Bradshaw v. Millikin
| Decision Date | 25 April 1917 |
| Docket Number | 414. |
| Citation | 92 S.E. 161 |
| Parties | L.R.A. 1917E,880, 173 N.C. 432 v. MILLIKIN. BRADSHAW |
| Court | North Carolina Supreme Court |
Appeal from Superior Court, Richmond County; Webb, Judge.
Civil action by B. K. Bradshaw against J. E. Millikin. Motion to continue injunction to final hearing denied, and plaintiff appeals. Error.
Specific performance of a contract is not a matter of right in equity but rests in the sound discretion of the court or chancellor.
These are the facts: Defendant sold and transferred to the plaintiff his barber business in the town of Hamlet, N. C together with all of the furniture, fixtures, and other property used therein, and the good will of the business for a certain consideration, and also agreed that he would not in any manner, either directly or indirectly, engage in the same, or any similar business in said town, for the period of two years from the execution of the contract, June 9, 1916 with this further condition:
"It is expressly understood that the stipulations aforesaid are to apply to, and to bind the heirs, executors and administrators of the respective parties, and in case of failure, the parties bind themselves, each unto the other in the sum of four hundred dollars, as liquidated damages, and not as a penalty, to be paid by the failing party."
The defendant did engage in the business of a barber in the town of Hamlet, N. C., within the two years, and plaintiff brought this action to enjoin him from continuing therein. The court held, and so adjudged, that the defendant should not be enjoined if he gave a good and sufficient bond in the sum of $500, upon condition that he pay the plaintiff such damages as he may suffer for the breach of this contract. The record is silent as to the important fact whether the bond was given by the defendant as required to be done by the order, but it was admitted here that it had been given, and that the restraining order was dissolved, and the parties desire the case to be decided on its merits.
W. H. Sanders, of Hamlet, and W. Steele Lowdermilk, of Rockingham, for appellant.
E. A. Harrill, of Hamlet, for appellee.
WALKER, J. (after stating the facts as above).
The plaintiff appealed, and his counsel contended here that he had a legal right to a continuance of the injunction to the final hearing, whether the bond was given or not, and in this we agree with him. Contracts in restraint of trade, like the one we are now considering, were formerly held to be invalid as against public policy, but the more modern doctrine sustains them when the restraint is only partial and reasonable. The test suggested by Chief Justice Tindal, in Horner v. Graves, 7 Bing. 743, by which to determine whether the restraint is a reasonable one, and valid, is to consider whether it is such only as will afford a fair protection to the interests of the party in favor of whom it is given, and not so large or extensive as to interfere with the interests of the public.
Without discussing the reasons upon which the rule is based or endeavoring to fix a limit beyond which the parties may not contract, it is sufficient to say that the terms of the present agreement are well within the principle under which such contracts are held to be valid. 9 Cyc. 525 to 533; Faust v. Rohr, 166 N.C. 187, 81 S.E. 1096; Sea Food Co. v. Way, 169 N.C. 679, 86 S.E. 603. It was said in Faust v. Rohr, supra, citing King v. Fountain, 126 N.C. 196, 35 S.E. 427:
These contracts not infrequently contain a clause in regard to the amount of damages to be paid if there is a breach, and the question is often raised whether the provision is to be considered in law as a liquidation of the damages, or merely as a cover for the exaction of a penalty, and there is a rule established for deciding this question. Where a contract has been made not to engage in any particular profession or business within stated limits, it has been the policy of the courts to construe such an agreement as liquidated damages rather than as a penalty, in the absence of any evidence to show that the amount of damages claimed is unjust or oppressive, or that the amount claimed is disproportionate to the damages that would result from the breach, or breaches, of the several covenants of the agreement. While the decisions in this class of cases are usually based upon the fact that the damages are uncertain and cannot be estimated, it has also been held that where the payment of the sum named is the very substance of the agreement, a recovery may be had for it. 13 Cyc. 99, 100.
It is to be observed, however, that the use of the terms "penalty" and "unliquidated damages" in the instrument is not necessarily conclusive as to the interpretation which shall be put upon it; and the sum so reserved may be held to be liquidated damages, although called a penalty in the covenant, and vice versa. 2 High on Injunctions (3d Ed.) § 1140.
In deciding whether the sum fixed by the contract as the measure of a recovery, if there is a breach, should be regarded as a penalty, or as liquidated damages, the court will look at the nature of the contract, and its words, and try to ascertain the intentions of the parties, and also will consider that the parties, being informed as to the facts and circumstances, are better able than any one else to determine what would be a fair and reasonable compensation for a breach; but the courts have been greatly influenced by the fact that in almost all the cases the damages are uncertain and very difficult to estimate. 13 Cyc. 102.
We are of the opinion that the sum to be paid upon a breach, as stipulated in this contract, is to be considered as liquidated damages and not as a penalty. There is nothing to show any disproportion between it and the real loss if there should be a breach, and there is no standard by which a jury could fix with any degree of certainty what would be the amount of damages flowing from a breach.
This being settled, what is the plaintiff's remedy? As a general rule, a plaintiff cannot sue both at law and in equity. If his legal remedy is certain and adequate, he must resort to it, but sometimes he may have an election between the legal and the equitable remedy. It would be manifestly unjust that he should be fully compensated for any loss resulting from a breach, and at the same time restrain the defendant from committing the very act for the doing of which, in the future as well as in the past, and for its injurious consequences, he has received or willingly accepted full damages. The rule governing such cases has thus been stated:
"If it is manifest that the parties intended that the particular act might be done upon payment of the sum specified, the power to do the act upon payment of the money enters into and forms a part of the contract, and equity will neither interfere to prevent the doing of the act nor to grant relief from the payment of the money agreed upon as an equivalent." 2 High on Injunctions (3d Ed.) Sec. 1139.
Or, as expressed in another way:
The mere insertion in the contract of a clause describing the sum to be recovered for a breach as liquidated damages, but which were not intended to be payable in return for the privilege of doing the acts forbidden by the contract, will not exclude the equitable remedy, and is regarded as put there for the purpose of settling the damages if there should be a suit and recovery for a breach, instead of an action, in the nature of a bill in equity, for what substantially would be a specific enforcement of the contract by restraining any further violation of it. This is the true doctrine, and is applicable to the facts of this case, as here the damages are liquidated, and they are not allowed for the purpose of authorizing the prohibited act to be done if they are paid, "or in return for the privilege of doing the act," but the intention was that the act should not be done, and the sum is fixed as the estimated damages if it is done. The contract says, and means:
"You shall not do the act, nor buy the right to do it by paying the stated amount, but if you fail to do it, you must pay the liquidated damages for your breach of it."
These views are supported, we think, by the best authorities, if not by all of them when properly construed. The case of McCurry v. Gibson, 108 Ala. 451, 18 So. 806, 54 Am. St. Rep. 177, is a very instructive one upon this question, and is so much like ours, and the law is so clearly and exhaustively considered therein, that we will refer to it at some length. The court first settles the principle by reason and...
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