p. 309the first part” (viz. appellants), or other competent judges and to have the same completed ready for steam, on or before the 15th day of October next” (i: e. 1857), under a forfeiture of one hundred dollars per day for each and everyday after the above date, until the same is completed as above..
James Clark and Albert A, Nunez, for appellants.
1st. The referee erred in not awarding damages to the defendants to be recouped or set-off against the plaintiff’s demand for the negligent, unskillful and deficient construction of the engines built for the steamer General Concha, and in failing to make any decision of the issue joined in reference to said damages.2d. In the present case in addition to the warranty implied by law, there was an express warranty contained in the contract. It is admitted by plaintiff in his reply that the letter of may 8th,. 1857, constitutes part of the contract under which the engines were built. In this letter Birkbecks & Hodges propose to build for the defendants two inclined condensed steam engines, &c., all complete of the best materials and workmanship, to be unsurpassed by any steam engine of its class, and guaranteed to propel a good model steamboat of the following dimensions, etc.: at a speed of not less than ten miles per hour in slack water.
3d. The referee not only did not find (as he should have done) damages in favor of the defendants, hut failed to malte any finding on the subject.4th. The finding of a referee to whom the decision of a cause is submitted, like the verdict of a jury'must respond to all material issues, and if it leave any of them undetermined no valid judgment can be based upon it.After the referee has made his report it only remains to inquire. 1. Whether he has passed on all the material issues made by the pleadings. 2. Whether the findings are sustained by the evidence. 3.. Whether the legal conclusions
p. 310áre correct. If the referee has erred in any of these particulars, a new trial or other appropriate rernedy should be granted. (Lakin agt. N. Y. & Erie Railroad Co., 11 How. 413 .)5th. It will not do to say that the item of $781.68, found by the referee to be due the defendants, is an award of damages for the negligent and defective construction of the engines.• *¡a.) The referee has not so said, and any such inference is sheer conjecture.(6.) It is reasonably certain that this item is the value of .the extra work performed by the defendants on the Virginia for which plaintiff admits in his reply, defendants are -entitled to a credit.
It is impossible to decide what judgment should have been rendered, uifless we determine what the referee has - left wholly undetermined.6th. The stipulation in the contract that the engines.were to be completed ready for steam, on or before the 15th day of October next (October, 1857), under a forfeiture of one hundred dollars per day after the above date, until the same is completed as above, liquidated the damages to which defendants were entitled in the event of Birkbecks & Hodges failing to finish the work within the specified time.It is competent for those who enter into.a contract to determine for themselves what shall be the measure of satisfaction for its violation and where a sum is named for that purpose whether it be denoninated a penalty forfeiture or liquidated damages, the agreement will be enforced, regard being bad to its true intent and meaning, rather than any technical interpretation of its terms.(a.) Where the defendant bound himself not to practipe as a surgeon within seven miles of M. under a penalty of ¿6500, the sum named was held to be liquidated damages/ (Sainter agt. Ferguson (62 E. C. L. 721.)(6.) In Pearce agt. Fuller ( 8 Mass. 223 ), the damages
p. 312to pay to said Messrs. Peasant Brothers the sum of one hundred dollars for each and every day of delay from said date, excepting, in case of fire or death.There can be no question but this provision liquidated- the damages for delay between the defendants and the parties to whom they were bound, and it was doubtless-in part at least to protect themselves against this liability (which had become absolute before the commencement of the present action), that a similar clause was inserted in the contract between defendants and plaintiffs assignors.
The referee having as matter of fact found, that the said work provided for in the aforesaid contract of 2Sth of May and letter of 8th May, 1857, was pot finished and completed by said Birkbecks & Hodges, until about the middle of. February, 1858, he should have found as matter of law, that defendants were entitled to the damages stipulated to be paid in case of such delay. "1. It cannot be fairly argued that the referee has by implication negatived the defendants’ right to damages for he ex■pressly finds the facts out of which the right arises. ,
2. It cannot be claimed that the question of damages entered into the adjustment found by the referee to have been made on the 26th of December, 1858.(a.) It clearly appears by the report, as well as by the evidence, what matters were embraced in the adjustment, if any was made.- (b.) A portion of the damages accrued after the alleged adjustment.
