Better Food Markets v. American Dist. Tel. Co.

• Decision Date: 06 February 1953
• Citation: 40 Cal.2d 179,253 P.2d 10,42 A.L.R.2d 580
• Court: California Supreme Court
• Parties: , 42 A.L.R.2d 580 BETTER FOOD MARKETS, Inc. v. AMERICAN DIST. TEL. CO. et al. L. A. 22373

Page 10

253 P.2d 10

40 Cal.2d 179, 42 A.L.R.2d 580

BETTER FOOD MARKETS, Inc. v. AMERICAN DIST. TEL. CO. et al.

L. A. 22373.

Supreme Court of California

Feb. 6, 1953.

As Corrected March 5, 1953.

Eugene S. Ives and John Goddard, Los Angeles, for appellant.

Lawler, Felix & Hall, Reed A. Stout, Los Angeles and John M. Hall, Redondo Beach, for respondent.

SHENK, Justice.

This is an action brought on counts alleged in tort and in contract wherein the plaintiff seeks to recover damages resulting from the alleged failure of the defendants to properly transmit burglar alarm signals to their own guards and to the headquarters of the municipal police department. Such failure is alleged to have permitted a burglar to escape with the sum of $35,930 taken from the plaintiff's food market.

On the first trial the court granted a motion for nonsuit in behalf of all the defendants except the American District Telegraph Company, and ordered judgment for those defendants. As against the defendant American District Telegraph Company the jury on the first trial found for the plaintiff, but a new trial was granted on the ground of insufficiency of the evidence. On the second trial the jury was unable to agree and was dismissed. Thereafter the defendant successfully moved for a directed verdict pursuant to section 630 of the Code of Civil Procedure (ordering judgment where motion for directed verdict should have been, but was not, granted), and the court ordered judgment for the defendant. On this appeal taken from that judgment the plaintiff contends that there is sufficient evidence of the defendant's negligence and breach of contract to sustain a verdict for the plaintiff, and that it error to grant the motion for a directed verdict.

In June of 1947 the parties entered into a written agreement whereby the defendant was to install and maintain its standard 'Central Station Burglar Alarm and Holdup System' in the plaintiff's food market. The contract provided that the defendant 'on receipt of a burglar alarm signal from the Subscriber's (plaintiff's) premises, agrees to send to said premises, its representatives to act as agent of and in the interest of the Subscriber * * *. The Subscriber hereby authorizes and directs the Contractor (defendant) to cause the arrest of any person or persons unauthorized to enter his premises and to hold him or them until released by the Subscriber * * *. The Contractor, on receipt of a holdup alarm signal from the Subscriber's premises, agrees to transmit the alarm promptly to headquarters of the public police department.'

Viewing the evidence in the light most favorable to the plaintiff on this appeal from a judgment on a directed verdict for the defendant, Anthony v. Hobbie, 25 Cal.2d 814, 155 P.2d 826, the following facts were established: On November 16, 1947, at approximately 7:30 p. m. the assistant manager of the plaintiff's market set the burglar alarm system and locked the building. As he entered his car in the parking lot he was accosted by an armed robber and at gun point forced to return and open the store, the inner office and the safe. The robber took the contents of the safe, taped the assistant manager, and left. Approximately 14 minutes elapsed between the time when the store was reopened and when the robber left the store with the loot. During this period signals were being received at the defendant's central station indicating the sequence of the opening and closing of the doors. The defendant's operators at the central station did not call a guard or inform the police until 7:51, 9 minutes after the signal indicating that the safe had been opened, was received. The assistant manager had succeeded in knocking a telephone off the hook and calling for help at approximately 7:50. The police arrived at the market at 7:52, within one minute after receiving a call. The defendant's guards arrived shortly thereafter. The assistant manager's watch was broken at the time he was taped and the hands had stopped at 7:50.

Under the circumstances of this case it would have been reasonable to conclude that the defendant had a duty to call the police as well as its own guards to the plaintiff's premises. Promptness being the essence of the defendant's obligation, its delay in acting could reasonably be found to be an omission to render the agreed service and a failure of performance of the contract.

