Nichols & Shepard Co. v. Beyer , 168 Mo. App. 686 ( 1913 )

FARRINGTON, J.

(after stating the facts). — As has been often said, the general rules by which the courts are to construe such agreements are well enough understood and defined, the difficuty lying in the application of the rules to particular cases, for there is frequently an apparent ingredient of both penalty and liquidated damages.

Ordinarily, the court must look to the subject-matter of the contract and the intention of the parties. [May v. Crawford, 150 Mo. 504, 51 S. W. 693.] ■

The courts do and should favor construing forfeiture stipulations to be penalties rather than liquidated damages. [13 Cyc. 95.] This is because in ordinary contracts the aggrieved party should recover no more than the amount of loss he has suffered.

In the case of Wallis Iron Works v. Monmouth Park Ass’n, 19 L. R. A. (N. J.) 456, 26 Atl. 140, the court in holding a stipulation as providing for liquidated damages we think very aptly and tersely states the rule, as follows: “But when damages are to be sustained by the breach of a single stipulation, and they are uncertain in amount, and not readily susceptible of proof under the rules of evidence, then, if the parties have agreed upon a sum as the measure of compensation for the breach, and that sum is not disproportionate to the presumable loss, it may be recovered as liquidated damages.”

Again, it is the duty of the court to examine- the entire contract and the surrounding circumstances of the particular case, and from it all determine whether the sum stated was inserted after an endeavor on the part of the parties to the contract to fix the compensation in case of a breach, or whether it was intended merely to deter a breach.

In the light of these rules, let us view the contract in this case. To begin with, from the date of its acceptance until the date of the breach, only eleven days elapsed, as in appellant’s letter of March 27,1912, reference is made to a letter written by respondent on March 24, 1912, to appellant’s agent refusing to consummate the deal. Nothing appears to have changed the status of the parties during that time; no work was done by the plaintiff on the machinery and no expense was incurred or anything of value parted with on the strength of the agreement. Indeed, all that appellant appears to have done was to tender the expense money to defendant covering the trip to Kansas City, and to write a letter accepting the terms of the order.

Shall this court say that it may reasonably presume that plaintiff suffered a loss of $480? From all the facts and circumstances surrounding this case, such a sum is grossly out of proportion to the presumable loss.

Furthermore, do the facts disclose a case where the amount of damages is not readily susceptible of proof? This is the sale of a threshing outfit — a manufactured article of merchandise — a thing so common and now in such general use as to no longer strike wonder and terror to the small boy. It has a market value that is easy of ascertainment. The rule as to the measure of damages for a failure to carry out a sale of an ordinary article of merchandise (where not made for a particular use) is as well fixed as is the measure of damages in a case where a debtor fails to pay his creditor a certain sum of money. The same rule applies to the old outfit to be turned in on the purchase price at $700.

Yet another test is to view the entire contract. Ir, is a lengthy printed order, except as to a few words and figures, designating the kinds and numbers of ths machinery and the time and terms of payment, which are written in ink. It contains descriptions, warranties, stipulations guarding against representations made by agents, stipulations guarding against any damages growing out of the acts or failure to act by the company, and then the fifteen per cent damage clause. Thus viewing it as it is written, common sense tells us that the items most discussed and considered by the agent of appellant and the defendant were those concerning the inspection clause, the kind of machinery to be purchased, the kind to be traded in, and the manner of payment. The amount of the per cent of damages was not written in ink, but was printed; it was a part of the printed form. This leads one to believe that there was no endeavor to arrive at the probable damages and fix the sum in advance, but that the damage clause was an arbitrary sum inserted ratber for the purpose of deterring than compensating . a breach. Again, granting, as contended by appellant,that the damages might be much or little, does not the very fact of itself that they feed it at a certain per cent of the purchase price preclude any attempt to arrive at an agreed probable loss? .Viewing the clause standing alone, was it to compensate for a single breach? Certainly not. First: It must be fifteen per cent if the vendee refuses to accept the machinery at Diamond, Missouri, after the vendor has gone to the trouble of shipping — and that on the twenty-fifth day of May. Second: It must he fifteen per cent if the vendee cancel in the meantime, for example, on the twenty-fourth day of March, two months prior to the other happening and when there has been no change watever shown in the status of the parties or in the machinery.

True it is, they called it “liquidated damages,” but their misnomer is no reason for this court to be led astray; the language is not conclusive. [13 Cyc. 91.] And certainly not in a case where the measure of damages is easily ascertainable, and where from the entire contract and from the particular item it appears to have been inserted as “scare money,” and put in not to compensate but to deter a breach; nor in a case where the amount fixed is so out of proportion to the ordinary fluctuation in the market price of as staple an article as a threshing outfit — and that in a period of only two and one-half months.

Other courts have passed on stipulations almost identical in language to the one under consideration and have pronounced them penalties. [Parlin & Orendorff v. Boatman, 84 Mo. App. 67; J. I. Case Threshing Mach. Co. v. Fronk, 117 N. W. (Minn.) 229; J. I. Case Threshing Mach. Co. v. Souders, 96 N. E. (Ind.) 177; Florence Wagon Works v. Salmon, 68 S. E. (Ga.) 866; Mansur & Tebbetts Imp. Co. v. Tissier Co., 33 So. (Ala.) 318.]

As in determining tbe character of an individual we often look to the company he keeps, so in ascertaining the true character of a clause of a contract the courts will scrutinize the terms and conditions with which the particular clause is associated; and, to that end, there is set forth in the statement herein some of the clauses of the contract under consideration, indicating, on the whole, that they were drawn for the sole benefit and protection of the vendor — drawn on printed forms, ready at all times for the signature of any purchaser when the kind of machinery and the time and terms of payment had been agreed upon.

The cases cited by appelant where the stipulation was held to provide for liquidated damages are in per-fact harmony with the views herein expressed as those cases arose out of contracts wherein the amount of damages was difficult to ascertain, or the amount was in reasonable proportion to the presumable loss and showed an honest endeavor to fix the sum to compensate rather than deter. Such authorities do not, therefore, persuade us to adopt appellant’s contentions in this case, which, viewed from any angle, shows up a penalty. We must therefore hold that the trial court committed no error.

For the reasons herein appearing, the judgment is affirmed.

All concur.