Summary
approving assertion of trial court's jurisdiction over the merits, but nevertheless finding the issuance of specific-performance relief affecting the Department of Liquor Control improper
Summary of this case from BCL Enterprises, Inc. v. Ohio Department of Liquor ControlOpinion
No. 32163
Decided December 16, 1950.
Department of Liquor Control — Agency contracts — Section 6064-11, General Code — Agent acquires no interest in exclusive right to sell — Services performed by agent — Breach of contract by principal — Remedies — Enjoining breach or specific performance not available, when.
1. An agent of the Ohio Department of Liquor Control appointed pursuant to Section 6064-11, General Code, can acquire no interest in the exclusive right of such department to sell spirituous liquors in packages or containers.
2. Such agent merely performs services in connection with sales actually made by the department.
3. Where a principal and an agent enter into a contract, under which the agent, for a definite period of time, is required to and is given the right to perform services for the principal in the sale of certain kinds of property which are owned by the principal and which the principal has an exclusive right to sell, and where the principal refuses to perform such contract before that period of time has expired, a court of equity will not require the principal to accept the services of the agent, either by enjoining the principal from breaching the contract or by ordering him to specifically perform the contract.
APPEAL from the Court of Appeals for Franklin county.
On February 23, 1949, The Hoffman Candy Ice Cream Company, herein referred to as the plaintiff, instituted an action in the Common Pleas Court of Franklin County in which it is sought to compel specific performance of a contract entered into between it and the Department of Liquor Control of the State of Ohio, herein referred to as the department.
So far as material, the petition alleges that on September 3, 1948, the department duly entered into a written contract with plaintiff, under the terms of which the department, in accordance with Section 6064-11, General Code, "appointed plaintiff which was * * * engaged in a mercantile business * * * to act as the agent of the * * * department * * * for the sale of spirituous liquor, for a period of four years commencing on the first day of September 1948, and ending on the 31st day of August 1952, and in consideration of plaintiff's serving as such agent and performing the duties enjoined upon it by said contract, said defendant agreed to pay plaintiff a sum equal to five per cent of the gross sales made by plaintiff as such agent"; that, under the terms of such contract, plaintiff is required to maintain an establishment suitable and adequate to meet the convenience and needs of the community, in which such establishment is located, for the purpose of selling and offering for sale various types and brands of spirituous liquor which the department "agrees in its discretion to furnish on consignment to the plaintiff in such amounts and of such types and brands as may be necessary, sufficient and adequate for the purpose and with the objective that such spirituous liquors be sold, distributed and disposed of by the plaintiff, having due regard to the character of the community, the density of the population therein, the demand of the public and any other existing conditions pertinent to the sale, distribution and disposal of such spirituous liquors by the plaintiff for the benefit and convenience of the public"; that both parties fully performed under such contract until February 10, 1949; that on that date plaintiff received from the department a letter advising plaintiff that the contract would be terminated at the close of business on March 14, 1949; that, in conformity with that letter, the department breached its contract in that it discontinued furnishing plaintiff with spirituous liquor, and after February 10, 1949, the department refused and continued to refuse to discharge its obligations under the contract to furnish such liquor to the plaintiff notwithstanding that plaintiff had consistently furnished the department with lists of its requirements; that, upon the execution of the contract, plaintiff, in accordance with the statute, executed a bond to the satisfaction of the department conditioned for faithful performance of plaintiff's duties under the contract; that, in order that the public might be accorded prompt and efficient service, plaintiff, before entering upon the discharge of its duties and obligations under the contract, remodeled its establishment and furnished it with expensive equipment at a cost in excess of $12,000; that plaintiff has fully complied with the contract and is ready, willing and able to continue to do so; "that said contract is of great and rapidly increasing value, and that if the aforesaid breach thereof" continues and the department does not deliver to and furnish plaintiff with spirituous liquor in accordance with the contract "plaintiff will suffer great, irreparable and irremediable loss and injury which cannot be adequately compensated by damages, and that it has no plain, adequate and complete remedy at law."
The prayer of the petition is that the court decree the contract to be a valid and binding obligation for the four-year period, that the department be enjoined from cancelling or terminating the contract, and that plaintiff be given a judgment for specific performance of the contract.
A temporary order was made enjoining the department from breaching the contract and directing the department to specifically perform that contract pending further order of the court.
On August 10, 1949, after a hearing on the pleadings and the evidence, the Common Pleas Court entered its judgment enjoining the department from cancelling or terminating the contract and providing for specific performance of the contract.
On appeal to the Court of Appeals on questions of law, the judgment of the Common Pleas Court was affirmed.
The case is before this court on appeal from the judgment of the Court of Appeals, a motion to certify having been allowed.
