Chamberlain vs. Bagley

cited the following authorities: 3 Stark. Ev. 1132, with note containing a collection of American authorities; 7 Wheat. 14, Tayloe vs. Sandiford; 4 Pick. 179, Brown vs. Bellotes; 18 Johns. 219, Gray vs. Crosby; 5 Cotoen 144, Spence vs. Tilden; 11 Mass. R., Rand’s ed. 83, note, Perkins vs. Lyman; 8 Ditto 223, Pierce vs. Fuller; 15 Ditto 488, Merrill vs. Merrill; 4 Ditto 433, White vs. Dingley; 7 Ditto 265, Upham vs. Smith; 1 Pick. 443, Stearns vs, Barrett; 3 Johns. Ca. 297, Dennis vs. Cummings; 15 Johns. 200, Hasbrouck vs. Tappan; 12 Wend. 393, Ayres vs. Pease; 16 Serg. Sp Rawle 320; 17 Wend, 447; 13 Ditto 587; 7 Cotoen 307.

In this case motion is made to set aside the verdict, on the ground that the sum named in the obligation in suit constituted a mere penalty, and cannot be regarded as liquidated damages, or as forming any criterion for the amount of the verdict for the plaintiff.

If this be so, the verdict should be set aside, and a hearing be had in chancery, to determine the actual damage sustained; for which, merely, judgment should be rendered.

The question thus raised is one difficult to be determined, owing to the contradictory decisions upon this subject. Courts, from a desire to avoid cases of seeming hardship, have, in many instances, made decisions disregarding the evident intent and design of the parties, to contracts; and a va~ riety of reasons have been assigned for this course. Holt, in a note to his Nisi Prius Reports, has attempted to classify the cases upon this subject, and arrives at the conclusion that the following points are sustained by them. 1. That where a sum of money, whether in the name of a penalty or otherwise, is introduced in an agreement merely to secure the enjoyment of a collateral object, the enjoyment of the object is considered as the principal intent of the contract, and the penalty only as accessory, and is therefore inserted merely to se-sure the damage really incurred. 2. Where an agreement contains provisions for the performance of several things, and then a large sum is stated at the end of it, to be paid upon the breach of performance, it will be considered as a penalty. 3. Where the payment of a smaller sum is secured by a larger, it should be regarded as a penalty. 4. Where the word penalty is specifically used, it is merely as a security, and will effectually prevent the court from considering the sum mentioned as liquidated damages. 5. A court of equity will relieve against a penalty upon a compensation, and a court of law will not enforce it beyond the actual damage sustained; but where there is an agreement to pay a particular liquidated sum, neither a court of equity, nor a court of law, can make a new agreement for a man, nor is there any room for compensation or relief. 6. When the precise sum, therefore, is not of the essence of the agreement, the quantum of damages may be assessed by a jury; but where the precise sum has been fixed and agreed upon by the parties, that very sum is the ascertained and liquidated damage; the jury are confined to it and the plaintiff cannot recover beyond. Holt's N. P. Rep. 5; 5 Bos. & Pul. 346, Astley vs. Weldon; 4 Burr. 2225, Lowe vs. Peers; 3 Car. & Payne 240, Christie vs. Bolton; 3 Barn. & Ald. 425, Farrant vs. Olmius; 2 D. & E. 32, Fletcher vs. Dyche; 8 Moore 244, Reilly vs. Jones.

• The difficulty under this classification of cases has been to determine whether the precise sum stipulated to be paid is “ of the essence of the agreement,” or not; and where an instrument “ is designed to secure the enjoyment of an object as its principal intent,” whether it might not have been equally the intention of the parties, if they failed to secure such enjoyment, to compel payment of the sum named as stipulated damages, rather than as a mere penalty. The rules adopted by the court in a portion of these classifications are arbitrary in their character, and are by no means certain to effect the true intent of the parties; while at the same time the doctrine seems to be sustained by another class of decisions, that where the parties agree to pay a particular liquidated sum, the intent of the parties must be carried into effect, and neither a court of equity or of law can relieve from it.

We see no reason why contracts of this kind should not be judged of by the same rules of construction as other contracts; or why a technical, restricted meaning, should be given to particular phrases without recurrence to other portions of the instrument to learn the design of the parties.

The more modern decisions upon this subject have turned on the construction of the agreement according to its general intent. In Reilly vs. Jones, 8 Moore’s Rep. 244, it is said that where it may be fairly collected that the intent of the parties was that the damages stipulated for, as between themselves, were to be considered as liquidated damages, they cannot be treated as a penalty, although they might operate as such in a popular sense. The same case is reported in 1 Bing. 302: and there is a similar case in Holt’s N. P. Rep. 43, Barton vs. Glover.

The rule is well laid down in 3 Shep. 273, Gowan vs. Gerrish, that the lawful intention of the parties, in a case free from fraud, when it can be ascertained must have a decisive influence in determining whether the sum stated is to be regarded as a penalty, or as liquidated damages. And in Knapp vs. Maltby, 13 Wend. 587, where the instrument was, I further covenant that in case of non-performance of any or either of the above covenants I will forfeit the sum of five hundred dollars as liquidated damages, it was holden to bind the party to that extent. Also, in Gammon vs. Howe, 2 Shep. 250, where the parties contracted mutually to do certain acts at a fixed period of time, and respectively bound themselves each to the other in the sum of five hundred dollars, for the faithful performance of the several agreements by them entered into, it was holden that the sum was not to be considered as a penalty, but as liquidated damages.

The words forfeit or forfeiture, penal sum or penalty, have in some instances been regarded as furnishing a very strong, if not conclusive indication, of the intention of the parties in an instrument of this description; but the weight to be given to such phraseology will depend entirely on its connection with other parts of the instrument. If an individual promises to pay the damage which may be incurred, under a given penalty, or under a forfeiture, the damage only in such case is agreed to be paid. On the other hand, the penalty may be expressly agreed to be paid in such terms as to admit of no doubt that such was the intent of the parties; and where such is the case, notwithstanding it may be named as a forfeiture, or the parties are spoken of as bound in a certain sum, if it was clearly the design of the parties that such sum should be paid, it is holden in the more modem decisions as liquidated damages.

The court are of opinion in this case that the sum inserted in the contract, to be paid on its non-fulfilment, was designed by the parties as liquidated damages. The defendant promised, “ if he did not conform to his agreement, to pay the sum of five hundred dollars, as a forfeiture for its non-performance and a portion of the money was advanced to him at the time, which, by the contract, was to be in part of the damage, or of the purchase money, as the circumstances in the end might require.

The minuteness and particularity with which these provisions were made, tend to show that the design of the parties was to ensure a performance of the contract without fail. They lived at considerable distance from each other, as appears from the contract entered into; and, from the time given in which to complete the contract, it is probable it might cause no little trouble and expense to the plaintiff to procure the means for the purchase of the land, and apply to the defendant within such time for a deed. There was sufficient reason, therefore, to affix a sum in damages that might he supposed to render the contract certain. The sum named to be paid is considerably less than half the consideration money of the deed. The promise is express, that it should be paid, if the contract was not completed; and though it is said it should be paid as a forfeiture, we have no reason to believe this term was used in a technical sense as a means to secure such reasonable damage as might afterwards be shown, but as an actual agreement made by them as to what the damage should be, and which the parties designed at the time should be paid, in case of non-ful-filment of the agreement, as so much liquidated damages.

Such, in our view, having been the intention of the parties in the contract now under consideration, the instruction of the court as to the rule of damage was correct, and there must be