Gray v. Crosby

Woodworth, J. delivered the opinion of the Court. The principal question in this cause, arises on the construction of that part of the covenant declared on, which is contained in the -following words : “It is further agreed, that if either of the parties to. this agreement, shall refuse to fulfil this agreement, according to its true meaning and intent, the party refusing shall pay to the other party the sum of 500 dollars, which shall be considered as liquidated dama-gesJ’’ On the part of the defendant, it is admitted, that he is liable to pay 500 dollars, and on the payment of that sum, it is contended, the parties are placed in the same si-tuaiion they were before the covenant was made. There is no doubt that if, upon a view of the whole instrument, it shall appear to have been the intent, that the damages stipulated should be received, in lieu of a perfor* manee of every thing covenanted to be done, and as an ex-tinguishment of the appraisement itself, then the defence is well founded. In order to determine this point, a careful examination of the agreement becomes necessary. The intent collected from the whole instrument, must be carried into effect, although there maybe a difficulty in reconciling all its parts. After an attentive examination, my judgment is convinced, that the construction contended for by the defendant was not contemplated by the parties, arid ought not to be sanctioned. Itappears, that the plaintiff having mortgaged three farms to William Watts, for securing 5,000 dollars, and this mortgage having been assigned to the defendant, he had, by virtue thereof, sold the laud mortgaged, and then had possession of two of the farms. Divers controversies and suits having arisen concerning the premises, the parties were mutually inclined to bring the controversy to a close, by a submission to three individuals. The basis of the submission was, tsiat an appraisement of the land be made at its real value, .and be applied to the payment of the debt due from the plaintiff, and of all legal claims and charges of the defendant against him, without reference to the price the land [223] sold for under the mortgage. The covenant, also, provides for the performance of certain things before the appraisement took place. At its date, April 6th, 1818, the plaintiff held the possession of one of the farms, and by that instrument bound himself to give immediate possession thereof' from the date, reserving the right to take off all his property. The cause of inserting this clause may have been, that the farm on which the plaintiff lived, was, in the first instance, to be appraised, and, in any event, to be applied toward the discharge of the defendant’s debt. Both parties expecting an appraisement would be made in a few days thereafter, it may not have been deemed necessary to defer the delivery of possession. The object and design of these parties appear to have been, that the decision of the appraisers should be conclusive on the matters submitted to them, and put an end to the controversy. This must be carried into effect, unless the clause respecting liquidated damages, is in language so plain and explicit as to require a different construction. The question submitted was of considerable magnitude; the terms of submission were settled on principles'of justice and liberality; the plaintiff was to perform acts immediately, altogether inconsistent with the idea that the covenant could be rescinded after the ap-praisement, by either party, on paying a sum in damages, thereby converting it into a -conditional arrangement, by which the parties were left to speculate as to the appraisement, and if not approved, then to proceed in their suits at law. I think the parties contemplated otherwise, and that the clause relied on may be explained and applied in such manner as to leave the appraisement in full force, and allow the plaintiff the benefit of it. This is a case of submission to arbitrators. From the nature of the case, either party might revoke it; and if the authority had been revoked before the making the award, the arbitrators could not proceed. This right is incident to every case of submission, whether it be by bond, covenant, or by parol. The consequence of revocation would be, that where there is a penalty, it is forfeited, and the plaintiff would recover such damages under the breaches assigned, as he may have sustained» (Allen v. Watson, 16 Johns. Rep. 205.) If, instead [224] of a penalty, eo nomine, the parties agree on a sum as liqui» (jarnageS} and one party revokes the authority, in such case, I apprehend the plaintiff would recover the specific sum agreed on. I consider the exercise of the power of revocation as one of the acts to which the damages'apply. But they do not apply to the sum of 310 dollars and 67 , cents, which appears to be the surplus of the appraisement, after paying the defendant his whole demand. The damages were intended to embrace two objects: to remunerate one party, if the other defeated the award by revoking the submission, and to compensate for the non-performance of those acts which the parties bound themselves to perform, previous to the award, and, such as the defendant is bound to perform; if he retains the Burdock and Wixon farms. For aught that appears, every thing stipulated has been performed, excepting the matters which are the subject of this suit. That the stipulated damages do not apply as a substitute for the award itself, and thereby become the means of defeating it, I think very plain,upon