Sunderland Brothers Company v. Chicago, Burlington & Quincy Railroad Company

• Decision Date: 27 September 1920
• Citation: 179 N.W. 546,104 Neb. 322
• Parties: SUNDERLAND BROTHERS COMPANY, APPELLEE, v. CHICAGO, BURLINGTON & QUINCY RAILROAD COMPANY, APPELLANT
• Court: Nebraska Supreme Court

179 N.W. 546

104 Neb. 322

SUNDERLAND BROTHERS COMPANY, APPELLEE, v. CHICAGO, BURLINGTON & QUINCY RAILROAD COMPANY, APPELLANT

Supreme Court of Nebraska

September 27, 1920

Motion for rehearing OVERRULED.

FLANSBURG J. ALDRICH, J., not sitting. LETTON, J., dissenting.

OPINION

FLANSBURG, J.

This matter now comes up on rehearing. Former opinion Sunderland Bros. Co. v. Chicago, B. & Q. R. Co. ante, p. 319.

The action was brought by the plaintiff, who had shipped building material in carload lots over defendant's railroad, and is based upon sections 6159, 6160, 6162, Rev. St. 1913, known as the "Reciprocal Demurrage Act," allowing recovery to the shipper of $ 1 per day, together with all actual damages sustained for each day's delay, in shipment and delivery of goods by the carrier.

The sole question presented is whether or not the provision of the statute, allowing $ 1 per day per car, together with all actual damages sustained, provides for liquidated damages to the shipper, or allows a recovery in the nature of a penalty.

If the allowance to the shipper is in the nature of a penalty, then the provision is in violation of section 5, art. VIII of the Constitution, providing: "All fines, penalties, and license moneys, arising under the general laws of the state, shall belong and be paid over to the counties respectively, where the same may be levied or imposed. * * * All such fines, penalties, and license moneys shall be appropriated exclusively to the use and support of the common schools in the respective subdivisions where the same may accrue."

The rule of distinction between penalties and damages is stated in Haffke v. Coffin, 89 Neb. 134, 138, 130 N.W. 1045 (quoting from Brennan v. Clark, 29 Neb. 385, 45 N.W. 472) as follows: "In construing a contract to determine whether or not a provision therein for the payment of a stipulated sum in case of default by one of the parties is to be considered as a penalty or liquidated damages, the court will consider the subject-matter, the language employed, and the intention of the parties. If the construction is doubtful, the agreement will be considered a penalty merely. If damages result from the performance or omission of acts, which damages are certain or can be ascertained by evidence, the stipulated sum is considered as a penalty; but, where the acts or omissions occasioning damages are not susceptible of measurement by a pecuniary standard, the sum stipulated ordinarily will be regarded as liquidated damages."

That rule has been repeatedly followed by this court and is the rule generally recognized in other states. 17 C. J. 937, sec. 235, 945, sec. 238.

The purpose of liquidated damages is to furnish compensation for an injury sustained, and, if the amount provided does not bear a reasonable relation to the damage which might be contemplated by the parties, or if it is apparent that it was intended to more than cover that damage, and is not compensatory merely, then it must be construed as a penalty. Such is the holding in Lee v. Carroll Normal School Co., 1 Neb. Unoff. 681; Brennan v. Clark, 29 Neb. 385, 45 N.W. 472; Squires v. Elwood, 33 Neb. 126, 49 N.W. 939.

In the two cases last-above mentioned, the court held that there the damages were easily ascertainable, and the amount provided must have been intended as a penalty, as there was no need for liquidating the amount by agreement.

In the case of Atchison & N. R. Co. v. Baty, 6 Neb. 37, and Grand Island & W. C. R. Co. v. Swinbank, 51 Neb. 521, 71 N.W. 48, a statute, which compels a railroad company to pay the owner of live stock killed upon the track double value of the property, has been held to provide a penalty and to be unconstitutional and void, since it is apparent that more than mere compensation is provided by the statute.

The plaintiff in this case relies upon the holding in Graham v. Kibble, 9 Neb. 182, 2 N.W. 455, and the cases which have followed that case, citing it as authority. Phoenix Ins. Co. v. Bohman, 28 Neb. 251, 44 N.W. 111; Phoenix Ins. Co. v. McEvony, 52 Neb. 566, 72 N.W. 956; and Hier v. Hutchings, 58 Neb. 334, 78 N.W. 638.