The pretence that the additional time was consumed by extra work is negatived by the express finding df the .referee, that the work provided for in the contract, was riot completed by Birkbecks & Hodges till the middle of February, 1858. eThe referee erred in sustaining the objection of plaidtifi’s counsel to the following question put to the witness, William Foulks, one of the defendants.
p. 313State what occurred between you and Birkbecks & Hodges or any of them, in reference to the engines and machinery of the Concha and the construction thereof.This question was ruled out on the ground of the inadmissibility of all evidence of what occurred between the parties, prior to and at the time of making the contract in suit.(a.) The rule which forbids the introduction of explanatory parol evidence, where the parties have made their contract in writing, excludes only parol.evidence of the language of the parties contradicting, varying or adding to that which is contained in the written instrument. The court may always put themselves in the place of the parties, and with this view evidence must be admissible of all the circumstances surrounding the authors of the instrument. Now the question excluded by the referee did no more than call for the attendant facts and circumstances, in the light of which the contract of the parties should have been interpreted and a knowledge of which was essential to enable the referee to put himself in their place. (1 Green, on Ev., §§ 282, 287.)(5.) Parol evidence is admissible to explain a latent ambiguity. Plaintiff’s assignors contracted to build two inclined condensing steam engines for use in the propulsion of a vessel. The evidence shows there were two modes of doing this, one with the engines connected by means of a centre shaft, the other with the engines disconnected and left to act independently. On the trial it became a material question, which of these two modes of construction was contemplated. To explain this latent ambiguity parol evidence not only of what occured, but of what was said was clearly admissible. (1 Green, on Ev., § 297, et seq.)Joseph Belknap, a witness for plaintiff, looks at (exhibit) Ne 14 and at specification and contract, and says, they do not call for connecting engines (taken subject to defendants objection that it is a question of law).
In admitting this evidence the referee erred; the witness was not colled upon to explain as an expert any technical
p. 314words ór terms of art, employed -in the contract, tint to construe the contract itself. (1 Greenl. on Ev;, §§ 280, 283.)Dennis McMahon, for the respondent.
I. The witness an expert of long standing, looked at the diagram of the engine, also at the contráct in suit, and specications, and gave an opinion as an expert, which was admissible under ail the authorities. (Smith agt. Gugerty, 4 Barb. S. C. R. 614; Rochester &-Railroad agt. Budlong, 10 How. Pr. R. 589; McKee agt. Nelson, 4 Cow. 305 .)II. The referee properly disallowed the item of $100 per day of forfeiture. The words of the contract of the 28th day of May, 1857, exclude the idea that the parties stipulated for the forfeiture of $100 per 'day, as stipulated damages. It Was intended as a penalty to be held in terrorem oVer the heads of .Bkkbecks & Hodges. • Not a word is said by the parties fixing" upon that sum, as agreed and liquidated damages; the Word forfeiture is used thus, indicating in legal construction a penalty.Noné of the cases have gone to "the extent .of holding that under such language, the whole forfeiture must be imposed. It is only in easés where the parties had expressly stipulated for the imposition of a c’ertain sum as liquidated damages, and then only in tliósé cases "wherein it appears that from its peculiar nátufé it is impossible to arrive at a correct conclusión as to the real" amount of the legal damages sustained by the patty damnified. (Dakin agt. Williams, 17 Wehd. p. 447.)See Judge Bronson’s remarks as to his reason for that decision in Hoag agt. McGinnis (22 Wend. p. 165).Ih this case the parties agreed to this expression; viz.: Arid the award of any tWo of them is to be final betweén the parties under the penalty of one hundred dtillá’fs, to be paid by the defaulting" party to the"one abiding thereto; this being the Stipulated dátílagés agreed upon by and between the said
p. 317expense of doing so by a drag link or chain, would have been trifling, by a centre shaft would, ánd did cost $950. After the 17th December, 1857, and prior to February, 1858, the firm of Birkbecks & Hodges did connect the two engines by a centre shaft and charged for that work as extra. The referee disallowed it as extra, but found the contract completed in February, 1858, so that on the 17th December, 1857, the appellants waived performance as a condition precedent to recovery, by accepting and clearing the vessel and by adjusting the plaintiff’s assignors account; but if by the contract B. & H. were bound to connect the two engines they would have been entitled to a deduction to that extent. The furnishing the drag link or chain a trifling^matter, would have connected, them or the making a central shaft which involved less than 10 per cent of the original costs, would have completed the contract according to that construction.Had the appellants the right after accepting and reducing to use the ship on the 17th December, 1857, to lay by until February, 1858, and then claim the $100 per day. We submit they had not such right. Their proper measure of damages under the circumstances of the case was the. sum it would have cost to have connécted the engines the expense of wharfage and watching the vessel.B. & H. did in fact connect the two engines prior to February, 1858, consequently the appellants did not sustain that damage, and in the allowance of $780 of deduction to the appellants by the referee, was included the expense of wharfage $125 and expense of watching $68. If the appellants desired to recover any other damages, they should have alleged and proved them or made some request to the referee to find and excepted to his ruling thereunder.III. The appellants are not in a condition to raise that forfeiture question on this appeal.Treating the disallowance of it as a question of fact or even mixed of fact and law, the affirmance by the general term of the referee’s report is conclusive on this court, as it cannot
