232 P. 1002 | Cal. Ct. App. | 1924
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *206
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *207 Plaintiff Hanlon Drydock and Shipbuilding Company, Inc., recovered a judgment against defendant *208 G.W. McNear, Inc., for the sum of $43,244.45 for repairing an oil tank steamer named "Asuncion." The defendant has appealed.
Respondent and other shipbuilders were invited to submit bids for the repair of said steamer in accordance with plans and specifications dated August 7, 1920, prepared and written by appellant. On August 12, 1920, respondent tendered its bid to perform said work in accordance with said plans and specifications for the sum of $37,000 and on the same day its bid was accepted. Respondent agreed to complete said repairs and to redeliver said steamer, in a seaworthy condition, within twenty days. Said specifications contained the following clause: "A penalty of $400.00 a day will be exacted and deducted from the contract price for each day that elapses between the actual completion of the contract and the time specified by contractor in the tender." On August 21, 1920, the parties made a supplementary contract in writing calling for additional repairs which respondent agreed to make within said period of time for the sum of $7,000. On August 30, 1920, a second supplementary contract was entered into orally between the parties whereby respondent undertood to drydock, clean, and paint said steamer for the reasonable value of the services performed, the work to be completed also within the original twenty-day limit. Said steamer was not ready for redelivery until September 25, 1920, which the court found was twenty-three days in excess of the limitation of time fixed by the contract and for which the court in this action allowed appellant, as provided in the contract, the sum of $400 a day for each day's delay, making a total deduction of $9,200 from respondent's entire demand. One of the main contentions made on this appeal is that the trial court should have declared the $400 a day clause of the contract void, as being a "penalty," and applied the measure of actual damages, which appellant claims amounted to $2,500 a day, making a total of $60,000.
[1] Under the code provisions of this state, a contract which attempts to fix the amount of damages in anticipation of a breach of an obligation is void to that extent (Civ. Code, sec.
Appellant concedes that in determining whether a provision in a contract is for liquidated damages, or for a penalty, the fundamental rule, so often announced, is that the construction of these stipulations depends, in each case, upon the intent of the parties, as evidenced by the entire agreement construed in the light of the circumstances under which it was made (Nakagawa v.Okamoto,
We are convinced that appellant's theory cannot be sustained. If adopted it would practically destroy the power given contracting parties under section
In the case of Sun Publishing Co. v. Moore,
In Banta v. Stamford Motor Co.,
Pacific Factor Co. v. Adler,
[4] The denomination in the contract of the $400 a day clause as a "penalty" is of no consequence. Even though designated as such it may be held to be liquidated damages, where the intention to the contrary is plain. (Williston on Contracts, par. 784; 1 Sedgwick on Damages, pp. 777-780.)
Other cases relied upon by appellant are Stark v. Shemada,
[6] It is also well settled, as was held in Thomas v.Anthony, supra, and McInerney v. Mack, supra, that where a party seeks to enforce a stipulated damage clause he must both plead and prove that the clause comes within the protection of said section
In Wilmington Transp. Co. v. O'Neil, supra, plaintiff sought to recover the sum of $3,500 for the loss of a "lighter" it had rented to defendant under a contract which provided that if the lighter was lost defendant would pay the sum of $3,500. The answer alleged "that the value of the lighter at the time it was delivered to defendant or at any other time thereafter did not exceed $1,800." The answer having admitted execution of the contract and the loss of the *216 lighter, plaintiff moved for and was granted judgment on the pleadings, the trial court awarding plaintiff the full amount of the stipulated damages. On appeal it was held that the amount agreed upon by the parties was a penalty, and the judgment was reversed, with leave granted plaintiff to amend its complaint so as to set forth actual damages. Aside from the fact that there can be no comparison, we think, between the feasibility of fixing the market value of the use of a "lighter" in 1890, the date of that contract, and of an oil tanker, in 1920, within a few months after the close of the World's War, nothing appears in that decision to show that it was ever averred in the complaint or at any time contended by plaintiff that when the contract was made it was impracticable or extremely difficult to fix actual damage. Certainly there was no evidence offered to that effect; as before stated, judgment was given on the pleadings. The case is therefore not in point.
