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which he was to receive from Stevens.

(146 N.E.)

of two years, until this action was tried in | hundred fifty dollars ($750), then, and in that common pleas court, and that he never suc- event, the party of the first part, at his option, ceeded in bringing the business up to where shall be entitled to take immediate possession it would pay the rent, aside from the $2,000 of said restaurant and equipment and fixtures, and to declare the provisions of this contract granting the use of said equipment, fixtures, lease, and good will to the party of the second part at an end, and shall be entitled to operate or dispose of said restaurant in such manner as he sees fit. Should strikes or other industrial conditions render it extremely difficult or impossible to secure necessary supplies for said restaurant, then and in that event the said weekly income of seven hundred fifty dollars ($750) guaranteed herein shall be reduced to four hundred dollars ($400) per week during

This action for the $5,000 liquidated damages was filed by Jones shortly after he took back the restaurant. The defendant's answer admitted the making of the contract, and denied all other allegations. On a trial in the common pleas court the court, at the close of all the evidence, granted a motion by the plaintiff for a directed verdict for $5,000, and for two items of rent and use of equipment, which were admitted.

The Court of Appeals reversed the court of common pleas, and remanded the case for a new trial on the ground that the provision of $5,000 liquidated damages was in fact a penalty.

the existence of said conditions.

"Ninth. Should party of the second part abandon or discontinue operating said restaurant, either voluntarily or by order of the authorities for violation of law, or, should the receipts fall below the sums provided in section Error is now prosecuted to reverse that under the conditions set forth in said section 8 of this contract for the periods mentioned and judgment.

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8, then and in that event the value of the said restaurant shall be considered as being only the actual value of the equipment, fixtures, and lease, and party of the first part shall then be entitled to receive from party of the second part the sum of five thousand dollars ($5,000), which said sum is hereby agreed to be the amount of the loss sustained to the business by reason of the loss of trade permitted by party of the second part, and in addition thereto party of the first part shall be entitled to immediate permanent possession of said restaurant."

[1] The rule as to whether damages provided for in a contract will be regarded as liquidated, or as a penalty, has heretofore been stated in this court. Doan v. Rogan, 79 Ohio St. 372, 87 N. E. 263; Norpac Realty Co. v. Schackne, 107 Ohio St. 425, 140 N. E. 480, and Miller v. Blockberger, 111 Ohio St. 146 N. E. 206. See, also, in this connection, Kunkel & Jordan v. Wherry, 189 Pa. 198, 201, 202, 42 A. 112, 69 Am. St. Rep. 802.

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The plaintiff in error at the trial waived the claim of $211.39 for breakage, and the defendant in error admitted the items of $325 for the balance of the February rent, and $166.67 for the use of equipment, so that the only question unsolved becomes that of the $5,000 item, the paramount question being whether the $5,000 item provided for in the contract is to be regarded as liquidated [2] From the foregoing authorities it seems damages or as a penalty. The three para- to be quite generally established that liquigraphs of the contract referring to the sub-dated damages exist in a contract when (1) ject are the third, eighth, and ninth, which provide as follows:

"Third. It is agreed by the parties hereto that the said restaurant business as now conducted by the party of the first part is in a prosperous condition, that the average gross weekly income therefrom is seven hundred fifty dollars ($750), and that the said business, including the good will, is worth five thousand dollars ($5,000) over and above the value of the fixtures, equipment, and lease, and party of the second part agrees that said restaurant business shall be conducted in such a careful and businesslike way that the average gross receipts for the week shall continue to be at least seven hundred fifty dollars ($750) during the life

of this contract.

"Eighth. Should the gross weekly income from said restaurant run below the sum of sev

en hundred fifty dollars ($750) for a period of four (4) weeks in succession, or should the average gross weekly income for a period of four (4) weeks in succession be less than seven

the damages would be uncertain as to amount and difficult of proof; (2) when the contract as a whole is not so manifestly unreasonable and disproportionate as to justify the conclusion that it does not express the true intention of the parties; and (3) when the contract is consistent with the conclusion that it was the intention of the parties that the damages in the amount stated should follow the breach.

