UNION PAC. R. CO. v. MITCHELL-CRITTENDEN TIE CO., 190 F. 544

SANBORN, Circuit Judge. This .is an action .by the Tie Company to recover of the Railroad Company the unpaid balance of the value of 378,392 cross-ties which the plaintiff had sold and delivered to the defendant. At the trial the parties stipulated that the price and value of these ties was $95,606.26, that 90 per cent, of this amount had been paid, and that the remaining $9,560.62 had been retained by the Railroad Company.

That company pleaded and claimed that it was not liable to pay this balance, because the ties were sold and ‘delivered under a contract of the parties to the effect that the Tie Company should sell and deliver to the Railroad Company 400,000 cross-ties on or prior to an agreed date, that it failed to deliver 21,608 of these 400,000 ties within the time specified, and that the contract contained stipulations that 90 per cent, of the value of the ties delivered each month should be paid during the succeeding month, that the remaining 10 per cent, should be retained until all the contracted ties were delivered, when it should be paid to the Tie Company, and that: “In caso default is made by the party of the first

part in delivery of the full quantity of cross-ties herein contracted for at the time specified, the 10 per cent, of contract price retained shall he applied by party of the second

part in satisfaction of its liquidated damages.” No evidence of the actual damages sustained by the Railroad Company on account of the failure to deliver the 21,608 Lies was introduced or offered, and the court instructed the jury to return a verdict for the plaintiff for the $9,560.62 and interest.

Counsel for the Railroad Company contend that this ruling was erroneous, because the clause of the contract recited was an agreement that the retained 10 per cent, of the value of the ties delivered should constitute the liquidated damages of that company for the failure of the Tie Company to deliver the 21,608 ties, and because there was no evidence of the value of the ties delivered. They discuss with learning and ability, and review some authorities upon, the question when an agreement that a sum certain shall constitute liquidated damages for the breach of a contract is enforceable and when it is futile.

The opinion of this court upon that question may be found in Brooks v. City of Wichita, 114 Fed. 297, 299, 52 C. C. A. 209, 211, Pressed Steel Car Co. v. Eastern Railway Co. of Minnesota, 121 Fed. 608, 619, 57 C. C. A. 635, 646, and Turner v. City of Fremont, 170 Fed. 259, 95 C. C. A. 455, to the effect that where the amount of the damages for the breach of a contract is uncertain and difficult of ascertainment, and the agreement discloses the intention of the parties to fix a sum certain as the liquidated damages, the contract will be enforced.

But where the contract discloses no such intention, or leaves the intention of the parties in this regard in doubt, and the amount specified is out of all reasonable proportion to the actual damages sustained, the contract is not an agreement for liquidated damages. Van Buren v. Digges, 11 Mow. 461, 13 L. Ed. 771; Sun Printing & Publishing Ass'n v. Moore, 183 U. S. 642, 22 Sup. Ct. 240, 46 L. Ed. 366; Dakin v. Williams, 17 Wend. (N. Y.) 447; Bagley v. Peddie, 16 N. Y. 469, 60 Am. Dec. 713; Wood v. Niagara Falls Paper Co., 121 Fed. 818, 58 C. C. A. 256; Stephens v. Essex County Park Commission, 143 Fed. 844, 75 C.

C. A. 60. The contract in hand contains no agreement that the retained 10 per cent, of the value of the cross-ties delivered should constitute or be considered the liquidated damages for the failure to deliver the entire 400,000 ties as agreed, and if such a stipulation had been made it would have fixed an unjust and unreasonable amount, an amount smaller the greater the breach and greater the smaller the breach. If the Tie Company had delivered only 1,000, and had defaulted in the delivery of 399,000 ties, the amount stipulated by such an agreement would have been 10 per cent, of the value of 1,000 ties.

If the Tie Company had delivered 399,000 ties, and had defaulted in the delivery of 1,000 ties, the amount thus stipulated would have been 10 per cent, of the value of 399,000 ties. It could not have been the intention of the parties to make such an agreement, for the presumption is that they intended to make a reasonable contract. The expressed terms of the agreement sustain this view.

They are not that the retained 10 per cent, shall constitute the Railroad Company’s liquidated damages in case of the Tie Company’s default, but they are that this 10 per cent, shall be applied in satisfaction of that company’s liquidated damages; that is to say, that it shall be retained to secure the payment of and when they are liquidated it shall be applied to the payment of the Railroad Company’s damages in case of the Tie Company’s default.

As there was no evidence what damages, if any, the Railroad Company sustained by reason of the default of ihe Tie Company, the stipulation of the contract regarding the liquidated damages constituted no defense to the Tie Company’s claim for the unpaid balance of the value of the ties it delivered. Nor can the contention that there was no evidence of the value of the ties delivered be sustained, because there was a written agreement of the parties introduced in evidence at the trial that their value was $95,606.26.

There was, therefore, no error in the court’s direction to the jury to return a verdict for the Tie Company, and the judgment in its favor is affirmed.