Fidelity & Deposit Co. of Maryland v. Jones

• Decision Date: 09 November 1934
• Parties: FIDELITY & DEPOSIT CO. OF MARYLAND v. JONES et al. (two cases).
• Court: Kentucky Court of Appeals

75 S.W.2d 1057

256 Ky. 181

FIDELITY & DEPOSIT CO. OF MARYLAND v. JONES et al. (two cases).

Court of Appeals of Kentucky

November 9, 1934

Appeal from Circuit Court, Jefferson County, Common Pleas Branch First Division.

Actions tried together, by Lawrence Jones and others and by Lawrence Jones and another against the Fidelity & Deposit Company of Maryland. Judgment for plaintiffs, and defendant appeals.

Affirmed.

Bruce &amp Bullitt, of Louisville, for appellant.

A. J. Carroll and Carroll & McElwain, all of Louisville, for appellees.

RICHARDSON Justice.

These actions were tried as one in the circuit court, and these appeals are prosecuted as one. The issues and the questions of law involved in them are identical; therefore, we shall dispose of them in one opinion.

They were instituted on bonds executed and delivered by the Jefferson Lake Oil Company, Incorporated, principal, and the Fidelity & Deposit Company of Maryland, surety, by which they obligated themselves unto J. Lyle Bayless, Lawrence Jones, and Leodis Leblanc "in the full amount of Twenty-five Hundred ($2,500.00) Dollars, payment of which well and truly to be made," on the condition that the Jefferson Lake Oil Company "shall well and truly perform and keep" its obligation set forth in a certain lease described in each of the bonds.

Claiming that the Jefferson Lake Oil Company had wholly failed to perform, or attempted to perform, its obligations as set out in the leases, Jones, Bayless, and Leblanc, the beneficiaries of the bonds, instituted these actions in the Jefferson circuit court against the Fidelity & Deposit Company of Maryland to recover as compensation, as per the terms of the bonds, the amount of each bond because of the Jefferson Lake Oil Company's breach of the lease contracts.

In the preparation and the trial of the actions, it was conceded that the Jefferson Lake Oil Company had utterly failed to perform or attempted to perform, the obligations imposed upon it by the conditions, provisions, and terms of the leases.

"The (trial) court ruled that as the wells had not been drilled as provided for by the terms of the bonds that the face amount of the bonds was liquidated damages and refused to let the Fidelity and Deposit go into the question of proof to show the improbability of damage to Jones" et al. "Jones (et al.) did not offer proof to show probability of damages." "The court excluded the evidence offered by the Fidelity and Deposit Company," that "tended to prove no loss to Jones (et al.), because of the failure of the Jefferson Lake Oil Company to drill wells as provided. The court's rulings were to the effect that the penalty of the bonds constituted liquidated damages and it was not necessary for Jones (et al.), to prove probability of damages and the Fidelity and Deposit could not show the improbability of damages to Jones" et al.

The Fidelity & Deposit, during the progress of the trial, received the impression that Jones et al. agreed with the Jefferson Lake Oil Company "to extend the time to commence drilling the well six months after the date upon which the commencement of the drilling was guaranteed in the bond of June 28th, 1929." Its counsel "moved for a continuance on the ground of surprise, in that the testimony showed a variance by showing the extension agreement beyond the date of the breach as set out in the petition." Its motion was overruled. Also, before the commencement of the trial, the Fidelity & Deposit tendered an amended answer and counterclaim which the court refused to allow to be filed.

At the conclusion of the evidence of both parties, the court peremptorily directed a verdict for Jones, Bayless, and Leblanc.

The Fidelity & Deposit is here presenting in its brief the questions stated above, for review and grounds of reversal. Since it has confined its right to reversal to the three grounds, none other will be considered. All other questions which might be presented are now and shall hereinafter be regarded as waived by it.

Taking up these questions in reverse order, we shall first dispose of the question of the right of the Fidelity & Deposit to have considered the ruling of the court refusing to allow the amendment to its answer to be filed. The record discloses that on entering its motion to file the amendment, the plaintiffs objected to the motion. Thereupon the court overruled its motion to which the Fidelity & Deposit reserved an exception; and the parties, by their counsel, and the court, proceeded to impanel the jury to try the case and no other or further order appears in the record concerning this amendment.

The Fidelity & Deposit Company did not request, and the court did not by an order direct, or permit, the amendment to be made a part of the record for any purpose.

