Court Opinion

ID: 8810461
Source: CourtListenerOpinion
Date Created: 2022-11-26 15:01:40.979045+00
Date Added: 2024-06-11T17:04:16.218519
License: Public Domain

MANTON, Circuit Judge
(after stating the facts as above). [1] Under the contract, the defendant below obligated itself to advertise for three years, to describe any starter or starters manufactured under the patents conveyed in all of its advértisements and printed matter, and on all name plates or in any of the manners or styles of advertising, as the “Rushmore starter,” or .the “Bosch-Rushmore starter,” or “System Rushmore.” It bound its assignees and successors to do likewise, and the parties agreed that, in lieu of such advertisement, the defendant below might pay $100,000 and thus be freed from the obligation so to do, and in the event of a breach of this obligation to advertise the parties agreed upon $100,000 as liquidated damages.
A reading of various samples of the advertisements and printed matter which the defendant below used and the method it indulged in, indicates a clear desire to so advertise as to convey to the mind of the average reader, and to the trade, that the ignition, lighting, and *467starting of the motor car could best be served by products of the defendant below, and while there is an actual picture displaying the starter of the plaintiff below, nowhere is credit given, as required b> the terms of the contract, to Rushmore for the starter, but in rather precise words the reader is led to believe that it is in fact the Bosch starter.
The defendant below urges that the clause of the contract providing for $100,000 as liquidated damages is, in fact, a provision fixing a penalty, and that, if it be treated as a question of liquidated damages, the contract was substantially performed by the Bosch Company, and there was no breach.
We agree with the Distinct Judge that there was a substantial breach of the contract to advertise the Rushmore starter. It is plain the parties intended to permit the defendant below to follow one of two courses: First, it might, if it saw fit, do no advertising whatever a.t a price of $100,000 as fixed upon by the parties, and the plaintiff below, upon the doctrine of alternative obligations, could have recovered that sum if it was not paid. But the defendant below did, in fact, do some advertising and choose to pretend to carry out its obligation of the contract by advertising, and thus did not seek to avoid or cancel the advertising obligation as it might have done. It is clear that the contracting parties valued the advertising as worth $100,000 to Rushmore. While the defendant below could eliminate advertising by paying $100,000, yet if it started to do so, and failed of substantial performance, the plaintiff below measured his loss at $100,000, and the defendant below agreed that this would be his damages.
[2] The fixed amount of $100,000 was not intended as, nor was it, a penalty. Many of the authorities determined the question of penalty as distinguishable from liquidated damages, by considering the reasonableness of the agreement, and attempted to ascertain what the liquidated damages bore proportionately to the loss actually suffered. Where it was found that the sum named is not disproportionate to the damages that might result from a breach, the stipulation was regarded as one of liquidated damages; otherwise, it was called a penalty.
In United States v. Bethlehem Steel Co., 205 U. S. 105, 27 Sup. Ct. 450, 51 L. Ed. 731, the court said:
“There has in almost innumerable instances been a question as to the meaning of language used in that part of a contract which related to the payment of damages for its nonfulfillment, whether the provision therein made was one for liquidated damages, or whether it meant a penalty simply, the damages to be proved up to the amount of the penalty. * * ® The courts at one time seemed to be qiiite strong in their views, and would scarcely admit that there e\er was a valid contract providing for liquidated damages. Their tendency was to construe the language as a penalty, so that nothing but the actual damages sustained by the party aggrieved could be recovered. Subsequently the courts became more ‘tolerant of such provisions, and have now become strongly Inclined to allow parties to make their own contracts, and to carry out their intentions, even when it would result in the recovery of an amount staled as liquidated damages, upon proof of the violation of the contract, and without proof of the damages actually sustained. * * * The question always is: What did the parties intend by the language used? When such intention is ascertained, it is ordinarily the duty of the court to carry it out."
*468The determination of the question depends upon the meaning and intent of the parties, as gathered from a full view of the provisions of the contract, the terms used to express the intent, and the peculiar circumstances of the subject-matter of the agreement. The true question is: What was the contract? 13 Cyc. 90.
In Stone, Sand & Gravel Co. v. United States, 234 U. S. 270, 34 Sup. Ct. 865, 58 L. Ed. 1308, the contract provided for “a forfeiture of all moneys and retained percentages due or to become due in case of failure to perform and due notice thereof”; and the court held this to be liquidated damages.
In Maryland, etc., Co. v. United States, 241 U. S. 184, 36 Sup. Ct. 545, 60 L. Ed. 945, a provision fixing a penalty for failure to complete on time of $20 per day was held to be liquidated damages.
_In Wood v. Niagara Falls Paper Co., 121 Fed. 818, 58 C. C. A. 256, this court, through Wallace, J., said:
“It is -not disputed that, in view of the subject-matter and nature of the agreement and the difficulty of estimating the exact damages likely to be sustained by the defendant in the event of a breach by the plaintiffs, it was competent for the parties to agree upon a fixed sum as liquidated damages for a breach; nor is it disputed that by the contract they did so agree. It is urged, however, that when it is made to appear in an action for the breach that no actual damages have arisen, notwithstanding the parties have agreed upon stipulated damages, the party iñ default is entitled to be relieved. That proposition is not sanctioned by the weight of authority. On the contrary, according to authority which is controlling upon this court, the law is that the naming of a stipulated sum in such a contract, to be paid for the nonperformance of a covenant, is conclusive upon the parties in the absence of fraud or mutual mistake, and evidence aliunde in respect to the damages actually arising from the breach cannot be received.”
It is apparent here the intent, as expressed in the contract and the stipulated facts, was that Rushmore was to stay out of the starter business for two years, and the defendant below was not only to manufacture and market his former product, but was to advertise it for a period of three years. Plaintiff below valued the advertising, which would keep his name before the public, and thus render it easier for him to enter business after the expiration of two years, at $100,000. We think the defendant below intended the same thing. The contract of advertising consisted of one covenant. We do not think that the covenant of advertising can be said to be separable. It consisted of one covenant, which has been breached in a very substantial way, and the damages agreed upon by the contracting parties must flow therefrom.
Judgment affirmed.