172 Iowa 643 | Iowa | 1915
‘ ‘ If the said party of the first part shall fail to complete said work by date specified herein, an amount equal to the sum of $25 per day, as liquidated damages for breach of this*645 contract, shall be payable to the city of "Winterset, for each day of delay thereafter, until completion of said work, and shall be deducted from the amount herein stipulated to be paid to the said party of the first part upon final settlement. ’ ’
There is nothing in the record to show how nearly the job was completed on October 1st or on November 15th; but the certificate of the city engineer is to the effect that the final completion of the work described in the first agreement was not effected until November 13, 1912, and that described in the other writings until January 3 or 4, 1913. There is also evidence tending to' show that, before any default was made, there was some oral agreement or arrangement by which the contract period was extended two weeks. After the work was done, the city proceeded to ascertain the full cost of the improvement on the basis of the contract price thereof, including also all engineering and’ other expenses incurred, and levied special assessments therefor upon the abutting property, making no reduction therefrom on account of the penalty or damages incurred by the contractor for failure to do the work within the contract period. These assessments were either collected in cash or provided for by certificates payable in installments. Before this suit was begun, the city paid the plaintiff, in money, bonds and certificates, the full amount of the contract price of the work, less the sum of $3,600, which it withheld and still withholds on the claim that, under the penalty or damage clause above quoted from the contract, it is entitled to retain as liquidated damages, the rate of $25 per day on each of the three written agreements.
The petition herein alleges full performance of his contract by plaintiff and demands recovery of the sum which the city withholds from the agreed price of his work. The city in answer admits the retention of the money, but alleges its right to do so substantially as above stated. Replying to the claim thus asserted, the plaintiff insists that the clause of the contract on which the city relies was intended to
The trial court found that, under the language of the contract and the' circumstances attending the transaction, the damage clause is to be treated as providing a penalty only, and that, in the entire absence of any showing of actual damage, the city was bound to pay the full contract price. It found also that the progress of the work by plaintiff was in fact delayed by the failure of the city to grade the streets preparatory to paving and to put in the storm sewers and drains which were to precede the work, done under the contract; and that, even if the contract were to be construed as providing for liquidated damages, none could be equitably allowed under the circumstances. Judgment being entered for the plaintiff for $3,600, the defendant appeals.
Whether a given clause of a contract provides a penalty or liquidated damages for its breach is often a troublesome question; and more frequently than otherwise, its solution is made to turn upon the peculiar facts of the individual case rather than upon any controlling precedents. The fact that the contract uses the express words “penalty” or “liquidated damages” is not at all conclusive' as to the character of the stipulation. The court will look at the whole instrument and the subject-matter of the contract and give it such interpretation as, under all the circumstances, will effect the purpose which the parties intended to subserve. To this end, the court may consider evidence of extraneous facts and circumstances tending to explain or make clear the real nature of the stipulation. It is said by Mr. Pomeroy that, if the intent is at all doubtful, the tendency of the courts is in favor of the interpretation which makes the sum a penalty. 1 Pomeroy’s Equity Juris. (Bd Ed.), Sec. 440. Indeed, the court will not be bound by the expressed intent of the parties, if the stipulation shall, in view of the entire record, be found inequitable.
In Seeman v. Biemann, supra, the Wisconsin court, considering a stipulation very like the one now before us, saysj
“That brings us to the necessity of determining whether the parties agreed upon $10 a day as the amount to be allowed as damages for each day’s delay, or whether that clause in the contract was intended as a mere security for the completion of the building by the time agreed upon,'hence should be considered as a penalty and recoverable damages be limited to such as proof shows Farr actually sustained. The law is too well settled to permit any reasonable controversy in regard ■to it at this time, that where parties stipulate in their contract for damages in the event of a breach of it, using appropriate language to indicate that the damages are agreed upon in advance, and such damages are unreasonable considered as liquidated damages, the stipulated amount will be construed to be a mere forfeiture or penalty and the recoverable damages will be limited to those actually sustained.*648 While courts adhere to the doctrine that the intention of the parties must govern in regard to whether damages mentioned in the contract are liquidated, they uniformly take such liberties in regard to the matter, based on arbitrary rules of construction, so called, as may be necessary to effect judicial notions of equity between parties, guided bf course by precedents that are considered to have the force of law.”
