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Lawskills.com Georgia Caselaw
CRAWFORD & ASSOCIATES, INC. v. GROVES-KEEN, INC.
47306.
Action on contract. Fulton Civil Court. Before Judge Fryer.
QUILLIAN, Judge.
The measure of damages in the case of a breach of contract is the amount which will compensate the injured person for the loss which a fulfillment of the contract would have prevented or the breach of it entailed. Where the contract provided that the consideration to the seller would be a percentage of the commissions received by the purchaser on certain transferred accounts, in the absence of a showing as to what future commissions could have been obtained but for the breach, the seller could only recover for the percentage of the commissions actually received.
Groves-Keen, Inc. brought suit against Crawford & Associates, Inc. in the Civil Court of Fulton County. The action was brought in two counts, one in fraud and one in contract. The first count, predicated on fraud, was dismissed by the trial judge at the close of the plaintiff's evidence. The second count alleged that since 1927 the plaintiff had engaged in the advertising business and had developed valuable customers during that period: that because of the death of the plaintiff's president, it was decided to sell its customer list in which was incorporated its good-will developed in its many years of advertising: that in February of 1969 after considerable negotiations, agreement was reached with the defendant, which is also engaged in the advertising business, under which the plaintiff agreed to transfer its customer list to the defendant; that at the time of its delivery the customer list had a value of $30,000; that because of defendant's failure to provide adequate attention and service to plaintiff's customers, the value of the customer list was destroyed. The plaintiff alleged that it was entitled to recover the value of the customer list and sought recovery in the sum of $30,000.
The defendant filed its answer and a counterclaim contending that the plaintiff had breached the terms of the contract by billing after the date of the contract and retaining the money obtained from these billings; that as a result the defendant was entitled to $966.95 of this money while the plaintiff was entitled to $474.98, later changed to $504.25, as its share of the commissions which the defend ant had obtained from the various accounts; that the plaintiff owed the defendant the difference.
The trial judge heard the case without the intervention of a jury and returned a judgment for the plaintiff in the amount of $9,266. From this judgment the defendant appeals.
From a review of the record the following facts appear. The plaintiff was an active advertising agency until the death of its president in October of 1968. From records introduced, in 1967 its gross receipts were $391,249.03 and its gross profit was $67,161.99; in 1968 the gross receipts were $384,802.69, the gross profit was $69,436.43, and the taxable income was $9,266.33. Preliminary negotiations for the sale of the business were conducted with Crawford and agreement in principle was reached in January of 1969 and was conditionally accepted by letter dated February 4, 1969. The agreement was confirmed by letter dated February 14, 1969.
As expressed in the letter of February 4, 1969, the contract provided, inter alia, that the plaintiff would furnish the defendant a list of its customers during the years of 1966, 1967 and 1968; that the defendant would direct a letter to the firms on the customer list as of February 1, 1969; that certain of the plaintiff's accounts had been acquired by the defendant effective as of that date; that the defendant would pay the plaintiff at the end of each 3 months period for a term of 5 years, 10% of the first $3,750 of gross commissions, plus 12 1/2% of the next $3,750 of gross commissions, plus 15% of the gross commissions in excess of $7,500. Gross commissions were defined as the total amount received by the defendant on media, printing and engraving, and freelance art work supplied for the former customers of the plaintiff.
The agreement further provided that the defendant would keep accurate books and records, and the plaintiff "shall have the privilege of auditing such books and records in the office of the defendant at reasonable times and upon reason able notice." Furthermore, the defendant agreed to assist the plaintiff in collection of accounts due the plaintiff but not assigned to the defendant for a period of 90 days from February 1, 1968; to render statements periodically but not more than monthly to such debtors as though the accounts were due the plaintiff and to receive payments thereon as trustee for the plaintiff and to remit promptly to the plaintiff all such money received. The defendant agreed that all money received from debtors of plaintiff as front January 1, 1969, should first be credited against the indebtedness existing as of that date. The defendant reserved the right to re-sign any accounts acquired.
Under date of January 31, 1969, the plaintiff billed two of its prime customers (Chicopee Manufacturing Company and Miller Hydro) for February 1969 advertising. Subsequently, the defendant by letter demanded payment of 15% commission for the amounts billed to these two concerns. Defendant claimed the right to bill these two companies, asserting that the effective date of the contract was February 1, 1969. The plaintiff claimed the right, asserting that all the work pursuant to February advertising had been effected prior to the date of the contract and its billing for February advertising was that of accounts receivable due it under the contract; furthermore, an agent for the defendant who had participated in the negotiations had approved such billing. Although Crawford contended that the plaintiff had breached its contract it continued to work the plaintiff's accounts and billed for them, receiving ultimately gross receipts of $31,665.85 from February through May 1969.
An employee of the plaintiff was employed by the defendant to handle the plaintiff's former customers. In May of 1969, he resigned from defendant's employment and took with him the remaining accounts. The defendant did not inform the plaintiff of the loss of the accounts and failed to rem it any proceeds to the plaintiff.
During the course of the trial the plaintiff introduced testimony as to the value of its customer list and good will which placed such assets at between $30,000 and $69,000. There was also testimony that in August of 1969, the plaintiff requested that the defendant allow it to audit the books in connection with the contract.
