant. R. C. C. arts. 1893, 1799 ; Campbell v. Lambert, 36 La. Ann. 35, 51 Am. Rep. 1 ; Landecker v. Sarpy, 37 La. Ann. 836 ; Martel v. Jennings-Heywood Oil Syndicate, 114 La. 358, 38 South. 253.

After the exception o.f no cause of action was overruled, defendant, “without * * * waiving the exceptions * * * ” defied that he was indebted to plaintiff in any sum, but admitted that “he had entered into a contract with plaintiff not in the manner set forth therein; and avers that the said plaintiff deliberately failed to comply with the terms of this contract as will be fully shown upon the trial hereof.” Respondent denied that he had refused to accept said counter, and further averred as follows:

“Further answering says that when he purchased said counter for his store petitioner agreed and obligated itself through its agents to deliver the same at once from its local warehouse, and it was found afterwards petitioner did not have any in the warehouse and could not make delivery.
“That respondent waited for the delivery of said counter all through the months of April, May, and the early part of June, and when he found out petitioner could not comply with its contract and he being in immediate need of the same, the contract was canceled the latter part of June, 1920, and respondent forced to buy another counter in the open market.
“Now, assuming the position of plaintiff in reconvention, petitioner alleges that in order to bind said contract he was induced to pay ■defendant in reconvention the sum of $12 as more fully appears from the receipt dated April 1, 1920, made part hereof, and to be produced upon the trial of this cause.
“First. That by reason of the failure of the Sherer-Gillett Company to comply with the terms and conditions of said contract and to deliver in due time said counter petitioner in reconvention has suffered damages in the true sum of $500, as will be more fully shown upon the trial of this cause.”

The prayer of the answer was that plaintiff’s petition be dismissed at its cost, and that defendant have judgment in reconvention for $512, with interest, costs, etc.

The answer contains no suggestion of the ■issue now raised, i. e., that the contract is a nudum pactum, although respondent’s rights under the “exceptions” were sought to be reserved. The defendant could have pleaded the want of mutuality, and, in the alternative, have set up and sued upon the alleged breach; but, on the contrary, he admitted the execution of the contract, and his complaint was, not that plaintiff was not bound, but that it had not complied with the terms of the contract, notwithstanding it had “agreed and obligated itself through its agents to deliver the same at once from its warehouse, etc.” It looks very much, therefore, as if the idea that the instrument was a nudum pactum was an afterthought.

It is evident that if defendant had sued upon this document in the first instance, as he has done in reconvention, and the present plaintiff had, itself, sued' in reconvention for the stipulated damages, defendant as plaintiff (suing upon the contract) could not be heard to say in defense of the action for damages, that the instrument was a nudum pactum. The situation is no different as it is; both parties are claiming rights growing out of and flowing from the contract, and hence' neither can repudiate it. The reason is that neither law, equity, nor good conscience will allow one to claim the benefits and at the same time escape the obligations of an undertaking. Willoughby v. Fidelity Co., 16 Okl. 546, 85 Pac. 713, 7 L. R. A. (N. S.) 548, and notes, 8 Ann. Cas. 603.

We conclude, therefore, that whatever may have been the relative rights of the parties in the beginning, the question of mutuality no longer exists under the state of the pleadings.

On the Merits.

We do not agree with the Court of Appeal as to the nature or purpose of the stipulation' for damages. The provision reads:

“I (or we) empower any attorney to confess a judgment against me (or us) in a sum equal to forty per cent, of the total rent covenanted to be paid, with costs of suit, and attorney’s fees of ten per cent, as your liquidated damages, in case I (or we) should wrongfully refuse to accept delivery of said counter; such power being in all -things coextensive with the power hereinbefore granted.”

It is apparent that the penalty was not to be recovered in addition to the purchase price, but only in event defendant refused to accept delivery; and once it was demanded and paid, plaintiff would have no further rights under the contract It represents the sum which the parties agreed should be the measure of the damages for the breach in the manner named. They had a right to make such stipulation under express provision of the Revised Civil Code, art. 1934, par. 5. The 40 per cent, sued for herein was no doubt intended to cover the expenses of plaintiff’s agent in obtaining the contract and the profit which it would have made had the agreement been carried out. In no event was it interest. Once the counter had been delivered and accepted and the price had become collectable, the contingency which made the present claim for damages possible would have passed out and been extinguished.