Messrs. Jenkins, Schuessler, Wendt and Gill, for appellee. Mr. Herbert S. Duffy, attorney general, and Mr. William C. Bryant and Mr. Charles T. Kaps, for appellants.
Since the department filed no bill of exceptions, the question before the Court of Appeals was and the question before this court is whether the Common Pleas Court was justified, on the allegations stated in plaintiff's petition, in granting to the plaintiff the relief, by way of injunction and specific performance, prayed for by that petition. On this appeal, therefore, we must assume that all the material allegations set forth in the petition are true.
Section 6064-11, General Code (116 Ohio Laws, pt. 2,226), provided for the establishment of "state liquor stores or agencies" and provided, so far as material to a consideration of the contract here involved:
"A person, firm or corporation engaged in a mercantile business may act as the department's agent for the sale of spirituous liquor and the department shall fix his compensation in such manner as it may deem fit, providing, however, that in no event shall the compensation paid such agent exceed seven per cent of the gross sales made by such agent in any one year * * *."
Section 6064-8, General Code, provides in part that the department "shall have and exercise the" power "to establish and maintain a state monopoly of the distribution of such [spirituous] liquor and the sale thereof in packages or containers."
Thus, the General Assembly has imposed in the department the exclusive right to sell spirituous liquors in packages or containers. Section 6064-8, General Code. State, ex rel. Fisher, Dir., v. Ferguson, Aud., 142 Ohio St. 179, 50 N.E.2d 992. It has, however, provided that certain persons, firms or corporations "may act as the department's agent for the sale of" such liquor and authorized the department to fix the compensation of such agents. Section 6064-11, General Code. Such an agent must necessarily act for the department in making a sale. In effect, the agent merely performs services in connection with sales which are actually made by the department. Since the General Assembly has given the department the exclusive right to sell such liquor, the agent can acquire no "interest" in that right to make such sales. It cannot, therefore, be said that such agent can have any agency coupled with an interest.
Where a principal and an agent enter into a contract, under which the agent, for a definite period of time, is required to and is given the right to perform services for the principal in the sale for the principal of certain kinds of property, which are owned by the principal and which the principal has an exclusive right to sell, and where the principal refuses to perform such contract before that period of time has expired, will a court of equity, either by enjoining the principal from breaching the contract or by ordering him to specifically perform the contract, require the principal to accept the services of the agent?
The authorities hold uniformly that no such injunction or specific performance will be granted. Port Clinton Rd. Co. v. Cleveland Toledo Rd. Co., 13 Ohio St. 544, 550 et seq.; annotation, "Specific performance of contract for services," 135 A.L.R., 279. See, also, New York Central Rd. Co. v. City of Bucyrus, 126 Ohio St. 558, 186 N.E. 450; 2 Corpus Juris Secundum, 1153, Section 73; 49 American Jurisprudence, 160, Section 137; 1 Mechem on Agency (2 Ed.), 403 et seq., Sections 566 and 567; 4 Pomeroy Equity Jurisprudence (5 Ed.), 1038, Section 1402; Restatement of the Law of Contracts, Section 379. Plaintiff has referred us to no authorities which authorize specific performance in such a case.
In the instant case, plaintiff does not seek to enjoin the department from breaching any negative covenants. Cf. Port Clinton Rd. Co. v. Cleveland Toledo Rd. Co., supra, at 550. Therefore, if the department is enjoined from breaching the contract, it is, in effect, ordered to specifically perform it. See Port Clinton Rd. Co. v. Cleveland Toledo Rd. Co., supra, at 551.
Various reasons have been advanced for refusing to grant specific performance of such contracts.
For example, it has been said that, in view of the peculiar personal relations which result from a contract under which one party is to render services for another party, it would be inexpedient, from the standpoint of public policy, to attempt to enforce such contract specifically. Thus, if the relationship of principal and agent is to be of value or profit to either, it must be accompanied by mutual confidence, loyalty and satisfaction. When these are gone and their places are taken by dislike and distrust, it is to the advantage of both principal and agent and of the public that the relationship of principal and agent be severed. See 49 American Jurisprudence, 158.
Another reason is that it would be inconvenient or even impossible for a court to conduct and supervise the operations incident to and requisite for execution of a decree for specific performance of such a contract. Thus, the court would be required to supervise and determine not only that the principal had fully performed but also to supervise and determine whether the performance rendered by the agent was the performance contracted for. See Port Clinton Rd. Co. v. Cleveland Toledo Rd. Co., supra, at 556. In the instant case, the court would be interfering with the power of the department to control its agent in selling spirituous liquor in packages and containers, a power delegated exclusively to the department by the General Assembly. Paragraph 3, Section 6064-8, General Code. Cf. Port Clinton Rd. Co. v. Cleveland Toledo Rd. Co., supra, at 557; New York Central Rd. Co. v. City of Bucyrus, supra, at page 567.