p. 318investigate questions of fact bn appeal, exeept'in the mode pointed out in the Code, which is on reversals of judgments-of referees by the general term on .question's of fact.Treating the. disallowance of it as a question of law, the appellants cannot raise it here as they have no where raised it on the case made. No request was made to the-referee to rule on this point; no request for him to find on it as a matter of law, no exception taken on the trial to it, no evidence offered in support-obit rejected} no motion to dismiss made, no specific exception to the findings of the referee, because of his disallowing that "item. The exceptions - filed to the •report are of the most general nature.IV. On this appeal the. appellants cannot urge that-the-report of the referee was erroneous on- the facts, questions of fact on affirmance below, are not properly before this court on appeal. (Metcalf agt. Mattison, 32 N. Y. R. 464; Doty agt. Carolus, 31 N. Y. R. 547; Wilcox agt. Hawley, 31 N. Y. R. 648 ; Peterson agt. Rawson, 34 N. Y. R. 370.)If is -insisted that the referee . erred in not awarding damages to the-defendants by way of recoupment or set off to the plaintiff’s demand fqr the negligent and unskillful construction of the-engines built, and in failing to make a decision upon the issue joined in reference to said damages.
The referee has made no special finding as to this claim, and there is no request to make any such finding, but he allowed an off-set of $781.68 to the defendants. It does not appear of what i' sm this amount is composed, nor'is it very material in my opinion, as the evidence as to the amount of the defendants’set-off included this claim for - damages was conflicting and presented questions of fact for the consideratio.n of the referee, which he Mas disposed of in his decision, and with which we are not at liberty to interfere. Questions of fact on affirmance below are not properly before this court, and the appellants under the adjudications heretofore made!
p. 319cannot urge that the report of the referee was- erroneous as to the facts
(Metcalf agt. Mattison, 32
N. Y. R. 464;
Doty agt.
Carolus, 31
N. Y. R. 547 ;
Wilcox agt.
Hawley, 31
N. Y. R. 648;
Peterson agt.
Rawson, 34
N. Y. R. 370.)
No exception was taken to the ruling of the referee admitting, the question put to one of the witnesses; whether the specification called for connecting the engines by a centre shaft. I think, however, that the question was a proper one. The witness was, an expert and the subject of inquiry was in resrard to a matter which was not familiar to the court. He looked at the,diagram of the engine, the contract and specifications, and gave an opinion to explain technical terms in the contract and the meaning of the provisions contained in the specifications which vs ere properly susceptible of explanation in this manner, such evidence, I think, was clearly admissible. (Smith agt. Gugerty, 4 Barb. 614 ; The R. & S. Railroad Co. agt. Budlong, 10 How. 289 ; Curtis agt. Gano, 22 N. Y. R. 426.)
I also think that the referee properly excluded evidence of what occurred between the parties prior to and at the time of making the contract., The rule is well settled, that all conversations had prior to the’execution of a written instrument become merged in the instrument when executed. There was nothing in the offer to show that the testimony was intended to explain what was otherwise obscure or unintelligible, and that such explanation was not inconsistent with the written contract ( 1 Gr. Ev., § 282), nor that the . facts and circumstances under which the contract was made would give any light in the interpretation of the instrument. (1 Gr. Ev., § 287). Neither was it offered to explain a latent ambiguity (id. 297). If the evidence was in any respect admissible, and the referee erred in excluding it, I am inclined to think that the difficuly was obviated .by the withdrawal afterwards on the part of the plaintiff, of all objections to- testimony of a similar character which was. offered by the defendants.
p. 320It is further insisted by the defendants’ counsel, that the stipulation in the contract to the effect that the engines were to be completed and ready on or before the fifteenth day of October, 1857, under a forfeiture of one hundred dollars a day after the above day, until they were completed, which was on .the 14th day of February, afterwards provided for liquidated damages, and the referee erred in not allowing those damages at the rate of one hundred dollars- per day. A point is taken by the plaintiff’s counsel, that the appellants are not in condition to raise this question of damages on this appeal, because as a question of fact the affirmance of the referee’s report by the general term is conclusive, and as a question of law, no request was made to the referee to rule on this point or to find as a matter of law, and no specific exception- was taken to the finding of the referee for disallowing this item. Without discussing the validity of these objections, I am of the opinion that this was. not a case for the allowance of the forfeiture named in the contract as liquidated damages.