Applying these principles to the case at bar, this record discloses that Jones sold to Stevens a good, going, and profitable restaurant business, one from which the defendant, Stevens, in the first month after the sale, made a profit of more than $500, the amount taken in by him in excess of the cost of food, gas, light, help, rent of $375, and $166.66 for the use of the business and equipment. From this profitable stage, existing at the time Stevens took over the restaurant

from Jones, the income in a few months, Stevens from performance. The clause with dropped so materially that, not only was there no profit, but Stevens defaulted in the rent, and in the payment to Jones for the use of the equipment, and the average gross receipts per week dropped far below the $750 provided for in the contract, whereupon Stevens voluntarily surrendered the premises and restaurant to Jones. A variety of reasons are given for this falling off of the business, and the consequent loss of the good will of the restaurant, Stevens claiming that a general business depression, and low gas pressure, which made it impossible to properly heat the premises, drove his customers elsewhere, while Jones, on his part, claimed that bad management, lack of proper service, inattention to business, and general mismanagement caused the falling off of business, and the consequent loss of good will.

The defendant's claims that a general depression and weather conditions that made it difficult to heat the premises caused the falling off in the business are not sufficient to excuse compliance with the contract in question: (1) Because the parties must be considered to have contracted with reference to some of the very conditions that afterwards developed, a clause in the contract providing, "Said restaurant business shall be conducted in such a careful and businesslike way that the average gross receipts for the week shall continue to be at least $750." (2) Because difficulty of performance is not necessarily an excuse for nonperformance.

In the case of New York Coal Co. v. New Pittsburgh Coal Co., 86 Ohio St. 140, 99 N. E. 198, there was an action to recover on the terms of the lease for royalty for mining a minimum amount of coal. The defense was as to claimed conditions beyond the control of the lessee. The court held: "The burden rests upon the defendant to show that it was prevented from mining and removing the minimum tonnage by a cause beyond its control, within the meaning of the saving clause in the lease, in order to relieve itself from liability for the specified minimum royalty."

reference to inability to secure necessary supplies is not sufficient to meet the situation shown by this record. Stevens contracted to maintain this business in such a condition that its gross income for any four weeks would not fall below $750 per week. Not only did he fail to do this, but all the trade fell off in such an amount that, by his own admission, he practically abandoned the restaurant and turned it back to Jones. There was, therefore, such a breach as provided for in the ninth paragraph of the contract. This being the unfortunate condition that confronted the parties, what were their relative rights under the contract? Both were experienced restaurant men, of full age, under no disability, and able to contract. Did they not bring themselves within the rule adopted by this court in Knox Rock Blasting Co. v. Grafton Stone Co., 64 Ohio St. 361, 367, 60 N. E. 563, from the case of Dwinel v. Brown, 54 Me. 468, as follows:

"The parties themselves best know what their expectations are in regard to the advantages of their undertaking, and the damages attendant on its failure, and when they have mutually agreed upon the amount of such damages in good faith, and without illegality, it is as much the duty of the court to enforce that agreement as it is the other provisions of the contract. * In construing the other parts of a contract, so in giving construction to the stipulation concerning damages, the intention of the parties governs. * * * It is the province of the court to uphold existing contracts, not to make new ones. It is not for the court to sit in judgment upon the wisdom or folly of the parties in making a contract, when their intention is clearly expressed, and there is no fraud or illegality. * *The interests of the publie are quite as likely to be subserved in maintaining the inviolability of contracts as they are in contriving ways and means to make a contract mean what is not apparent upon the face of it, to save a party from some conjectural inequity growing out of his supposed inadvertence or improvidence."

Are these damages capable of accurate measurement or are they uncertain and difficult of proof? They relate to the loss of

And the court in its opinion, at page 176, good will of a business, which is a most 99 N. E. 207, said:

"The specified causes in the clause in question, viz., strikes, lockouts, fires, floods and lack of transportation facilities, are well understood and have well-defined meanings. So that if the lessee desired to include other matters, particularly such as are contended for here, he should have taken the precaution to have them particularly mentioned in the contract, otherwise he will be held to have waived

them."

Applying this doctrine it would have been entirely possible to have inserted in this contract a saving clause in regard to depreciation in business conditions or a shortage

valuable asset, yet intangible and most difficult of measurement. Many definitions of good will have been given, but a simple and understandable one is: "The 'good will' of a business is merely the hope grounded on a probability, the probability that the old customers will resort to the old stand." Didlake v. Roden Grocery Co., 160 Ala. 484, 49 So. 384, 22 L. R. A. (N. S.) 907, 18 Ann.

Cas. 430.

In Morgan v. Perhamus, 36 Ohio St. 517, 38 Am. Rep. 607, this court described it as follows:

"The good will of a business is a species of personal property," and, "although inseparable

(146 N.E.)

*

sets of a concern, both in fact and in the estimation of a court of equity. * It is a portion of the subject-matter which produces profits.'"

