Davis v. Gillett

Foster, J. In this case the defendant has given to the plaintiff his bond in a form very commonly adopted, in which, having acknowledged himself to be holden and bound to the plaintiff in the sum of one thousand dollars, he recites a condition to the effect that having agreed, for a certain valuable consideration, not to do certain things, he stipulates that, upon the performance of such condition, the obligation shall be void. It is not denied, nor doubted, that the condition incorporates a lawful and proper contract, the performance of which may be enforced at law ; and the bond is unquestionably intended to be a security for the performance of the defendant’s covenant. The rules applicable to the construction of such an instrument are defined with tolerable certainty, and are as well expressed by Mr. Sedgwick, in his treatise on the Measure of Damages, as in any other textbook in which the authorities upon this subject have been collected, arranged, and discussed. The learned author finds certain rules and principles to be deducible from the very numerous adjudications upon the subject involved in the present inquiry. The substance of these principles is, that the language of the agreement is not conclusive, and that the effort of the tribunal called to put a construction upon it will be to ascertain the true intent of the parties, and to effectuate that intent. In order to do this courts will not be absolutely controlled by terms that may seem to be quite definite in their meaning, but will be at liberty to consider and declare a sum mentioned in a bond to be a penalty, even although it may be denominated liquidated damages, and vice versa, if manifest justice requires that a construction opposite to the expressed language of the instrument should be adopted. In such cases, the court do not assume (as they certainly could not) to make a new contract for the parties; but they conclude that the parties have incorrectly and inconsiderately expressed their intention. The court, therefore, ascertain the intention, and then give effect to it. From all the cases, it seems to be manifest that the general disposition of the courts in this country is to regard the sum expressed in a bond as a penalty or security for the performance of the condition, and not as liquidated damages, in cases where the parties have not expressly declared it to be certainly the one or the other; and, therefore, if the agreement assumes the form of a bond, with condition that it shall be void upon the performance or non-performance of an act, the prima facie presumption is, that the sum of money mentioned therein is intended merely as a security and not as liquidated damages ; and this presumption will stand until controlled by very strong considerations. It is true, that where the condition is of the character expressed in this instrument, for a breach of which the damages are altogether uncertain and indefinite, the court would more readily incline to regard the sum of, money named in the bond as the liquidated amount which the parties had agreed to regard as the damages for a failure to [130] perform the stipulated 'condition, than as mere security; but where the parties have omitted to make their intention certain by the use of unequivocal expressions which would bind them (and so render judicial interpretation of their language unnecessary), the general rule seems to be settled, that the damages will not be considered as liquidated. We see no sufficient reason to take this case out of the operation of the general rule, as we have expressed it; and we have been unable to find any reported cases in conflict with it. On the contrary, in support of these views, we may refer to Sedgwick on the Measure of Damages 452-486, passim, and notes; Esmond v. Van Benschoten, 12 Barb. 365; Tayloe v. Sandiford, 7 Wheat. 13; Astley v. Weldon, 2 Bos. & Pul. 346; Street v. Rigley, 6 Ves. 815; Price v. Green, 16 M. & W. 346, 354; Davies v. Penton, 6 B. & C. 216; Higginson v. Weld, 14 Gray 165; Richards v. Edick, 17 Barb. 260; Story’s Eq. Jur., sec. 1318; Bouv. Law Dic. (14th ed.) tit. Liquidated Damages; Smith v. Wainwright, 24 Vt. 97; 3 Pars. Con. 156-164, passim, and notes; Tayloe v. Sandiford, 7 Wheat. 13, in which Mr. Ch. J. Marshall uses the following language: “ In general, a sum of money in gross, to be paid for the non-performance of an agreement, is considered as a penalty, the legal operation of which is to cover the damages which the party, in whose favor the stipulation is made, may have sustained from the breach of contract by the opposite party. It will not, of course, be considered as liquidated damages; and it will be incumbent on the party who claims them as such to show that they were so considered by the contracting parties.” The cases in our own Reports—Chamberlain v. Bagley, 11 N. H. 234; Brewster v. Edgerly, 13 N. H. 275, and Mead v. Wheeler, 13 N. H. 351—are not in conflict with these views, which, moreover, are supported by Blaisdell v. Blaisdell, 14 N. H. 78. The rule of construction of the bond in suit is determined by the principles of the common law; the statutes of this State (referred to by the plaintiff) having reference only to the practical enforcement of the agreement, after its true intent and purport shall have received judicial interpretation. Gen. Stats., ch. 213, secs. 9 and 10. We are therefore of the opinion that the ruling at the trial term was correct, and that the plaintiff is entitled to judgment for such sum as shall be found equitably due, upon such evidence as may be submitted to the court.