Case ID: iowa_94/html/0680-01.html
Source: Caselaw Access Project
Author: {"author": "Deemer, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

H. C. Sanford v. The First National Bank of Belle Plaine, Iowa, Defendant, S. B. Hamilton, Appellant.
    1 S 4 5 Liquidated Damages: construction. Defendant contracted to buy an interest in plaintiff’s stock and to become his partner. He deposited five hundred dollars in a bank as “a forfeit” if he failed to carry out the contract. Plaintiff leased a building for the firm, notified all creditors of the proposed change, and on defendant’s suggestion added a new line to the stock. Held, as the question whether a sum named in a contract is liquidated damages or a penalty should be solved by considering the intention as the nature of the contract indicates it, and all surrounding circumstances, and not merely by reading the contract, the said five hundred dollars ought to be treated as liquidated damages.
    6 Practice. In an action to recover liquidated damages no proof of actual damages need be made.
    
      2 Practice on Appeal: abatement. Where a bank, which stands indifferent between two claimants of a deposit, pays same into court after judgment to pay one of said claimants, this fact and that the successful claimant then satisfies the judgment, does not entitle him to have an appeal thereafter taken by his adversary dismissed.
    
      Appeal from Benton District Court. — Hon. J. B. Caldwell, Judge.
    Wednesday, May 22, 1895.
    Action by H. C. Sanford1 against the First National Bank of Belle Plaine and S. B. Hamilton to recover as liquidated damages certain moneys deposited with defendant bank by Hamilton, to be paid plaintiff in the event Hamilton failed to consummate an agreement of partnership entered' into with plaintiff. The court directed a verdict for plaintiff, and defendant Hamilton appeals.
    
    Affirmed.
    
      
      C. M. Nagle for appellant.
    
      T. H. Milner for appellee.
   Deemer, J.

On. tlie seventeenth diay of October, 1802, the plain-tiff and defendant Hamilton entered into a written contract for the purpose of forming a partnership to conduct the drug: business in the city of Belle Plaiine, Iowa, to commence in the mouth of January, 1898. The capital -stock was- to be six thousand dollars, of which each was- to contribute one-half. The firm- was to purchase the furniture and fixtures then owned by Sanford, and the stock of good® owned by plaintiff was to be invoiced at Chicago' prices, with five per cent, -added for freight. It' was also agreed that Hamilton and his son should put in their time as .against Sanford's in the conduct -of the business, and each partner was, toi receive sixty dollars per month as wages, which amount each' was 'allowed to withdraw. Sanford was to have general charge of the cosiness, but was to consult his partner freely upon matters of interest. The property, when invoiced, was to be turned over to the firm free and clear of all incumbrances. The contract also provided: “Hamilton, is to deposit, $500.00 in the First National Bank of Btelle Plaine, Iowa, a® a, forfeit in case he should refuse to comply with the terms of this contract.” The five hundred dollars so named wa& deposited as agreed. After the making of the contract, and on the twenty-fourth day of December, 1892, Hamilton notified plaintiff in writing that he did not intend to carry out, the contract, and declared all arrangements at an end. Plaintiff then commenced this snit to recover the five hundred dollars deposited ■with the bank. Upon the issues joined the cause was tried! toa jury, and at the conclusion of plaintiff’s testimony both parties rested, and the court directed a verdict for plaintiff, construing the clause quoted from the contract as liquidated damages, and not a penalty, and Hamilton appeals.

I. The judgment was rendered' April 14, 1893, and the appeal taken May 6. On the twentieth day of April the bank paid into court the five hundred dollars held by it, and plaintiff canceled and satisfied! the judgment. A motion kasi been filed to dismiss the appeal, because 'tlhlei judgment has keen satisfied. We think this motion should be overruled. The bank was merely a nominal party, indifferent to the claims of either of the litigants'. It was simply the custodian of the fund, and could not, by paying ovar the money in litigation to the clerk on to the plaintiff, defeat the defendant’s light of appeal. The defendant hais done nothing indicating a purpose to abandon the appeal, and should not be estopped by reason of the conduct of his eodefendiant. None of the cases' cited by appellee cover facts like these.

