Court Opinion

ID: 9626321
Source: CourtListenerOpinion
Date Created: 2023-08-22 08:08:29.060364+00
Date Added: 2024-06-11T18:06:25.454163
License: Public Domain

CARTER, J.
I dissent.
This court holds the following provision a valid contract for liquidated damages: “It is agreed by and between the parties that the Contractor [defendant] is not an insurer, that the payments hereinbefore named are based solely on the value of the service in maintenance of the system described, that it is impracticable and extremely difficult to fix the actual damages, if any, which may proximately result from a failure to perform such services and in case of failure to perform such services and a resulting loss its liability hereunder shall be limited to and fixed at the sum of fifty dollars as liquidated damages, and not as a penalty, and this liability shall be exclusive.” (Emphasis added.)
It is conceded that defendant failed to perform its duty; that plaintiff’s loss resulted therefrom; that plaintiff’s loss was the sum of $35,930 which was taken, by a burglar, from plaintiff’s food market.
In order to uphold the so-called $50 liquidated damage provision, it was necessary for the majority to find that damages were “impracticable or extremely difficult” to fix at the time the contract was entered into, and further that the $50 provision bore a reasonable relation to any loss which the parties contemplated might be sustained as a result of a breach of the contract.
It is said in the majority opinion that “In determining this question [the losses which might be expected to occur] the court should place itself in the position of the parties at the time the contract was made and should consider the nature of the breaches that might occur and any consequences that were reasonably foreseeable.” Placing myself in the position of the parties at the time the contract was entered into. T would say that one way of ascertaining the loss which might occur, was to take an average of the amount of cash left in the safe in the store overnight; an inventory of the average merchandise kept in the store. If the losses sustained did not approximate the damages provided for by the parties, the. rule set forth in Kothe v. R. C. Taylor Trust, 280 U.S. 224 *190[50 S.Ct. 142, 74 L.Ed. 382], would be applicable. There the parties provided for excessive liquidated damages, and the Supreme Court held that the damages provided for in the contract bore no reasonable relation to the probable loss to be sustained and held the provision a penalty and therefore unenforceable. It is the rule that the validity of the provision must be proved by the one seeking to enforce it. And as is said in the majority opinion “Where a trial court does find that such a situation did exist [impracticability or extreme difficulty in fixing damages] but it appears to a reviewing court that from the nature of the possible detriment the damages could have been fixed without difficulty, a judgment based on the finding will be reversed (Stark v. Shemada, supra, 187 Cal. 785).”
It is also said in the majority opinion that “The question becomes one of law where the facts are not in dispute and admit of but a single conclusion.” Even if the facts are not in dispute, they seldom admit of but one conclusion. In this ease, one jury found for plaintiff and the second jury disagreed. Does this not prove that these facts admit of more than one conclusion? I think it does. It is also said here that whether damages are impracticable, or extremely difficult, to fix is “except on admitted facts . . . generally a question to be resolved by the trier of fact. . . .’’In Rice v. Schmid, 18 Cal.2d 382 [115 P.2d 498, 138 A.L.R. 589] (the latest pronouncement of this court on this subject), it was held that in “each instance” it was a question of fact. Further, even on admitted facts, more than one inference can be, and is often, drawn. (See Black v. Black, 91 Cal.App.2d 328 [204 P.2d 950] [stipulated facts; different inferences possible]; Crisman v. Lanterman, 149 Cal. 647 [87 P. 89, 117 Am.St.Rep. 167] [agreed statement of facts; different inferences possible] ; Anderson v. Thacher, 76 Cal.App.2d 50 [172 P.2d 533] [evidence not conflicting; conflicting inferences therefrom possible] ; Rench v. McMullen, 82 Cal.App.2d 872 [187 P.2d 111] [only documentary evidence offered was subject to conflicting inferences].) Again, this court goes to great lengths to uphold the validity of a provision such as this. Note the “possibilities” which it considers might have happened from a failure of the burglar detection system. It is said that “Entrances to the building after working hours might be made by persons having authority as well as by burglars or by persons bent on mischief. They might or might not cause *191damage. There might be the theft of a ham, or of a truckload of goods, or the contents of a safe. There might be a breaking in for the purpose of theft and no theft. If money was taken it might be a few dollars or many thousands. Books might be tampered with, or papers abstracted. Damage might be caused in many ways that were not foreseeable.” If persons having-authority to enter did so, plaintiff would, in all probability, not have sued the defendant, or, if it had done so, that would have been a matter of defense at the trial. If a ham had been stolen, the provision for $50 in all probability," would have been held a penalty as disproportionate to the loss involved. These same arguments apply to the balance of the “reasoning” of the majority.
It is also necessary that the amount agreed upon by the parties “represent the result of a reasonable endeavor by the parties to estimate a fair average compensation for any loss that may be sustained. (Dyer Bros. Golden West Iron Works v. Central Iron Works, supra, 182 Cal. 588; Rice v. Schmid, supra, 18 Cal.2d 382, 386; Restatement, Contracts, § 339, p. 554.) ” In other words, the amount agreed upon must bear some reasonable relation to the losses which might occur as a result of a breach. In my opinion, the $50 provision bears no reasonable relation to any amount which might have been lost by a failure of the system to operate.
The characteristic feature of a penalty is that it bears no relation to the actual damage which may be caused by a breach, but is arbitrarily fixed without any attempt to estimate the amount of injury. (8 Cal.Jur. 847.) The majority admits that the validity of a liquidation clause in a contract must be determined in accordance with the facts and circumstances of each particular case, but distinguishes the following cases: Pacific Factor Co. v. Adler, 90 Cal. 110 [27 P. 36, 25 Am.St.Rep. 102], Stark v. Shemada, 187 Cal. 785 [204 P. 214], Rice v. Schmid, 18 Cal.2d 382 [115 P.2d 498, 138 A.L.R. 589], Robert Marsh & Co., Inc. v. Tremper, 210 Cal. 572 [292 P. 950], Eva v. McMahon, 77 Cal. 467 [19 P. 872], Sherman v. Gray, 11 Cal.App. 348 [104 P. 1004], on the ground that “in each there were factors which would permit the parties to fairly estimate actual damages in the event of a breach—as a predetermined amount for every item of merchandise an obligor failed to deliver,” and that “The function of the agreed sum in each of those cases was to insure performance by the obligor and was properly held to be a *192penalty. ’ ’ I find no distinguishing features. It. appears to me that the $50 provision here might just as well be held to be a penalty in the event of nonperformance by the defendant, and that it certainly bears no reasonable relation to the losses which the parties had in contemplation.
I would reverse the judgment with directions to the trial court to retry the case and submit the issue of damages to the jury.