EAST MOLINE CO. v. WEIR PLOW CO., 95 F. 250

BUÜSTN, District Judge, upon this statement of the case, delivered the opinion of the court. The principal contention in the case is whether the court erred in not giving judgment for the defendant below for the amount ' claimed as stipulated damages. The finding of facts being in favor of the defendant and against the plaintiff, it seems evident that nominal damages might have been awarded to the defendant upon its counterclaim.

The requirement lor nominal damages, however, would he satisfied with a judgment for one cent, and the case might' he reversed for not so awarding, if the rendering of a judgment for costs had depended thereon. But, so long as judgment for costs was given in favor of the defendant, we cannot reverse the judgment because one cent or five cents did not go with the judgment for costs, as nominal damages. It is presumable, under_ the circumstances, that the failure to allow nominal damages with the judgment for costs was the result of inadvertence. Laubenheimer v. Mann, 19 Wis. 519; Eaton v.

Lyman, 30 Wis. 41; Hibbard v. Telegraph do., 33 Wis. 558; Smith v. Machine Co., 26 Ohio St. 562; Mahoney v. Robbins. 49 Ind. 146; Palmer v. Degan, 58 Minn. 505, 60 N. W. 342. But on the main question, of giving judgment for the $50,000 provided for in the contract, we think there was no error.

The ease is clearly one coming within the rule long ago laid down by the English and American courts, that where the agreement secures the performance or omission of various acts, together with one or more acts in respect to which the damages on a breach of the covenants are certain and readily ascertainable, and there is a sum stipulated as damages to he paid by each party to the other for a breach of any of the covenants, such sum is a penalty merely. Astley v. Weldon, 2 Bos. & P. 346-353; 3 Pars. Cont. (8th Ed.) 161, and cases cited in footnote; Bagley v. Peddie, 5 Sandf. 192; Trower v.

Elder, 77 Ill. 452; Lyman v. Babcock, 40 Wis. 517. The supreme court of Illinois, in Trower v. Elder, supra, laid down the rule as follows: “Vi here there are several covenants or stipulations in an agreement, the damages tor the nonperformance of some of which are readily ascertainable by a jury, and the damages for the nonperformance of the, others are not measurable by any exact pecuniary standard, and a ‘sum is named as damages for a breach of any of the covenants or stipulations, such a sum is held to be a penalty.” This principle, we think, is fairly applicable to the case at bar.

Here are a great number of stipulations upon the part of either party, of varying importance, in regard to some of which the damages for nonperformance are readily ascertainable by a court or jury, while some are clearly of the contrary character, with one general provision for damages, equally applicable to each and all the various covenants. Take the one on plaintiffs part, for instance, providing that the buildings shall be kept insured for three-fourths their insurable value. The damages for a breach of such a stipulation are readily ascertainable by a court or jury.

The same rule holds in regard to the provision for employing a certain number of men. Suppose a lesser number than 300 were employed; could it he supposed that the parties intended that the damages for employing only 275 men at the plant, instead of 300, should be $50,000?

There are also various provisions on the part of the defendant below, like those in regard to providing street-car service, water supply, lighting station, and switching facilities, where the damage could no doubt he separately assessed in case of a breach, and where it would do violence to suppose that the parties could ever have intended that $50,000 should be the stipulated sum to be paid for a breach of any one of these minor provisions.

Where there are so many and various separate covenants upon either part to be performed, of varying importance, if the parties intend to stipulate thq same large sum to be paid upon any breach, without any regard to the degree of importance it may have in the general scheme of the parties, certainly they should be required to make their meaning plain; and, if they do not make it clear that such was the intent, it is the more reasonable construction to construe such provision for damages as a penalty. This leaves each party free to prove the damages actually sustained.

Again, if the intention in such a case is to make the agreed damages apply to some particular main provision of the contract, and not to all, this, also, should be made manifest by express terms. In Taylor v.

Sandiford, 7 Wheat. 13, Chief Justice Marshall lays down the rule somewhat more broadly than the subsequent English and American decisions would warrant, as follows: “In general, a sum of money in gross, to be paid for the nonperformance of an agreement, is considered as a penalty, the legal operation of which is to cover the damages which the party in whose favor the stipulation is made may have sustained from the breach of contract by the opposite party.” While that case was, no doubt, correctly decided, the general doctrine there laid down does not seem to take proper account of the cases where it is evident that the damages for a breach would be uncertain in their nature, and impossible of ascertainment by a jury.

