Deuninck v. West Gallatin Irrigation Co.

ME. COMMISSIONER CLAYBEEG prepared the opinion for the court. This is an action upon a written contract, by which it is claimed that respondent agreed to furnish certain water to D. EL Ueuninck for the purpose of irrigating 129 acres of his land. The complaint sets forth the contract, and then alleges that, in reliance upon its terms, plaintiffs prepared their land for culti — 258 — vation, and planted crops; that l’espondent failed to furnish, the water contracted for, and that because thereof plaintiffs were damaged in the sum of $1,981.28. The respondent demurred to this complaint- on three distinct and separate grounds, but abandoned two of them upon the argument, and only insisted on the remaining one, which was “that the complaint does not state facts sufficient to constitute a cause of action.” The demurrer was sustined by the court below1. Plaintiffs stood upon .their complaint, and judgment was entered in favor of defendant for its costs. Prom such judgment this appeal is taken. The contract sued upon'is somewhat peculiar in its provisions, and for a better understanding of all its terms we quote it in full: “Bozeman, Montana, June, 20th, 1899. This is to certify: That the West Gallatin Irrigation Company has this day received from Bev. D. El Deuninck the sum of Two Hundred and Pifty-Eight Dollars ($258.00) upon the following conditions, to-wit: Said West Gallatin Irrigation Company agrees to furnish to said D. El Deuninck 129 inches of water for the irrigation of 129 acres of the land of said D. El Deuninck, or any part of the same situate convenient for delivery for service from the ditch of the West Gallatin Irrigation Company, in the East y¿ of Sec. 24, T. 1 S., B. 8 East, said water to be furnished and delivered during the irrigating season of 1899. If, however, said company shall for any reason fail or be unable to deliver said water to said D. E. Deuninck, according to the terms hereof, it agrees and binds itself to return to said D. E. Deuninck — $258.00—the amount of money so paid, and- said D. El Deuninck agrees to accept the same and! to release and hold harmless the said company for any loss or damage arising from its failure or inability to furnish said water or any part thereof as aforesaid. It being specifically understood and agreed between the parties hereto- that the said West Gallatin Irrigation Company is liable, for various causes, to be unable to' furnish the said water as herein set forth, and that in the event of such failure or inability to furnish the same and of damage accruing — 259 — to said D. E. Deuninek by reason of suck failure the said Two Hundred and! Fifty-Eight Dollars ($258.00) constitute liquidated damages therefor and the payment thereof to the said D.. E. Deuninek shall constitute payment and settlement in full of such damages. In witness whereof the said D. El Deuninek has hereunto set his hand and seal, and the West Gallatin Irrigation Company has caused its corporate name to be affixed by its manager, the day and year first above written. Executed in duplicate. Eev. D. E. Deuninek. [Seal.] (Signed) By El C. Kinney, General Manager.” The questions argued all arise upon the construction of this contract, and the appropriateness and sufficiency of the allegations of the complaint as applied to the contract when construed. Counsel for appellants contend: First, that this contract is void under the provision of Section 2243, Civil Cbde, to the extent that it attempts to fix the amount of damages for a breach thereof in anticipation of such breach; and, second, if not void, the provisions for the return of the money in case of a breach of -its terms do not constitute legal liquidated damages, as provided in Section 2244, Civil Code, and claim that appellants are therefore entitled to> recover whatever actual damage they have suffered because of the alleged breach thereof by respondent. Counsel for respondent contend to the contrary upon both of these propositions. The two sections above referred to are as follows: “Sec. 2243. Every contract by which the amount of damage to be paid, or other compensation, to be made, for a breach of an obligation,- is determined in anticipation thereof, is to that extent void, except as expressly provided in the next section. “Sec. 2244. The parties to a contract may agree therein u pun an amount which shall be presumed to be the amount of damage sustained by a breach thereof, when, from the nature of the ease, it would be impracticable 'or extremely difficult to fix the actual damage.” It first becomes important to determine the character of the contract, and’ascertain whether it is one attempting to provide — 260 — for liquidated damages in case of a breach of its terms by respondent in anticipation thereof. It first recites the receipt of $258 by respondent from appellant Deuninck upon condition that respondent agrees to furnish him with 129 inches of water during the irrigating season of 1899 for the purpose of irrigating 129 acres of land. Thus far it is plain, and needs no construction, and amounts to an absolute promise upon the part of the respondent, in consideration of $258 thus paid by Deuninck, to furnish the water specified at the time stated. This comprises the entire contract in so- far as the furnishing of the water is