The Penn's Grove record., 1895-09-27
COOP 0 s~HogMAKtRs
MAchine Lessees Need Not Pay Usuriol
Penalties.

Machine Lessees Need Not Pay Usurlous
Penalties.
A decision OF the Supreme Court
in the suit OF the Goodyear Shoe
Manufacturing Company against the
Selz-Schwab company is Of general
interest to all manufacturers using
leased machines and OF particular in
terest to wholesale smoemakers who
rent the machines used In their facto-
rIes.
The Goodyear company controlt
most of the patents on shoe ma.
thinery and leases plants to big
shoemakers all over the country, who
pay a fixed royalty as rent. 1t makes
uniform leases, all of which provide
that the lessees shall render an ac-
count on the 10th day Of each month
of the number Of pairs Of shoes made
by the different machines during the
preceding month. The most material
provision of the lease la that the
rent shall be due on the first of each
month and shall De paid within one
mon b thereafter, but II the rents
are paid on the 18th a discount of 20
per cent. is granted. In the present
ase, while the machines were being
operated by the Selz-Schwab COM
pany, certain parties disputed the
ownership of the patents and gave
mott e to manufacturers not to pay
rent to the Goodyear company. As
the result of this notice, the SELF.
Schwab company did MT pay its rent
on the 18th of the month. After.
ward the conflicting claimants set.
tied with each other, and then the
Goodyear company demanded the
full rent refusing to allow the so
per cent discount because the rent
had not been paid In time to get the
discount
Suit was begun by the Goodyear
company for the full schedule rate,
under the lease. The lessor claimed
that the lease was to be construed as
a license to use the machines, and
that the provision for a discount did
not constitute a penalty, and that
the Selz-Schwab Company was bound
to pay the royalty contracted for In
the lease. Tee Selz-Schwab Com.
pauy contended that the actual roy.
atty agreed to be paid was the so per
cent Of the specified rate, and that
the excess aboge that amount was a
penalty, and that having paid the
% per cent, though after the 10Th
Of the month, the debt was dis.
harged.
The court held that the reasonable
construction Of the contract is that
the parties intended that 80 per
cent. of the rate specified In the
schedule should be the full amount
OF royalty to be paid; that the pro-
vision for the discount was part Of
the scheme for fixing the amount of
the rents, and that so per cent must
be considered as the real royalty to
be paid; that, both the maximum
and the discount rates being fixed Ia
the lease. 1t was idle to contend that
the maximum amount Is the real rent
agreed upon and that the smaller
amount Is a mere discount price.
The court held that where by the
terms of the contract a greater sum
of money is to be paid upon default
of payment Of a lesser sum, at a
given time. the provision for the pay
ment of the greater sur will be held
a penalty. That being a penalty the
court held that, according to the
terms Of the contract, the so per
cent stipulated damages would be
regarded as usurious and would not
be considered as binding.
In conclusion, the court held that
from the terms of the lease itself the
50 per cent. must be considered the
amount for which the lessor was
willing to lease tie machines and did
lease them, and that the greater
sum was simply a penalty to induce Q
prompt payment Of the rent.
The decision Is a far-reaching one,
as 1t affects a large number of manu-.
facturers In other lines who are using
rented machines.