Ward v. Jewett — 27 N.Y. Super. Ct. 714

Majority

p. 714

Henry G. Ward, plaintiff and appellant, vs. James C. Jewett, et. al. defendants and respondents.

Headnote

1. Where, hy the terms of an agreement between the parties to the action, no other act is required to be performed by one of them, (the plaintiff,) than the payment of money, a clause therein, binding either party to pay to the other, in case of a failure to perform any of his covenants, a specified sum as liquidated damages, being only capable of being construed as a penalty, as to that one, cannot be construed differently as to the others.

2. Although, in an action for a breach of such agreement, an adherence by the plaintiff’s counsel to an untenable point of law made in his opening, viz. that the plaintiff is entitled to the sum fixed as liquidated damages, might justify a dismissal of the complaint, its abandonment immediately after being made, accompanied by an offer to prove the damages, which were specially stated in the complaint, and an application for leave to amend the demand for relief, will entitle him, upon proper evidence, to recover such damages.

(Before Robertson, Ch. J., and Barbour and Garvin, JJ.)

Heard January 18, 1867;

decided April 1, 1867.

This was an action to recover damages for a breach hy. the defendants of their covenants contained in a sealed agreement to build, furnish, and with certain exceptions fit for use, " three steamers according to a plan and specifications alleged in such agreement to be thereto annexed. The only act to be done by the plaintiff, according to such agreement, was the payment of the price of such vessels in installments at certain

p. 715

stages of the work, as it advanced. A clause in such instrument bound either party to pay to the other, in case of a failure to perform any part of his covenants therein contained, a certain sum ($20,000) as liquidated damages. •

Such agreement, and breaches of the covenants therein contained by the defendants, are set forth in the complaint, and judgment therein demanded for the sum so fixed as liquidated damages. The answer set up as a defense, that no plan or specification for building such vessels was ever annexed to such original agreement or made, and alleged the abandonment mutually of such agreement, and the substitution of a modified one in its stead, which altered the character of such vessels, fixed no time for their completion, and only required the employment of due diligence therefor. Such answer averred a failure by the plaintiff to require the articles necessary to complete the equipment of such vessels, also to do various acts, and furnish various articles necessary to enable the defendants to complete the contract on their part, and to pay the sum agreeed upon by him to be paid as the price of such vessels. It also claimed a set-off for work done, materials furnished, and money paid at the plaintiff’s request, and took issue upon the other facts stated in the complaint. The plaintiff controverted the facts upon which such set-off was claimed in the answer, by a reply.

On the trial the plaintiff’s counsel opened his case to the jury, and claimed the sum mentioned in the agreement in question as liquidated damages. The counsel for the, defendant thereupon moved, upon the pleadings and such opening, to dismiss the complaint. The plaintiff’s counsel then stated he was prepared to prove the damages specially stated in his complaint, and applied for leave to amend its demand for relief in that respect, which was refused. The court then dismissed the complaint; to which decision the plaintiff’s counsel excepted, which exception was ordered to be heard in the first instance at the general term. Upon which order the case was heard..

p. 716

0. Lawton, for the appellant.

1. The ground of dismissal does not appear, and no reason is given in the case ; we must, therefore, look into the pleadings, and if, upon the case they present, an action can he maintained, a new trial must be granted. The defendants’ counsel did not pretend any surprise, nor suggest that they had been misled; they did not even oppose the motion to amend.

II. The complaint is upon a contract for the construction' of three steam screw propellers, averring breaches, and specially setting forth the damages amounting to $45,447.19 ; but as the damages for non-performance were settled, fixed and liqui-, dated by the parties in the' contract at $20,000, judgment for that sum only was claimed.