That good will has a real value no one denies, but only those who are versed in the requirements, opportunities, and exigencies of a business are qualified with any accuracy to estimate the value of its good will.

are skilled, experienced, and expert in fixing the value thereof. May it not be said that those who have spent years in a business are better qualified to fix this value than others? Such individuals were the very persons to the contract in question, and therefore we think that this contract is consistent with the conclusion that the amount of damages for the loss of the good will fixed by the parties was not unconscionable, and that it

This the parties to this contract, both exwas the intention of the parties themselves perienced restaurant men, sought to do, and that the damages indicated in the contract that value was fixed at the sum of $5,000. should follow as a measure of breach thereThe contract as a whole does not show that of. In support of this view attention is the amount they fixed was so unreasonable called to the case of Leary v. Laflin, 101 and disproportionate as to justify the conMass. 334, involving a contract not dissimclusion that it did not express the true in-ilar from that in the case at bar: tention of the parties at the time it was made, for did not Stevens make a profit the first month of over $500? Was it not a going, paying, concern that was turned over by Jones to Stevens? The business appears to have been one that was highly profitable under proper management, but once its trade or good will was gone the nature of the business was such that it was difficult to reestablish it.

Jones was liable for the rent of these premises in the sum of $4,500 a year. This Stevens in the contract agreed to pay, but failed to do. In addition to that Stevens further agreed to pay $2,000 a year for the use of the restaurant and its equipment, and also to return the equipment in the condition in which it was received. This contract was breached by Stevens, and as a result thereof Jones lost $2,000 per year for the use of the restaurant and equipment from the time of Stevens' default to the end of the term of the lease. Jones also lost the good will of the business, which, when Stevens went into possession, was showing a profit of more than $500 per month after payment of all necessary expenses, the rent, and for the use of the restaurant, equipment, etc. A further loss was sustained by Jones in his effort to restore the restaurant to its former paying position, after Stevens had abandoned the restaurant and surrendered possession on March 1, 1921, and Jones was also liable

on his lease to the end of its term, at the rate of $4,500 a year, which lease did not expire until March 1, 1924. All of these items indicate a financial loss to Jones in amounts which show that the agreement of the parties to the contract to fix the sum of liquidated damages for the loss of good will at $5,000 was not unconscionable.

It may be suggested that by reason of enumeration of the above items it is thereby shown that these damages are susceptible of direct proof. This by no means follows, for the reason that the action is one for the loss of the good will of the business, a species of property which, as indicated above, is in itself difficult of exact measurement, and accomplished usually only by those who 146 N.E.-57

"In an action on a bond for the payment of $1,000, as liquidated damages,' to the lessor of lessee should not keep the stable during the dea stable, and the good will of its business, if the mised term in manner as satisfactory to all reasonable parties as the lessor had previously done, and at the end of the term surrender 'said demised premises and good will in as good repute and run of custom as now thereto pertain,' held, that the sum named was to be considered liquidated damages, and not a penalty,"

In the case of Guerin v. Stacy, 175 Mass. 595, 56 N. E. 892, it was held:

"A lessee gave a bond to his sublessee con

ditioned that, if through the acts of the forlessee ousted before the expiration of the term, the obligation should remain in force and the obligor should pay the obligee the sum of $2.500 as liquidated damages. The sum named was also the penalty of the bond; and it was implied that if the sublessee should enjoy his term undisturbed the obligation should be void. would have expired in July, 1898. It was terThe bond was dated August 17, 1894. The lease minated in July, 1897, and the sublessee, finding that he would be recognized by the owner only as a monthly tenant, gave notice and left the premises on October 22, 1897. Held, in an action for a breach of the bond, that the sum named was liquidated damages and not a penalty."

mer the lease should be terminated or the sub

Chief Justice Holmes, delivering the opinion of the court, uses this apt language at

page 597, 56 N. E. 892:

"There is no doubt that a sum which is to be paid upon the breach of a primary undertaking may be treated as a penalty in some cases, notdamages in the contract. The typical case is withstanding the fact that it is called liquidated where it secures several promises of varying importance, one or more of which is for the payment of a much smaller sum of money. Fisk v. Gray, 11 Allen, 132. Wallis v. Smith, 21 Ch. D. 243, 257, 268, 275. But we heartily agree with the Court of Appeals in England, that so far as precedent permits, the proper course is to enforce contracts according to their plain meaning, and not to undertake to be wiser than the parties, and therefore, that, in general. when parties say that a sum is payable as liquidated damages, they will be taken to mean what

they say and will be held to their word. Wal-, province of the court to enter the domain of lis v. Smith, 21 Ch. D. 243. Atkyns v. Kinnier, the right of parties to contract, and to grant 4 Exch. 776, 783. In the language of Baron relief because unfortunate results may have Parke in the case last cited, 'If there be a con- followed the execution of such contracts. tract consisting of one or more stipulations, the breach of which cannot be measured,' as in

theory of law the damage caused by a failure to pay money can be, 'then the parties must be taken to have meant that the sum agreed on was to be liquidated damages and not a penalty.'"

