Barry v. Harris

The opinion of the court was delivered by Powers, J.

The jurisdiction of courts of equity to reform written instruments which through fraud or mistake fail to speak the true agreement of the parties, has long been firmly established. The strict rule of law, that parol evidence shall not be received to contradict or vary written instruments, is not enforced in equity in cases of this kind; but the court well ascertain the contract that the parties in fact made, and this must necessarily, in most cases, rest in parol. But in all such cases, the proof must be of the strongest and most conclusive character. Such.is the English and the American rule. Townshend v. Stangroom, 6 Ves. 334; Preston v. Whitcomb, 17 Vt. 183 ; Shattuck v. Gray, 45 Vt. 87 . But in cases where the party seeking to rectify an instrument also *396 seeks the specific performance of the instrument as corrected, there is much dispute in the books as to the admissibility of parol proof. The English courts hold that a defendant resisting a specific performance, may show by parol a mistake, as a reason why he should not be compelled to perform the contract; but refuse such evidence when offered by a plaintiff seeking specific performance, with a variation of the contract. The leading case on the subject is Woollam v. Hearn, 7 Vos. 211, where the complainant sought to show, by parol a mistake in the amount of the rent reserved in a memorandum for a lease, and also asked for the specific performance of the contract as corrected'; but the evidence was rejected, and the doctrine of that case is the settled law of the English court. 15 Ves. 516; 1 Ves. & B. 524; 1 Y. & Col. C. C. 559. It is difficult to see any distinction in principle between the case of a party seeking to establish his rights under a falsely written contract by showing the truth, and the case of á defendant securing his rights under such contract by showing the truth by way of defence. In many cases in this country, the English rule has been denied. Chancellor Kent, in a masterly discussion of this subject, and on a thorough review of the English cases, in Gillespie v. Moore, 2 Johns. Ch. 585 , lays down the rule that in equity, parol evidence is admissible to show a mistake in a written contract, as well where the plaintiff seeks relief affirmatively on the ground of mistake, as where the defendant sets it up as a defence or to rebut an equity. This case is appi’oved by Judge Story, 1 Eq. Jur. s. 161; and although not followed, by some of our sister states; it seems to us to express the true rule to be adopted.

The cases all agree that equity will correct mistakes in written instruments. Why correct them, unless the parties may each reap the benefits and be held to the obligations of their contracts when made to speak the truth? and .when corrected, what objection c.m there be to giving relief in the same case that demands the correction ? Why should remedial justice be meeted out to one party to the contract and denied to the other? We think the parties stand on a level in respect to the remedy, and in respect to the means of securing it. • -1

*397 In the case at bar, there is no question that the contract of September 9, 1868, executed by the defendant, was intended for the benefit of Cook and Barry, and that, by a mere mistake, the names of Cook and Barry as payees were omitted. The case then falls within the rule above stated, and the contract may be made to read as the parties intended it should. The jurisdiction of chancery being rightfully invoked for the purpose of reforming this contract, the court will not stop here, and turn the parties over to a court of law, but will retain the case, and grant such further relief as the party may be entitled to.

Objection is made that this contract as corrected and made payable to Cook and Barry, can only be enforced by them, and not by this orator alone. This question will depend upon the rights that the orator got by his purchase of Cook’s interest in the partnership property and effects of Cook and Barry, as set forth in the bill. It is clear on the proof, that all the rights that Cook and Barry had in this freighting business bought of the defendant, passed to the orator by his purchase from Cook. The orator succeeded to the business of the firm of Cook & Barry, and to all the privileges, immunities, and rights of action growing out of or incident to the defendant’s sale to that firm; and if the firm had a chose in action against the defendant under this contract, it would, in equity, pass by assignment to the orator, and the orator, taking the delivery of the contract as such assignee, may, in equity, sustain an action thereon in his own name. 2 Story Eq. Jur. ss. 1040 to 1058 ; Day v. Cummings, 19 Vt. 496 .

What property did Cook and Barry buy of the defendant September 9, 1868 ? The bill states that they bought the defendant’s team and whatever appertained thereto, and the good will of his business. The defendant admits the sale of the team, but denies that he obligated himself personally to abstain from doing freighting business over these routes. Contracts having for their object a partial restraint upon the exercise of one’s business or calling, if reasonable, are always upheld and enforced by courts. We are fully satisfied in looking at this contract of September 9,1868, and the other evidence in the case, in the light of the surrounding circumstances,, and as applied to the subject-matter involved, *398 that the parties fully understood that the defendant was to abandon this business over the routes named; that this was the inducement that led Cook and Barry to purchase the defendant’s property — they bought him off the road — they got rid of competition. It was not their sole object to become possessed of the defendant’s team ; but they contracted for an exclusive right to do this business over these routes as against him; and hence, it is no answer to say that (he defendant has put no new team onto the routes. The defendant’s personal acquaintance with this business aud the customs on the line, and his personal influence as affecting this business, were an important element in the consideration of this purchase. It follows' that this immunity against competition by the defendant, was a valuable asset in the partnership property of Cook and Barry. It enhanced the value of their business. It was a protection that they enjoyed in virtue of their purchase, and it had such a value as made it a proper subject of legal security and legal vindication. Hall v. Barrows, 4 De G. J. & S. 150 ; Adams Eq. 246; 2 Chit. Cont. (11th ed.) 985.

