Lampman v. Cochran — 16 N.Y. 275

Majority

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Lampman v. Cochran.

Headnote

A sum specifically named, in a written agreement “ as liquidated damages," in case either party should fail to perform the contract, must nevertheless he construed as a penalty, where, upon the face of the instrument, it appears that such sum will necessarily be an inadequate compensation for the bre&ch of some of the provisions and more than enough for the breach of others.

A contract provided, among other things, that one of the parties should give to the other, on a specified day, a promissory note for $200, and on a subsequent day a bond and mortgage for $2000, with interest, and the parties agreed therein “to pay one to the other the sum of $500, as liquidated, damages," upon failure to perform the contract; Held, that the sum mentioned is to be regarded as having been wrongly named by the parties, and as being in fact a penalty.

Appeal from the Supreme Court. The complaint demanded. $500 as liquidated damages upon a contract by which the plaintiff covenanted to convey to the defendant his farm on or before the 15th day of December, 1851, provided the defendant should pay the said plaintiff, ‘6 on or before the 15th of December, 1851, three thousand and one hundred dollars, in the following payments, viz.: five hundred dollars on or before the 15th of December, 1851; the second payment, by note, two hundred dollars, due on or before the first of April, 1852; third payment, three hundred dollars, bearing interest after the first day of April, 1852, and due on the first day of December, 1852, and the balance to be secured by bond and mortgage, given on the 15th day of December, 1851,•’ and to be payable in a specified manner. The

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agreement closes with this clause: “ And the said parties to this instrument further agree, to and with each other, to pay one to the other the sum of five hundred dollars, as liquidated damages, in case one of the parties shall fail t<¡ perform said contract according to this instrument.”

On the trial at the Greene circuit, before Mr. Justice Wright and a jury, the plaintiff proved the execution oí the contract, and that he tendered a deed, in conformity therewith, to the defendant on the 15th December, 1851, which the latter refused to receive. It appeared that the defendant paid to the plaintiff $100 at the time of the execution of the contract. The defendant moved that the plaintiff be nonsuited. The judge held that the covenant in the contract was in the nature of a penalty to cover actual damages, and that the plaintiff could only recover such actual damages as he could prove that he had sustained by a violation of the agreement; that, as the proof stood, he might take a verdict for nominal damages. The plaintiff declined to take such a verdict and was nonsuited, taking exceptions to the decision and to the nonsuit. The judgment entered for the defendant was affirmed by the Supreme Court, at general term in the third district, and the plaintiff appealed to this court.

Lyman Tremaine, for the appellant.

John H. Reynolds, for the respondent.

According to the just rules of construction, the sum of $500 was intended as liquidated damages for a total and entire non-performance of all the stipulations of the contract, on either side j and a total or partial breach iof either of the stipulations, on the part of the defendant, is not within the intendment of that clause. The agreement does not say that a breach of each or either of the stipulations shall be visited with $500 liquidated damages,

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as it should have done if such had been the intention of the parties. The defendant proved he had paid the plaintiff $100 on the contract prior to December 15th, 1851, and the same had been accepted and indorsed. There was not an entire failure, therefore, to perform the contract, but a partial failure only, which, within adjudicated cases, prevents the recovery sought for in this action. ( Shute v. Taylor, 5 Metc., 61 .)

But, if this agreement were susceptible of the construction that a partial failure of either stipulation of the contract would forfeit the $500 as liquidated damages, then the case could not be construed as one of liquidated damages, because one of the stipulations is that the defendant is to give his own note for the payment of $200. It is fully settled that where a large sum is agreed to be paid, in default of paying a smaller sum agreed to be paid by the same instrument, then the larger sum is a penalty, although the instrument denominates it liquidated damages.

But the judgment should be affirmed on the ground first mentioned, viz., that although the damages are liquidated, vet it does not arise or accrue in this case, because the -defendant partially performed one of the stipulations of the contract, whereas the contract provides only for an entire non-performance.

The case in which, according to the terms jf their contract, $500, as liquidated damages, are to be paid by one party to the other, arises if either party shall fail to perform the contract according to the instrument; and either party has failed if he has so conducted, in respect to the performance of the contract, that the other party can maintain an action against him for non-performance according to the terms of the instrument. Any breach which can be assigned will make out a failure to perform. If the damages are liquidated, then they form the only measure of damages, for either party, upon the breach of all or either

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of the engagements in the instrument. It might then happen that, for not giving a note of $200, without interest, due on or before April 1, 1852, the party in fault would be bound to pay $500; when, if he gave the $200 note, but did not give his bond and mortgage for $2100, with interest, the remedy of the other party would be limited to a recovery of $500. This shows that, within the rule in Astley v Weldon (2 Bos. & P., 346) and Kemble v. Farren (6 Bing., 141), as the rule deducible from those cases is stated in Cothael v. Talmage (5 Seld., 551), the parties to this contract must be regarded as having given a wrong name to this sum of $500, and that it is in substance a penalty and not liquidated damages. It is not intended at all to deny that the value of the bargain, on a contract for the purchase or sale of real estate, is a subject for previous ascertainment by contract, so as to support an agreement for liquidated damages in case the bargain shall fall through by the fault of either party, but only to show that the contract between these parties cannot be disposed of as possessing that char acter.

The judgment should be affirmed.

Denio, Oh. J., Selden, Brown, Paige and Bowen, Js., concurred in the opinion of Johnson, J.; Comstock, J., did not sit in the case.

Judgment affirmed.