Retailers Service Bureau, Inc. v. Smith

• Citation: 163 S.E. 649,165 S.C. 238
• Decision Date: 04 April 1932
• Docket Number: 13377.
• Parties: RETAILER'S SERVICE BUREAU, etc., Inc., v. SMITH.
• Court: South Carolina Supreme Court

163 S.E. 649

165 S.C. 238

RETAILER'S SERVICE BUREAU, etc., Inc., v. SMITH.

No. 13377.

Supreme Court of South Carolina

April 4, 1932

Appeal from Common Pleas Circuit Court of Kershaw County; W. H Townsend, Judge.

Action by Retailer's Service Bureau, etc., Incorporated, against Arthur Smith, doing business as the Camden Furniture Company. From order directing verdict for plaintiff, defendant appeals.

Reversed in part and remanded .

W. L De Pass, Jr., of Camden, for appellant.

L. A Wittkowsky, of Camden, for respondent.

BONHAM J.

The 29th of August, 1928, plaintiff, respondent, and defendant appellant, entered into a written contract set out in the transcript of record at folios 105 to 110, both inclusive. By the terms of the contract respondent bound itself to furnish certain advertising matter to the appellant each succeeding month of the term of the contract which was to continue for one year beginning with the month of October, 1928. In return for this service appellant contracted to pay respondent the sum of $49.75 on or before the 15th day of each month. The contract was in the form of a written order from appellant to respondent which was to become effective as a contract when signed by the named officers of the respondent company; it was so signed. The contract contains this stipulation (made by appellant):

"This agreement constitutes the full understanding between us, and verbal understandings of your agents other than the conditions set forth herein, do not form a part of it."

"This agreement may be terminated only by us upon notification registered mail, and upon payment of all obligations then accrued, together with the payment of forty per cent of the remaining monthly payments as liquidated damages." (Italics added.)

Under the contract respondent furnished the advertising matter for October and December, 1928; appellant telegraphed them asking that that for November, 1928, be not sent. He accepted and used that sent for October and December, 1928. January 9, 1929, he telegraphed respondent canceling the contract.

Respondent brought its action to recover the sum of $99.50, the amount due for the service for the months of October and December, 1928, and the sum of $199 representing 40 per cent. of the amount of the value of the remaining ten issues of the contract, as liquidated damages, and which appellant stipulated in the contract he would pay.

For answer to the complaint, appellant, for a first defense, denied that the contract was as set out in the complaint; that he signed the contract in reliance upon plaintiff's promises and agreement; that plaintiff breached the contract by not furnishing the dummy book and cuts on the dates agreed upon, thus putting defendant to great expense and preventing further performance by defendant.

For a second defense he reiterated the allegations of the first defense, and alleged further that at plaintiff's request he purchased an addressograph machine, mailing list and plates at a cost of $435; that plaintiff agreed to furnish and deliver the dummy books one month in advance of the issue, and to let defendant have copies of "Furniture Sales Builder" one or two days before the first of each month; that plaintiff failed to keep these agreements by which defendant was damaged in the sum of $435, which he set up as a counterclaim.

The case was tried by Hon. W. H. Townsend, circuit judge, and a jury at the June, 1930, term of the court of common pleas for Kershaw county. At the conclusion of all of the testimony his honor granted a motion for directed verdict in favor of plaintiff. From the order directing this verdict defendant appeals.

There are seven exceptions: Exceptions 1 and 2 challenge the correctness of the ruling of the presiding judge that the 40 per cent. damages provided for in the contract were liquidated damages and not a penalty. Exception 3 alleges error for that the court refused to allow defendant to offer testimony in regard to the negotiations leading up to the contract, which, defendant's attorney said, would not alter or vary the terms of the written contract. Exception 4 imputes error for that the court excluded testimony offered to show the date on which plaintiff agreed to deliver each month's issue to defendant, the contract being silent thereon. Exceptions 5 and 6 charge that it was error not to send the case to the jury on the question whether plaintiff had breached the contract and thus justified defendant in rescinding it. Exception 7 charges that it was error to grant plaintiff's motion for directed verdict without allowing defendant's attorney to be heard in opposition to it.

Appellant's counsel, in his argument, groups the issues under four heads.

Are the damages provided for in the contract liquidated damages or a penalty?

The uncontradicted evidence was held by the presiding judge to show that the provision is for liquidated damages. Plaintiff's witness Morse testified, and it is unrefuted, that the item of liquidated damages amounting to $199 was made up of a commission of 20 per cent. they had paid on the ten remaining issues unused, amounting to $99.50; a 5 per cent. commission to the sales manager amounting on the ten unused issues to $24.87; one thousand covers prepared for the months of January, February, and March at a cost of $20 per thousand, $60; expended for special arts plates, etc., $14.63.

Appellant's counsel in support of his contention that the damages provided for by the contract constitute a penalty relies on the case of Ould v. Spartanburg Realty Co., 94 S.C. 184, 77 S.E. 866, 867. In that case the realty company sold Ould some real estate for the sum of $2,500 to be paid, a certain sum cash, and certain sums in monthly payments. It agreed to make some improvements thereon in "a reasonable time." After paying $756, Ould stopped payments because, as he alleged, the realty company breached its contract by neglecting to make the improvements it had contracted to make, and in other respects. Thereafter the realty company conveyed the lots to another person. Ould brought action to recover the amount he had paid, with interest. Defendant set up in the answer, among other things, the defense that the contract contained a clause for liquidated damages in these words: "It is agreed that if the purchaser shall be in default in making any of the said payments for a period of sixty days, this agreement shall be null and void, and the money paid thereunder shall be retained by the party of the first part as liquidated damages, without any liability to account for the same." The court said: "The second, third, and fourth grounds of appeal are from his honor's construction of the clause in the contract (just above quoted)--in refusing to construe such default or forfeiture as liquidated damages, in construing it as a penalty, and refusing motion for nonsuit. His honor held that both parties conceded that the covenants were independent. The question to be determined is, Does this clause under the law and particular circumstances of this case [italics added], create a forfeiture by the use of the words 'liquidated damages,' or is it a penalty?" It was held to be a penalty, and the court said further:

"The evidence shows conclusively that the defendant failed to carry out the contract as made before the plaintiff, in any manner, breached it by failing to make the payments agreed upon. ***

"Under the evidence in this case, this view is not in conflict with the law as declared in the case of Carter v. Kaufman, 67 S.C. 462, 45 S.E. 1017."

It appears then that the principle announced in the quoted case Carter v. Kaufman, is still of force in South Carolina. We take from it this statement: "The case of Worrell v. McClinaghan, 5 Strob. 115, shows conclusively that the eleventh exception must be sustained. In that case there was a stipulation in the contract for building a house; that it should be completed by a certain day, and in default there was to be a deduction of $100 for every month which intervened between that day and the completion of the building. The court held that the forfeiture partook of the character of liquidated damages, and not that of a penalty, and that the jury should have been instructed to that effect as matter of law. In the case under consideration it unquestionably appears upon the face of the contract that the damages therein mentioned are liquidated, and his honor the circuit judge should have so ruled as a matter of...