In the case of Peabody v. Richard Realty Co., 69 Misc. Rep. 582, 125 N. Y. S. 349, it was held:

Entertaining this view, it becomes our duty to reverse the judgment of the Court of Appeals, and affirm the conclusion of the court of common pleas.

Judgment of the Court of Appeals reversed, and that of the common pleas affirmed.

MARSHALL, C. J., and JONES, MATTHIAS, ALLEN, KINKADE, and ROBINSON, JJ., concur.

(No. 18680.) (Supreme Court of Ohio.

March 17, 1925.)

(Syllabus by the Court.)

"In behalf of a lessee, to whom the lease, for 10 years, turned over absolute control of some 20 pieces of property, including 18 stores and a hotel, with several thousand dollars worth of BUTTERICK PUB. CO. v. SMITH et al. furniture, to be returned in good condition, at a rental of $2,666 per month, besides the payment of taxes and insurance, and the making of repairs, a surety company executed a bond to the lessor, providing that, if the lessee failed to perform any of the terms of the lease and was dispossessed by reason thereof, the surety company should pay $10,000 to the lessor as stipulated and liquidated damages, and not as a penalty. Held that, in view of the damages which could be inflicted by mismanagement or carelessness of the lessee, damages were not easily ascertainable on a mere basis of monthly rental, and, no unconscionable advantage being given, the provision for liquidated damages would be enforced."

This case discusses the principle of liquidated damages provided for in contracts, and cites many authorities in support of the conclusions reached, and it was affirmed by the Supreme Court of New York, 145 App. Div. 903, 129 N. Y. S. 1139.

We are not unmindful of the rule that where it is doubtful whether a provision should be deemed as for a penalty, or as one for liquidated damages, the court should incline to regard it as for a penalty, yet, where there is difficulty in assessing the actual damages, and the plain intention of the parties as evidenced by the contract indicates that damages in the amount agreed upon should follow the breach, and the sum is not so manifestly unconscionable, unreasonable, and disproportionate as to justify the contrary conclusion as to their intention, it follows, as a matter of law, that the amount in question should be construed as liquidated damages and not as a penalty.

If private contracts entered into by persons under no disability, and in the absence of any fraud, are to be sustained, the rights of the parties to thus contract must be upheld, even though one or both parties thereto sustain financial loss. The law cannot exercise supervision over the actions of people who enter into contractual relations, and if the contract possess no disabilities the parties must be regarded as bound by the terms of their contract. It does not lie within the

Appeal and error 907 (3)-Where record discloses judgment rendered on evidence by both parties, presumption is that evidence was sufficient to sustain judgment.

Where a record discloses that a trial court rendered judgment upon "evidence introduced on behalf of each party," there being no finding of facts or bill of exceptions in the reviewing court to affirmatively show what such evidence or facts were upon which such judgment was rendered, the presumption of law is that there was sufficient evidence before the trial court to sustain the judgment.

Error to Court of Appeals, Hamilton County.

Action by the Butterick Publishing Company against Maurice Smith and another. Judgment for plaintiff was reversed by the Court of Appeals, and plaintiff brings error. Reversed.-[By Editorial Staff.]

In this case the record discloses that the original action was instituted in the superior court of Cincinnati in November, 1923, by the Butterick Publishing Company, a corporation, plaintiff in error herein, against Maurice C. Smith and Anna Smith, as partners, defendants in error.

The action was based upon a contract to recover $617, the alleged price of a stock of patterns and a cabinet for holding the same, claimed to have been delivered to the defendants in pursuance of the terms of the contract. The answer of the defendant Maurice Smith consisted of a general denial and a second defense alleging accord and satisfaction.

The defendant Anna Smith, for her answer, set up a general denial.

On January 30, 1924, the plaintiff filed a motion to strike the answer of Maurice Smith from the files, and a motion for summary judgment against him, alleging that the answer was sham, false, and filed solely for the purpose of delay. On February 16, 1924,

(146 N.E.)

a motion similar in effect was filed against Alvin H. Rowe, of Cincinnati, for defendthe answer of defendant Anna Smith. ants in error.

