Burley Tobacco Soc'y v. Gillaspy

• Decision Date: 12 December 1912
• Docket Number: No. 7,708.,7,708.
• Citation: 100 N.E. 89,51 Ind.App. 583
• Parties: BURLEY TOBACCO SOCIETY v. GILLASPY.
• Court: Indiana Appellate Court

51 Ind.App. 583

100 N.E. 89

BURLEY TOBACCO SOCIETY

v.GILLASPY.

No. 7,708.

Appellate Court of Indiana, Division No. 2.

Dec. 12, 1912.

Appeal from Circuit Court, Dearborn County; George E. Downey, Judge.

Action by the Burley Tobacco Society against Harry Gillaspy. From a judgment for defendant, on sustaining a demurrer to the complaint, plaintiff appeals. Reversed, with directions.W. A. Byron, of Brookville, Ky., Givan & Givan, of Lawrenceburg, and Smith, Duncan, Hornbrook & Smith, of Indianapolis, for appellant. Morris W. McManaman, of Harrison, Ohio, Warren N. Hauck, of Lawrenceburg, and Louis B. Ewbank, of Indianapolis, for appellee.

ADAMS, J.

Suit by appellant against appellee to recover the sum of $480, as liquidated damages for the breach of the following contract: “Book No. 1173. 1909 Crop. County: - Harrison, O., Oct. 14, 1909. This contract made this day witnesseth: That in consideration of the benefits to be derived herefrom by the parties hereto, and that this contract is made by the undersigned and accepted by the hereinafter named board of control and tobacco society, as a mutual contract with other contracts of like import, taken, and to be taken and entered into by and with many other growers of tobacco, which are of mutual benefit to all, the undersigned growers of tobacco, owning 18 acres of Burley tobacco of the 1909 crop grown on the farm in possession of the undersigned in Dearborn county, Ind., adjoining land of John Lemond, hereby constitute and appoint the - county board of control and Burley Tobacco Society, corporations under the laws of Kentucky, as sole agents for the purpose of receiving, commingling, handling, warehousing, inspecting, insuring, grading, financing and selling all of the said tobacco in such manner and on such terms as said Burley Tobacco Society may prescribe pursuant to its charter and by-laws, and for such purpose hereby transfer and assign to and invest in said agents the title and right of possession to said tobacco pursuant to their charter and by-laws, and agree to deliver the same on demand at such point in said county as said society may designate; provided said tobacco shall not be sold below the general price fixed by said society on like grades of tobacco. This pledge shall also include all tobacco grown or owned by the undersigned of said year's crop, that may not be specified above. The undersigned, by reason of this contract, becomes and is entitled to all the privileges as a member of said tobacco society. The undersigned further subscribes for shares of the capital stock, to the amount equal to 10 per cent. of the gross sales of the tobacco hereby pledged, in the Burley Tobacco Company, to be incorporated, and authorize the Burley Tobacco Society to pay for said stock out of the proceeds of said tobacco when sold. Upon our failure to fully comply with the terms and conditions of this contract, we hereby agree to pay to said society as liquidated damages, twenty per cent. (20%) of the value of said tobacco for the benefit of the members of said society. The board of directors of the Burley Tobacco Society are authorized to dissolve the pool, as to this year's crop, if in their opinion a sufficient quantity of tobacco had not been pledged; provided such dissolution is declared on or before October 1, 1909, and this pledge shall be deposited for safe-keeping in a bank in this county, selected for that purpose by said county board of control and the executive board of the Burley Tobacco Society, to await and subject to the final action of said directors of Burley Tobacco Society. The solicitor has no authority to change the terms of this contract. P. O. New Trenton, Ind. Harry Gillaspy, Landlord. The Burley Tobacco Society, and - County Board of Control, by Alfred Eisen, Solicitor. B. F. Bauar, Witness. Pledge No. 117321.”