On the question of whose fault it was that the agreement was not carrie'd.out, we find that both parties were slow in taking action in the matter. The order was dated April 1, 1920, and acknowledged by postal card about April 10th; and, on April 27th, defendant wrote plaintiff as follows:

“Your letter to hand regarding the shipment of our counter. I am not in shape as yet, to see my way clear to purchase such a counter, and I ask that you cancel the order right away.
“But I may think it over and take one of your smaller ones. Please send me your catalogue prices on yoiir small counters, so I may get my counter as soon as shipment is possible.
“Thanking you sincerely for this favor.”

This letter was not acknowledged until May 13th, on which date plaintiff replied that although it was not customary to allow cancellation of orders, in this particular instance, if defendant would send it an order for a smaller counter, it would ship same instead of the one first ordered. Catalogue and price lists were sent, with the request the ^defendant reply promptly in order that a new contract might be forwarded for his signature.. Having received no response froln this letter, plaintiff again wrote on May 24th, in part, as follows:

“We have not heard from you in reply to that letter (May 13th) and if we do not hear from you by return mail we will deliver the counter and will expect you to accept it in accordance with the terms of the contract which you signed.”

Again on June 8th, plaintiff wrote defendant that it had had no answer to its former letters, and that “we are placing the matter in the hands of our attorney” ; that it seemed defendant was “endeavoring to get out from under your contract,” and such action could not be permitted; and it further suggested that in order to avoid trouble, defendant “do something definite pretty quick.” This last communication, although dated June 8th, provoked the following response on June 11th, from defendant:

“We are -fo-day in receipt of your two letters, the first we have heard from you since I ordered my counter. I wrote you in regards to the delay, and wishing to have it changed to a short counter. But got no reply. Now 1 have purchased me a counter here, and as for trying to jump my contract, you can cancel my order, and refund me my $12.00. As you did not stand up to your contract as signed by your agent, and I guarantee you that my attorney is as good as yours.”

This last letter of defendant was not true in at least three important particulars: First, it was not the first he had heard from plaintiff since ordering the counter, as is evidenced by his letter of April 27th, quoted above, wherein he acknowledges receipt of one from plaintiff after giving the order, and asked permission to order a smaller counter; second, he had made no complaint about delay in said letter-of April 27th; and, third, the assertion that he had purchased another counter was admitted by him as a witness not to be true. It is true that plaintiff’s first two letters were addressed to defendant at 1025 Camp street, his former place of business, and the last to 1422 Pauline street; but he got at least three from plaintiff, for he acknowledged one April 27th, and two on June 11th, and plaintiff never claimed to have written but four times, including the postal card acknowledging the order.

' Plaintiff’s secretary in depositions taken by commission testifies, that plaintiff had a number of counters of the design first ordered by defendant in a warehouse in the city of New Orleans, one of which could have been delivered within an hour’s time. Defendant says that he coniplained to the agent of plaintiff of the failure to deliver upon the occasion of his attempt to collect an installment of the rent a short while after the contract was signed; but this, too, fails to jibe with the documentary evidence. The first installment, as shown by the contract and note signed by defendant, did not become due or collectable until June 1, 1920, and defendant’s letter, saying he was “not in shape as yet to see my way clear to purchase such a counter,” was written on April 27th, a month and three days before anything else was due; and he made no complaint about delay therein, but requested that he be sent a catalogue and allowed to select a smaller counter. There is no explanation of why defendant did not get, if he in fact did not receive it, the one remaining letter or post card which he is not shown to have actually acknowledged over his own signature; and we are very much impressed with the belief that he did receive them all, and within a reasonable time after they were written.

Considering all the facts and circumstances, we are convinced that the real reason for the.failure to deliver and of the defendant to accept the counter in compliance with the tender contained in plaintiff’s letter of June 24th, after defendant failed to make another selection, was that the latter changed his mind and determined not to accept the counter or to perform any of the other stipulations of the agreement; hence he is liable for the stipulated damages.

For the reasons assigned, the judgment of the Court of Appeal is annullod and set aside, and the decree of the district court is reinstated and made the judgment of this court; defendant pay all costs.

O’NIELL, O. J., and OVERTON, J„ dis-, sent.