The question whether such damage as are stipulated in the gross amount fixed for a failure to perform a contract, is in the nature of a penalty, is one of considerable difficulty, and the authorities upon the subject are replete with contradictions.
It is not necessary to review the various cases where the question is discussed, and it is enough to refer briefly to some of the principles by which cases of this character are to be determined. One of the rules of construction established is, that the courts are to be governed by the intention of the parties to be gathered from the language of the contract itself, and from the nature and circumstances of the case (Cotheal agt. Talmadge, 5 Seld. 554; Crisdee agt. Bolton, 3 Car. and P. 240), and in all the cases the courts have |reated it as a question as to the intention of the parties. (Reynolds agt. Bridge, 37 Eng. L. and Eq. 130.) Having in view this rule it is scarcely to be supposed that the parties intended
p. 321to fix an amount so extravagant and which would be if allowed as claimed, so grossly disproportionate to the actual damages as liquidated damages, for so trivial an omission or delay and I cannot discover any sufficient and satisfactory reason for any such'inference or conclusion; nor is any such intention to be presumed upon the hypothesis that the damages resulting from a breach of this contract would be of such an uncertain amount, as to be incapable of proof, and that it would be difficult to show the nature of the injury caused and the actual damages arising from the delay.
It may also be observed that the language of the contract itself militates against any such theory. Not a single word is said about liquidated damages, and the word forfeiture, which is equivalent to a penalty is used, which manifests that a penalty was intended. Nor should it be overlooked that many of the cases decided sustain the doctrine that even where the term liquidated damages is incorporated in the instrument, the gross amount fixed is in the nature of a penalty. (Hoag agt. McGinnis, 22 Wend. 165 ; Spear agt. Smith, 1 Den. 454 ; Bagley agt. Peddie, 16 N. Y. R. 469; Lampman agt. Cochran, 16 Id. 275; Staples agt. Parker, 41 Barb. 648 .)
Another view may also be invoked, and I think is applicable to the present case, and that is, that there is sometimes plausible ground for withholding.the doctrine of liquidated damages, when the party might be responsible for the whole amount of damages for the breach of an unimportant part of a contract, and so be made to pay a sum by way of damages grossly disproportionate to the injuiy sustained (5 Seld. 557, before cited; Clement agt. Cash, 12 N. Y. R. 253). Looking then at this provision of the contract as it stands, with all the difficulties in the way of its construction, with which the numerous authorities on the subject invest it, and considering the severe consequences which would accrue from a strict and rigid enforcement of its conditions, and with very much to show a different intention, I am- constrained
p. 322to hold that there is not such a clear expression of the intent of the parties as would warrant the conclusion that the amount named was designed as liquidatéd damages.
The views I have expressed dispose of all the questions presented, and the judgment of the general term must be affirmed.
The only exception which appears to have been taken by the appellants to the ruling of the referee in receiving or rejecting evidence, was to his sustaining the plaintiff’s objections to proof of the oral negotiations and conversations between the parties prior to, and at the time of the making of the contract in suit. The rule is too familiar to be questioned that it is not competant to alter, vary or affect the obligations created by a written agreement by evidence of cotemporaneous or prior negotiations of the parties. The questions which were objected to called for all that took place. In every possible view of the subject such a question was properly excluded.
