J. I. Case Threshing Machine Company v. Souders

• Citation: 96 N.E. 177,48 Ind.App. 503
• Decision Date: 26 October 1911
• Docket Number: 7,312
• Parties: J. I. CASE THRESHING MACHINE COMPANY v. SOUDERS
• Court: Court of Appeals of Indiana

96 N.E. 177

48 Ind.App. 503

J. I. CASE THRESHING MACHINE COMPANY v. SOUDERS

No. 7,312

Court of Appeals of Indiana

October 26, 1911

From Superior Court of Tippecanoe County; Henry H. Vinton, Judge.

Action by the J. I. Case Threshing Machine Company against Frank T Souders. From a judgment for defendant, plaintiff appeals.

Affirmed.

Edwin P. Hammond, William V. Stuart and Dan W. Simms, for appellant.

Edgar G. Collins, for appellee.

OPINION

ADAMS, J.

Appellee, who was defendant below, purchased a threshing outfit from appellant, the terms being evidenced by a written contract. The only part of the contract involved in this appeal is the following stipulation:

"In consideration of the expense incurred by the company in soliciting, investigating and taking this order, the purchaser promises and agrees to pay all freight charges on said machinery from the factory, and fifteen per cent of the price above stipulated in cash, in case he cancels this order or declines to accept said machinery."

The purchase price of the machinery was $ 2,475. Appellant shipped and offered to deliver the machinery to appellee, who declined to receive it, and this action was brought to recover the sum of $ 371.25, being fifteen per cent of the purchase price, and the further sum of $ 21.60, the amount of freight paid upon the shipment. All proof of freight charges paid by appellant was withdrawn from the jury at the close of the evidence. The court then gave to the jury a peremptory instruction, directing a verdict for appellee, and entered judgment on the verdict that appellant take nothing by its action, and that appellee recover his costs. Appellant filed its motion for a new trial, the overruling of which motion constitutes the only error assigned and relied on for reversal.

The only question presented to this court and argued by counsel, is whether the agreement heretofore set out constitutes a claim for liquidated damages, or whether it provides for the payment of fifteen per cent of the purchase price as a penalty. Appellant contends that if the stipulated damages are to be held as liquidated damages, and not as a penalty, then the court invaded the province of the jury in giving the peremptory instruction. Appellee admits that this is strictly true, but says that the construction to be given the stipulation for damages is one of law for the determination of the court, and as the court properly interpreted the law, no error resulted from giving the peremptory instruction.

Whether the amount stipulated in a contract to be paid by a party upon failure of performance is to be treated as liquidated damages, or as a penalty, has been a fruitful source of litigation, and the subject of much judicial interpretation. Certain general rules are recognized as controlling, but when applied to particular cases, the question becomes one of great difficulty, and the authorities are not in full accord. The general rule governing the subject is laid down in 1 Sedgwick, Damages (8th ed.) § 405, as follows: "Whenever the damages were evidently the subject of calculation and adjustment between the parties, and a certain sum was agreed upon and intended as compensation, and is in fact reasonable in amount, it will be allowed by the court as liquidated damages. This rule will be found to be applicable to all contracts, and really involves the consideration of the subject in the three following aspects--that of the intent of the parties; that of the reasonableness of the contract, and that of the weight allowed by the court to the language employed." The same authority (1 Sedgwick, Damages [8th ed.] § 406), on the question of intention of the parties, says: "Courts will not go outside the contract to ascertain the intention of the parties in entering into it. To do this would often be to violate the elementary maxim that parol evidence cannot be introduced to vary or control a written instrument, and, accordingly, it is well settled that the character of the agreement is a matter of law to be decided by the court upon a consideration of the whole instrument."

In 1 Sutherland, Damages (3d ed.) p. 721, it is said: "The trend of judicial thought and action on the subject is well and frankly expressed by Justice Marshall of the Wisconsin court: '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 considered to be a mere forfeiture or penalty and the recoverable damages be limited to those actually sustained. While courts adhere to the doctrine that the intention of parties must govern in regard to whether damages mentioned in their 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 of course by precedents that are...