It is averred in the complaint that the plaintiff is a corporation, organized under the laws of the state of Kentucky, not for profit, but to foster and promote the interests of all growers of Burley tobacco, by the dissemination of information concerning the growing of said tobacco, to encourage the betterment of its quality, to act as agents for the growers of Burley tobacco in the marketing of their crops, and to aid and assist all growers in obtaining a fair and remunerative price therefor; that the plaintiff gave the defendant due and reasonable notice to deliver his crop of tobacco grown in 1909 to the plaintiff at West Harrison, Dearborn county, Ind., as provided in said contract; that plaintiff has complied with and performed all the terms and conditions therein to be performed by it, but that defendant has failed, neglected, and refused to comply with the terms thereof; that he failed and refused to deliver his said crop of tobacco at West Harrison, Ind., or any other place, and, in violation of said contract and the conditions thereof, sold and delivered said tobacco to other parties who were not members of the plaintiff corporation; that he received as the proceeds of the sale of said tobacco the sum of $2,400. The court sustained appellee's demurrer to this complaint, and, appellant refusing to plead over, judgment was rendered in favor of appellee for costs.

The appeal from this judgment involves but a single question-whether or not the complaint states a cause of action. The objection urged by appellee against the sufficiency of the complaint, and in support of the judgment, are: (1) That the contract set out in the complaint, as to appellee, was executed without consideration; (2) that the contract provides a penalty for nonperformance; and (3) that the contract is in restraint of trade and against public policy.

[1] As to the first proposition, the inquiry arises: What benefit accrued to the appellee, or was to accrue, in consideration of the contract that he would not be entitled to receive, except by reason of the contract? It is obvious that some benefit was to accrue to appellee, by the chain of similar contracts entered into by many other growers of tobacco, through a common selling agent charged with the duty of receiving, handling, warehousing, insuring, grading, and selling the same. The contract also provides that appellee is entitled to all the privileges of a member of the Burley Tobacco Society, and entitled to have his tobacco sold at a price not less than that fixed by the appellant for like grades of tobacco. The manifest purpose of the contract was to strengthen and increase the efficiency of the Burley pool for 1909, and thus enable the appellee to obtain a greater price for his tobacco as a member of the pool than by selling his crop separately. We think there was an adequate consideration moving to appellee for the execution of the contract.

[2] It is also urged by appellee that 20 per cent. of the value of appellee's crop to be paid in the event of nonperformance of the contract is a penalty, and, as there was no averment of actual damages, the complaint is insufficient and the action cannot be maintained. Whether a stipulated amount of money to be paid by one party to an agreement for nonperformance is to be considered as liquidated damages or as a penalty is not always clear. The following is the general rule, as declared in 1 Sedgwick, Damages, § 405: “Whenever the damages were evidently the subject of calculation and adjustment between the parties, and a certain sum was agreed upon and intended as compensation, and is, in fact, reasonable in amount, it will be allowed by the court as liquidated damages. This rule will be found to be applicable to all contracts, and really involves the consideration of the subject in the three following aspects: That of the intent of the parties; that of the reasonableness of the contract; and that of the weight allowed by the court to the language employed.” In this state the rule is declared in Jaqua v. Headington, 114 Ind. 309, 16 N. E. 527, that “where the sum named is declared to be fixed as liquidated damages, is not clearly disproportionate to the loss that may result from a breach, and the damages are not measurable by any exact pecuniary standard, the sum designated will be deemed to be liquidated damages.” Mondamin, etc., Dairy Co. v. Brudi, 163 Ind. 649, 72 N. E. 643;Bird v. St. John's Episcopal Church, 154 Ind. 138, 56 N. E. 129;Johnson v. Gwinn, 100 Ind. 466;McCormick v. Mitchell, 57 Ind. 248;Chicago, etc., Ry. Co. v. McEwen, 35 Ind. App. 261, 71 N. E. 926;Merica v. Burget, 36 Ind. App. 463, 75 N. E. 1083;J. I. Case, etc., Co. v. Souders, 96 N. E. 177.

[3] The benefits of membership in the appellant society were, to a large extent, contingent upon the willingness of all to abide by the terms of their contracts. Every grower who joined in the agreement, and then violated the same by failure to...