Court Opinion

ID: 4720744
Source: CourtListenerOpinion
Date Created: 2021-08-12 02:36:17.066484+00
Date Added: 2024-06-11T08:07:38.053760
License: Public Domain

Mackintosh, J.
(dissenting) — For the reason that I think the opinion in this case states an unsound principle of law, I am forced to dissent.
Upon the question whether the contract under consideration is void as against public policy, or the provisions of the state constitution in regard to monopoly and trusts, or under the Sherman Anti-Trust Act, there may be a very serious question, and that the contract should be held void there is supporting argument in the recent decisions of the United States supreme court in the cases of American Column & Lumber Co. v. United States, U. S. Adv. Ops. 1921-22, p. 159, decided on December 19, 1921, and Federal Trade Commission v. Beech Nut Packing Co., U. S. Adv. Ops. 1921-22, p. 178, decided January 3, 1922. But I am not so much concerned with that question as with the other question decided in this case, and am willing to assume that the contract is a valid and enforcible one.
It is elementary, and will be conceded to be the general rule by every one hearing it stated, that courts of equity will not enjoin the breach of contracts. Where the contracts provide for liquidated damages, or, if not so providing, the damages can be ascertained which will compensate for the breach, the party not in fault will be left to sue for such damages, or he may compel specific performance. Where a contract provides for liquidated damages, specific performance is not available in some jurisdictions, but after a consideration of this question with our recent case of Asia Investment Company v. Levin, decided February 23, 1922, to be reported in 118 Washington Beports (204 Pac. 808), we are committed to what seems to us to be the better rule; that, although the contract agrees upon liquidated damages, still, upon a breach by one party, the other party has the option of suing for the recovery of such damages, or in equity to enforce specific performance. But there are certain classes of cases in which courts of equity will not order specific perform*443anee, one of those classes being where the equity court would be compelled to take over and conduct the business, or to engage in such constant supervision of the execution of the details of the contract as to be a burden upon the court. In those cases the party to the contract against whom the breach has occurred is relegated to his action at law for damages, and it is to avoid such action that injunctions are sought, which will indirectly have the effect of, at least, partially compelling performance.
But courts of equity will not beat around the bush in this manner unless the law action for damages is not sufficient, and they hold that, where the contract provides for liquidated damages, such damages are sufficient. Of course, within this rule fall those cases where the party committing the breach is insolvent, it being apparent that an action at law against him for breach of his contract would furnish inadequate relief; so, in insolvency cases, we find courts of equity enjoining the breach of contracts where the court cannot order specific performance.
No injunction should he allowed to prevent the breach of the contract before us. The contract itself, after pledging the grower to “strictly and fully comply with and perform the stipulations and agreements on his part herein to be performed,” states that it is “hereby further and mutually agreed that, inasmuch as it is impossible at this time to fix and estimate the actual damage which will be sustained by the association in the event that the grower shall fail to abide by his agreement to market his said fruit through the association, such damages are hereby estimated and agreed upon as one dollar per box for each box of cranberries grown or sold by the grower . . . . ”
No language more explicit or definite could have been used to create a stipulation for liquidated dam*444ages. The provision meets all of the requirements that have been set down by this court as constituting a provision in a contract one for liquidated damages. We therefore have a case where the parties themselves have left nothing to be decided in an action at law against the grower, except the question of whether he has or has not breached his contract. The damages-flowing from such a breach, if it is established, have been absolutely determined, and the courts are uniform in holding that such a determination by the parties constitutes adequate compensation for the breach. In this case, however, the court, in substance, says that the provision for liquidated damages is without effect, and that a breach of the contract will be enjoined, although the parties themselves have determined upon the measure of damages.
This court should not substitute its judgment as to whether damages are adequate or inadequate, contrary to the judgment of the parties to the contract themselves, who have formally agreed that damages in a certain amount are adequate, such agreement as to the amount of damages having been made in full view of all the purposes which the contract was seeking to accomplish, and the indefiniteness of the amount of damages a breach might occasion.
