Los Angeles Olive Growers Ass'n v. Pacific Surety Co.

California Court of Appeal Feb 25, 1914 No. Civ. No. 1401.Published

Before: Shaw

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Holding. The court held that a complaint alleging a breach of a surety bond is sufficient to state a cause of action when it pleads the performance of conditions precedent generally and alleges that actual damages were impracticable or difficult to fix, even if the liquidated damages clause is unenforceable. The court further held that a provision for liquidated damages in a contract covering multiple acts of varying importance does not invalidate the entire agreement.

Issues

Whether a contract provision stipulating a fixed sum for the breach of any of several acts of varying importance constitutes an unenforceable penalty.
Whether an allegation that it is impracticable or extremely difficult to fix actual damages is sufficient to survive a demurrer.
Whether a general allegation of compliance with conditions precedent in a contract is sufficient under the Code of Civil Procedure.

Disposition. reversed

Quotations verified verbatim against the opinion

“In pleading the performance of conditions precedent in a contract, it is not necessary to state the facts showing such performance, but it may be stated generally that the party duly performed all the conditions on his part”

Synopsis

Damages—Contracts Purporting to Liquidate—Validity op Stipulations.—The rule that where an agreement contains provisions for the performance or nonperformance of several acts of different degrees of importance, and then a certain sum is*stipulated to be paid upon a violation of any or all of such provisions, and the sum will be in some instances too large and in others too small a compensation for the injury thereby occasioned, such sum is to be treated as a penalty, and not as liquidated damages, is modified by sections 1070 and 1671 of the Civil Code, which provide that every contract by which the amount of damage to be paid for a breach of an obligation is determined in anticipation thereof is to that extent void, except that the parties to a contract may agree therein upon an amount which shall be presumed to be the amount of damage sustained by a breach thereof, when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage.

Id.—Sections 1670 and 1671 op the Civil .Code—Presumption as to Which is Applicable.—The rule of section 1670 of the Civil Code that agreements purporting to liquidate damages are void, is presumed to apply in all cases, unless the party seeking to recover under the agreement shows by averment and proof that his ease comes under the exception in section 1671, that parties to a contract may stipulate the amount of damages for a breach thereof, when it would be impracticable or extremely difficult to fix the actual damage.

Id.—Action on Bond—Liquidated Damages—Sufficiency of Complaint.—In an action on a bond given to secure the performance of a contract to supply laborers to harvest a crop of olives, an allegation in the complaint “that it would be and was and is impracticable or extremely difficult to fix the actual damages suffered by the plaintiff by reason of said breach,” is sufficient to bring the case within the rule of section 1671 of the Civil Code, providing that the parties to a contract may' stipulate the measure of damages for a breach thereof when it would be impracticable or extremely difficult to fix the actual damage.

Id.—Invalid Portion of Contract—Rejection as Surplusage—Sufficiency of Complaint.—Where a provision in a contract to furnish laborers to harvest an olive crop, which fixes the damages in case of a breach, may, if invalid, be rejected as surplusage, and the remainder of the contract, and the bond given to secure its performance, be enforced, a complaint in an action on the bond which alleges the making of the contract, the giving of the bond, a breach of its covenants and resulting damages, states a cause of action for actual damages, regardlesss of the invalidity of the provision purporting to liquidate damages.

Id.—Breach or Covenant—Pleading Notice to Surety.—An allegation in such a complaint that the plaintiff gave due notice to the defendant of the breach of the contract, as provided in the bond, is sufficient, under section 457 of the Code of Civil Procedure, without alleging the facts as to the giving of the notice.

SHAW, J.

Action to recover damages upon a surety bond conditioned for the faithful performance of a contract .made by plaintiff with one Rukichi Tajiri whereby the latter, for the consideration therein specified, agreed to furnish plaintiff with capable Japanese labor in the picking and harvesting of plaintiff’s olive crop.

Defendant interposed a demurrer to the complaint, which was sustained without leave to amend. Judgment of dismissal followed, from which plaintiff appeals.

The contract and bond are both set out

in haec verba

in the complaint, from which it appears that on October 10, 1910, Tajiri entered into a contract with plaintiff which, among .other things, provided that he should furnish plaintiff orderly and capable Japanese men- to pick the olives then growing in ■plaintiff’s olive orchards. The contract contained the following, among other provisions:

“It is further understood that the party of the second part (Tajiri) is to furnish a good and acceptable bond to the party of the first part in the amount of $1000, which amount it is hereby agreed shall be the amount of damages to the party of

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the first part in ease the party of the second part (Tajiri) fails to fulfill this agreement. ”

Pursuant to the provision of the contract requiring him so to do, Tajiri secured from defendant a bond executed by it in the sum of one thousand dollars, payable to plaintiff, and conditioned that Tajiri should well and faithfully perform said contract so made with plaintiff, according to its terms and conditions, in which case it was declared the bond should be null and void; otherwise to remain in full force and effect. This bond, as declared therein, was executed by the surety company upon certain express conditions—namely: that plaintiff as obligee therein should fully perform all the covenants contained in said contract on its part agreed to be performed, and notify the surety “in writing of any act on the part of the said principal or his agents or employees which may involve a loss for which the said surety is responsible hereunder, within ten days after the obligee or any representative duly authorized by him to oversee the performance of said contract shall learn of said act; and a registered letter mailed to the general agents of said surety at their office in Los Angeles, Cal., shall be the notice required within the meaning of this bond.” The complaint further alleged that on December 1, 1910, Tajiri entered upon and proceeded with the performance of the contract, and “about January 1, 1911, when said contract had been only partially performed, wholly failed, neglected and refused to further carry out or fulfill the terms and conditions,, or any of the terms and conditions, of his said contract with the plaintiff, and wholly abandoned the same and failed, neglected and refused to further carry out and perform the same or any of the same or any part thereof; and that the said contract was never carried out or performed by the said Tajiri or otherwise or at all; of all of which the plaintiff duly notified the defendant Pacific Surety Company in writing as in and by said bond provided. ’ ’

Los Angeles Olive Growers Ass'n v. Pacific Surety Co.

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Synopsis

SHAW, J.

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