III. The defendants take issue upon that portion of the contract which states the modelling of the vessels and the specifications for building, &c. They deny that the damages were in fact fixed or liquidated, and claim that the words of the contract must be regarded merely as a penalty. They deny that the plaintiff had performed his part of the contract. They aver that the contract was waived by the parties, and a new agreement had between them, which they set forth ; that the time for completion had been extended. They admit that the vessels were not completed until long after the 1st day of March, 1863, but do not aver that they were ever completed. They admit the payment of $68,000, (about $10,000 more than ever became due by the terms of the contract,) and wind up with two counter-claims, amounting to $23,000 ; and thus the whole controversy between the parties is set forth in the pleadings, and fully placed before the court.

IV. The contract was duly executed and delivered under the hands and seals of the parties, and no fraud is alleged or pretended; and in it they have fixed, settled and liquidated the damages at $20,000, and they are bound by it. The words are plain and their meaning unmistakable, and the court will not alter it or make a new contract for them.

1. The damages were settled, fixed and liquidated by the

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contract; the damages were uncertain and difficult to be ascertained. (Clement v. Cash, 21 N. Y. Rep. 256 , 258, 259. Westcott v. Thomson, 18 id. 363, 367 . Norton v. Woodruff, 2 id. 153, 16, 469. Cotheal v. Talmage, 5 Seld. 551.)

2. If not, then the court should have ruled, as claimed in the answer, “ that the words were to be regarded merely as a penalty,” and allowed the trial to proceed, leaving the parties to their remedy, by motion, if harm should result to either ; this would have been fair, just and legal. It was just such decisions as this, that certain sections of the Code were adopted to prevent. (Code, §§ 169,170,173,174.)

3. Although it does not in either view of the case seem to require an amendment for the trial of the case, yet, regarding the case as the court did, the amendment ought to have been allowed.

V. The complaint sets forth a cause of action, and there is no rule, practice or law by which the plaintiff can be turned out of court, without being allowed the attempt, at least, to prove it. The prayer is always for such judgment as the plaintiff supposes himself entitled to, but the recovery is upon the cause of action. (Code, § 142, subd. 3.) As to what a cause of action is, see Meyer v. Van Collem, ( 28 Barb. 231 .)

YI. The summons is no part of the trial record; in this case, it was not before the court, and no point was made upon it, and none can be raised here for the first time. If wrong, the only remedy is by motion at the special term.

VII. The complaint was improperly and arbitrarily dismissed, and a trial should be allowed, with costs to abide the event.

Ban Marvin, for the respondents.

I. The court decided rightly in dismissing the complaint. The plaintiff was not, upon the allegations of the complaint, entitled to the relief he demanded. The sum of $20,000 in the last clause of the contract was a penalty. The words cc liquidated damages ” do not determine the question. The intent of the parties is to be gathered from a consideration of

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the whole contract and all its stipulations. Staples v. Parker, 41 Barb. 648 . Hosmer v. True, 19 id. 106.) Where, as in the present cases, there are covenants for the performance of several things of various degrees of importance, and a large sum is stated at the end to be paid upon breach of the contract, it is a penalty. Where the sum stated is in some instances too large and in others too small a compensation, it is to be regarded as a penalty. (Esmond v. Van Benschoten, 12 Barb. 366 , and cases there cited. Astley v. Weldon, 2 B. & P. 346. Kemble v. Farren, 6 Bing. 141. Sedgwick on Damages, 421. Niver v. Rossman, 18 Barb. 50 .)

II. This rule prevails in all cases where the actual damages are capable of being liquidated and computed or fairly estimated, as they are in the present case, where the damages claimed are all for moneys paid, for not furnishing specific articles of equipment of well known values and for not completing the vessels in time. The allegation of the loss of a sale by the non-completion of the vessels is not a ground of damages.