The applicable rule where an amended pleading is not permitted to be filed, as in this instance, is aptly stated in Newman's Pleading and Practice (Revised Edition of 1907, § 675), as follows: "An order merely rejecting an amended pleading does not, either at law or in equity, make it a part of the record, and though the clerk copy such a pleading in the transcript, but without any order recognizing it as the paper offered, it can not be considered on appeal. Nor can it be considered if the order make it a part of the record, unless it be identified by the order or by the certificate of the clerk as the paper tendered and rejected. Unless, therefore, a rejected pleading be made part of the record by order, and identified, it should be embodied in a bill of exceptions. The text is supported by Hortsman v. C. & L. R. R. Co., 18 B. Mon. 223; Young v. Bennett, 7 Bush, 476; Bramel v. Bramel, 62 S.W. 529, 23 Ky. Law Rep. 11; Lewis' Adm'r v. Bowling Green Ry. Co., 147 Ky. 461 [144 S.W. 377, 39 L. R. A. (N. S.) 929]; Commonwealth v. P., C., C. & St. L. R. Co., 163 Ky. 646 ; and many other similar cases." Grigsby v. Smith, 174 Ky. 819, 192 S.W. 856.

The tendered amendment not being made a part of the record, either by an order of court, or the bill of exceptions, the Fidelity & Deposit is not now entitled to have it regarded as a part of the record, or urge the ruling of the court thereon as a ground of reversal. We are not disposed to disregard this familiar rule of practice and assume the duty of considering the tendered amendment, and the ruling of the court appertaining to it.

During the examination, as a witness, of one of the plaintiffs, counsel of the Fidelity & Deposit "moved the court for a continuance on the ground of surprise, in that the testimony shows a variance by showing the extension agreement beyond the date of the breach as set out in the petition."

The application in every case for a continuance is addressed to the sound discretion of the court (Crane v. Hall, 165 Ky. 827, 178 S.W. 1096), and unless this discretion has been abused, the action of the court will not be disturbed by this court. The trial court is never bound to accept either the mere statement of counsel requesting the continuance or that of an affidavit supporting the application.

The actions were filed in March, 1931. Between that date and the date of trial, March 10, 1932, the Fidelity & Deposit had filed an amendment to its answer and counterclaim on June 13, 1931, October 24, 1931, and March 8, 1932.

Even if the mere statement of the counsel were sufficient on which to base the motion, there was no showing that it had been diligent in discovering the facts which it asserts were a variance from the petition. The motion to continue was properly overruled.

With these questions of practice disposed of, we are brought to a consideration of the vital issue debated in the briefs.

The courts, without an exception, agree that it is competent for parties entering upon an agreement to avoid all future questions as to the amount of damages which may result from the violation of the contract, and to agree on a definite sum as that which shall be paid to the party who alleges and establishes the violation of the agreement. And where this course has been adopted and the specific sum named in the contract, the difficulty which arises in an action to recover a specific sum is whether it should be considered as liquidated damages, or only as a penalty. Also, if no damages have been sustained by reason of the violation of the agreement, a clause liquidating the damages will not avail the plaintiff. In such case only nominal damages are recoverable.

"Just compensation for the injury sustained is the principle at which the law aims, and the parties will not be permitted, by express stipulation, to set this principle aside." Myer v. Hart, 40 Mich. 517, 523, 29 Am. Rep. 553.

In Hahn v. Horstman et al., 12 Bush, 249, we said "Parties to a contract may agree upon any amount of compensation for its breach as liquidated damages which does not manifestly exceed the amount of injury suffered, and the party in default will be required to pay this fixed sum as an equivalent for the loss sustained. Pierce v. Fuller, 8 Mass. 223 ; Bagley v. Peddie, 16 N.Y. 469 ; Mott v. Mott, 11 Barb. [ N. Y.] 127." Continuing we said: "If the actual damage sustained by the party complaining can not be reached or determined by any known rule of law, then the courts are disposed to look alone to the measure of damage fixed by the contract; but as a general rule where the actual damage can be ascertained from the nature of the contract itself, the courts are always inclined to disregard the language of the contract so far as it fixes the damages, and particularly in cases where a strict construction of the language used would result in oppression to the party against whom the claim is asserted, by giving to the complaining party more damages than he has really sustained. ...