this consideration, that the damages are given, “ on a refusal to perform the agreement.” The moment the award or appraisement was made, the most important part of the controversy was settled and concluded, without requiring any further act to be done. Before the award, a large sum ivas due to the defendant on the bond and mortgage; after the appraisement was made, and it appearing that th'e value of the land appraised exceeded the amount of all the defendant’s claims, the demand of the defendant was satisfied, because no further act was required to be done by either party to give the award effect thus far. By the terms of the submission and the appraisement under it, the defendant’s demands were extinguished, if the lands were appraised at more than their amount. They were appraised at a greater sum, and that excess is claimed in this suit. It is perfectly clear to my mind, that the liquidated damage's have no application to this part of the subject; there is nothing here to refuse or perform^ and without something ^hich could be the subject of refusal, the clause has no effect. If, then, so great a portion of the controversy is extinguished by the mere force of the ap-praisement, and without any further act of the parties, can [225] there be any ground for saying, that the stipulated damages were intended as a substitute. If this point be conceded, and I do not see how it can be questioned, it would be absurd to allow, that as to the excess of the appraisement, whatever that might be, the parties intended, that instead of paying such excess, the party liable to the payment might elect to pay the liquidated damages in lieu thereof: And yet, if the defence is well founded, this is the necessary consequence. In all the cases where a party relies on the payment of liquidated damages as a discharge* it must clearly appear from the contract, that they were to be paid and received absolutely in lieu of performance. (4 Dallas Rep. 150. Graham v. Bickham.) In the case of Slosson v. Beadle, (7 Johns. Rep. 72.) and Hasbrouck v. Tappen, (15 Johns. Rep. 200.) it expressly appeared, that ¡he damages were in lieu of performance, and payment thereof was an alternative reserved for the party’s election. The present case is not equally explicit; but granting that no objection arises on this ground, still it must be limited to such things as were to be performed by the parties, and cannot extend to so much as the award, per se, settled and concluded; nor can they be substituted for the payment of the surplus, the right to which depends on the conclusiveness, of the appraisement. In this view of the subject* the plaintiff cannot claim the stipulated damages, nor can the defendant elect, that on the payment thereof, his bond and mortgage may stand revived, and be set off against the. plaintiff’s demand. If it were necessary in this casé* resort might be had, in furtherance of the intent, to a strict construction of the words “ shall refuse to fulfil*•” for it must be admitted, that a mere refusal is very distinct from a stipulation to receive a certain sum, instead of performance. A party may refuse, still he is bound to perform his contract, and I cannot perceive how his refusal is to be adjudged a waiver of performance, unless it is so expressed-"There is another point of view in which this question may be placed. The plaintiff alleges, that the defendant has not paid the 310 dollars and 67 cents, the surplus remaining after satisfying the defendant’s demand. The defendant covenanted, that if the amount of the appraisement exceeded [226] his claims, he would pay the balance. If the defence can he supported, it must be solely on the ground of the defendant’s refusing to pay ¿his sum, and it would then present a case, where one party covenants, on a certain contingency, to pay to another, a sum of money, with proviso, that if he refuses, then to pay a larger sum as liquidated damages. Such facts constitute no right to recover beyond the money actually due. Liquidated damages are not applicable to such case. If they were, they might afford a secure protection for usury, and countenance oppression under the forms of law. My opinion, then, is, that the set-off was properly excluded, that the plaintiff is not entitled to recover any thing for liquidated damages, and that the verdict was correctly taken for the 310 dollars and 67 cents. There is a further objection to the set off relied on at the trial$ the defendant had sold three farms under the mortgage, but it is no where stated for what sum they were sold. The defendant’s claim, including the bond and mortgage, was 6,326 dollars and 91 cents. At the trial, the defendant contended, that “ the whole bond assigned to him by Watts, stood in force,” and offered to set off 500 dollars, to pay the stipulated damages, and claimed to have the residue certified in his favour. If the defendant had been entitled to a set-off, it could only be for the amount remaining due, after crediting the money for which the land sold; yet, without offering any proof as to that point, the defendant claims the whole of the original debt without deduction. This was altogether inadmissible. The jury could not determine, from this statement, how much was allowable ; or whether, after crediting the amount of sales, enough remained to satisfy the 500 dollars ; and if there was more, how could they determine on the balance to be certified ? On this ground, also, the defence was correctly excluded. The plaintiff is entitled to judgment. Judgment for the plaintiff.