III. In order to hold that the sum named in the contract is liquidated damages and not a penalty, these things most concur. 1. It must be held to be so in favor of each party as against the other. 2. Also, in respect to every distinct covenant and stipulation. 3. If it is a penalty as regards any one stipulation or either party, it must be so held as respects the whole contract. (Staples v. Parker, 41 Barb. 648 . Hosmer v. True, 19 id. 106.) Eow all the stipulations on the part of the plaintiff are for the payment of various sums of money at different times, some more- and some less than $20,000. But no damages for the mere non-payment of money can ever exceed the legal interest. (Gray v. Crosby, 18 John. 219 -226. Sedgwick on Damages, p. 400.) As to the covenants on the plaintiff’s part, there the sum fixed is a mere penalty. And if so as to the plaintiff’s covenants, it must be equally so as to the defendants’ covenants, else there can be no mutuality in the contract.

IV. The sum of $20,000, if regarded as liquidated damages

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at all, can only be claimed upon a total, and not upon a partial failure to perform. The complaint states a case of partial performance by the defendants. (Reynolds v. Brady, 37 Eng. Law and Eq. 123.)

Y. The plaintiff was not entitled to the relief asked for in his complaint, and in the opening of his counsel, and he did not ask to be allowed to establish or prove any other case entitling him to relief. The only request made by his counsel was to be allowed to amend the prayer of his complaint, so as to allow him to prove the actual damages, and when his request was denied, although he stated that he was prepared to prove the actual damages, yet he did not offer or ask leave to do so. (Bishop v. Houghton, 1 E. D. Smith, 566. Reubens v. Joel, 3 Kern. 488. Towle v. Jones, 19 Abb. 449 .)

YI. The decision of the court denying the plaintiffs motion to amend cannot be reviewed on appeal, nor is it the subject of an exception. (Gould v. Rumsey, 21 How. 97 . McQueen v. Babcock, 13 Abb. 268 .) And if it could, the amendment asked for would not" have benefited the plaintiff, as it would not have permitted the introduction of any evidence, except what was already admissible.

The admission and exclusion of evidence does not depend upon the prayer of the complaint, but upon the allegations and statements therein.

By the Court,

The complaint in this case was dismissed on the trial, undoubtedly, on the ground that it showed no right to recover the liquidated damages claimed by the plaintiffs’ counsel in his opening. In this the court would probably have been right, if the complaint showed no other cause of action. By the terms of the agreement set out in such complaint, no other act was required to be performed by the plaintiff but the payment of money. So that the clause as to liquidated damages, as to him, could only be construed as a penalty. (Bagley v. Peddie, 16 N. Y. Rep. 469 . Beale v. Hayes, 5 Sandf. 640 . Lampman v. Cochran,

p. 720

16 N. Y. Rep. 275 .) And could not be construed differently as to the defendants. (See Lampman v. Cochran, ubi sup.)

But the complaint did show a good cause of action in the agreement therein set forth and its breach, and even averred special damages thereby. The fault committed by the plaintiffs’ counsel in his opening, of claiming liquidated damages only, was forthwith repaired, by stating his ability to prove the special damages, and asking leave to amend the demand of relief in his complaint for that purpose, if necessary, the moment it was brought to his attention by the motion of the counsel for the defendants. He had as yet no opportunity of offering any evidence, so that if the dismissal was not sustained by an inherent vice in the complaint, it was erroneous. If the opening of the plaintiffs’ counsel, in stating an untenable point of law, to wit, that he was entitled to the sum fixed as liquidated damages, could be relied on, in case he adhered to it, to sustain such dismissal, its abandonment as soon as made relieves the case of that difficulty.

The prayer for relief becomes of course wholly immaterial after the defendant has answered ; the plaintiff being entitled to any which the case made in his complaint warrants. (Code, § 275.) The dismissal of the complaint was therefore erroneous, and there must be a new trial,

Cases cited

Staples v. Parker 41 Barb. 648 N.Y. Sup. Ct. 1864-07-12 p. 718
Esmond v. Van Benschoten 12 Barb. 366 N.Y. Sup. Ct. 1852-01-05 p. 718
Niver v. Rossman 18 Barb. 50 N.Y. Gen. Term 1853-12-05 p. 718
Beale v. Hayes 5 Sandf. 640 N.Y. Super. Ct. p. 719