It is not enough that the plaintiff offers to perform and expresses a willingness and intention to perform entirely in accordance with the provisions of the contract. 49 American Jurisprudence, 161. A court of equity should not expend its time, as a decree for specific performance might require it to do, in determining whether the agent, to whom it has granted specific performance, is from time to time continuing to furnish the services which he has agreed to give in consideration for the obligations of the principal under the contract. See Port Clinton Rd. Co. v. Cleveland Toledo Rd. Co., supra, at 555, 556.
The plaintiff has argued that the usual reason, given for denying to an agent the relief of specific performance for breach of a contract to give and receive services, is the presence of an adequate remedy at law; and that, in the instant case, plaintiff has no such remedy by reason of his inability to recover damages for breach of this contract. In so arguing, plaintiff contends that, by reason of the provisions of Section 6064-30, General Code, he has been deprived by the General Assembly of any right to recover damages at law for breach of this contract. It is not necessary for the court at this time to decide whether he has been deprived of any such right to damages. See paragraph 9, Section 6064-8, General Code. However, if the General Assembly has, as plaintiff contends, provided that the department cannot be held liable in damages at law for breach of such a contract, we believe it would be entirely inconsistent with the intention thereby expressed by the General Assembly for a court of equity to impose upon the department the more extraordinary obligations of a decree for specific performance of such contract.
The Common Pleas Court based its decision upon the reasoning that, while the department had the "power" to revoke the agency contract, it did not have the "right" to revoke such contract. It would seem obvious that, if a court will specifically require a defendant to perform such a contract, such defendant does not have any "power" to revoke it. The authorities which use these terms speak of the "right" to revoke as the ability to revoke without being liable in damages, and the "power" to revoke as the authority to revoke even though liability for damages may arise because of the revocation. 2 Corpus Juris Secundum, 1155, Section 74; 1 Mechem on Agency, 405, Section 568; 1 Ohio Jurisprudence, 640, Section 15.
Our conclusion is that the Common Pleas Court erred in its decree, providing for specific performance of the contract involved in the instant case. It follows that the judgment of the Court of Appeals must be reversed and final judgment rendered for the department.
Judgment reversed.
ZIMMERMAN, STEWART and FAUGHT, JJ., concur.
WEYGANDT, C.J., MATTHIAS and HART, JJ., dissent.
Under the conceded facts plaintiff and defendant entered into a written contract under the terms of which the defendant, under authority conferred by Section 6064-11, General Code, appointed the plaintiff agent of the defendant for the sale of spirituous liquor for a period of four years. The plaintiff is engaged in the mercantile business in the city of Cleveland and, in consideration of its services as such agent, the defendant agreed to pay a sum equal to five per cent of the gross sales made by such agent at its place of business.
During the term of this contract the defendant breached its agreement and refused to carry out the provisions thereof. The majority holds that such contract may not be enforced in this action. That is tantamount to a holding that the plaintiff has no remedy for, by the express provisions of Section 6064-30, General Code, an action for damages is precluded.
It must be noted that the Liquor Control Act nowhere authorizes the abrogation of these contracts. Licenses and permits, granted for the sale of liquor by the glass, may be revoked or cancelled under the provisions of Section 6064-25, General Code, but the action of the department must be after hearing and upon proof of violation of the restrictions of the act or of a rule or regulation of the board or for other sufficient cause. Likewise the department may cancel leases upon ninety days notice, such cancellation being authorized by the provisions of Section 6064-8, General Code.
The decision of the majority holding that although the contract is a valid and binding contract it may be arbitrarily terminated is contrary to the spirit and purpose of the Liquor Control Act. Protected from liability to respond in damages, as it is by Section 6064-30, General Code, power to enter into and then capriciously terminate such agreements by the department is given the stamp of approval.
No cases are cited in the majority opinion based upon facts such as are involved here. At common law a principal may discharge his agent even though there is a contract that such agency should continue for a definite period of time. In cases where resulting damages might have been collected by an action at law specific performance is denied, but in situations such as presented in this case equitable relief should be awarded.
This is not a question of mere personal service. The plaintiff, at considerable expense, remodeled its store and devoted a portion of its space and the services of its employees to the performance of the duties prescribed by the terms of the contract entered into with the Department of Liquor Control. The carrying out of the decree of specific performance in this case does not represent any of the difficulties which led courts in the cases cited in the majority opinion to refuse relief. A complete answer to that contention is found in the record in this case. It is disclosed that for a period of more than a year this agency has operated under decrees of the Court of Common Pleas and of the Court of Appeals and there is nothing to show that the operation could not continue in the same manner as heretofore.
WEYGANDT, C.J., and HART, J., concur in the foregoing dissenting opinion.