Blackwood v. Liebke

Hilt, C. J., (after stating the facts.) The sole question presented on ■ this appeal is whether the stipulation in the contract for the payment of $1 per tree for all the merchantable trees, of the dimensions mentioned in the contract, is a penalty or whether it is stipulated damages. The-circuit court held it was a penalty, and the plaintiff (appellant here) contends that it was stipulated damages. A learned discussion as to when agreements in contracts will be treated as stipulated damages and when as penalties, by Mr. Chief Justice Watkins, may be found in the case of Williams v. Green, 14 Ark. 315. Summing up the matter, he says: “Our impression is that wherever the act to be done or abstained from is other than the payment of money, the circumstance that the actual damages may be more or less easily susceptible of ascertainment ought not to influence the construction of an agreement to be one way or the other, a stipulation for damages or merely by way of penalty. Where the damages are at all uncertain or unliquidated, the parties ought to be allowed to anticipate and stipulate them if they choose to do so. Whenever courts attempt to take a distinction among contracts of this class, where no uniform or intelligible rule can be laid down to govern the distinction, they not only assume a most vexatious jurisdiction to reform the contracts of weak or sanguine men, but it tends to impair the confidence which all men ought to have in the obligation of contracts.” In Lincoln v. Little Rock Granite Co., 56 Ark. 405, this statement was quoted from and approved. In Nilson v. Jonesboro, 57 Ark. 168, the court said: “The authorities, however, show that where the intention to liquidate the damages is not obvious, the stipulated sum will usually be given the effect of a penalty if it exceeds the measure of a just compensation and the actual damage sustained is capable of proof. (Citing authorities.) But where the contract is of such a nature that the damage caused by its breach would be uncertain and difficult of proof, the sum named by the parties is generally held to be liquidated damages, if the form and language of the instrument are not unfavorable to that construction, and the magnitude of the sum does not 'forbid it.” In Stillwell v. Paepcke-Leicht Lumber Co., 73 Ark. 432, the court said: “Usually, the surest test of liquidated damages is where the actual damages caused by the breach would be uncertain and difficult of proof, and the sum stipulated appears to be reasonable compensation for the injury occasioned by the failure to perform the contract.” A learned writer on the subject, after discussing the difficulties in applying the principles involved, says: “Notwithstanding the deplorable state of the decisions, it may be assumed, first, that if, by the terms of the contract, a greater sum is to be paid upon default in the payment of a lesser sum at a given time, the provision for the payment of greater sum will be held a penalty; second, where, by the terms of a contract, the damages are not difficult -of ascertainment according to such terms and the stipulated damages are unconscionable, the latter will be regarded as a penalty; third, within these two rules parties may agree upon any sum as compensation for the -breach of a contract.” I Sutherland on Damages, § 283. Applying the foregoing principles to the facts in this record, the court is of opinion that the agreement was enforcible as one for stipulated damages, and was not a penalty. The evidence shows that this was a large body of land: and the contract called for the cutting of only one kind of trees thereupon, with the stipulation that the trees of merchantable size and quality must all be cut clean, so that isolated merchantable trees would not be left. The purpose of this was plain and reasonable. The landowner sold all of the merchantable ash timber upon this large body of land, and his compensation therefor was dependent upon the. amount of timber cut; he desired it all cut, in order that he might obtain the full price for all of his ash timber on this tract. The evidence shows that where a tract is sparsely timbered, with just a few isolated trees of merchantable value left standing, the market value thereof would be less than the market value of the same amount of timber on a heavily timbered tract, on account of the increased expense of hauling it out; and, it might be added, on account of the difficulty to find purchasers for small quantities of timber. In order to avoid 'having isolated merchantable trees scattered over a large tract, the land owner exacted this clause in the contract. It would be difficult to find a more positive element of damage, and yet the measure of it is indeterminate and dependent on many conditions. Turning to Mr. Sutherland’s test, which is a fair deduction from the authorities, the contract cannot be condemned as one requiring a greater sum to be paid in default of the payment of a lesser sum at a given time; nor as one where the damages are not difficult of ascertainment and t'he amount stipulated is unconscionable. It will not do to say that the amount is unconscionable because the price of ash timber had risen $1.50 per thousand feet during the life of the contract. Had it fallen $1.50 during that time, certainly there could be no claim that it was unconscionable; and the fluctuation in the market of salable commodities is just as liable to be on the one side as un the other. This fact furnishes a reason why the parties might contract for a fixed price and thereby escape market fluctuations. It is argued that the landowner is not damaged. That his trees have increased in value, and that he is seeking to exact a higher price therefor than they were worth at the time he made the contract, and yet retain the trees. And it is further argued that where t'he damages are capable of ascertainment, the amount fixed will be disregarded, although declared to be liquidated damages. But the question is not as to the status of the parties at the time when the contract terminated, but as to the status of the parties at the time they made the contract. It may be, as t'he contract works out, that it would be easy to ascertain the damages for the breach of it, or to prove that there were none. But if the status of the parties at the time of the contract was such that it would be difficult or impossible to have anticipated the damage for a breach of it, and there was a positive element of damage, then under the authorities there is no reason why that may not be anticipated and contracted for in advance. The Supreme Court of the United States have reviewed this subject fully in Sun Ptg. & Pub. Assn. v. Moore, 183 U. S. 642. Referring to the contention made in that case, which was sustained by some decisions, that where actual damages can be assessed from testimony, the court must disregard any stipulation fixing the amount and require proof of the damage sustained, the court, speaking through Mr. Justice White, said: “We think the asserted doctrine is wrong in principle, was unknown to the common law, does not prevail in the courts of England at the present time, and it is not sanctioned by the decisions of this court.” And then the court reviewed the authorities, seeking, as it said, to demonstrate the soundness of its repudiation of that asserted doctrine; and said: “The decision of this court on the doctrine of liquidated damages and penalties lend no support to the contention that parties may not bona fide, in a case where the damages are of an uncertain nature, estimate and agree upon the measure of damages which may be sustained from the breach of an agreement. On the contrary, this court has consistently maintained the principle that the intention of the parties is to be arrived at by a proper construction of the agreement made between them, and that whether a particular stipulation to pay a sum of money is to be treated as a penalty, or as an agreed ascertainment of damages, is to be determined by the contract fairly construed, it being the duty of the court always, where the damages are uncertain and have been liquidated 'by an agreement, to enforce the contract.” The contract for the one dollar per tree was valid, and should be enforced. There was no error in the trial of t’he issue on t’he count for timber cut and not hauled, and the judgment on that count is affirmed. The judgment on the count for trees left standing is reversed and cause remanded for a new trial on that count.