HOME LAND & CATTLE CO. et al. v. McNAMARA et al., 111 F. 822

GILBERT, Circuit Judge, after stating the case as above, delivered the opinion of the court. One of the contentions upon the part of the appellants is that the appellees cannot demand the specific performance of the contract, for the reason that they themselves failed to carry out its provisions by refusing to pay the $23,325, which, under the contract, became due upon the delivery of the cattle which were turned over to and received by the appellees upon October 21st and 22d. The contracting parties, at the time of entering into the contract, had estimated the herd of cattle at 30,000 head.

It was known that it consisted of two grades,—beef cattle and stock cattle. It was believed that of the former there were 9,000 head, and the Cattle. Company so guarantied. The price of $25 per head for the whole herd was agreed upon on that basis. The beef cattle were more valuable than the stock cattle. The testimony on behalf of the appellees is that, but for the guaranty that there were 9,000 head of the beef cattle, they would have paid no more than $23 per head for the herd.

It must be borne in mind that this provision for the forfeiture of .$20 per head for shortage in the stipulated number of beef cattle does not provide for general damages for breach of the contract. It does not relate to the stock cattle, nor does it contemplate damages for failure to deliver the full 30,000 head. If, for instance, there had been a delivery of 9,000 head of beef cattle under the contract, and no other cattle whatever had been delivered, the provision in the contract for forfeiture would not have applied to such a breach.

There is no ground for the contention that the provision requiring the Cattle Company to pay the appellees $20 per head for all the beef cattle that fell short of the 9,000 head so guarantied is equivalent to a rebate from the purchase price upon the theory that the stock cattle were less valuable than the beef cattle. The facts fully contradict this theory. It is proven that at the stipulated price of S25 per head the appellees, although they received less than the stipulated number of cattle, received better cattle than their contract called for.

The number of cattle actually found to be in the herd, instead of 30,000, was about 16,000 head, but the proportion of beef cattle to the stock cattle in the herd as delivered was much greater than the proportion contemplated in the contract. By the terms of the contract considerably less than one-third of the herd were to be beef cattle. As the cattle were actually delivered, nearly one-lialf were beef cattle.

It is apparent, therefore, that there was no damage to the appellees by reason of the disparity in value between the stock cattle and the beef cattle which they had received; on the contrary, that disparity was to their advantage. The bill alleges, it is true, that the cattle under the contract possessed “a special and peculiar value” to the appellees, “which could not be adequately compensated for in money damages.” This averment is evidently inserted for the purpose of showing that the case is one for specific performance.

It does not relate to the beef cattle especially, but to the whole number of cattle contracted for. There is no averment in the bill that the beef cattle possessed special value to the appellees, and there is no allegation upon wdiich it may be predicated that the appellees sustained special damages for the failure to deliver the beef cattle, or any damages other than those which resulted from the increase in value of the cattle. Not only is there no such averment, but there is no evidence whatever of such damage.

It appears from the testimony that more than one-half of the beef cattle which were received by the appellees under the contract were, immediately upon delivery to them, at different times, consigned to the market at Chicago; and one of the appellees testified that no more than 1,000 head of them were used in filling their contracts with the Indian agencies, and that the appellees were not damaged, so far as their beef contracts were concerned, by the failure of the appellants to deliver the remainder of the 9,000 head.

The provision for the payment of $20 per head for each head short of the 9,000 did not provide, therefore, for actual damages, or for an equitable compensation to the appellees in case of a breach of the guaranty, in any view of a possible deficiency in the guarantied number of the beef cattle.

It can readily be seen, for instance, that, if one-half of the i6,oqo‘ head delivered had been beef cattle, there would have been a shortage of 1,000 beef cattle under the contract, involving a forfeiture of $20,000 for a breach which would have occasioned no damage whatever to the appellees; or, if the 16,000 head delivered had been all stock cattle, and there had been a total failure to furnish any beef cattle whatever, the forfeiture would have been $180,000, a sum vastly in excess of any possible damages.

In short, it is evident, under the facts of the case, that the appellees could sustain no injury from the breach of the guaranty, except that which resulted from the increase, in the value of the beef cattle during the season of 1897,—a contingency that was not foreseen, the amount of which increase could not be pre-estimated, and which the referee has found was in fact $5 per head, a sum grossly disproportionate to the stipulated forfeiture.' The agreement can be regarded in no other light, therefore, than as a stipulation for a penalty.

It calls for the payment of a sum of money greatly in excess of the actual damages, and it is a case where the damages could have been easily ascertained by proof of the market value of the cattle at the time of the breach of the contract. Such agreements the courts uniformly refuse to sustain, leaving the party injured by the breach to his remedy at law for the recovery of his actual damages. 1 Suth. Dam. 490. But whether the agreement in this instance is strictly one for a penalty or for liquidated damages is not material.

In either case it is made void by the Code of Montana (sections 2243, 2244), which enacts that a contract by which the amount of damages to be paid or other compensation to be made for breach of obligation is determined is to that extent vo.id, except that “the parties to a contract may agree upon an amount which shall be presumed to be the amount of damages sustained by a breach thereof, when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage.” There is nothing in the record.to show that the damage to the appellees by reason of the breach of the guaranty in this case could not have been ascertained without difficulty.

The only element of damages from the shortage in the number of the beef cattle was the difference between the contract price and the market price at the time of delivery: The appellees had no legal excuse, therefore, for refusing to pay the $23,325 which was. due under the contract upon the delivery of cattle on October 22d. They had no right to withhold the monej'-, or to apply it on their claim for damages. Their damages, if any they sustained under the contract, had not been liquidated. By refusing to make the payment, they violated a material provision of their agreement.

Their refusal to pay justified the appellants in declining to make further delivery of cattle, and it effectually bars them now from suing in equity for the specific performance of the contract. • ft is said, however, that the appellants failed to avail themselves, of the right to question the ruling of the court below by their omission to take proper exception to "the findings of the master in chancery. The case of Kimberly v. Arms, 129 U. S. 512, 524. 9 Sup. Ct. 355, 32 L.

Ed. 764, is cited in support of the doctrine that, where parties have consented to a reference to a master to hear and decide all the issues of the case, and report his findings, both of fact and of law, “his determinations are not subject to be set aside or disregarded at the mere discretion of the court.” It is true that the court in that case remarked that such findings, “like those of an independent tribunal, are to be taken as presumptively correct, subject, indeed, to be reviewed under 1he reservation contained in the consent and order of the court, when there has been manifest error in the consideration given to the evidence or in the application of the law, but not otherwise.” It is not necessary, however, in the case at bar, to determine what would have been the effect of a failure to take exception to the findings of the master upon a question of fact, or his omission to make material findings of fact.

It is sufficient to point to the fact that the exception to the construction given by the court to the ninth clause of the contract was taken in apt time within the rule indicated in Kiiuberlj v. Arms.

After the report of the master was filed, the appellants filed in the circuit court proper and specific exception to the master’s conclusions of law upon the very ground which is involved in the foregoing discussion, and upon the contention that the only damages which the appellees could be allowed were to be computed upon the difference between the market value of the cattle at the time of the delivery and the price which was agreed to be paid. Eq. Rule 83; Hatch v. Railroad Co. (C. C.) 9 Fed. 856; Jennings v. Dolan (C. C.) 29 Fed. 861 ; Fidelity Insurance & Safety Deposit Co. v. Shenandoah Iron Co. (C.

C.) 42 Fed. 372. The decree will be reversed, and the cause remanded, with instruction to dismiss the bill.