Morrill v. Weeks

The first question in construing this contract is to ascertain the time the parties intended it should continue in force, and the acts of the parties and the language of the contract furnish all the evidence we have in regard to it. These show that they intended to engage in the insurance business on joint account for the term of five years, unless one of them should desire to withdraw from the business within that time, and in that event a way was provided by which it might be done. This is the effect of the language if given its usual and natural meaning; and while it is perhaps capable of a construction which would continue the contract in force until the parties should comply with its provisions in respect to withdrawal, this is not its natural meaning, and the acts of the parties show that this was not their understanding of it; for at the end of five years the defendant assumed complete control of the business, and for more than thirteen years the plaintiffs permitted him to treat it as his own without asserting any claim of control over or ownership in the business. This is evidence of a practical construction of the contract, and is entitled to great weight in determining the question of intent. As a rule, when the parties to a contract have so acted in relation to any of its provisions as to show their understanding of them, and this course of action has continued for a long time, the court will adopt that understanding unless the language of the contract is clearly incapable of such construction. Newmarket Mfg. Co. v. Pendergast, 24 N.H. 54, 66; Winnipiseogee etc. Co. v. Perley, 46 N.H. 83, 108. Its language and the acts of the parties both show that this contract was to terminate at the end of five years.

The defendant agreed to give the plaintiffs seven and one half per cent of all premiums collected by him upon policies written in the New Hampshire Company while the contract was in force, but failed to keep this agreement as to policies written between August 1, 1883, and February 19, 1885, when the contract ceased to be in force. The intention of the parties is generally the test to determine whether a promise to pay a fixed sum of money for any default in the performance of a contract is in the nature of a penalty or of liquidated damages. Hurd v. Dunsmore, 63 N.H. 171; Houghton v. Pattee, 58 N.H. 326; Davis v. Gillett, 52 N.H. 126; Mead v. Wheeler,13 N.H. 351; Brewster v. Edgerly, 13 N.H. 275; Chamberlain v. Bagley,11 N.H. 234. A promise to pay a large sum of money in the event of a default in the payment of a much smaller sum is, however, an exception to this rule, for the law makes interest the measure of damages for failure to pay money when it is due, and will not permit parties to avoid the usury laws in this way. Mead v. Wheeler, supra. Such a promise will be treated as a penalty and not as liquidated damages.

The purpose of a penalty is to insure the performance of a contract, and not to fix the measure of damages which may be recovered for a breach of it; and except in actions to recover the penalty, the injured party can recover the full amount of his damages. Brown v. Bellows, 4 Pick. 179; Foley v. McKeegan, 44 Ia. 1, — 66 Am. Dec. 107, 113, note. Hence it follows that the plaintiffs can recover in this action their share of all premiums collected by the defendant while the contract was in force, although the amount exceeds three hundred dollars.

The parties were joint owners of the business at the time when the contract ceased to be in force, and the defendant, having appropriated the plaintiffs' share, must account to them for its value at the time he converted it. He contracted to do this, and even if he did not he must still do it; for when one joint owner appropriates common property, he must account to his cotenant for all he has used in excess of his share. Gage v. Gage, 66 N.H. 282.

The defendant's claim that the plaintiffs have been guilty of laches has no foundation, for the case does not find this fact and the only evidence of it is their delay in bringing this action; and mere delay for any time short of that prescribed by the statute of limitations, which in this case is twenty years (P.S., c. 217, s. 4), does not as a matter of law constitute laches. Leaird v. Smith, 44 N.Y. 618, 625.

The defendant was under no legal obligation to account to the plaintiffs, either for their share of the premiums which he had collected or of the business which he had converted, until they demanded such an accounting, so until that time neither claim would carry interest. As no demand was made previous to the beginning of this action, the plaintiffs can recover interest only from that date.

Case discharged.

BLODGETT, C.J., did not sit: the others concurred.