In the case of Williamson v. Barrett, supra, the question of liquidated damages was not involved at all. The proposition there was the measure of damages and not the amount, that is, the rule to be applied in ascertaining the value of the use of a boat during the period of repairs, which had been previously sunk in a collision on the Ohio River during the year 1848. The court held that the owner could recover the amount for which "the vessel might have been chartered during the period of the repairs" according to the market price for the hire of such vessels, the court saying that such market price could "be ascertained as readily, and with as much precision as the price of any given commodity in the market." That particular portion of the opinion was vigorously assailed in a dissenting opinion by three members of the court, including Chief Justice Taney, in which it was held that the rule of "loss of market" and "probable profits of a voyage" was "too uncertain in its nature to entitle it to judicial sanction"; that such had been the settled doctrine of that court for more than thirty years, and that "the supposition that the amount of damages can be easily fixed, by what the injured boat could have been hired for, on a charter party, during her detention, will turn out to be a barren theory," etc. The rule announced by the majority opinion had been deviated from, to some extent at least, in later cases. (The Conqueror,
We find nothing in the cases of Los Angeles O.G. Assn. v.Pacific Surety Co.,
[8] Appellant makes the additional contention that the sum stipulated as damages was unreasonable and therefore void. The question of the unreasonableness thereof must, of course, be judged in the light of the circumstances existing when the amount was agreed upon. Much of the evidence on this point has already been narrated, but in addition it shows that said sum was proposed and written into the specifications by appellant, and was at all times allowed to remain unchanged. It was upon the faith of the proposals and statements made in said specifications that respondent calculated and tendered its bid. If, after respondent's bid had been invited and before it was accepted, conditions changed as to ownership of the vessel or as to concluding a charter-party therefor, so that appellant knew that the sum stated in the specifications had become grossly inadequate to cover appellant's damage in case of delay and that the amount thereof would reach a sum greatly in excess of that stated in the stipulation, we believe that in order to legally charge respondent with such increased damage, said stipulation should have been modified or eliminated by appellant before the acceptance of respondent's bid and the letting of the contract. Appellant surely knew better than respondent what its damage would be in case of the delay, and it cannot be supposed that appellant would have entered into a contract containing a stipulation written by itself, for the payment of damages in the sum of only $400 a day if it knew or had reason to believe that its damage would approximate $2,500 a day and that it could legally recover that amount. It must, therefore, be assumed from these circumstances that the sum of $400 a day was honestly arrived at, on a fair basis, as representing the reasonable amount of damage appellant believed it would suffer in case of delay and was in good faith inserted in the contract. Furthermore, we are of the opinion that under the circumstances related appellant is not in a position to question the reasonableness of that amount.
[9] The next point made by appellant is that the oral agreement of August 30, 1920, for drydocking, cleaning, and painting the vessel was an independent contract, and that none of the terms of the original contract applied thereto; *219 that the delay did not occur under the original contract, but under the latter contract, and that, therefore, the provisions of the original contract for stipulated damages did not apply. The trial court found that the oral contract for drydocking, cleaning, and painting was "additional and supplementary to the original contract," and that the terms of the original contract, so far as applicable, were made part of the supplementary contract. There is ample evidence to support the finding. The subsequent agreement clearly related to and became a part of the one general transaction, the work of drydocking, cleaning, and painting having been begun before the work under the original contract had been finished. When respondent agreed to the limitation of time stated in the original contract, the $400 a day clause for delay was not expressly excluded and respondent's understanding was that it was included. We believe that under the circumstances the promise made by respondent in the original contract to complete the work in twenty days and the promise to pay stipulated damages in case such time was exceeded must be construed as a single provision, and that appellant may not split the same so as to demand the enforcement of the beneficial portion and reject the application of the remaining portion.
But whether or not the $400 a day clause applied to the supplementary contract makes little difference, for the reason that it manifestly appears from the evidence that it was the original contract that was breached.
