Geiger v. Western Maryland R. Co.

• Citation: 41 Md. 4
• Parties: E. L. H. GEIGER, JOHN DOWNEY and JAMES M. EPPLY, Assignees in bankruptcy of JAMES MCGUCKIN, GEORGE T. SHOWER and JAMES MCGUCKIN, JR., v. THE WESTERN MARYLAND RAILROAD COMPANY.
• Decision Date: 26 June 1874
• Court: Court of Appeals of Maryland

41 Md. 4

E. L. H. GEIGER, JOHN DOWNEY and JAMES M. EPPLY, Assignees in bankruptcy of JAMES MCGUCKIN, GEORGE T. SHOWER and JAMES MCGUCKIN, JR., v. THE WESTERN MARYLAND RAILROAD COMPANY.

Court of Appeals of Maryland

June 26, 1874

APPEAL from the Superior Court of Baltimore City.

A statement of the case will be found in the opinion of the Court. Three exceptions were taken in the Court below by the appellants; the first and second to the exclusion of evidence, and the third to the rejection of their prayers and the granting of those of the defendant. The prayers are omitted as the Court's judgment thereon is based exclusively upon the views expressed in the opinion. The verdict and judgment being for the defendant, the plaintiffs appealed.

The cause was argued before BARTOL, C.J., STEWART, GRASON, MILLER and ROBINSON, J.

Stewart Brown and F. W. Brune, for the appellants.

The thing to be done in construing the contract is to ascertain the real meaning and intent of the parties, and in so doing where technical expressions, such as "liquidated damages," have been used, the Court will not allow itself to be confined to the mere language of the particular provision, however explicit, as standing by itself, even where a contrary construction is expressly declared not to be intended; but, from the whole instrument, from the nature of the undertaking, the situation of the parties, the effect of the construction upon the rights of the parties, the number variety and relative importance of the defaults to be compensated for, or punished by one general clause of forfeiture, will determine what must have been the meaning of the parties, notwithstanding in what terms they may have expressed that intention.

Further--In considering a provision like this, in view of the unwillingness of the law to work a forfeiture, in order also to guard against oppression, and looking upon compensation as the true measure of damages, the Courts have laid down certain general principles of interpretation of such contracts, which will be applied wherever applicable.

The rule is well stated in Mayne on Damages, 92 Law Library, (66) thus: "when the sum which is to be security for the non-performance of an agreement to do several acts, will, in case of breaches, in some instances be too large, and in others too small a compensation for the injury thereby occasioned, that sum is to be considered as a penalty." 3 Parsons on Contracts, 159, gives two rules as the result of the authorities, viz: The sum agreed on will be treated as penalty, unless it is payable for an injury of uncertain amount and extent, or, unless payable for one breach of contract, or if for many unless the damages to arise from each of them, are of uncertain amount. See Astley vs. Weldon, 2 B. & P., 346; Kemble vs. Farren, 6 Bing., 141; Horner vs. Flintoff, 9 Mees. & Welsby, 678; Taloe vs. Sandiford, 7 Wheat., 13; Beall vs. Hayes, 5 Sandf., 640; Owens vs. Hodges, 1 McM., 106; Foley vs. McGeegan, 4 Iowa, 1; Watts vs. Sheppard, 2 Ala., 425; Streeper vs. Williams, 48 Penna., 454; Hough & Wife vs. Kugler, 36 Md., 195.

Applying these rules as laid down in said authorities to the particular provisions in question, it will be found that the disputed sum falls within the class of penalties, or securities, and not liquidated damages.

The nature of the right to annul, and the circumstances under which it may be exercised, are yet to be considered. After the time fixed by the contract for completion, or at least after the time (if any,) to which such completion had been definitely postponed, (more particularly if it appeared that the company had prevented or contributed to prevent such completion within the time,) such right could not lawfully be exercised.

There was ample evidence to show not only that the contractors were hampered and delayed in working, but also that these defaults on the part of the Company, prevented the completion, or contributed to prevent the completion within the original time prescribed.

This was matter of fact for the jury, and the evidence should in this view have been submitted to them, but is altogether disregarded by the Court's instructions. Rodemeyer vs. Hazlehurst, 9 Gill, 288; B. & O. R. R. Co. vs. Resley, 7 Md., 297; Parker Vein Coal Co. vs. O'Hern, 8 Md., 197.

