Hennessy v. Metzger , 152 Ill. 505 ( 1894 )

Mr. Justice Magruder

delivered the opinion of the court:

The principal question in this case is, whether or not the architects, in fixing the amount of the final certificate, had a right to deduct the item of $1350.00. This amount represented damages for delay at $50.00 per day for 27 days. By the terms of the specifications, the work was to be completed by June 1. It was not completed until July 21. The architect decided, that the appellants were chargeable with 27 days of delay at $50.00 per day between June 18 and July 21. By holding that they were not chargeable with delay until June 18, he held that the delay from June 1 to June 18 was proper and excusable.

By the terms of the contract, “it is agreed, that all damages for delay as mentioned in the specifications shall be deducted from the contract price as liquidated damages.” As the contract price was to be paid out “upon presentation of certificates signed by said architects,” the deduction was necessarily to be made by the architects, in order to determine the amounts for which the certificates should be issued. The deduction was to be made of “all damages for delay as mentioned in the specifications.” What damages are mentioned in the specifications?

The specifications provide, that, “in order to secure the completion of the work at the time and in the manner specified, it is hereby declared and set forth, that the damages, arising from the nonfulfillment of this contract, shall be $50.00 per day for each and every day the work remains undone after the above date, which sum of damages shall be deducted from the contract price as liquidated damages.” Are appellants chargeable with damages at $50.00 per day for the time following the day fixed by the agreement for the completion of the work, or are they chargeable only with such actual damages as may have resulted from their delay?

Whether the sum fixed by the contract is to govern, or whether the actual damages are to be considered, depends upon the question whether the stipulated amount is to be regarded as a penalty, or as liquidated damages. If it be a penalty, no other sum can be recovered or allowed than that which will compensate for the actual loss. If the amount named in the contract be regarded as liquidated damages, it forms the measure of damages, and the jury are confined to it. (Sedgwick on Meas, of Das. —6ed.—pages [396], [397].) In order to determine whether -the stipulated sum is a penalty or liquidated damages, the court will consider the language used, the subject matter of the contract, and the intention of the parties. The fact, that the parties use the words, “liquidated damages,” in their agreement, does not always determine the question. (Scofield v. Tompkins, 95 Ill. 190; Sedgwick on Damages,—6 ed.—marg. page 399).

In the present case, however, these words are not only used in the specifications, but in the main body of the contract. Their repetition would seem to indicate, that it was the intention of the parties to have the damages for delay fixed at a particular sum, so as to be deducted from the contract price before the certificates of the architects should be issued. The courts generally show a disposition to lean towards that construction, which excludes the idea of liquidated damages, and permits the party to recover only the damage which he has actually sustained. (Sedgwick on Meas, of Das. marg. page 399). But the effort of the court will be to get at the true intent of the parties, and to do justice between them. (Sedg. on Meas, of Das. marg. page 421). Here, we are inclined to think, that a careful studs'- of all the provisions of the contract, and of the specifications which are to be considered a part of the contract, reveals an intention to fix upon damages which are liquidated, stipulated or stated ; that is to say, to agree upon a definite sum, as that which shall be paid to the party who alleges and establishes the violation of the agreement. (Sedg. on Meas, of Das. marg. page 398).

Where the parties to a building contract agree, that the architect shall pass upon the work and certify as to the payments to be made, his decision is binding, and can only be attacked for fraud or evident mistake, (McAuley v. Carter, 22 Ill. 53 ; Korf v. Lull, 70 id. 420). In such a contract, if provision is made for payment of the price upon the presentation of the architect’s certificate, the obtaining of such certificate is a condition precedent to the right to require payment, and an action cannot, as a general rule, be maintained to recover the money until the certificate has been obtained from the architect. (Michaelis v. Wolf, 136 Ill. 68; Arnold v. Bournique, 144 id. 132). Here, not only is it agreed, that the owner is to pay the contract price of $15,600.00 upon presentation of certificates signed by the architects, but the decision of the architects is made final as to certain matters upon which they are authorized to pass.