Code 20-1407 provides: "Damages recoverable for a breach of contract are such as arise naturally and according to the usual course of things from such breach, and such as the parties contemplated, when the contract was made, as the probable result of its breach. (71 Ga. 518)."
In construing the contract the following salient facts should be noted. The consideration was expressly set forth as a specified percentage of gross commissions received from service performed by the defendant for certain former customers of the plaintiff. Although the customer list contained in excess of 80 names only 8 accounts were taken over by the defendant. The defendant reserved the right to re-sign any account. There were no extended contracts with any of the customers who were presumably able to terminate their arrangement with the plaintiff and consequently the defendant at any time. Both parties understood this.
There was evidence introduced as to the value of the plaintiff's good will. Plaintiff cites authority that such evidence shows a valid measure of damages. Reid v. Bryant, 100 Ga. App. 105, 110 (110 SE2d 571); Shaw v. Jones, Newton & Co., 133 Ga. 446 (8) (66 SE 240). In Shaw v. Jones, Newton & Co., 133 Ga. 446, 450, supra, it is held: "Upon the breach of a contract of sale of the good will of a business, the measure of damages is the loss suffered by the purchaser by reason of the wrongful acts of the seller constituting the breach, and in estimating such damages all the facts and circumstances tending to show the extent thereof may be considered by the jury; but if the plaintiff fails to furnish sufficient data to enable the jury, with a reasonable degree of certainty and exactness, to estimate the actual damages sustained by the purchaser, then his recovery will be restricted to nominal damages." It is clear that these cases involve suits where the plaintiff was the purchaser and not the seller as here. Furthermore, they emphasize the fact that the plaintiff must furnish sufficient data to enable the jury, with a reasonable degree of certainty and exactness, to estimate the actual damages sustained.
"Damages growing out of a breach of contract, in order to form a basis of recovery, must be such as could be traced solely to breach, be capable of exact computation, must have arisen according to the usual course of things, and be such as the parties contemplated as a probable result of such breach. Sanford-Brown Co. v. Patent Scaffolding Co., 199 Ga. 41 (33 SE2d 422). 'The measure of damages in the case of a breach of contract is the amount which will compensate the injured person for the loss which a fulfillment of the contract would have prevented or the breach of it entailed. In other words, the person injured is, so far as it is possible to do so by a monetary award, to be placed in the position he would have been in had the contract been performed.' 17 CJ 847, quoted and adopted in Ga. Power Co. v. Fruit Growers Exp. Co., 55 Ga. App. 520, 527 (190 SE 669)." Darlington Corp. v. Evans, 88 Ga. App. 84, 90 (76 SE2d 72). "An injured party can not be placed in a better position than he would have been in if the contract had not been breached." Lastinger v. City of Adel, 69 Ga. App. 535, 536 (26 SE2d 158).
Here the plaintiff freely contracted to receive a consideration contingent on how the defendant fared with the plaintiff's former customers. There was no minimum amount of money or number of accounts set forth. Clearly the plaintiff (and for that matter the defendant) did not contemplate that all or even a majority of the accounts would be maintained. The defendant, under the contract, agreed to direct a letter to those firms which composed the customer list of the plaintiff, advising that certain of the accounts of plaintiff had been acquired by the defendant. In practice only about 10% in number were "acquired" by the defendant, who could re-sign any of these and of course the firms composing the accounts could also "re-sign." Under such an arrangement the plaintiff could recover only for the commissions actually received, plus those which reasonably might have been accrued but for the breach. See Code 20-1406. The burden was upon the plaintiff to establish such damages.
The previous profits of the plaintiff would not be a proper measure of damages since the defendant was only maintaining a portion of the accounts which contributed to the plaintiff's profit and income figures in 1967 and 1968. The plaintiff would have to show what its prospective gain would have been during the life of the contract.
The only sums which might have been projected were the figures based on the 8 accounts which the defendant took over from the plaintiff. These figures encompass a very limited time span from February to May 1969. The plaintiff introduced no evidence to show what its expected gain might be, and these figures without other data as to their future expectancy and probability of continuance would not be sufficient information to form the basis for the trior of fact to compute a projected loss figure.
Thus, a judgment in excess of the portion of the commissions earned until May 1969 can not be sustained.
2. The contract provided that the defendant "shall keep accurate books and records on the accounts covered by this agreement" and the plaintiff "shall have the privilege of auditing such books and records in the office" of the defendant "at a reasonable time and at a reasonable notice."
There was no requirement for the defendant to account and no request by the plaintiff to audit the records until August 1969. Thus, the trial judge erroneously held: "Defendant failed to account to plaintiff for any receipts until October of 1969."
3. The trial judge properly denied the defendants counterclaim. Under the contract, the plaintiff, and not the defendant, was entitled to the sums billed for the accounts on January 31, 1969.
4. The remaining enumerations of error are without merit.
Judgment reversed. Hall, P. J., and Pannell, J., concur.
Lipshutz, Macey, Zusmann & Sikes, Charles C. Pritchard, for appellee.
McClain, Mellen, Bowling & Hickman, A. O. Bracey, III, Arthur Gregory, for appellant.
ARGUED JULY 6, 1972 -- DECIDED NOVEMBER 6, 1972 -- REHEARING DENIED NOVEMBER 30, 1972 -- CERT. APPLIED FOR.
Friday May 22 14:31 EDT


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