But if the appellee's view be correct, and the forfeiture be enforced, it can only be applied to the 15 per cent. fund retained under the contract, until its completion. Because--1st. This is the only fund designated, that even approaches a liquidated sum. 2d. It is the only fund that was to remain unpaid, or that could come properly within the description of the " unpaid part of the value of work done." All other sums, and particularly the 85 per cent. monthly estimates, were expressly stipulated to be paid, and in no proper sense, after they became payable, ought they to have been unpaid. 3d. Especially is this the case, in view of the extent of the right claimed in the appellee's prayers, to be exercised on the mere volition of the engineer, subject to no review, requiring no justification by facts, and no proof of default; only such things should pass under forfeiture as are expressly included in its terms. 4th. Nor could damages, caused by the company's defaults, rightfully remain unpaid, at any period, and such, if any, should not be included.

No such distinctions were made however, but every amount retained in hand, due or withheld, was by the Court declared forfeited. Howard vs. Phila. & B. R. R. Co., 13 Howard, 307. See also, Faunce vs. Burke, 16 Penna., 478; Streeper vs. Williams, 48 Penna., 450; Rodemeyer vs. Hazlehurst, 9 Gill, 288.

Robert Baldwin and William A. Fisher, for the appellee.

Under the first exception, the appellants proposed to show, that after the contract had been annulled, the parties, to whom the work was allotted on the Baltimore Division, did not proceed with more expedition than McGuckin, Shower & Co. There can be no doubt that the Court acted properly in the rejection of this testimony.

It was offered for the purpose of showing that McGuckin, Shower & Co. were proceeding with reasonable expedition. The question as to whether the work was progressing properly, was not to be passed upon by the jury,--the determination of that matter was confided entirely to the Chief Engineer, and the evidence was entirely irrelevant.

But, even if that question had been open, the fact that other contractors had done no better than McGuckin, Shower & Co., could be no evidence that they had done well. Such a test would be no more safe in the domain of fact than in that of morals.

The next exception was taken to the refusal of the Court to allow the plaintiffs to prove that, after the annulment of the contract, and after the Company had advertised for proposals, Geiger and others called upon the officers of the appellee, and offered to do the work at the former prices, and to give security.

There is no theory of the case upon which such evidence could have been admissible. The annulment of the contract left the Company entirely free to contract anew, and the officers of the Company pursued the usual and proper course in advertising for bids, and accepting the lowest offers from parties supposed to be responsible. The result was, that more than the retained per centage and unpaid money was absorbed, but such a result does not even prove that the judgment of the officers was misled.

The evidence was not admissible as affecting the damages, because, the retained per centage was in the hands of the appellee, strictly as liquidated damages.

The third exception was to the action of the Court with respect to the prayers. The plaintiffs presented eight prayers, all of which were rejected, and the defendant two, which were granted.

The contract between the parties made the Chief Engineer the arbiter between them, and committed to him solely the authority to determine whether the work was progressing with sufficient speed; and his determination was conclusive, and in this controversy must be treated as correct. 1 Redfield on Railways, 416; Peirce on Railways, 377-9, 381-2; Faunce vs. Burke, 16 Penna. St. Rep., 479-480; Ranger vs. Great W. R. R. Co., 5 Ho. Lords Cases, 106-110; Herrick vs. Belknap, 28 Vermont, 679, 684-5; Kidwell vs. B. & O. R. R. Co., 11 Grattan, 690; Scott vs. Corporation of Liverpool, 5 Jur. N. S., 108, &c. Hennessey vs. Farrell, 4 Cushing, 267; 5 th and 8 th Ins. of Judge Taney in Howard vs. Phil, &c. R. R. Co., 1 Amer. R. W. Cases, 88.

The determination is in the nature of an award, and could be relieved against, even in equity, only for fraud, partiality, or obvious mistake. 1 Redfield on Railways, 416; Scott vs. Corporation of Liverpool, 31 Law Times, 147.

The annulment of the contract produced the consequences that the agreements of the appellee, and all claims based upon them, should at once become null and void, and that the unpaid part of the value of the work done, should be forfeited to the use of the appellee, in the nature of liquidated damages. The fund is what the contract calls it-- liquidated damages. Faunce vs. Burke, 16 Penna. St., 482-4; Ranger vs. Great W. R. R. Co., 5 Ho. Lords Cases, 94, 95, 104, 108, 119; Howard vs. Phil. &c. R. R. Co., 1 Amer. R. W. Cases, 102, 103, 104, 106-7, and note at bottom of page 107; 2 Parsons on Contracts, sec. 2, chapter 7.

The prayers granted, asserted these principles, and those rejected were inconsistent with them.

ROBINSON J., delivered the opinion of the Court.

This suit was brought by the appellants as assignees in bankruptcy, to recover damages of the appellee, for breaches on two contracts for the construction of the appellee's railroad, and to recover in addition thereto for...