Court Opinion

ID: 6549297
Source: CourtListenerOpinion
Date Created: 2022-07-19 22:22:38.654205+00
Date Added: 2024-06-11T15:56:03.753199
License: Public Domain

Smith, J., (after stating the facts). The court must n'ecessarily have found as a matter of law, from the facts stated, that the sum named in the contract was a penalty and not liquidated damages; and the first question is whether or not that finding was correct, and if that question is. answered affirmatively, a second question arises upon the action' of the court in directing a verdict after that finding had been made. • The books are full of cases, where contracts calling for payment of what is demonimated “liquidated damages” have been construed by the courts to be mere penalties, and there are several such cases in our own reports, and the rule of construction of such provisions is stated by this court in the opinion by Judge Mansfield in Nilson v. Jonesboro, 57 Ark. 168, and approved by Justice McCulloch in Stillwell v. Paepcke-Leicht Lbr. Co., 73 Ark. 436, as follows: “Usually the surest test of liquidated damages is where the actual damages caused by the breach would be uncertain and difficult of proof, and the sum stipulated appears to be a reasonable compensation for the injury occasioned by the failure to perform the contract. The purpose in permitting such stipulation for damages as compensation, is to render certain and definite that which appears to he uncertain and not easily susceptible of proof. But the damages so stipulated for must be such as to amount to compensation only, and not so excessive or unreasonable as to amount purely to a .penalty, without being confined to the elements of fair compensation.” Applying this test to the contract under consideration, we are of opinion that the provision with reference to the 25 per cent as damages is a stipulation for a penalty. This is true because, in the first place, it provides for this recovery for any partial breach, such as failure to insure, to execute deed of trust, or to make payments or to otherwise comply with the terms of the contract. Moreover, there could be no great uncertainty, or difficulty of proof, in ascertaining the actual damages upon failure to perform the contract. For instance, upon an entire repudiation of the contract, as here exists, the difference between the contract price and the price at the factory, f. o. b. cars, measures the damages; and, further, it may be said, that the sum named is so excessive for some possible breach of the contract, that it can not be confined to the elements of fair compensation, and under these circumstances, the court did not err in holding the sum named was not recoverable as liquidated damages. But because this is a stipulation for a penalty, it does not follow that a verdict for the defendant should have been directed by the court. In the case of Stillwell v. Paepcke-Leicht Lumber Co., supra, after holding the contract there construed to be a stipulation for a penalty, the court said: “Nor could the stipulation be separated, and a part discarded as a penalty, and the remainder treated as liquidated damages. This being true, the court should have permitted proof as to the actual damages sustained by the appellant by reason of appellee’s failure to perform the contract.” And it was there held that the court erred in refusing to allow proof of the actual damages sustained and reversed the case on that account. Here the cáse was not submitted to the jury and there was no opportunity to assess even nominal damages. The undisputed facts here are that appellee failed to comply with his contract and wholly repudiated it and his action in so doing stands unexcused and appellant was entitled to recover at least nominal damages. Western Union Tel. Co. v. Aubrey, 61 Ark. 613. Appellant stood upon his contention that the sum sued for was recoverable as “liquidated damages” and made no attempt to show that any actual damages had been sustained, nor the amount thereof, and accordingly under our view of the evidence in this case he can recover only nominal damages. But we have held that a cause will not be reversed and remanded where nominal damages only can be recovered. Crutcher v. Choctaw, O. & G. Ry. Co., 74 Ark. 358; Glasscock v. Rosengrant, 55 Ark. 382; Ringlehaupt v. Young, 55 Ark. 128; DeYampert v. Johnson, 54 Ark. 165; Buckner v. Railway, 53 Ark. 16. Accordingly the judgment of the court below is reversed and judgment will be entered here in favor of appellant for nominal damages and all costs of this cause.