Streeper v. Williams

The opinion of the court was delivered, by

Agnew, J.

— This case is very defectively stated. We find, in our paper-book, no copy of the bill of exceptions, and no statement of facts. We understand, from the argument, that it was a case of total failure on the part of the defendant, and we infer, from the verdict against the defendant, that the plaintiff must have tendered performance on his part.

Upon these facts, and the terms of the agreement, we must determine whether the stipulated sum is a penalty or liquidated damages. Upon no question have courts doubted and differed more. It is unnecessary to examine the numerous authorities in detail, for they are neither uniform nor consistent. No definite rule to determine the question is furnished by them, each being determined more in direct reference to its own facts than to any general rule. In the earlier cases, the courts gave more weight to the language of the clause designating the sum as a penalty or as liquidated damages. The modern authorities attach greater importance to the meaning and intention of the parries. Yet the intention is not all-controlling, for in some cases the subject-matter and surroundings of the contract will control the intention where equity absolutely demands it. A sum expressly stipulated as liquidated damages will be relieved from, if it is obviously to secure payment of another sum capable of being compensated by interest. On the other hand, a sum denominated a penalty, or forfeiture, will be considered liquidated damages where it is fixed upon by the parties as the measure of the damages, because the nature of the case, the uncertainty of the proof, of the difficulties of i’eaching the damages by proof, have induced them to make the damages a subject of previous adjustment. In some cases the magnitude of the sum, and its proportion to the probable consequence of a breach, will cause it to be looked upon as minatory only. Upon the whole, the only general observation we can make is, that in each case we must look at the language of the contract, the intention of the parties as gathered from all its provisions, the subject of the contract and its surroundings, the ease or difficulty of measuring the breach in damages, and the sum stipulated, and from the whole gather the view which good conscience and equity ought to take of the case. Equity lies at the foundation of relief' in the case of forfeiture and.penalties, and hence the difficulty of reaching any general rule to govern all cases: The research of counsel has furnished us with many authorities, but I refer to the following only as containing these general views: Chase v. Allen, 13 Gray 42; Samler v. Ferguson, 7 C. B. 716; Chamberlin v. Bagley, 11 N. Hamp. 234; Sammon v. Howe, 2 Shep. 250; Meade v. Wheeler, 13 N. Hamp. 351; Maine v. King, 10 Barb. S. C. 59; Nevin v. Bossman, 15 Barb. 50; Lampman v. Cochran, 19 Id. 388; Corheal v. Talmage, 5 Seld. 551; Duffey v. Sharkey, 11 Ind. 70; Jaquuh v. Hudson, 5 Mich. 123.

The agreement in this case is a contract for the sale of a hotel. The plaintiff agreed to make a clear title to defendant on the first day of April following its date, which was in February, and to give immediate possession of the bar-room and fixtures. The defendant was to pay $3000 on the signing of the deed on the 1st of April, and agreed that plaintiff should retain possession of a certain part of the property four weeks. The price was to be $14,000, but no time was fixed for the payment of any part except the $3000. Then came the clause in question: “ The parties to the above agreement doth severally agree to forfeit the sum of $500 — say five hundred dollars, in case either party fail to comply with the terms of this agreement.” The first feature striking our attention is the great disproportion between this sum and the purchase-money, or even the portion to be paid on the 1st of April, when the deed was to be made. Clearly, it was not intended to enforce payment of the purchase-money, or its first instalment only. Nor could it be intended to protect the defendant against a failure to make the title after payment of the first instalment. This leads obviously to the conclusion that the only intention of stipulating this sum was to protect against a total failure where the contract was abandoned. If either party failed the other might abandon, and demand the sum stipulated for this contingency. Were the sum adequate in magnitude to compel specific performance, we might conclude it was intended as a penalty only, against which equity would relieve on a full compliance with the contract. But its manifest inadequacy, as compared with the value or the price of the property, leaves no other reasonable conclusion than that it was intended as a compensation to either party, when the other wholly abandoned the contract. In this view, the parties must have intended the sum as liquidated damages, and not as a penalty.

But this intention might not alone determine the equity, and therefore we also look at the state of the case as it probably might be in case of abandonment; for, if the damages are definite in their nature, and easily to be ascertained, it might be unconscionable to award the whole sum as damages. This leads to a consideration of the subject-matter, and the terms of the contract. The property is a hotel — the plaintiff describes himself to be a hotel-keeper, and he contracts to deliver immediate possession of a part. Now, this involves the breaking up of his business, the purchase or lease of a new residence, and the disposal of furniture needed for a hotel, but probably not for a private family. Relying on the performance of the defendant, the plaintiff may make many journeys in search of a new home, encounter difficulties in suiting himself, involve himself in Dew purchases, raise large sums of money, and in many ways incur heavy losses and expenses, and yet he may be unable, or find it very difficult, to prove their extent. So the defendant might contract for the sale of his own property, purchase furniture and liquors, contract for loans of money to perform his contract, and incur liabilities, all causing him losses very difficult to be ascertained. Now, every one knows how difficult it is to reach and estimate the real losses men suffer from disappointment in their plans, and many of the subjects of loss cannot be put in evidence. An accurate account can scarcely be stated in dollars and cents, and yet but few, if asked to name a sum for a total abandonment of such a contract, would be willing to take the risk much lower than at the sum stipulated here.

From all these circumstances, added to the intention deduced from the contract, we conclude that the parties fixed the sum stipulated, as the measure of the damages either would probably suffer from a total failure, and the compensation to be made therefor. The word “forfeit,” according to many of the authorities, is therefore outweighed by the other elements of interpretation, and we must construe it as meaning “to pay.”

But we are told that the jury assessed the damages at $50— one-tenth of the stipulated sum. This is- true, but it does not follow they had no difficulty in doing so, or that the very difficulty of proving and making the proof was not the cause of so small a verdict. It establishes only that, as a jury must find upon the evidence, the proof was not sufficient to enable them to give more. But it does not detract from the nature of the case, or explain away the intention gathered from the contract.

The judgment is affirmed.