When the parties have agreed on the amount, it will not do for this court to say that it is inadequate. No stipulation for liquidated damages is set aside for that reason, but may be set aside for the reason that they are so excessive as to amount to a penalty. The parties knew, as well as this court, “that it is impossible to fix and estimate the actual damage sustained, in event the grower shall fail to abide by the agreement and the damages are only estimated.” Tet this is the situation in nearly all cases where liquidated *445damages are agreed upon. The parties knew, as well as this court, that they desired “to protect the respondent, and the other growers which it represented, in accomplishing the purposes of the undertaking,” for in the contract they said, “the grower fully understands that the purposes, among others, of this agreement is to maintain and increase to its greatest efficiency the association . . . . and to accomplish this .... he agrees that he will not sell . . . . .his fruit to any other firm, etc. . . . and it is . . . agreed that, inasmuch as it is impossible at this time to fix and estimate the actual damage . . . such damages are estimated and agreed upon as $1 per box . . . which sum shall be allowed in any action brought ... to recover damages for the breach of this agreement.” What did they mean? Were they so incompetent to contract for themselves, and so unfamiliar with the subject-matter with which they were dealing, and so unskilled in expressing their ideas that this court will say their language is futile and rewrite the contract as it thinks it should have been? To do so is to violate too many sacred rules of contracts.
The decision is based upon the case of Harris v. Theus, 149 Ala. 133, 43 South. 131, 123 Am. St. 17, 10 L. R. A. (N. S.) 204, and others noted in connection with that case in 10 L. R. A. (N. S.) 204. It seems to me that those cases can be clearly distinguished from the case at bar. The majority of them are cases in which either a professional or business man has sold out his practice or business, and has agreed with the purchaser not to resume business or practice in competition with the purchaser for a certain definite period of time. In such cases the courts have enjoined the seller from committing a breach of his contract.
The. exception to the rule in that class of cases has always been recognized as sound. The principal case
*446of Harris v. Theus, supra, was a case where the seller of certain lands agreed not to engage in a certain business within ten miles of the place, so long as the purchaser should be engaged in that business.
In the case of Diamond Match Co. v. Roeber, 106 N. Y. 473, 13 N. E. 419, 60 Am. Rep. 464, a contract was made by the seller with the purchaser that he would not, within any time during the next ninety-nine years, engage in the manufacture of friction matches, except in certain specific territories, and breach by the' seller was enjoined. The court said:
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“It is, of course, competent for parties to a covenant to agree that a fixed sum shall be paid in case of a breach by the party in default, and that this should be the exclusive remedy. The intention in that case would be manifest that the payment of the penalty should be the price of non-performance, and to be accepted by the covenantee in lieu of performance. . . . It is a question of intention, to be deduced from the whole instrument and the circumstances; and if it appear that the performance of the covenant was intended, and not merely the payment of damages in case of a breach, the covenant will be enforced. ’ ’
Ropes v. Upton, 125 Mass: 258, was a case where the parties were partners and one sold to another his interest and good will, and agreed not to carry on business in the same place, and on attempting to do so was enjoined.
Heinz v. Roberts, 135 Iowa 748, 110 Ñ. W. 1034, was an agreement by .an attorney who sold his practice and represented that he would not practice his profession within certain territory. Injunction against the breach was granted.
Wilkinson v. Colley, 164 Pa. St. 35, 30 Atl. 286, 26 L. R. A. 114, was a case of a physician who sold out his practice and agreed not to return thereto for a period of ten years. In less than four years he resumed prac*447tic© in the same community where he had originally practiced, and an injunction was granted against this conduct.
In Zimmermann v. Gerzog, 13 App. Div. 210, 43 N. Y. Supp. 339, the vendor of a business agreed that he would not enter a similar business for a given period of time. The breach of this covenant was enjoined.
The other cases cited in the majority opinion are ones where there had been no provision for liquidated damages, or where the remedy at law was inadequate.
The case of American Electrical Works v. Varley Duplex Marget Co., 26 R. I. 295, 58 Atl. 977, presented a situation where the respondent had contracted to put machinery in the appellant’s factory, to be used for their joint benefit, and the complainant, in reliance on its right to use the machinery, had, in addition to expending money for material, entered into contracts to supply large quantities of the product to be manufactured thereby. The court held that damage for failure to perform was not susceptible of computation, and defendant should be enjoined from removing the machinery, although the contract between the parties could not be enforced by specific performance.