Upon the same subject, Mr. Sutherland says: “The intention of parties on this subject, under the artificial rules that have been adopted, is determined by very latitudinary construction. To be potential and controlling that a stated sum is liquidated damage, that sum must be fixed as the basis of compensation and substantially limited to it; for just compensation is recognized as the universal measure of damages, not punitory. Parties may liquidate the' amount by previous agreement. But when a stipulated sum is evidently not based on that principle, the intention to liquidate will either be found not to exist or will be disregarded and the stated sum treated as a penalty. ’ ’ 1 Sutherland on Damages (3d Ed.) pages 722-724.
In the leading and oft cited case of Jacquith v. Hudson, 5 Mich. 123 (the eminent jurist, Christianey, J., writing the opinion), it is said in substance that it is only in very restricted or conventional sense that even the intention of the parties-to the contract .is controlling. The rule is there stated as follows:
“The real question in this class of cases will be found to be, not what the parties intended, but whether the sum is, 'm fact, m the nature of a penalty; and this is to be determined by the magnitude of the sum, in connection with the subject-matter, and not at all by the words or the understanding of the parties. The intention of the parties cannot alter it. ”
In his work on Damages (9th Ed.1), Yol. 1, Sec. 410, Mr. Sedgwick says, “Where the stipulated sum is wholly collateral
The Nebraska court gives controlling consideration to the question of fair compensation. It says:
‘' The courts, in determining whether a sum fixed by a contract to be paid for its violation is liquidated damages or a penalty, will take into consideration the subject-matter of the contract, the consideration on which it is based, the language of the contract, and the intention of the parties; but these facts, nor any of them, nor all of them, will not necessarily control the court’s construction. One is entitled to recover from another with whom he has made a contract, and which the other has violated, such damages as will put him in as good a position as he would have occupied had the contract been performed; but he is not entitled to recover such damages as would make him a gainer by reason of the other party’s violation of the contract.” Gillilan v. Rollins, supra.
We ourselves have expressly approved the doctrine of the Wisconsin court above cited. Sanders v. McKim, 138 Iowa 122. See also Coen v. Birchard, 124 Iowa 394, 397, where it is said that the court will always relieve if the dam
Many other authorities to the same general effect could be cited, were it necessary. It is to be admitted that others of a different tenor are not wanting. Indeed, the conflict of judicial opinion upon this question is of long standing and irreconcilable. The general view finding expression in the precedents and text books which we have qited appears to 'be' fair and well calculated to secure justice for both parties to the contract, and is more in harmony with the position we have heretofore taken when called upon to deal with controversies of this nature. Applying the principles thus approved to the facts of this case, we are satisfied that the damage clause on which the city founds its claim to withhold the money earned by plaintiff should be construed as providing a penalty.
Assuming, for the present, that the plaintiff was wholly at fault for the failure to complete the job within contract time, there is not the slightest hint in the evidence that damage or injury of any kind resulted therefrom to the city. True, if we were to hold that the contract clearly and conclusively provides for liquidated damages, the defendant was probably not required to offer such evidence — -the breach of the contract being shown; but the utter absence of any such showing, directly or indirectly, and the tax which it places upon human ingenuity to conjecture what sort of loss or injury to the city in its corporate capacity the parties could have anticipated and provided against, for which an absolute forfeit of $75 per day would be a reasonable compensation, are matters of very material consideration, when we come to decide whether we will treat that claim as providing for liquidated damages or penalty. It is to be kept in mind that this provision has no reference to a failure of the contractor to do a good, workmanlike job, or to a failure to do the work strictly and in all re'spects according to the plans and specifications, but relates only to the time when the work shall be done. It is conceivable that a few days’ delay in that respect might work
There are still other r'easons for holding this provision a penalty merely. Here are three several contracts, or three several parts of one contract, the subject-matters of which are of varying importance. Two of them are for the' construction of comparatively large paving improvements, and one for another very small job of two or three blocks; yet in each agreement is inserted the same provision for $25 per day