Now when the orator purchased Cook’s interest in the partnership property, including this contract, as stated in the bill and established by the proofs, he acquired the same rights under the contract that Cook & Barry had, and, as we have seen, may.in equity enforce such rights in his own name.

. This brings us to inquire what rights in respect to relief under the contract the orator has. It is insisted by the defendant, and such seems to have been the view adopted in the court below, that this sum of five hundred dollars mentioned as payable in the contract, is a sum designed to secure only such actual damages as the orator can show; that the case falls within the scope of our statute regulating actions upon penal bonds. Gen. Sts. c. 30, ss. 63, 65.

Our statute is a substantial transcript of the English statute, 8 ancí 9, William III, c. 11, s. 8. Prior to the statute of William, the only relief that defendants had when sued at law upon penal bonds was, to apply to a court of equity. At law, they were held liable for the full penalty'; but in proper cases, equity would give relief upon paying the amount equitably due. To *399 prevent this circuity of action, this statute was passed, giving the common-law courts the power to ascertain the equitable sum due. But the statute only applies to bonds, contracts, and obligations with penalties, or wherein the sum payable is in essence a penal sum or forfeiture. But it does not reach or apply to the case of stipulated damages, such damages being parcel of the contract of the parties. Murray v. Earl of Stair, 2 B. & C. 82; Mercer v. Irving, E. B. & E. 569 ; 8 T. R. 255 ; Adams Eq. ( 6th Am. ed. ) 247. The English cases cited below were decided since this statute, and no claim was made that it was applicable. Our statute, most obviously, has the same construction. Whether a fixed sum mentioned in a contract as payable on certain contingencies named, shall be construed as a penalty or as agreed damages, is a question that has led to much discussion and great differences of opinion among judges and commentators. It seems to be conceded on all hands, that if it be clear that the parties have agreed for themselves upon a definite sum as the measure of the damages to be paid for a violation of their contracts, the courts will not undertake to make new contracts for them; and the general rule is, that in doubtful cases, the court will incline to treat the sum as a penalty rather than otherwise. In all cases, the intention of the parties is to be ascertained and effectuated. The form of the instrument will sometimes throw light on the question. The nature of the contract entered into, whether consisting of a single act or of many acts to be done or omitted, the amount of the sum fixed, whether commensurate with the apparent actual injury, are all considerations proper to be weighed in determining the intent of the parties.

Contracts whereby a party agrees not to exercise his vocation for a limited time or in a particular place, under an obligation to pay a stipulated amount, have often, perhaps generally, been held to be contracts conditioned for the payment of liquidated damages rather than penalties. The difficulty of ascertaining the actual damages in such cases has doubtless led to this construction. They have been regarded in many cases as alternative contracts, giving the party the right to pay the sum named if he wishes to do the thing prohibited. The following are well considered cases *400 of this character : Green v. Price, 13 M. & W. 695 — (affirmed in 16 M. & W. 346) ; Galsworthy v. Strutt, 1 Exch. 658 ; Atkyns v. Kinner, 4 Exch. 776; Barton v. Glover, 1 Holt, 43 ; Sainter v. Ferguson, 62 E. C. L. 716 ; Reynolds v. Bridge., 88 E. C. L. 528 ; Mercer v. Irving, 96 E. C. L 562 ; Pierce v. Fuller, 8 Mass. 223 ; Mott v. Mott, 11 Barb. 127 ; of Smith v. Admr. of Wainwright, 24 Vt. 97 . The court in Smith v. Wainwright, recognizes the course of decision above referred to; but in that case holds from the language made use of, that the sum fixed was intended as a penalty. It is clear that the defendant has violated his contract and resumed business over these routes. We think in this case that the form of the contract, the practical impossibility of ascertaining the damages consequent upon a violation of the contract, the i'easonableness of the sum name.d, and the object and purposes of the contract, clearly make it a case of stipulated damages.

Some other questions were discussed in the argument, but it is unnecessary to consider them.

The decree of the Court of Chancery is reversed, and cause remanded, with instructions to enter a decree for the orator in accordance with the views herein expressed.

I