McPherson v. Robertson

STONE, C. J. — Plaintiff and defendant being partners in the sale of drugs and medicines, in October, 1884, entered into a written contract of dissolution, signed by each of the partners. The stipulations were and are mutual,, and pro [461] vide for the doing of several things by each alike, all looking to an early settlement of- the partnership accounts. Some oi these stipulations are of such a character, that damages for the breach of them can be measured and ascertained by a money standard, with absolute or proximate certainty. Others are such that damages for their breach are in their nature uncertain, and are not capable of being ascertained by any satisfactory and known rule. Among the former we may mention the agreement, that neither party should apply any of the partnership effects to his personal uses,' and that moneys collected by either should be placed in bank, and a correct cash account kept of the same. Among the latter is the stipulation, that if the liabilities of the partnership are not liquidated by the 1st day of January, 1885, then a final settlement of the partnership accounts was to be had at that date. The concluding clause of the agreement of dissolution is in the following terms : “And the said T. L. Bobertson and J. O. McPherson agree, and by these presents obligate themselves, each for himself, that if either of them break or violate any of the obligations of this said contract and agreement, then the party so breaking or .violating such obligation shall forfeit to the other, as damages, the sum of one thousand dollars,” The present suit-was commenced by Bobertson, against McPherson, in June, 1886. It declares on the written agreement of dissolution, setting it out in haec verba. The breaches assigned are as follows : “Yet, although plaintiff has complied with all its provisions on his part, the defendant has failed to comply with the following provisions thereof, to-wit: 1st. Defendant failed • and' refused to join in a final settlement of the partnership business on the 1st day of January, 1885, as stipulated in said agreement, and has never been ready at any time since said 1st day of January, 1883, to go into said final settlement, although repeatedly asked by plaintiff to do so. '2d. Defendant has appropriated assets of said firm to his individual or other purpose, besides the liquidation of the liabilities of said firm.” In reference to these breaches it may be observed, that the first fails to aver that the liabilities of said partnership had not been “liquidated by the 1st day of January, 1885 and the second one fails to aver any amount of assets of said firm, misappropriated by McPherson. It is not oitr intention, however, to decide this case on the mere form of the-pleadings.' The defendant failed to plead to said complaint, or to make any defense thereto, and judgment by default final [462] was taken against Mm, for one thousand dollars, without the intervention of a jury. Was the sum of one thousand dollars, expressed in the contract, stipulated damages, or was it a mere penalty? Pew questions in the law-books are more difficult of satisfactory solution, than the one propounded above. Much has been written upon it, with some contrariety of conclusion. There is little or no dissent from the following propositions : When a sum in gross is promised to be paid, on the breach of a promise to pay a smaller sum, or on the failure to do an act, or perform a duty, the damages for the failure to do or perform which can be ascertained by a satisfactory rule or standard, then the sum promised is penalty, and not a sum certain to be recovered in nume'/o. When the act or duty to be performed is entirely of a class, the damages for the breach of which can not be ascertained proximately by any standard or known rule, then a promise to pay a gross sum on the breach or non-performance of such obligation is agreed compensation, or liquidated damages. And there are other classes of cases, in which it is held that the sum promised, is the agreed and fixed compensation for the breach. — 2 Green. Ev. § 258-9 ; 2 Sedg. Dam. (7th ed.) 200, et seq. There is another class, somewhat intermediate. Agreements sometimes contain more stipulations than one, and then express a promise to pay a gross sum, on the breach of such agreement. The sum thus expressed and promised is treated as the agreed compensation, or recoverable damages, for an entire breach of all the stipulations, and, hence, not recoverable in gross for a partial breach, and, consequently, are not liquidated damages. And this rule applies, where, as in this case, some of the stipulations are of a class, for whose breach there is no known or satisfactory rule for estimating the damages, provided there are other stipulations, one or more, to which a known rule or standard of damages can be applied. This principle is fully sustained by the following authorities, and we will act on it: Hooper v. S. & M. R. R. Co., 69 Ala. 529, and authorities cited; Astley v. Welden, 2 Bos. & Pul. 346; Kemble v. Farren, 6 Bing. 141; Gray v. Crosby, 18 Johns. 219; Dakin v. Williams, 17 Wend. 447 ; s. c., 22 Ib. 201; Jackson v. Baker, 2 Edw. Ch. 471; Beale v. Hayes, 5 Sandf. 640; Niver v. Rossman, 18 Barb. 50; Heard v. Bowers, 23 Pick. 455; Shute v. Taylor, 5 Metc. (Mass.) 61; Curry v. Larer, 7 PennSt. 470; Carpenter v. Lockhart, 1 Car. (Ind.) 434; Moore v. Platte County, 8 Mo. 467; Gower v. Saltmarsh, 11 Mo. 271; [463] Bright v. Rowland, 3 How. (Miss.). 398; 3 Pars. Contr. (7th ed.) 171, et seq. and notes (bottom page.) The one thousand dollars, expressed in the agreement we have been considering, was not liquidated damages, but was mere penalty ; and only a jury could assess the damages. The Oircuit Court erred in rendering judgment final on the default. One of the breaches assigned is the failure of McPherson to settle the partnership accounts according to the agreement. As the complaint now stands, there can be no recovery at law for that breach. To justify a recovery on that ground, and to fix data for the assessment of damages, an accounting and adjustment of the partnership dealings must be had. This neither the jury nor the common-law court was competent to make.— Vincent v. Rogers, 30 Ala. 471; Vincent v. Martin, 79 Ala. 540; Jackson v. King, at present term, ante, p. 432. Whether, if an adjustment in chancery of the partnership accounts had been rendered necessary by McPherson’s refusal to come to a settlement, Robertson could recover the cost and damages he had been thereby forced to incur and sustain, is a question not before us, and we will not consider it. Reversed and remanded.