Shreve v. Brereton

The opinion of the court was delivered, by

Read, J.

This is an action of covenant, to recover damages for the breach of a contract by the defendants, to deliver twelve thousand barrels of petroleum or rock oil of certain specific gravity, in monthly instalments of one thousand barrels each, to the plaintiffs, at the landing of the Aladdin Oil Works, in bulk or in barrels. The price was six and a half cents per gallon delivered as aforesaid, and to be measured in the tanks at said works ; and settlements were to be made at the end of every month for one thousand barrels, provided that quantity had been delivered during the month, when $500 was to he paid in cash by plaintiffs and the residue in their note at four months. The defendants had the privilege of delivering in advance during the spring and summer months, not exceeding two thousand barrels, and during the fall and winter months, not exceeding three thousand barrels, but only one thousand barrels to be settled for at the end of any one month.

If the defendants did not keep up the supply the plaintiffs were at liberty to buy any deficiency of oil at market prices, and to charge the difference in price, freight, &c., to defendants, who agreed to pay the same. On the 13th August 1862, the oil for the month of July and Wo boats was settled and paid for by the plaintiffs.

On the 19th of August, six days afterwards, the defendants wrote to plaintiffs complaining of the lowness of the water, and fearing they could not get down enough to make out the one thousand barrels for the month. “ What we want is this, should we not be able to get oil down this month, we want to give you two thousand barrels in September, and settle for both August and September, on the 1st of October. If this arrangement is satisfactory please let us know immediately. The proceeds of your note have been duly received.”

The price of oil ranged during the summer from three to four cents, and even as low as two and a half cents per gallon, but in September it began to rise and rose greatly in October and November. No oil was delivered after the settlement for the month of July above stated, and on the 11th November the plaintiffs had a notice served on the defendants, informing them, that unless they kept up the plaintiffs’ supply, the plaintiffs would purchase in the market, and charge them with the difference of price. To this there was no answer, and they afterwards purchased oil to supply all the arrears of the defendants.

Judge Williams, in a very able charge, submitted the case under proper instructions to the jury. He first submitted the question whether the plaintiffs had committed such breaches of the contract,, as would justify the defendants in rescinding the contract, and if they found they had, then whether the defendants had waived them. - If the plaintiffs were guilty of any such breach and it was not waived by defendants, then the plaintiffs could not recover.

If the breach did not justify a rescission, or refusal to deliver the residue of the oil, and was not waived by the defendants, then they would be entitled to - defalk the damages sustained by them from the damages sustained by the plaintiffs for the non-delivery of the residue of the oil.

But if the plaintiffs did not fail to perform the contract on their part, or if their failure was waived by the defendants, then the plaintiffs will be entitled to recover such damages as they have sustained in consequence of the defendants’ refusal to deliver the oil.

The plaintiffs purchased the residue in the open market, but they were only allowed to recover the difference in price at the periods Avhen the oil should have been delivered, or, as expressed by the learned judge, <£ they can only recover the difference betAveen the contract and the market price, as of the date of the breaches, or within a reasonable time afterward.”

We have read carefully the judge’s charge, to which we refer as a most complete exposition of the Avhole case, and we see nothing in the first seven specifications of error.

This brings us to the eighth specification, which raises the question, whether the $10,000 in the contract is a penalty, or liquidated damages. If it be liquidated damages, then the plaintiffs have by the defendant’s refusal to deliver the residue of the oil sustained more than $15,000 damages, Avhich are not reached or covered by the sum so fixed in the contract.

Upon this question the cases in our state are few, and afford us very little aid in a case, like the present. They are Graham v. Bickham, 4 Dall. 149, decided nearly seventy years ago ; Robeson v. Whitesides, 16 S. & R. 320; Curry v. Larer, 7 Barr 470; Burr v. Todd, 5 Wright 206; and Streeper v. Williams, 12 Wright 250. In all but the last case the sums named were considered penalties. “ The general leaning,” says Judge Coulter, ££ however, is that such agreements shall be considered as penalties, so that a party shall recover such damages only as he shows that in justice and fairness he ought to recover. The general rule of laAV is, that the remedy shall be commensurate Avith the injury sustained. A scrutiny of the American cases leaves every agreement of the kind pretty much at large to. stand on its OAvn peculiarities.”

The classes into which judges and text-writers have arranged the cases in which the sum has been treated as a penalty, do not seem to be strictly applicable to a case like the present. But Mr. Greenleaf, in his excellent Treatise on Evidence, vol. ii. § 459, in giving tAvo of the rules for inferring that the parties intended the sum as liquidated damages, furnishes principles by which this case is governed. ££ 1. Where the damages are uncertain,, and are not capable of being ascertained by any satisfactory and known rule, whether the uncertainty lies in the nature of the subject itself, or in the particular circumstances of the case. 2. Where from the nature of the case and the tenor of the agreement, it is apparent that the damages have already been the subject of actual and fair calculation and adjustment between the parties.”

Now, it is clear that neither of these rules, nor the examples given, include the case before us, for the damages can be reduced to as nearly a perfect certainty as the calculation of interest, and it was impossible in the fluctuation in prices in the course of a year, that the damages could have been the subject of actual and fair calculation and adjustment. So Mr. W. Pitt Taylor, in his Treatise on Evidence, vol. i. p. 56, says: — “ So the question whether the sum mentioned in an agreement to be paid for a breach, is to be treated as a penalty, or as liquidated damages, is one of law to be decided by the judge, upon a consideration of the whole instrument.” In Sainter v. Ferguson, 7 Com. Bench 730, Mr. Justice Cresswell said: “If there be only one event, upon which the money was to become payable, and there is no adequate means of ascertaining the precise damage that may result to the plaintiff, from a breach of the contract, it is perfectly competent to the parties to fix a given amount of compensation in order to avoid the difficulty;” and Mr. Justice Williams said: “ I agree with the rest of the court, that it is competent to the parties by mutual agreement to settle the amount of damages that are in their nature uncertain and difficult of estimation, where they depend upon the failure to perform a single act.”

There is in this agreement a stipulation entirely incompatible with the idea that the sum named was liquidated damages, for whenever there was a failure to supply, the plaintiff could go into the market and buy and charge the difference, and there is not a word to show that they must stop purchasing when the differences reach the $10,000, and then the contract is at an end, although there may be three or more deliveries to be made ; on the other hand, if all the deliveries were made but the last one thousand barrels, it would be most unreasonable to exact the whole amount when the whole damage might only be a fourth or some other portion of the sum fixed.

The damages in this case were ascertained without difficulty, there being no conflicting evidence, and the market is so large, and the prices so well known, that there was no trouble of that kind. For these reasons, and for those assigned by the learned judge, we are of opinion the eighth specification of error is not sustained.

As long as it was profitable, the defendants made their monthly deliveries ; but when the market price rose to and above the contract price, they then ceased altogether, and gave no explanation of their conduct. The verdict and judgment are right.

Judgment affirmed.