Summary
In Curtis v. Van Bergh (161 N.Y. 47) Judge VANN carefully restated the rule; but the very essence of his treatment of the subject is that unless the damages could be found thus to be appropriate and in true proportion they would not be allowed (p. 51).
Summary of this case from Matter of Publishers' AssnOpinion
Argued October 24, 1899
Decided November 21, 1899
C.C. Werner for appellants. Nathaniel Foote for respondent.
The question presented by this appeal is whether the sum which the plaintiff's assignor promised to pay the defendants for each day's delay in completing the building, after expiration of the period stipulated, is in the nature of a penalty or of liquidated damages. This question depends upon the intention of the parties, which is to be gathered from the language used in making the contract, read in the light of the circumstances surrounding them at the time. ( Little v. Banks, 85 N.Y. 258, 266; Kemp v. Knickerbocker Ice Co., 69 N.Y. 45, 58; Colwell v. Lawrence, 38 N.Y. 71, 74.) The words of the contract are that the sum of fifty dollars shall be paid by the plaintiff's assignor to the defendants for each day, after the date named for performance, "as fixed, settled and liquidated damages" which the defendants "will sustain by reason of the failure * * * to complete said building" within the time specified.
If this language is given its ordinary meaning the parties have not only defined the sum promised to be paid, as liquidated damages, but have expressly covenanted that it is the amount of damage which the defendants would sustain in consequence of the delay, thus limiting recovery to the sum named, even if the actual damages should greatly exceed it.
The plaintiff, however, contends that the language of the agreement is not conclusive, and that these words should not be given their ordinary meaning, because the per diem payment is so excessive as to shock one's sense of justice and to warrant the inference that the parties could not have intended what they said, because it would be unreasonable. It is insisted that as the rent reserved was but $5.75 per day, the sum of fifty dollars for each day's delay is so out of proportion to the probable loss, as to bring the contract within that class of cases which hold that where the sum agreed to be paid is so great as to be unconscionable it will be regarded as a penalty, even if the parties have expressly declared their intention to be otherwise. ( Kemble v. Farren, 6 Bing. 141; Jackson v. Baker, 2 Edw. Ch. 471; Spencer v. Tilden, 5 Cow. 144; Niver v. Rossman, 18 Barb. 50; Mott v. Mott, 11 Barb. 134; Beale v. Hayes, Sandf. 640.)
These authorities show that the courts have struggled hard against the apparent intention of the parties, in order to relieve the one in default from an improvident bargain. It is, however, the law of this state, as settled by this court, that where the language used is clear and explicit to that effect, the amount is to be deemed liquidated damages when the actual damages contemplated at the time the agreement was made "are in their nature uncertain and unascertainable with exactness, and may be dependent upon extrinsic considerations and circumstances, and the amount is not, on the face of the contract, out of all proportion to the probable loss." ( Ward v. Hudson River Building Co., 125 N.Y. 230; Little v. Banks, 85 N.Y. 258; Kemp v. Knickerbocker Ice Co., 69 N.Y. 45, 57; Clement v. Cash, 21 N.Y. 253; Baglie v. Peddie, 5 Sandf. 192; S.C., 16 N.Y. 469; Dunlop v. Gregory, 10 N.Y. 241; Cotheal v. Talmage, 9 N.Y. 551.)
We thus reach the ultimate question, whether the damages within the contemplation of the parties when they made the contract in question, are so uncertain as to be difficult of ascertainment, and if so, whether they are so grossly excessive as to be out of all proportion to the probable loss?
In making said contract the defendants provided for the lease of a building, to be erected, when there was less than six months' time within which to complete it, and they needed protection from the consequences of failure. They were engaged in a growing and profitable manufacturing business, which required more room and additional machinery. It was necessary to have the new building ready when their old lease expired, or their business would be seriously interrupted, and they would have no place to put either their new or their old machinery. Moreover, they could not manufacture goods for the fall and holiday trade, and they would be subject to summary ejectment from their old quarters for holding over after expiration of their term. It was doubtful whether, at midsummer, they could secure another place, temporarily, and if they could, it would compel them to move twice, at an increased expense and loss of time. Both parties knew that the failure to have the building ready on time would naturally result in the loss of business, and either in the temporary occupation of another building or a forcible removal through legal process. These elements of damage, which were necessarily within the contemplation of the parties, as reasonable men, when they made the contract, are uncertain, hard to ascertain with exactness and dependent upon extrinsic circumstances and considerations. Who can tell the loss to a large manufacturing business caused by closing the works in a busy season, by the removal of such a business to temporary quarters, or by summary dispossession at the hands of an officer? Who can estimate the injury to a manufacturing plant under such circumstances? What is more difficult to prove than loss of profits or damages to a business? What pecuniary standard is there to measure them by? ( Little v. Banks, supra.) How can the amount be fixed, except by agreement? The damages, under the facts before us, are necessarily hard to establish with exactness, or otherwise, yet they may be so serious as to render it desirable to have the amount agreed upon in advance. The parties themselves can "come to a more satisfactory conclusion as to the damages than would be possible for a jury." ( Jones v. Binford, 74 Me. 445.) This is, therefore, one of those cases where it must be presumed that the parties stipulated for the payment of a fixed sum of money absolutely, "from the difficulty of ascertaining any exact amount of damages which would be sustained by a breach of the agreement." ( Chase v. Allen, 13 Gray, 42.)
Is the sum agreed upon out of all proportion to the probable loss, under the circumstances known to the parties when the agreement was made? Is it so disproportionate that one "would start at the mere mention of it," which is the test laid down in Cotheal v. Talmage ( supra)? Of course the parties did not contemplate a long delay in completing the building or neither of them would have entered into the contract at all. We cannot say, as matter of law, that fifty dollars a day for the absolute suspension of a prosperous manufacturing business, for a few days, at the busiest season of the year, accompanied by a temporary removal to other quarters, or a forcible removal to the street, is so excessive as to shock one's sense of justice. It is less in proportion to the actual damages than the amounts sustained in several of the cases cited. Indeed, the actual damages might exceed it and the covenant thus prove a protection to the one in default.
We think the learned trial judge erred in directing a verdict for the plaintiff, and that the judgment below should be reversed and a new trial granted, with costs to abide the event.
All concur.
Judgment reversed, etc.