Opinion
November, 1908.
Farley Rumsey, for plaintiff.
John R. Halsey, for defendants.
The action is to foreclose a mechanic's lien. On July 10, 1906, the plaintiff contracted in writing with Hartman and Horgan to excavate and remove the materials (including sewer trench) on certain lots at the southeast corner of One Hundred and Sixty-second street and Ogden avenue, according to grades to be given by the engineer, at the following prices: Earth, 55 cents per cubic yard; rock in general excavation, $1.74 per cubic yard; rock in trenches, $2.50 per cubic yard; classification of earth and rock to be governed by city classifications; payments every two weeks upon engineer's certificates; 20 per cent. to be retained until completion; final payments to be made in such sums and upon such certificates as to include the retained percentage; said property to be cleared of all surplus material in eight weeks under a penalty of $5 per day to be paid as liquidated damages for each and every day consumed in excess of eight weeks; such stone as might be needed for the building of foundation walls, in quality and quantity, to be determined by the engineer, to be excepted from the contract. An engineer, being employed by the defendants, delivered to the plaintiff a blue print sketch showing the grades and lines of the said excavation, and plaintiff agreed to pay one-half of said engineer's charges. The cost of the work performed aggregated $6,810.80, and it is not claimed that it was even substantially completed until November 12, 1906, or more than nine weeks after the time specified in the contract. Four payments were made between July 28 and September 14, 1906, on certificates of the engineer, aggregating $3,511.60, and two payments between September 29 and October 12, 1906, without such certificates, aggregating $1,841, a total of $5,352.60. About January 9, 1907, plaintiff filed a lien for $1,783.92. The amount now demanded is $1,458.20. The principal contention of the defendants is their right to "demurrage" for 212 working days between September 6, 1906 (the date of the expiration of the eight weeks) and May 17, 1907, when the last work was performed upon the contract. Although the defendants might protest against delay and still claim damages for the plaintiff's breach of the contract in that regard, yet their payment as late as October 12, 1906, without a certificate may well be urged in corroboration of plaintiff's testimony excusing the delay. Further than this, it appears that after a conference between the parties with a view of adjusting their differences the plaintiff, about May 17, 1907, went upon the premises and performed certain minor work. But, aside from the merits, the question of enforcing a clause in such a contract which provides for the payment of a certain sum or sums described therein as "a penalty to be paid as liquidated damages" is one of frequent presentation upon which much has been written in text books, law dictionaries and judicial decisions. From an examination of the authorities I reach the conclusion that without regard to the language of the contract, which may describe the amount agreed upon as either "penalty" or "liquidated damages," or, like the present case, as a "penalty to be paid (or agreed upon or regarded) as liquidated damages," the test of the enforcibility of such a provision is the actual intent of the parties, which may be ascertained from the instrument itself and all the evidence before the court with particular reference to the fundamental fairness of this clause of the contract. The amount agreed upon should not, either upon the face of the contract or from all the circumstances, appear disproportionate to the provable or probable actual loss sustained by the party who seeks to enforce this clause. To ascertain whether or not the amounts claimed as such liquidated damages are disproportionate some evidence is necessary. If no evidence be offered on this subject, how is the court in position to fix the sum? It follows that, if there be no evidence dehors the contract, the penalty or forfeiture, no matter how it may be described, will not be allowed. In other words, proof must be furnished upon which to base approximate actual damage. If the owner allows the contractor to complete after the time limit, or if delay be caused by the owner or by extra work, may he stand by and at the end recover arbitrary damages to offset work performed and material furnished without showing that he has been injured, or how, or to what extent? I know of no modern authority so holding. In the case at bar no evidence of damage for delay was submitted, and the penalty of $5 per day for 212 working days from September 6, 1906, to May 17, 1907, or $1,060, is disallowed. The contract, as has been shown above, provided for the removal of the material except such stone as might be desired for the building of foundations, quality and quantity to be determined by the engineer. Defendants claim that plaintiff left too much stone on the premises. Considerable testimony was taken on this subject, from all of which I conclude that the quantity and quality of stone not removed was authorized by defendants to be left on the premises. Defendants further claim that they were put to expense in removing rubbish or surplus materials. While the evidence is not definite, it seems to me that an allowance to the defendants of $100 on this claim would be equitable. Defendants also claim that plaintiff did not complete the excavation to grade. This is strongly negatived by the testimony of Mr. Sterling, an engineer, and also by the fact that in May, 1907, the plaintiffs furnished labor for removing some "high points" in the excavation. Plaintiff should have judgment for $1,458.20, less $100 allowed as above; $30, one-half engineer's charges, and $45 expense of completing excavation of yard, leaving a balance of $1,283.20, with costs, but without interest.
Ordered accordingly.