Case ID: nys_5/html/0319-02.html
Source: Caselaw Access Project
Author: {"author": "Pratt, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Ward v. Hudson River Bldg. Co.
    
      (Supreme Court, General Term, Second Department.
    
    May 18, 1889.)
    1. Contracts—Liquidated Damages or Penalty.
    Two building contracts provided that the builder should pay the owner $10 per day for every day’s default after the dates fixed for completion, “as and for liquidated damages. ” The builder being in default on March 5, 1888, a third contract was made, which referred to the provisions in the original contracts for the§10 per day as a “penalty, ” allowed the builder an extension of time until March 35, 1888, recited that the so-called “penalties for default” would amount to $1,540, and provided that “the sum or penalty” which would become due at the date of the desired extension “shall be $1,540 by way of liquidated damages, unless said houses and all extra work are then entirely finished, ” etc. A severe storm occurred on March 10th, and continued until the 13th, and the builder did not entirely complete certain parts of the work by the 35th, claiming that the storm rendered it impossible to do so. Thereafter the parties made a fourth agreement, reciting the agreement of March 5th, and that by its terms certain “ penalties ” were to be paid, etc.; that the builder claimed that the “penalties” should not be exacted because the default was caused by an act of God; and that the parties were willing to go on with their contracts, “leaving the question of said penalty for litigation, ” and waiving all questions “ except the one question of penalty, as alleged. ” Held, that the $1,540 were liquidated damages, and not a penalty.
    •3. Same—Act of God.
    The builder was not entitled to relief from the provision for liquidated damages, though the storm be considered as an act of God. He should have protected himself against such danger by his contract.
    A Same.
    Especially is the storm no excuse where it appears that the work might have been entirely completed, by the exercise of due diligence, between March 5th and 10th.
    Appeal from special term, Westchester county.
    
      
      Barlow & Carman, (George W. Gotterill, of counsel,) for appellant. Iittdd & Hunt, for respondent.
   Pratt, J.

This action was commenced in equity to obtain relief from a-so-called “penalty” provided in a contract between the parties, and to recover a sum of money. The first, and perhaps the controlling, element in the case is whether or not the sum against which relief was sought was a penalty or fixed and liquidated damages. The facts are quite complicated. A statement of the material facts is necessary to a proper understanding of the case. The undisputed evidence was that the parties made four agreements in writ-' ing. The first one was made' April 28, 1887, and provided that plaintiff should do and finish certain work on, and furnish materials for, two houses-for defendant, at Hill View, South Yonkers, N. Y., on its plots 9 and 27 on the map, under the direction and to the satisfaction of an architect, according to drawing and specifications,—the work to be wholly finished on or before October 1, 1887; and defendant agreed to pay therefor $10,800, in three installments, as the work progressed, provided the architect certified that the work had been done upon which the installments respectively depended. The second contract was made in June, 1887, and contained like provisions respecting the building of two other houses for defendants at same place, on its plots 17 and 19 on said map, for which defendant was to pay $10,100,—in installments upon the architect’s certificates,—the work to be completed on or before January 1, 1888. Each of these contracts provided that plaintiff should pay the defendants $10 per day for every day’s default after the dates fixed for completion of the work, as and for liquidated damages. It seems that plaintiff was to build two other houses for defendant on plots 11 and 45 on said map. The plaintiff was in default under all these contracts on the 5th of March, 1888, and on that day the parties entered into a further contract in writing. This third contract recites the first two contracts above noted, and refers to the provision for the $10 per day as “a penalty.” It then recites that plaintiff desired an extension of time to complete his work, viz., until Marph 25, 1888, on the four houses to be built under the two contracts, dated, one in April, and the other in June, (on plots 9, 17, 19, and 27,) and until August 1st on those to be built on plots 11 and 45. It also recites that the so-called “penalties for default” on the four houses (plots 9, 17, 19, and 27) would amount to $1,540. There would have been 'due to plaintiff from defendant a payment under the two contracts amounting to $1,210 on the houses on plots 17 and 19. The instrument tlien attests a mutual agreement that “the sum or penalty” which would become due March 25, 1888,—the date of the desired extension on houses,—“shall be $1,540 by way of liquidated damages, unless said four houses and all extra work are then entirely finished in accordance with the plans and specifications under the original contracts,” and that no further payments should be made on the houses on plots 9, 17, 19, and 27 until the same are entirely completed on or before March 25, 1888, and that if they were completed on that day the defendant would wTaive all claim to the $1,540, and plaintiff would waive all claim for certain contemplated extra work; and in that event defendant would then pay the $1,210, etc.

