Burrill v. Daggett

• Decision Date: 01 December 1885
• Citation: 1 A. 677,77 Me. 545
• Parties: BURRILL v. DAGGETT.
• Court: Maine Supreme Court

1 A. 677

77 Me. 545

BURRILL

v. DAGGETT.¹

SUPREME COURT OF MAINE.

Filed December 1, 1885.

On report.

This was an action of debt on bond, and the questions before the law court were,—first, whether a breach of the condition had occurred; and, second, whether the sum named in the bond was to be regarded as a penalty or as liquidated damages.

Potter & Lancaster, for plaintiff.

Brown & Carver, for defendant.

FOSTER, J. On the day of the date of the bond in suit the defendant sold to the plaintiff his barber-shop, tools, fixtures, furniture, stock, and good-will of trade in said shop, for the sum of $300. As a part of the consideration of the purchase he gave the plaintiff the bond in suit in the penal sum of $500, conditioned, among other things, never to open and keep a barber-shop in the town of Fairfield. Nearly two years after the sale and the giving of this bond, the defendant bought out a barber-shop in an adjoining building, and since that time has continued the business of barbering, working at the barber's trade in said shop.

The only questions in controversy are whether there has been a breach of this bond; and if there has been, whether the same sum mentioned is to be regarded as a penalty or as liquidated damages.

The plaintiff contends that there has been a breach of the bond, and that he is entitled to recover the above-named sum of $500 as liquidated damages. The defendant denies that there has been any such breach, and claims that his purchase of another barber-shop, which was in operation at the time, and his continuation of the barbering business therein, working himself at his trade, is not opening and keeping a barber-shop, and therefore not within the engagement. We are not inclined to adopt the defendant's view of this question. Although there may not have been more than two other shops of the kind in the village, as the case shows, at the time the defendant sold to the plaintiff, it may well be inferred that it was the understanding of the parties, from the language of the bond, viewed in the light of the attendant circumstances as disclosed in the case, that the defendant was not again to engage in the business by keeping a barber-shop. He sold to the plaintiff, not only his shop, tools, etc., but also his good-will in the business. It was against the competition of the defendant that the plaintiff intended to provide; and whether the defendant bought out and kept another barber-shop, or opened and kept one independently of any in operation at the time, still continuing the business and working at his trade, it would be a violation of the condition of the bond.

The remaining question, then, is whether the $500 shall be regarded as liquidated damages, or only security for the damages actually sustained; and whether the sum named in instruments of this nature is to be regarded as a penalty or liquidated damages is not always free from difficulty. It must rest, however, upon the construction to be given to the language used, and there are certain principles that may be resorted to in most cases to aid in determining this question.

The bond is in the usual form, and the general rule and preference of the law in such cases is that the penal sum therein named is to be regarded as a penalty, and not as liquidated damages. Smith v. Wedgwood, 74 Me. 459; Cushing v. Drew, 97 Mass. 446; Henry v. Davis, 123 Mass. 346. Yet courts endeavor to learn the real intent of the parties to the contract, and, if that can be ascertained, will be governed by it. "It is always a question of construction, on which, as in other cases where the meaning of the parties in a contract provable by a written instrument arises, the court may take some aid to themselves from circumstances extraneous to the writing. In order to determine upon the words used, there may be an inquiry into the subject-matter of the contract, the situation of the parties, the usages to which they may be understood to refer, as well as other facts and circumstances of their contract." Perkins v. Lyman, 11 Mass. 81. This is not done for the purpose of modifying or controlling the language used, but the more clearly to interpret the true meaning of the language, aided by the circumstances that gave birth to it. To determine whether the sum named is intended as a penalty or as liquidated damages, the court in Pennsylvania, in Streeper v. Williams, 48 Pa. St. 454, say that it is necessary to look at the whole instrument, its subject-matter, the ease or difficulty in measuring the breach in damages, and the magnitude of the stipulated sum, not only as compared with the value of the subject of the contract, but in proportion to the probable consequences of the breach.