If it had been proposed to show a distinct collateral agreement not embraced in the terms of the contract, a different question would arise, but there was no such claim or pretence. If the terms of the agreement were ambiguous in their application to the subject matter, it might be competent. to show what was before the minds of the parties, but no such ambiguity existed. The terms of the written agreement prescribed certain particulars, and in respect to whawas not specified. The engines agreed to be built were to be unsurpassed by any steamboat engines of their class, and guaranteed to propel a boat of dimensions stated, at a speed mentioned. It is clear that except in the particulars stated the details of the construction were left to the judgment of the builders, and no evidence of parol agreements inconsistenwith this was admissible. But there is in truth no foundation whatever for the exception. The plaintiff’s counsel withdrew his objections, and the witness testified at great
p. 323length to his interviews with the plaintiffs, and what took place between them from the moment when the proposition to build was first made, down to the time when the steamboat went to Havana. The other exceptions are chiefly addressed to the findings of fact which are not the subject of review in this court in the form presented by the present case. Had the supreme court deemed it their duty to reverse the judgment upon questions of fact, and so stated in the order of reversal, the present law gives this court jurisdiction to review such questions. The appellant’s counsel in his argument has taken a much wider range, and asks us to reverse because .the referee has not found or passed upon various matters which he claims were in issue. If he desires a more full or specified finding he should have required it, and if necessary have sought the aid of the court below to: that end. It is not within the jurisdiction of this court to examine the case except upon the facts found, and if there was no error in law committed, assuming the facts to be as found by the referee, we have no other alternative but to affirm the judgment. Whether upon a request to find upon issues or questions deemed material, and a refusal by the referee to find either way an exception will lie which would be available in this court, was left undecided in Grant agt. Morse (22 N. Y. R. 323), and the question does not arise here, for the case does not show that the appellant desired or has in any manner sought or requested any other or fur-*' ther findings than are contained in the report of the referee. Upon the facts found the conclusions of law stated by the referee are inevitable, unless as matter of law it be true that it appears by such findings that the defendants were entitled to be allowed $100 per day as liquidatated damages for the contractors’ delay in coinpleting the engines contracted for so far as necessary to extinguish all clams by the plaintiff’s assignors. The contract bore date May 28, 18-5?, and in teims required the plaintiff’s assignors to build and place on board a steamboat to be furnished by the defendants, two
p. 324steam engines of the description specified, for the price of $8,000,
“ and to have the same completed ready for steam, on or before the 15th of October next, under a forfeiture of $100 per day for each and every day after the above date until the same is completed as above.” The referee has-found that the work so agreed to be done was not completed until about the middle of February, 1856, 120 days after the day mentioned for its completion. It does not appear by any distinct specification in the referee’s report whether he allowed anything to the defendants for damages by reason of the delay, or whether any damages were proved by them to have been sustained. The proper inference is that if any were proved they were allowed.
But it is quite clear that $100 per day or $12,000, were not allowed, else it would have extinguished all claims by the plaintiff. I think that in this there is no error. First: The contract declares this provision to be a forfeiture.” . It must then be so construed and the parties be deemed to have so intended, unless the agreement plainly indicates the contrary. The general rule requires that what the parties themselves prescribed as a forfeiture shall be so treated. The agreement' in this case does not clearly indicate the contrary. The engines were to be built and put up complete, to the satisfaction of the defendants or other competent judges. -The forfeit or penalty as such, was appropriate to compel the plaintiffs to supply or remedy the slightest, deficiency, but by no means indicated that a slight defect easily and at small expense supplied, was to be. compensated and no more than compensated at $100 per day. Second: The report of the referee shows that the parties themselves either treated this provision of the contract as not providing a sum certain as liquidated damages, or for reasons satisfactory to themselves varied performance according to the letter of the contract. On the 27th of December, seventy-two days after the expiration of the term limited by the contract for the completion of the work, they adjusted the amount due to the assignors
p. 325of the plaintiff at $9,676.34, recognizing the rights of the contractors notwithstanding the delay, to the full contract price, and to payment for extra work beyond that price. This plainly indicated either that the sum mentioned as a forfeiture was a mere penalty, and the delay was without actual damage to the defendants, or that such penalty or forfeiture had been waived by reason of alteration or extra work. Third: If the question whether the $100 per day was intended by the parties as liquidated damages or a penalty, depended upon facts extrinsic to the contract itself, as upon the relation of the defendants to the subject, their possible engagements to other parties, the value of the use of the completed engines, or other circumstances known to the parties when the contract was made, and in view of which the agreement was entered into, these were subjects of proof on the trial, and the finding of the referee so far as it could properly be affected by such cirumstances, must be regarded as a finding of facts and conclusive. It is a matter of some satisfaction to me (though not within our province to investigate, because a mere question of fact), that the defendants appear by the evidence to have collected from the party by whom they were employed to build the steamboat, the whole bill, and even more than has been awarded to the plaintiffs in the action. The judgment should be affirmed All the judges concurred.