In these cases it is entirely proper for the parties to agree upon the amount of damages, and such agreements are upheld by, and are not in disfavor in, the courts. In such cases the rule is properly laid down by the appellate court of Illinois in Burk v. Dunn, 55 Ill.

App. 25, as follows: “When the damages are considerable, are not capable of exact ascertainment, and rest mainly in estimation, and are based upon matters which are more or less uncertain, and where there is no fraud in procuring the contract, the amount fixed by the parties ought to be the guide for the court.” But we know of no cases recognizing an exception to the rule laid down as above in Parsons and in Bagley v. Peddie and Trower v.

Elder, where there are various stipulations, under some of which the damages could be readily estimated, and others not, and where the provision for damages, as in the case at bar, applies to all alike. There can be no doubt, if the provision for damages had by agreement of parties been made to apply only to a main breach on the part of the plaintiff below in not erecting and completing the plant by a day certain, the damages for such a breach being entirely uncertain and speculative in character, that the provision would properly be construed as one for stipulated damages.

The counsel for plaintiff in error has, in his reply brief, contended for an exception to the rule he thinks applicable to the case, and for authority quotes from 1 Suth.

Dam. § 294, as follows: “Where an agreement contains several stipulations, differing in importance, and a sum is mentioned as liquidated damages to be paid in case of a breach, and of such amount as is apparently appropriate to a total breach, it will be intended to fix the damages only for such a breach; .and an intention will not be imputed to make it payable for breach of minor and unimportant parts, in the absence of language very clearly expressing it.” But, upon examination of this statement in Sutherland, we And it wholly unsupported by any authority. The only case cited by him is Hoagland v. Segur, 38 N.

J. Law, 230, which does not hold to sucli a doctrine. On the contrary, the general rule of the English and American cases, as above given, is distinctly affirmed and followed in that case. The court even lays down the rule quite as strongly as the general line of cases would warrant, where it says: “While the courts have allowed parties to adjust in advance, and stipulate for damages to be awarded in certain cases for the nonperformance of agreements of this kind, they have adopted certain rules of construction for determining where such an adjustment has taken place.

The general rule is that where the agreement contains disconnected stipulations, of various degrees ol' importance, the sum named will be considered as a penalty, though it is called ‘liquidated damages,’ unless llie agreement specify the particular stipulation or stipulations to which the liquidated damages are to be conferred. As was said by Lord Coleridge in Magee v. Lavell, L. R. 9 C. P. 115, the courts refuse to hold themselves bound by ilie mere use of the words ‘liquidated damages,’ and will look at what was considered, in reason, to have been intended by parties in relation to the subject-matter.

The intention must be derived from (he whole agreement, and. if it bo doubtful upon the whole agreement whether the sum named was intended to be a penalty or liquidated damages, it-will be construed to be a penalty.” This doctrine was applied by the New Jersey court to the case then in hand, and the provision in question, so far as it affected the breach, held in that case to be a penalty. It was as though the defendant in this case had sued to recover 850,000 as stipulated damages for a breach of the covenant to keep the buildings insured, or that to keep 300 men in its employ.

It was noi: reasonable to suppose that the parties L tended to have the provision for the payment of so large a sum as stipulated damages to apply to a covenant, which prevented the defendant from receiving money on deposit, which was a minor stipulation of the contract, and held to be included in and part of the banking business. In that case, upon the sale of a banking house by the defendant, it was provided that defendant, after allowing a reasonable time to close out his business of banking, should not engage in the business again for 10 years, nor receive money on deposit.

And it was stipulated that, if he did continue in the business contrary to the agreement, he should pay $10,000 as stipulated damages. lie was sued for receiving money on deposit, and it was claimed that the $10,000 provision related to that stipulation.

But the court held that receiving deposits was a necessary part of the banking business, which defendant had the right to carry on for a reasonable time until he could close out the business, and that by a true construction of the contract the provision for paying $10,000 as damages only applied to the stipulation against continuing in the banking business, and did not apply to tire subordinate provision against receiving money on deposit. And in discussing that question the court used this language, which is,Mr.

Sutherland’s only excuse for the principle he has laid down: “In every case the parties to such an arrangement are in fact controlled, in fixing the sum which shall be compensation for nonperformance, by the importance of the main object and purpose of the agreement, without regard to minor details. An intention to make the sum so determined on payable on the breach of minor and unimportant parts of the agreement will not be imputed, in the absence of language declaring such intention with precision.” The case is not by any means an authority favorable to the contention of the plaintiff in error.

The judgment of the circuit court is affirmed.