Before proceeding to the fourth agreement it will be well to state the intervening facts. Plaintiff claims that they constitute the ground on which he should be relieved from the so-called “penalties.” His evidence shows-that on Wednesday, March 6th, the houses were completed with the Exception of the cess-pools and cisterns, and that three or four days would have been sufficient time in which to have finished them; that on Sunday night, March 10th, the remarkable snow-storm called “the blizzard” set in, and continued until Wednesday morning, the 18th, to such an extent that it was impossible to work in these cess-pools and cisterns; that it was warm and fair on Thursday, the 14th, and rainy on Friday and Saturday, the 15th and 16th; that he put on a force of about 100 men—all that he could get-—on Wednesday, the 13th, to shovel away the snow, only to find the cess-pools and cisterns full of water; that it took them three days to pump them out—until the 20th —so that they were dry enough for the men to work in them, and even then that the bottoms were springy; that the water flowed in upon them to such an extent that the cement would not set until after the 30th of March. His workmen testified that they worked diligently to complete the work, and perhaps that may be assumed after the storm. On the 30th of March the plaintiff’s counsel addressed a note to defendant, in which he claimed that the completion of the work on the 25th had been prevented by the storm as an act of God, and insisted that the work was substantially, though not “ wholly or entirely, ” completed. On the 16th of April the parties made their fourth agreement, which recites their agreement of the 5th of March, and “ that by the terms of said agreement certain penalties were to be paid in case the houses therein mentioned were not finished on or before March 25, 1888; and, in case they were finished, the titles to the plots referred to in said contract were to be passed, and all matters therein referred to were to be adjusted on March 26th. ” It also recites that the houses were not completed on the 26th, and that the architect’s certificate was not presented, and that plaintiff claimed that the penalties should not be exacted by reason of the facts set up in the letter of his counsel under the date of the 30th March, and that the parties were willing to go on and close their contract, “leaving the question of the said penalty for litigation in case said Ward chooses to litigate the same, the suit to be commenced within six months, if at all, and the said parties hereto removing all other questions and property from their controversy, except the one question of penalty, as alleged.” It then attests that the parties closed their matters, reserving the question aforesaid. The defendant gave its deeds, and insisted on the claim to the $1,540. Plaintiff waived all claims except-to the payment of $1,210. Plaintiff then brought his suit asking, first, to be relieved from the penalty, and that he might recover the balance due on his alleged right to the payment. Defendant set up the several agreements, the plaintiff’s defaults, and denied that the storm constituted a defense, whether as an act of God or otherwise. It asked no affirmative relief. The learned trial judge in his opinion treated the reserved sum as a “penalty,” but in his decision granted relief against it mainly on the ground that the completion of the work was prevented by the storm as an act of God, and adjudged that plaintiff was entitled to the balance claimed by him.

The parties have been most persistent in referring to the so-called “penalty” by two utterly inconsistent and irreconcilable names. In both their original contracts they refer to the $10 per day for default as liquidated damages. The expression in each is the same,—“as and for liquidated damages.” This, then, is the starting-point. The $10 per day was not as a penalty. There was a definite and distinct agreement that it was “as and for liquidated damages.” Then, singularly enough, in their third agreement, which provides for the extension, they talk about the accumulation—the $1,540—in their recitals as a penalty. But when they came to the contractual clauses they varied their description of it, referring to it as “the sum or penalty;” thus showing that there may have been some dispute between them with respect to its exact legal character. But they“settled it. They “mutually agreed that the sum or penalty due under said contract on March 25, 1888, shall be one thousand five hundred and forty dollars ($1,540) by way of liquidated damages. ” They use this precise expression twice during the course of that contract, and then they afterwards refer to it again by the phrase “as liquidated damages.” They here use the latter as distinguished from the former,—the idea of penalty. They could not have made their agreement clearer if they had used the not infrequent phrase, “as and for fixed and liquidated damages, and not as a penalty. ” Having thus thrice definitely agreed upon its legal character, under such circumstances as to preclude the supposition of ignorance or misunderstanding, it would seem like undoing their bargain to treat this sum as a penalty. We do not overlook the fact that the recitals in their final agreement again refer to the $1,540 as a penalty. But that must be taken as the plaintiff’s phrase. He was reserving the right to litigate the defendant’s claim to this sum. It was to his interest to call it a penalty. The purpose of that agreement, as far as it related to this $1,540, was to preserve the right of each party in statu quo. neither of them waived anything respecting this sum. If the plaintiff chose, it was to be the subject of litigation and judicial construction; and in this view of the recital it is not a matter of much importance by what name they called or referred to it. The mere name would not change its legal character, or the rights of either party respecting it, especially in view of the absence of evidence showing any mistake or misunderstanding, and of the vital fact that each party was evidently standing upon and did not intend to waive any of his legal rights respecting it. We therefore conclude that the plaintiff was justly liable to defendant for that $1,540, and was not entitled to any relief against it, unless there was some legal excuse growing out of the storm as an act of God. We are unable to see our way to hold this a sufficient excuse. The plaintiff’s duty to finish the cess-pools and cisterns was clearly within his contract. It was a duty assumed by him by virtue of his contract, and not by operation of law. The rule in such cases is that he should have protected himself against such a danger by an appropriate clause in his contract. Harmony v. Bingham, 12 N. Y. 99; Tompkins v. Dudley, 25 N. Y. 275; School-Dist. v. Dauchy, 25 Conn. 530; Trustees v. Bennett, 27 N. J. Law, 514. And, besides that, we do not see how plaintiff can meet the -difficulty that he was not diligent in prosecuting his work after the contract of March 5, 1888, was made. Grant that it was not signed until the 6th, which was Wednesday, his witness says that the work might have been done in three or four days. It might therefore have been finished on Saturday. This witness says that the weather during that interval was good. The storm -did not begin until Sunday night. Indeed, the plaintiff really offers no ex-ouse for his delays under either of these contracts. So early as October 26, 1887, the defendant wrote him that they “noticed with disappointment and -displeasure that there have been no men working, nor has any work been ■done upon the cottages * * * for some time past.” The defendant never waived, but always insisted upon, the liquidated damages, doubtless as a means of hurrying forward their work. They offered, nay agreed, to waive their right on March 5th or 6th, provided the plaintiff would finish the work by the 25th. And yet there is no pretense that he did anything from that time on until the storm came. Courts cannot nor ought they to favor or accept such pleas under such circumstances as excuses for non-performance of engagements. Liquidated damages often constitute the only practical remedy in such a case. The owner or employer builds upon the contractor’s promise to finish, permits him to name his own time, makes his plans for the sale or rental of his houses with reference to it, and the stipulation for liquidated damages is generally the only adequate means by which he may protect himself against a falling market and a variety of other risks incident to the development of property by building upon it as a business. It follows from these views that the judgment should be reversed, and that a new trial should be ordered. The costs of the trial and of this appeal are awarded to the defendant, to abide the event.