II. Appellee also- moves to dismiss the appeal because of defendant’s delay in presenting it to this court. Such delay as there was is- fully explained by appiellant’s counsel, and the motion is overruled.

5 III. The only real question on the merits is whether the five hundred' dollars- deposited' with the bank should be treated as a penalty or as liquidated: damages'. No proposition of law is attended with more difficulty on account of the apparent conflict in the authorities than this one. The rule in such case® is- easily stated, but its application is of great difficulty. It is manifest that many of the courts, in- construing such a contract, have been guided by their innata 'ideas of justice in each particular case, rather than by the strict rules of law to be applied to the contract which the parties have in fact made. It may he stated, as a. general rule, that in construing such contracts the court will •endeavor to ascertain the intention of the parties* and will give the forfeiture clause such effect a®'they 'intended it should have. This words used* whether “forfeiture*” “liquidated damages,” or “penal sum,” are not alone conclusive. Nor, indeed,, is the language of the contract generally. The court will look to the nature of the contract, the situation of the parties, and to all the surrounding facts and circumstances which throw light upon the intent of the parties for the purpose of determining what meaning they placed1 upon the words used. True, there are some other artificial rules often properly applied' in the interpretation of these contracts, to some of which we may have occasion to refer. The rule we 'have just announced 'is sustained by the following cases: De Graff, Vrieling & Co. v. Wickham, 89 Iowa, 720; Foley v. McKeegan, 4 Iowa, 1. The evidence shows there was considerable correspondence between the parties before the contract was finally consummated. And it also shows that after the execution of the contract, Hamilton, or his son, came to Belle Plaine, just before the “holiday season,” and assisted somewhat about the store. Plaintiff arranged for a lease of the building in which the business was to be conducted by the firm, and took an invoiceof the goods. He also, notified all creditors, of the proposed change, and arranged his business with reference thereto. He also- put in a stock of wall papier at Hamilton’s suggestion, which Hamilton assisted him to select. This he would not have done had it not been' for Hamilton’s request. Another very strong circumstance is the deposit of the five hundred dollars with the bank by Hamilton under the terms of the contract. And while it was called a “forfeit,” which ordinarily means a “penalty,” when used in a contract, yet, when deposited with a third party, as in this case, we think dt is1 (evident thalt the parties intended that Hamilton should lose the whole of it in the event he failed to comply with- his contract. White v. Dingley, 4 Mass. 434; Hinton v. Sparkes, L. R. 3 C. P. 161; Betts v. Burch, 4 Hurl. & N. 506; Wallis v. Smith, 21 Ch. Div. 243; Lea v. Whitaker, L. R. 8 C. P. 70. The sum deposited is not unreasonable in amount, as compared with the amount of property invoiced. It is payable for one breach, — that is, failure to purchase the half interest in the business; and the injury, as will be sieen from the 'circumstances shown, is in some degree uncertain. These circumstances lead to the inference that the parties intended the forfeit as the measure of damages. Maxwell v. Allen, 78 Me. 32, 2 Atl. Rep. 386, is almost exactly parallel to this case; and Streeper v. Williams, 48 Pa. St. 450, is a case very nearly in point, and states the rule so clearly that we need not refer to others in support of our conclusions.

IV. It is also insisted that the court was in error ■in- directing a verdict for plaintiff, because there was no proof that he suffered any damage by reason- of defendant’s breach of contract. If the money deposited is to be treated as liquidated damages, then' no such proof is required. Kelso v. Reid, 145 Pa. St 606, 23 Atl. Rep. 323; Spicer v. Hoop, 51 Ind. 365; De Graff, Vrieling & Co. v. Wickham, supra. The case of Hathaway v. Lynn, 75 Wis. 186, 43 N. W. Rep. 956, announcing a contrary rule, does not commend itself to our judgment. We reach- the conclusion that thie1 judgment of the- district court is right, and it is affirmed. ■