Shotwell v. Dairymen's League Co-Operative Association, Inc.

• Decision Date: 06 April 1944
• Citation: 22 N.J.Misc. 171,37 A.2d 420
• Parties: WALTER D. SHOTWELL, PLAINTIFF, v. DAIRYMEN'S LEAGUE CO-OPERATIVE ASSOCIATION, INC., A CORPORATION, DEFENDANT
• Court: U.S. District Court — District of New Jersey

37 A.2d 420

22 N.J.Misc. 171

WALTER D. SHOTWELL, PLAINTIFF, v. DAIRYMEN'S LEAGUE CO-OPERATIVE ASSOCIATION, INC., A CORPORATION, DEFENDANT

District Court of the First Judicial District of the County of Warren, New Jersey

April 6, 1944

For the plaintiff, Demarest & Roth.

For the defendant, Herr & Fisher.

OPINION

On action at law.

Kingfield D. C. J.

The state of demand in the above case contains two counts. In the first count the plaintiff sued to recover for milk sold and delivered to the defendant and claimed damages in the sum of $ 162.99; which was reduced by stipulation by both parties in open court to the sum of $ 153.59. In the second count, the plaintiff sued to recover the amount of $ 69.34 due on a certificate of indebtedness; which was reduced by stipulation by the parties to the suit to the sum of $ 64. The defendant thereby admitted that there is due the plaintiff on both counts of his state of demand the sum of $ 217.59. The defendant further agreed that this amount be set off against any recovery allowed on its counter-claim, and that judgment be entered for the net amount only, if such be the case.

The counter-claim involved a suit for liquidated damages arising out of plaintiff's breach of a contract wherein the plaintiff appointed the defendant his sales agent with full power and authority to sell the plaintiff's milk, until terminated by either party by written notice as specified in paragraph 17. The contract further provided that the plaintiff would not dispose of his milk through any other source except with the consent of the defendant. The contract also provided as follows:

"2. The producer covenants and agrees to and with the Association that if he at any time refuses or neglects to deliver such milk or the manufactured product thereof produced or manufactured by him to the Association, or upon its order, at such time and place as the Association may direct, then and in that event in every such case the producer neglecting or refusing so to do will pay to the Association for such refusal or default, the sum of Ten ($ 10.00) Dollars per cow for 12 cows, and if such default or refusal shall continue for more than one month, an additional sum of Three Dollars ($ 3.00) for each cow per month, for the same number of cows so long as such default or refusal continues, none of which payments are to be construed to be a penalty or forfeiture, but as stipulated liquidated damages as prescribed in Section 37 of the Cooperative Corporation Law of the State of New York, and it is hereby agreed that the Association will suffer by reason of such refusal or default, it being agreed by the parties hereto that this agreement is one of a series of agreements with producers of milk, depending for its true value upon the strict adherence of each and of all of said producers to each and all of said agreements."

The testimony indicated that the plaintiff signed the contract, although he claimed he did not read it and had no copy of same. However, it is elementary that the failure to read the contract did not relieve the plaintiff from any liability arising from its breach. The facts clearly disclosed that the plaintiff deliberately breached the contract by selling milk to O'Dowd's Dairy, another distributor, without the consent of the defendant. Plaintiff attempted to justify his breach by a sale of the farm stock to his brother, but possession was never delivered and an immediate reconveyance was effected by the brother. The brother did not appear to testify, the bills of sale were not introduced in evidence, and the plaintiff had uninterrupted possession of the farm stock, all of which indicated that a true sale did not take place.

This brings up the question as to whether the liquidated damage clause is enforceable as such, or whether it should be considered a penalty, and also whether its validity depends on the law of New Jersey or that of New York.

After the plaintiff signed the contract in New Jersey, it was sent to the defendant's office in New York where it was signed and accepted. The defendant is a New York corporation and its business is confined for the most part to New York but it does operate in four other states, including New Jersey. The case of Mayer v. Roche (Court of Errors and Appeals), 77 N.J.L. 681; 75 A. 235, held that the proper law of the contract is the law by which the parties thereto intended or may fairly be presumed to have intended, the contract to be governed. It is stated in 112 A. L. R., on page 124, as follows:

"With the qualification (1) that its enforcement must not be violative of the settled public policy of the forum, or of a statute of the forum enacted for the protection of its citizens, and (2) that it must not have been adopted with the object of evading the otherwise applicatory law it is held or assumed in many cases, at least as to the construction, effect, and obligation of the contract, and frequently as to its validity, that a stipulation in a contract that it shall be governed or construed by the law of a particular jurisdiction is valid and should be given effect."

In view of the above, if the parties themselves agreed that the New York law govern the clause in question, this court does not intend to overrule their expressed intention.

A New York attorney testified for the defendant and introduced in evidence section 37 of the Cooperative Corporation Law of New York, Consol. Laws, c. 77, which is as follows:

"Members may be required to sell through corporation; breach of contract. 1. The by-laws may require the members to sell all or any part of their specifically enumerated agricultural, dairy and horticultural products, exclusively through the corporation; but in such case, shall specify a reasonable period, in each year, during which any member, by giving to the corporation the notice prescribed in the by-laws, may withdraw and be released from his obligation to employ the services of the corporation in respect to such products and supplies.

"2. The by-laws or the marketing contract may fix, as liquidated damages, which shall not be regarded as penalties, specific sums to be paid by the members to the association upon the breach of any provision of the marketing contract regarding the sale or delivery or withholding of products; and may further provide that the member who breaks his contract will pay all costs, premiums for bonds, expenses and fees, in case any action is brought upon the contract by the association.

"3. In the event of any such breach or threatened breach of such marketing contract by a member, the association shall be entitled to an injunction to prevent the further breach of the contract and to a decree of specific performance thereof. Pending the adjudication of such an action and upon filing a verified complaint showing the breach or threatened breach and upon filing a bond in such form and amount as may be approved by the court, the association shall be entitled to a...