There is evidence upon which it could have been found that the loss was the proximate result of the defendant's delay in responding to the alarms. There was but one individual committing the burglary. He acted deliberately and there is reason to believe that the agreement between the parties was entered into with the intention of providing for the apprehension of such a person before he left the premises. The time and distance factors indicate that this particular burglar may have been caught had the police and guards been called to the premises a few minutes earlier, and that the delay of nine minutes after the safe had been opened permitted the escape. Such probabilities are to be weighed in the light of common experience in such matters and present a triable issue of fact. There was substantial evidence from which a jury could have found that the plaintiff's loss was the proximate result of the defendant's breach of its contract. Therefore it was error for the trial court to order judgment for the defendant on its motion for a directed verdict.

There remains the question of the validity of the following provisions of the contract for liquidated damages: 'It is agreed by and between the parties that the Contractor is not an insurer, that the payments hereinbefore named are based solely on the value of the service in the 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.'

It is generally recognized that a valid agreement may be made for the payment of liquidated damages, whereas an agreement for the payment of a penalty is invalid. Under the law generally the parties are allowed to contract for liquidated damages if it is necessary to do so in order that they may know with reasonable certainty the extent of liability for a breach of the agreement. Where the parties exercise their business judgment in providing that it is impracticable and extremely difficult to fix the damages which may result from the defendant's failure to render its service such a provision is not controlling as to the actual difficulty in fixing damages, although it is entitled to some weight. See Stark v. Shemada, 187 Cal. 785, 788, 204 P. 214; Dyer Bros. Golden West Iron Wks. v. Central Iron Wks., 182 Cal. 588, 592, 189 P. 445; see also Restatement of Contracts, § 339(f), p. 544.

The statutory law and its interpretation in this state are in accord with the general law. Civil Code section 1670 states that a provision in a contract which provides for the amount of damages to be paid in the event of a breach of the contract is void, except as expressly provided in section 1671 as follows: 'The parties to a contract may agree therein upon an amount which shall be presumed to be the amount of damage sustained by a breach thereof, when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage.' Unless a clause providing for liquidated damages falls within the provisions of section 1671 it is invalid, Dyer Bros. Golden West Iron Wks. v. Central Iron Wks., supra, 182 Cal. 588, 593, 189 P. 445; Long Beach City School Dist. v. Dodge, 135 Cal. 401, 405, 67 P. 499; and except on admitted facts this is generally a question to be resolved by the trier of fact, Rice v. Schmid, 18 Cal.2d 382, 385, 115 P.2d 498, 138 A.L.R. 589; Petrovich v. City of Arcadia, 36 Cal.2d 78, 86, 222 P.2d 231; Dyer Bros. Golden West Iron Wks. v. Central Iron Wks., supra, 182 Cal. 588, 593, 189 P. 445. It is settled law that the burden is on the party seeking to rely upon a liquidated damage provision in a contract to plead and prove facts showing impracticability. Rice v. Schmid, supra, 18 Cal.2d 382, 385, 115 P.2d 498; Dyer Bros. Golden West Iron Wks. v. Central Iron Wks., supra, 182 Cal. 588, 593, 189 P. 445.

The plaintiff argues that there is no difficulty in the present case in fixing the actual damage and that the amount of money stolen should be the actual damage. Its contention is that the time for the determination of the question of the impracticability and difficulty in fixing the damages is after the loss has occurred. This is not the rule. In determining this question 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 forseeable. In Hanlon Drydock etc. Co. v. McNear, Inc., 70 Cal.App. 204, 232 P. 1002 (relying on Pacific Factor Co. v. Adler, 90 Cal. 110, 120, 27 P. 36, the court, in dealing with the question presented by the plaintiff's contention, stated, 70 Cal.App. at page 211, 232 P. at page 1005, 'If adopted it would practically destroy the power given contracting parties under section 1671 of the Civil Code in any case to make a binding agreement as to stipulated damages * * *. Appellant's theory is manifestly contrary to authorities of other jurisdictions, notably the federal jurisdiction; it finds no support in the text-books so far as our attention has been called, and if inference may be indulged in, we think the cases of the local jurisdiction clearly indicate that there is no intention to depart from the universal rule established elsewhere.' The court cited...