concerned, for a breach of which the' complaint was filed. It then attempts to provide for damages upon a breach thereof in the following language: “If, however, said company shall for any reason fail or b¿ unable to- deliver said water to said- D. E. Deuninck, according to the terms hereof, it agrees and binds itself to return to said D. E. Deuninck — -$258.0(>—the amount of money so paid, and said D. E. Deuninck agrees to accept the same and to release and hold harmless the said company for any loss or damage arising from its failure or inability to furnish said water or any part thereof as aforesaid.” Then, as if necessary to make the above quoted clause more definite and certain, and to surely limit the. liability of the respondent for a breach to-the repayment of the consideration received therefor, we find the following clause: “It being specifically understood and agreed between the parties hereto that the said West Gallatin Irrigation Company is liable, for various causes, to be unable to- furnish the said water as herein set forth, and that in the event of such failure or inability to furnish the same and of damage accruing to said D. E-. Deuninck by reason of such failure the said TWo Hundred and Eifty-Eight Dollars ($258.00) constitute liquidated damages therefor and the payment thereof to the said D. E. Deuninck shall constitute payment and settlement in full of such damages.” We see no legal distinction-between the two clauses above quoted as to their purpose and effect. Both were evidently intended! to accomplish the same purpose and produce the' same result, viz., determining and fixing the amount of — 261 — damages to be paid in case of a breach of the contract occurred. It seems that it was contemplated that a breach would probably occur, and respondent, in anticipation of such breach, desired that the amount of damages which might accrue therefrom should be limited to the amount of- the consideration pai.d to it for such contract. It will be no-ticedl that the contract is not one to furnish tire water if the respondent is able so to do, and, if unable or prevented by any cause, to be excused therefrom, but it is one whereby respondent agrees to furnish the amount of water specified absolutely, and at all events, with a provision that, if it -fails so to do for any reason, it is only to be liable to-the other contracting party for damages in an amount equal to the sum paid by him as a consideration for the contract. It seems to us, from a careful consideration of the contract,' that it falls clearly within the provisions of Section 2243, swpra, and is, therefore void to the extent of the liquidated damages agreedl upon in ease of a breach. If the contract is void in law tci this extent, it is of the same legal effect as though such 'provisions had been entirely omitted from its terms. It therefore was, in legal effect, a contract to furnish 129 inches of water during the irrigating season of 1899 for the purpose of irrigating 129 acres of land. The complaint .was evidently framed upon this theory, and is clearly sufficient: ■ ■ As to the next contention, counsel for respondent claim that,; even if it is- a contract 'attempting to provide for liquidated damages for a breach, and is void to- that 'extent-, under the provisions of Section 2243, supra, it is a good contract for liquidated damages under Section 2244, supra; that the suit- should have been brought to recover such liquidated damages; and, inasmuch as the complaint is not framed on that theory, the demurrer was properly sustained. Counsel seem to overlook the effect of Section 2243, supra, by which all contracts for liquidated damages are to that extent void, “except as provided in the next section.” Therefore, if a suit be brought on the contract for the actual, and not the liquidated, damages, defendant must show to the court as a matter of defense that it is errone — 262 — ously instituted. It must be shown to the court by proper pleadings and competent proof that the contract falls within the provisions of Section 2244, sufra,. This does not depend entirely upon the contract itself. Pacts must be pleaded and proven from which the court can say as a matter of lawi that the contract for liquidated damages is valid because “from the nature of the ca»e it would be impracticable or. extremely difficult to fix the actual damages.” The mere stipulations of the contract axe insufficient for that purpose. (Patent Brick Co. v. Moore, 75 Cal. 205, 16 Pac. 890; Pacific Factor Co. v. Adler, 90 Cal. 110, 27 Pac. 36, 25 Am. St. Rep. 102; Jack v. Sinsheimer, 125 Cal. 563, 58 Pac. 130 ; Long Beach, etc. v. Dodge, 135 Cal. 401, 67 Pac. 499.) It is therefore clear that a legal contract for stipulated damages, urged as a defense to a suit brought upon the contract to recover actual damages, cannot be presented to the-court by demurrer to such complaint, but must be raised by answer alleging the existence of such facts as bring it clearly within Section 2244, supra. We are of the opinion that the court below erred in overruling said demurrer and entering judgment for defendant, and that the same should be reversed. Pee C'ubiam. — Por the reasons stated in the foregoing opinion, the judgment of the court below is reversed. Me. Justice Holloway was disqualified, and took no part in this decision.