The rule, as stated in the case of Graham v. Kibble, supra, and as followed in the cases just above cited, is entirely consistent with the rule stated in the beginning of this opinion. In all of these cases statutes were involved which provided that a party could recover from a public officer a certain stipulated amount in damages, in case of the wrongful act or oppression of the officer in charging excessive fees, or in arresting a party who had been released on habeas corpus, etc.

In the case of Graham v. Kibble, supra, the amount of damages allowed by statute was $ 50, in case a public officer should charge excessive fees. It was argued that the statute provided a penalty. The court's decision, however, was based upon the proposition that the amount provided was in the nature of liquidated damages, though a part of the opinion by way of dictum discussed the amount allowed as a penalty, and intimated that in the case of public officers a penalty could be provided. In the case of Grand Island & W. C. R. Co. v. Swinbank, supra, in which the court held that a statute allowing double damages against a railroad company for the killing of live stock was unconstitutional, Judge Irvine said (p. 526): "The so-called penal statute discussed in Graham v. Kibble, supra, was sustained as being a provision for liquidated damages. It related to a case where the actual damages are difficult, if not impossible, of ascertainment; whereas the statute we are considering requires the actual damages to be admeasured, and then arbitrarily requires the defendant to pay the plaintiff twice that sum."

By reason of the court's dictum in the case of Graham v. Kibble, that the amount allowed was a penalty, such provisions have later been referred to as penalties in the cases following that case. In the case of Phoenix Ins. Co. v. Bohman, supra, the court stated that the statute, allowing a party to recover $ 50 against an officer taking excessive fees, was highly penal in its nature. In that case and in the case of Phoenix Ins. Co. v. McEvony, supra, and of Hier v. Hutchings, supra, the constitutionality of the statute was not reasoned or discussed, but the statute was sustained simply on the authority of Graham v. Kibble. It further appears that those statutes should have been expressly sustained as providing liquidated damages, as was done in the former case.

The cases so far discussed, then, are in complete harmony, so far as the question has been expressly considered, upon the rule of determining between liquidated damages and a penalty. The plaintiff urges that the case of Clearwater Bank v. Kurkonski, 45 Neb. 1, 63 N.W. 133, is a case in favor of the constitutionality of the statute in question. The statute in that case provided for the recovery of $ 50 liquidated damages and also for actual damages sustained. It is apparent that the amount allowed, $ 50, if given in addition to actual damages, was a provision for more than actual compensation to the person injured, and it would seem that, when that statute comes before the court again, that case must be overruled if the decisions in all the cases above referred to are to be adhered to. In the Kurkonski case, the question of allowing extra damages, in addition to the $ 50, is not discussed as tending to show that any more than compensation was intended to be provided by the statute. The opinion in that case discloses that the question of whether or not the $ 50 was a penalty was not very closely considered, and it is stated in the opinion that the amount was evidently intended as liquidated damages, and the case of Graham v. Kibble, supra, cited as authority.

That the legislature could provide liquidated damages, if it was apparent that the amount provided was intended to be compensatory only, has been held in the case of Cram v. Chicago, B. & Q. R. Co., 84 Neb. 607, 85 Neb. 586. In that case, however, the statute was upheld on the ground that the amount allowed was to cover damages only, and the court stated that, if more than that amount had been allowed, the provisions must have been construed as a penalty.

In the case of Smith v. Chicago, St. P., M. & O. R. Co., 99 Neb. 719, 157 N.W. 622, the court, in construing the statute involved in the Cram case, said that, though the statute provided for liquidated damages, that remedy was in addition to the common-law remedy, and that the shipper had a right to elect and waive the statutory penalty and recover his actual damages as at common law. The reasoning in that case makes it apparent that the court considered both remedies could not be allowed. The decision seems to have gone a great limit, however, in allowing the shipper to elect whether he shall recover his actual damages instead of the liquidated damages provided, if it is understood that such election is given for those damages which arise purely from delay, and not from other acts of the carrier. The very purpose of providing liquidated damages is to reduce the damages, due to delay, to a definite sum, but, if the purpose is further to give a specified sum only in those cases where the actual damages are equal to or are less than the amount provided by the statute, and to give the shipper the election to recover all damages and waive the liquidated amount whenever his actual damages amount to more, then it would seem the statute might, in effect, allow the shipper to recover more than the compensatory damages only, for he would obviously seek to recover the amount fixed by statute when it was to his advantage, and when he would thus receive more than the actual damages he had sustained, and, on the other hand, he...