Scofield v. Tompkins

Per Curiam: The question presented by this demurrer is whether the $22,770 named in the agreement as the price of the land, and also as liquidated damages in case that sum was not promptly paid, may be recovered, or only such damages as can be shown to have been actually sustained by breach of the agreement. Appellant has the land, and by this action seeks to recover its full price and also retain the land. It is manifest that his actual loss can not be equal to the value of the land. If it was worth nothing, then appellees agreed to pay this large sum for what was of no value. If it was worth that sum, then appellant has land of that value, unless its market price has depreciated. And if depreciated, then his loss is only commensurate with the depreciation. It is, therefore, clear that his loss is not equal to the sum named as liquidated damages. ' The fact that the parties fix a sum to be paid and call it liquidated damages, does not always control the question as to the measure of the recovery for the breach of the contract. Courts will look to see the nature and purpose of fixing the amount of damages to be paid. And if the clause fixing the amount of the damages appears to have been inserted to secure prompt performance of the agreement, it will be treated as a penalty, and no more than the actual damages proved can be recovered, j It is said in Sedgwick on Meas. Dam. 492: “But in the case we are now considering, the courts, especially in this country, have'generally shown a marked.desire to lean towards that construction which excludes the idea of liquidated damages, and permits the party to recover only damages which he has actually sustained. The language of the contract is not controlling. If, indeed, the word (penalty’' be used, as we shall see hereafter, it will never be construed as a sum absolutely fixed. But the reverse is by no means the case; and the phrase, ‘liquidated damages’ has often been made to read ‘penalty’ ” That author further says, p. 493: “ If, from the nature of the agreement, it is clear that any attempt to get at the actual damage would be difficult, if not vain, then the courts will incline to give the relief which the parties have agreed on. But if, on the other hand, the contract is such that the strict construction of the phraseology would work absurdity or oppression, the use of the term liquidated damages will not prevent the courts from inquiring into the actual injury sustained and doing justice between the parties.” The weight of the authorities sustains these propositions. The language in this character of contracts is no more explicit or emphatic for paying the sum named than is the penalty of a bond. And all know such penalties are never enforced, but simply the actual damage sustained, if less than the amount of the penalty. The same reasons may and frequently do exist for holding, under such an agreement as this, that no more than the actual damage shall be recovered, as in cases of penal bonds. When to enforce such an agreement would work great hardship and oppression, it should never be enforced. In this case no inconvenience is perceived in proving the actual damages appellant has sustained. And it would be highly unjust and oppressive to permit a recovery of such a large sum when the actual damages do not exceed, if they reach, one-twentieth part of the amount claimed. Why allow perhaps more than twenty thousand dollars, or even more, than the loss sustained? If it be said it is the contract of the parties, it may be replied it is no more so than is a penal bond. All the circumstances considered, it would seem incredible to believe that sane parties could have understood and intended to pay as damages $22,770, simply for a failure to pay that sum of money on a specified day, and permit the owner to hold the land free from all claim on their part, simply to give the greater part, and it may be all, to him without any consideration or benefit in the smallest degree commensurate to this large sum. To so believe would be :1 urd, and it would be highly oppressive to so hold. To give the language in this case the construction that it is absolute and must be carried out literally, would work the same wrong and oppression that was originally produced by enforcing payment of penal bonds. And for the same reasons this should not be enforced. But appellant should be left to recover such damages only as he can prove he has sustained by reason of the breach of the contract. J It is true, the parties are authorized to agree upon any sum as compensation for the breach of the contract, which does not manifestly exceed the amount of the injury suffered. This is believed to be the doctrine of the courts and to be well sustained by authority. ■ In this case it is manifest that the sum fixed is above, and greatly above, all damage that could have been sustained by the breach of this contract. And we must hold that it was inserted as a penalty to secure prompt payment, and intended to be paid absolutely in case of failure to pay for the land on the day specified and on the contract being rescinded/ The judgment of the court below must be affirmed. Judgment affirmed.