In accordance with these principles, our own court, in the case of Holbrook v. Tobey, 66 Me. 414, has adhered to the same doctrine. Mr. Justice Walton, after stating that if a party binds himself in a certain sum not to carry on any particular business or kind of business within a certain territory, or within a certain time, the sum mentioned will, in general, be regarded as liquidated damages, says: "Of course, if the sum named should be out of all proportion to any possible damage which the plaintiff could sustain, the court would hold otherwise, upon the very reasonable presumption that the parties never could have intended that the sum named should be regarded as liquidated damages." In the case at bar there is no express agreement in the bond that the sum named shall be regarded as liquidated damages. Nor are we able to find anything in the language of the bond, the subject-matter of the contract, or the nature of the case that would justify a conclusion that this sum was intended by the parties to be the stipulated and ascertained damages in case of a breach. We may properly consider the fact that the parties were negotiating in reference to a business of not very great magnitude, and that the whole consideration paid for the subject-matter of the purchase was much less than the sum named in the bond. And when we further take into consideration the situation of the parties, as well as the proportion that this sum bears to the probable consequences of a breach, we can arrive at no other conclusion than that it was the intention of the parties that the sum named should be considered only as security for whatever damages might be sustained upon breach of the bond

The case of Caswell v. Johnson, 58 Me. 165, is very similar to this, and the language of the two instruments so nearly identical that no extended reference to it is necessary; and in that case the court arrived at the same conclusion as in this.

In accordance with the stipulation in the report the entry may be: Case sent back for trial on the damages.

PETERS, C. J., WALTON, DANFORTH, LIBBEY, and EMERY, JJ., concurred.

NOTE.

Sale of Business—Good-Will.

Good-will is defined to be "the advantage or benefit which is acquired by an establishment beyond the mere value of the capital, stocks, funds, or property employed therein in consequence of the general public patronage and encouragement, which it receives from constant or habitual customers, on account of its local position or common celebrity, or reputation for skill, affluence, or punctuality, or from other accidental circumstances or necessities, or even from ancient partialities or prejudice." Carey v. Gunnison, (Iowa,) 17 N. W. Rep. 881; Story, Partn. § 99. It is said by the United States circuit court for the Northern district of New York, in the case of Barber v. Connecticut Mut. Life Ins. Co., 15 Fed. Rep. 312, that the good-will of an established business is nothing but the chance of being able to keep the business which has been established;—the sale of a mere chance, which vests in the purchaser nothing but the possibility that a preference which has been usually extended to him has been enforced in equity, and recognized at law as effectual between the parties to the contract. See Phyfe v. Wardell, 5 Paige, 268; Armour v. Alexander, 10 Paige, 571; Hathaway v. Bennet, 10 N. Y. 108. Definitions are also to be found in Cruttwell v. Lye, 17 Ves. Jr. 335; Churton v. Douglas Johns. Ch. 174; Wedderburn v. Wedderburn, 22 Beav. 84; Chissum v. Dewes, 5 Russ. 29; and Gibblett v. Read, 9 Mod. 460.

Good-will connected with any trade or occupation is a valuable right, and may be made the subject of barter and sale, Carey v. Gunnison, (Iowa,) 17 N. W. Rep. 881; Wallingford v. Burr, (Neb.) 22 N. W. Rep. 350; Herefort v. Cramer, (Colo.) 4 Pac. Rep. 896; Cruess v. Fessler, 39 Cal. 336; Morse v. Hutchins, 102 Mass. 439; Barber v. Connecticut Mut. Life Ins. Co., 15 Fed. Rep. 312; McFarland v. Stewart, 2 Watts, 111; Holden v. McMakin, 1 Pars. Eq. Cas. 270; Howe v. Searing, 19 How. Pr. 14; Dougherty v. Van Nostrand, 1 Hoff. 68; Williams v. Wilson, 4 Sandf. Ch. 379; Musselman's Appeal, 62 Pa. St. 81; Shackle v. Baker, 14 Ves. Jr. 468; Cruttwell v. Lye, 17 Ves. Jr. 335; Mellersh v. Keen, 28 Beav. 453; Bradbury v. Dickens, 27 Beav. 53; Johnson v. Helleley, 34 Beav. 63; Wedderburn v. Wedderburn, 22 Beav. 84; Turner v. Major, 3 Giff. 442; Churton v. Douglas, Johns. Ch. 174; Banks v. Gibson, 11 Jur. (pt. 1, N.S.) 680; Hitchcock v. Coker, 6 Adol. & E. 438; Beal v. Chase, 31 Mich. 490; 14 Amer. Law Reg. 563. It may be bequeathed. Hitchcock v. Coker, 6 Adol. & E. 438; Smith v. Everett, 27 Beav. 446. But see Robertson v. Quiddington, 28 Beav. 529. And if unlawfully taken away or destroyed, the law will award compensation to the injured party. Carey v. Gunnison, (Iowa,) 17 N. W. Rep. 881. A person may sell his business and good-will in such a manner as to debar himself of the privilege of again entering upon the same business in that locality. Lord Eldon says, in Kennedy v. Lee, 3 Mer. 441: "There is another way in which the good-will of a trade may be rendered still more valuable; as by certain stipulations entered into between the parties at the time of the one relinquishing...