Eakin v. Scott

• Decision Date: 10 April 1888
• Citation: 7 S.W. 777
• Parties: EAKIN v. SCOTT <I>et al.</I>
• Court: Texas Supreme Court

7 S.W. 777

EAKIN v. SCOTT et al.

Supreme Court of Texas.

April 10, 1888.

Appeal from district court, Concho county.

Action on a note as damages for breach of contract, by J. H. Scott and G. S. Lowery against Thomas Eakin. Judgment for plaintiffs, and defendant appeals.

J. O. Hall, for appellant. Willingham & Harris and G. H. Garland, for appellees.

GAINES, J.

This suit was brought in the court below by appellees against appellant, and grew out of a contract for the sale of cattle. The agreement was in writing, and by its terms appellees sold and contracted to deliver to appellant a certain stock of cattle, for the consideration of $50,000, to be paid as follows: $8,000 in 60 days; $5,250 in 6 months; $15,750 in 1 year; $5,250 in 18 months; and $15,750 in two years, from the date of the instrument. For these payments appellant executed his promissory notes, all bearing 10 per cent. per annum interest, and dated the same day as the agreement. The note which first fell due is as follows: "$8,000. PAINT ROCK, TEXAS, June 1, 1885. Sixty days after date I promise to pay to the order of J. H. Scott and G. S. Lowery, at the Northern Bank of Kentucky, at Lexington, Ky., the sum of eight thousand dollars, with interest from date till paid at the rate of ten per cent. per annum, with exchange on New York. This amount is part payment of the purchase money for the H 2 brand of cattle this day sold to me by the said Scott & Lowery, and upon which property the said Scott & Lowery have retained a vendor's lien to pay said sum. It is agreed by me that the above amount shall act as a forfeiture in the event I shall abandon said trade." The agreement also contained this stipulation: "It is further agreed by said parties that the first note, of eight thousand dollars, due in sixty days from the date hereof, is to act as a forfeiture by the said Eakin in the event he abandons this trade; and, upon payment of said sum of money at said time, said property is to be delivered to said Eakin." Appellant abandoned the contract, and refused to pay the note for $8,000, although appellees performed all the stipulations of the agreement on their part. The suit was brought for the recovery of the $8,000, and the petition set forth the entire agreement, and alleged plaintiffs' compliance with its terms, and defendant's abandonment of the trade. The case was tried upon an agreed statement, in which the facts stated in the petition were substantially admitted, and in which it was further agreed that no actual damages accrued to the plaintiffs from the defendant's failure to comply with the contract.

The correctness of the judgment depends upon the question whether the stipulation for the forfeiture of the $8,000 note is to be treated as an agreement for liquidated damages, or as a mere penalty to recover such damages as the plaintiffs should actually sustain. The questions presented by this class of contracts are a fruitful source of litigation, and are usually difficult to be determined. Stipulations for liquidated damages are generally for amounts in excess of the actual damages, and in such cases work a hardship upon the parties in default. In consequence, the courts strongly incline to treat all agreements to pay a lump sum in case of the failure to perform the terms of a contract as a mere penalty; and in all doubtful instances to allow a recovery only for the actual damages. This is even so where the contract expressly names the sum as "liquidated damages," if the damages are such as can be ascertained with reasonable certainty according to the rules...