Chicago & Alton R. Co. v. New York, L. E. etc. Co., 24 Fed. 516, was a case where an injunction was granted to restrain breaches of negative covenants, which resulted in compelling the observance of affirmative covenants, the court saying, however, that equity would only interfere when the recovery of damages at law would inadequately redress the impending injury.
The case of Western Union Tel. Co. v. Union Pacific R. Co., 3 Fed. 423, enjoined the violation of a contract which called for the performance of continuous duties involving the exercise of skill, personal labor and cultivated judgment, but for the reason that damages could not adequately be arrived at.
*448From the case of American Electrical Works v. Varley Duplex Marget Co., supra, an extensive quotation is contained in the opinion of the court, which quotation is composed largely of a quotation from the opinion of Judge Lowell in Singer Sewing-Machine Co. v. Union Button-Hole etc. Co., Fed. Cas. No. 12,904. The court, in referring to the opinion of Judge Lowell, says, as appears in the quotation, “the question under consideration according to the most modern authorities is found in the-opinion of Judge Lowell.” The opinion of Judge Lowell was rendered in September, 1873, so that it cannot be said to be a review of extremely “modern authorities.” Moreover, Judge Lowell himself, in the case of Bickford v. Davis, 11 Fed. 549, decided in April, 1882, referred to his former opinion in the Singer Sewing-Machine case, supra, recognizing it as being contrary to the general rule, saying, “as a general rule a court of equity will not order such a contract to be specifically performed . . . There are a few exceptions to this rule, as I said in the Singer Sewing Machine case . . . still, it is the general rule. ”
Passing now to a review of the cases which, to my mind, have squarely considered the question before us, and attempting to confine the consideration of them within reasonable limits, and on that account taking principally those from the United States supreme court, we find the following: In Sun Printing etc. Ass’n v. Moore, 183 U. S. 642, that court said:
“The naming of a stipulated sum to be paid for the non-performance of a contract is conclusive on the parties in the absence of a fraud or mutual mistake. Parties may, in a case where the damages are of an uncertain nature, estimate and agree upon the measure of damages which may be sustained from the breach of the agreement. ’ ’
*449In that case, Chief Justice White, in a most elaborate opinion, reviewed the entire question of liquidated damages, and shows that, where the parties have made certain what otherwise would be uncertain, by agreeing upon the amount of damages, such agreement is binding upon them.
In Javierre v. Central Altagracia, 217 U. S. 502, the supreme court of the United States held: Injunctive relief will not be granted in equity against disposal of sugar cane elsewhere than at the sugar factory designated in the contract with the growers, as a suit for damages will afford adequate relief.
The court saying:
“The doubt as to the relief granted below is more serious and in the opinion of the majority of the court must prevail. According to that opinion a suit for damages would have given adequate relief and therefore the appellee should have been confined to its remedy at law. Again, the court would not undertake to decree specific performance and to require and to supervise the raising of the crop and the grinding of the sugar for even the now remaining period of the decree. There is a certain anomaly in granting the half way relief of an injunction against disposing of the crops elsewhere when the court is not prepared to enforce the performance to accomplish which indirectly is the only object of the negative decree. There is too a want of mutuality in the remedy, whatever that objection may amount to, as it is hard to see how an injunction could have been granted against the appellee had the case been reversed.”
In Marble Co. v. Ripley, 77 U. S. 339, the same court held in effect that there is a presumption that the breach of an agreement to transfer personal property can be relieved by pecuniary compensation, and where the breach of the contract to transfer personal prop*450erty can thus he compensated, an injunction cannot be granted to prevent the breach.
In Burdon Cent. Sugar Ref. Co. v. Leverich, 37 Fed. 67, it was held:
‘ ‘ The breach of a contract by which defendant agreed to have her whole crop of sugar for two years refined at plaintiff’s refinery may be adequately compensated by damages at law, and equity will not enjoin a violation of the agreement.”
The court, in Emerzian v. Asato, 23 Cal. App. 251, 137 Pac. 1072, held that: On defendant’s breach of a contract to care for and sell to plaintiff orange trees, plaintiff could not enjoin defendant from disposing of the same to others.