Under date of February 23, 1924, the record discloses as follows:

"1924, Feb. 23. Minute 133. Entry granting motions to strike answers from the files and judgment for plaintiff for $638.60 and costs. "Defendants except.

"This cause coming on to be heard upon plaintiff's motions to strike from the files the answers of defendants, Maurice Smith and Anna Smith, and also plaintiff's motions for judgment against said defendants, and the court having heard the arguments of counsel for plaintiff and for the defendants and having heard the evidence introduced on behalf of each party, and being fully advised in the premises, it is now ordered and considered that said motions be granted, and that the answers of defendants, Maurice Smith and Anna Smith, be stricken from the files for the reason that said answers are frivolous and sham, filed in bad faith, and for the sole purpose of delay; and the court finds that the allegations of the petition are true. Thereupon it is further ordered and considered that plaintiff recover judgment against said defendants, Maurice Smith and Anna Smith, for the sum of $638.60, and for its costs herein expended, to all of which defendants except."

On February 26, 1924, a motion for a new trial was filed, and on March 1 the same was overruled and an exception noted for the defendants.

DAY, J. The judgment of the superior court in this case, which the Court of Appeals reversed, recites as follows:

"This cause coming on to be heard upon plaintiff's motions to strike from the files the answers of defendants, Maurice Smith and Anna Smith, and also plaintiff's motions for judgment against said defendants, and the court having heard the arguments of counsel for plaintiff and for the defendants and having heard the evidence introduced on behalf of each it is now ordered and considered that said moparty, and being fully advised in the premises, tions be granted."

Accordingly the answers of the defendants were stricken from the files, for the reason that the same were found to be frivolous and sham and filed in bad faith and for the pur- · pose of delay, and the court found that the allegations of the petition were true and rendered judgment for plaintiff.

This being the record before the Court of Appeals, and being merely a transcript of the docket and journal entries, and the original papers from the superior court, but nothing at all to show what occurred at the hearing below, or what evidence was heard and considered by the superior court, as recited in its journal entry, was there sufficient beError was prosecuted to the Court of Ap-fore the Court of Appeals to justify this repeals by Maurice and Anna Smith, the rec- versal? We think not, for the reason that ord in that court disclosing, under date of March 10, 1924, that petition in error, transcript, and original papers were filed. Later on summons was duly issued for the Butterick Publishing Company, and the record does not disclose that any bill of exceptions setting forth the evidence taken in the hearing in the superior court was ever allowed and filed in the court of appeals. The matter came on for hearing in the Court of Appeals, and, omitting its formal parts. the record discloses that the following judgment entry of reversal at the costs of the defendant in error was made in that court:

"Upon consideration whereof, the court find there is error in said proceedings apparent upon the face of the record and the judgment of said superior court of Cincinnati to the prejudice of plaintiff in error in this, to wit:

"That said court erred in granting the motions of defendant in error to strike the answers of plaintiffs in error from the files, in granting the motions of defendant in error for summary judgment, and in rendering judgment for defendant in error."

To this judgment of reversal the plaintiff in error, the Butterick Publishing Company, seeking a reversal, prosecutes error to this court.

Edward H. Brink, William F. Fox, and Clark Wilby, all of Cincinnati, for plaintiff in error.

the record of the superior court imports verity and there was sufficient evidence to justify the court's action, the presumption being, until the contrary appears upon the face of the record, that the same was in all respects legal.

This court in Thomas v. Kalbfus, Recr., 97 Ohio St. 232, 236, 119 N. E. 412, 413, in passing upon the right of a trial court to strike out matter which constitutes sham pleading, a pleading not filed in good faith, and intended only for delay, speaking through Matthias, J., said:

"The record discloses that the demurrer to the first defense of the answer was treated in the trial court as a motion to strike out that defense on the ground that it constituted a sham pleading, a pleading not filed in good faith, and intended only for delay; and upon hearing it was sustained.

"The evidence adduced upon that hearing was not incorporated in the bill of exceptions and consequently was not presented to the Court of Appeals. That court, recognizing the presumption of the legality of the proceedings in the trial court, and assuming, in the absence of any record covering that branch of the case, that the finding was justified by the evidence adduced, refused to review the finding and judgment in so far as it affected the first defense of the answer.

"The authority of the trial court to order a sham pleading stricken from the files has been recognized by this court, and such procedure

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