The twenty-day limitation expired on September 2, 1920. The original contract provided that this $400 a day clause should apply "for each day that elapses between the actual completionof the contract and the time specified by the contractor in the tender." Said contract further provided that the contractor's time and liability should "cease when repairs and replacements are completed; when a sufficient dock trial is completed and he has removed all his equipment and dirt occasioned by the repairs to the vessel, and the vessel is in all respects ready to leave the works of the contractor in a seaworthy condition and ready for the sea"; also that "when the work of installation is completed, the boilers will be given a six-hour dock trial under full steam with main engines and auxiliaries running full speed." Appellant's construction of the contract pertaining to completion of the *220 work and redelivery of the vessel is found in its answer wherein it is alleged "that in said agreement for the repair of said steamer `Asuncion' it was agreed between the parties that plaintiff should complete its work and redeliver said steamer to defendant on Oakland estuary within twenty days from date the repairs were begun." It therefore clearly appears that when the repairs and replacements were completed it was necessary to make certain tests, and the ship was thereafter to be redelivered on Oakland estuary in a seaworthy condition and ready for the sea, and that all of these requirements should be complied with on or before September 2, 1920, or $400 a day was to be deducted from the contract price until such redelivery was made. The evidence shows that the vessel was placed in respondent's drydock on September 1, 1920. At that time the repairs called for by the original contract had not been completed. On September 4, 1920, respondent attempted to remove the vessel, but the drydock failed to function and the vessel did not leave the drydock until September 22, 1920. Even then, when the vessel left the drydock all of the repair work required to be done under the original contract had not been completed. The vessel was thereupon taken to the Moore Company's plant and drydocked, and the work specified in the original contract completed. The vessel was not redelivered to appellant in a seaworthy condition nor was it ready for the sea until September 25, 1920, that is, after it left the Moore Company plant. The Moore Company was paid $1,195 by respondent for completing the work respondent should have performed under the original contract. It matters little that the repairs called for by the original contract were, as appellant states, "substantially completed" when respondent's drydock broke down. The fact is they were not completed. Nor does it make any difference that much of the Moore Company bill was incurred, as appellant claims, for making "a re-examination of the original work previously made necessary by the fact that the drydock had broken down." It all proves that until the ship left the Moore Company plant it was not in a seaworthy condition nor ready for redelivery.
[10] Appellant further objects to the finding that "the terms and conditions of the original contract so far as applicable to said drydocking, cleaning, and painting contract were made a part thereof" upon the ground that the finding *221 is too general, and consequently inoperative, in that it fails to find which of the particular terms and conditions were applicable. There was only presented for consideration here those portions of the original contract relating to limitations of time and liquidated damages, and with the rest of the contract we are not concerned. Moreover, the finding becomes immaterial in any event in view of the fact that the breach occurred under the original contract.
[11] Appellant complains of the failure of the court to find "what the reasonable market value of the `Asuncion' was per day" and upon the question of "damages suffered by defendant for payment of wages and provisions to the crew of `Asuncion' while on drydock." The application of the rule of stipulated damages rendered immaterial the question of the market value of the ship at the time the breach occurred, and in answer to the latter point it is enough to say that respondent was not obligated to make any payments or perform any duties other than those specified in the contract.
[12] The failure to find upon the allegations of negligence as set forth in appellant's cross-complaint was not error. The court allowed appellant the full measure of legal damages resulting from the delay, and hence the cause of the delay, whether or not from negligence, became an immaterial issue.[13] The findings as made are supported by the evidence and are sufficient in form and in substance to sustain the judgment, and even if immaterial issues had been found upon, the judgment would not be affected thereby.
[14] Appellant further objects to the allowance for interest. We think the trial court improperly awarded respondent interest on the sum sued for in the second count from the date of the redelivery of the vessel to October 25, 1920, which amounted to $54.18. Up to October 25, 1920, the amount due respondent under the supplementary contract was an unliquidated demand. Consequently respondent was not entitled to interest thereon. (Cox v. McLaughlin,
The judgment will be modified by deducting therefrom the sum of $54.18, representing the amount of interest improperly allowed, and as thus modified will stand affirmed. Respondent will recover its costs
Tyler, P.J., and Cabaniss, J., pro tem., concurred.
A petition by appellant to have the cause heard in the supreme court, after judgment in the district court of appeal, was denied by the supreme court on February 9, 1925.
All the Justices concurred.