In New Hartford Canning Co. v. Bulifant, 78 App. Div. 6, 78 N. Y. Supp. 951, the court stated that one who agreed to sell and deliver corn, cannot be enjoined from selling to another, although the purchaser alleged irreparable injury, the facts simply showing liability in damages for failure to deliver it, which could be recovered in an action at law.'
See, also, to the same general effect: Electric Lighting Co. v. Mobile etc. R. Co., 109 Ala. 190, 19 South. 721, 55 Am. St. 927; Starnes & Mosley v. Newson, 1 Tenn. Ch. 239; Bomer Bros. v. Canaday, 79 Miss. 222, 30 South. 638, 89 Am. St. 593, 55 L. R. A. 328; General Elec. Co. v. Westinghouse Elec. & Mfg. Co., 144 Fed. 458; Berliner Gramophone Co. v. Seaman, 110 Fed. 30; Grape Creek Coal Co. v. Spellman, 39 Ill. App. 630; Lone Star Salt Co. v. Texas etc. R. Co., 99 Tex. 434, 90 S. W. 863; Taussig v. Corbin, 142 Fed. 660; Hair Co. v. Huckins, 56 Fed. 366.
Judge Cushman, in Blue Point Oyster Co. v. Haagenson, 209 Fed. 278, held that a court of equity will not interfere in a contract by which the owners of oyster beds agreed to sell their entire product for a *451term of years, at stated prices per sack, with a provision that they would sell to no one else, the contract specifying the quantity and quality of each sack, specific performance being denied for the reason that the character of the ease was such that continuous supervision of the court would be required during the term of the contract, and injunction being refused for the reason that complainant had an adequate remedy at law, the oysters which were the subject of the contract having an ascertainable market value. Judge Cushman cites over one hundred authorities in that opinion.
Last, but not least, we trust, this court itself has decided this question squarely in the case of Gardiner v. Gyorog, 109 Wash. 660, 187 Pac. 318. In that case a contract was considered for the sale of three tons of Cascara bark, and also all bark defendant “shall peel or have for sale during the season.” The action was brought to enjoin the defendant from selling the bark to any one other than the plaintiff. The court said:
“The evidence shows that the appellant could have purchased this bark at an advance of probably one cent per pound over the contract price. In other words, the appellant in an action at law for damages, could recover one cent per pound, or $6.75. The appellant insists that respondent is insolvent . . . [we notice in the instant case there is no suggestion or mention of any kind of insolvency] but we think it is not plain, even upon these facts that the respondent could not respond to whatever damages the appellant might recover in an action at law for damages. ‘ The general principle by reason of which a litigant is remitted to a court of law if he has an adequate and efficient remedy in that tribunal, is also the test of his right to an injunction restraining the breach of a contract. The court must be satisfied of the inadequacy of the legal remedy before it will grant the desired relief. ... It seems also that the contract must be one on which an action *452at law could be maintained. . . . ’ The court below was not satisfied of the inadequacy of the legal remedy, and we are of the opinion was amply justified by the proof upon this question. ’ ’
To my mind, this case cannot be distinguished from the case at bar, and the opinion of the majority does not attempt to do so, for it does not even refer to it.
This dissent has already extended itself possibly unnecessarily, for the reason that it is only expressing an idea of/what the law ought to be, ráther than'what it is, in view of the decision of the majority of the court; but to summarize the situation, it would appear that the law ought to be that, where parties have agreed in a contract upon liquidated damages, and the contract is of such a nature that specific performance cannot be decreed, for the reason that such decree would result in the continuous supervision of the court, or in the-constant invocation of the court’s orders to complete the performance, the courts will say that there is an adequate remedy at law, and that the extraordinary remedy of injunction will not be applied; that the indirect specific performance of contracts will not be compelled by means of injunction where the law court can afford adequate relief. To this rule there only seems to be the exception, which has been noted when referring to the authorities relied on by the majority opinion, of contracts where the seller has agreed not to engage in business in competition with the buyer, and possibly, save for a few sporadic exceptions not heretofore noted, the rule I contend for is supported by all the authorities. For these reasons, I dissent.