If the parties fail to agree as to the true value of extra or deducted work, the decision of the architects shall be final and binding. The proof tends to show that there was a disagreement upon these subjects, and there is no reason why the decision of the architects in relation thereto should not be regarded as final. The contract provides, that, in case the alterations or deviations required by the owner call for additional time for execution, a fair and reasonable amount shall be added to the time stipulated for the completion of the said building as set forth in the specifications; and that, as to the amount of extra time, the decision of the architects shall be final and binding. The proof tends to show, that there was a disagreement upon this subject; and, as the architects allowed 18 days for such extra time, we see no reason why the allowance should not be accepted. The contract provides, that the decision of the architects shall be final and binding, “in case of any disagreement between the parties relating to the performance of any covenant or agreement herein contained.” One of the agreements contained in the contract is, that all damages for delay as mentioned in the specifications shall be deducted from the contract price as liquidated damages. The proof tends to show, that there was a disagreement upon this subject. The architects were just as much empowered to decide upon the performance of this agreement for the deduction of the stipulated damages, as upon the performance of any other agreement in the contract. They had the power, also, to make a final and conclusive decision respecting the construction or meaning of the specifications, in case of afiy dispute in relation thereto. This included that portion of the specifications in relation to damages, as well as any other portion thereof.

It is said, however, that, where the clause fixing the amount of the damages appears to have been inserted to secure prompt performance of the agreement, it will be treated as a penalty, and no more than the actual damages proved can be recovered. (Scofield v. Tompkins, supra). We do not think that this rule is applicable to the damage clause in the specifications here. The specifications are to be considered as a part of the contract. The contract and specifications are one instrument. Although the specifications designate June 1 as the date for the completion of the work, yet the contract provides that the additional time to be allowed, which in this case was 18 days, shall be added to the time for the completion of the work as set forth in the specifications. Where, therefore, the specifications declare, that the damages arising from the nonfulfillment of the contract shall be $50.00 per day for each and every day the work remains undone “after the above date,” in order to secure the completion of the work “at the time and in the manner specified;” the reference must be understood to be, not to the precise time or.date specified, as, for instance, June 1, but to the time or date as fixed by the addition of such extra time as has been made necessary by the alterations or deviations referred to, and as has been decided upon by the architects ; that is to say, June 18. So, the words, “in the manner specified,” do not refer exclusively to the details of the work set out in the specifications as originally drawn, but to said details as modified or changed by the alterations which the owner is allowed to make. The damages are not allowed as a mere penalty for the non-completion of the contract at the time and according to the terms originally designated, but for a failure to complete it at the time and according to the terms, which may be decided to be “equitable and just,” and “fair and reasonable,” in view of allowable alterations or deviations.

It is evident, that it would be quite difficult to ascertain the damages resulting from delay in the completion of a mill, built, as this was, to be used for the manufacture of linseed oil. Where from the nature of the contract, the damages cannot be calculated with any degree of certainty, the stipulated sum will usually be held to be liquidated damages, where they are so denominated in the instrument. (Sedg. on Meas, of Das. marg. page 422; Lynde v. Thompson, 2 Allen, 456 ; Texas and St. L. Ry. Co. v. Rust, 19 Fed. Rep. 239 ; Wolf v. Des Moines, 64 Iowa, 380; Cushing v. Drew, 97 Mass. 445 ; Consolidated Coal Co. v. Peers, 150 Ill. 344; 5 Am. & Eng. Enc. of Law, page 25, and cases in notes). It has been held, that damages for delay in completing a house are such uncertain damages, as indicate an intention to agree upon a fixed measure of damages, and not to name a sum as a penalty merely. (Hall v. Crowley, 5 Allen, 304).

For the reasons here stated, we are of the opinion, that the trial court did not err in instructing the jury, that the plaintiffs were entitled to recover the contract price together with the value of the extra work, less deductions and less damages on account of failure to complete the building according to the contract, unless they should find, under the evidence and the instructions of the court, that the plaintiffs were concluded by the certificate of the architects as to such extras, deductions and damages.

The question whether, in fixing the amount of the final certificate, the architects acted fraudulently, capriciously, arbitrarily or unreasonably, or failed to exercise their judgment honestly, impartially, and free from bias in favor of the defendant, was submitted to the jury by the instructions of the court; and upon this question, which is one of fact, the judgment of the Appellate Court is final, so far as we are concerned.

After a careful examination of the whole record in this case, we are satisfied that the judgment of the trial court, as affirmed by the Appellate Court, does justice between the parties, and that there is no sufficient reason for a reversal of the judgment of the latter Court.

The judgments of the Appellate and Circuit Courts are affirmed.

Judgment affirmed.