Court Opinion

ID: 8031984
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:16:32.254599+00
Date Added: 2024-06-11T16:37:00.043473
License: Public Domain

The following opinion on motion for rehearing was filed September 27, 1920. Rehearing denied.
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, to*323gether 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 (quoting from Brennan v, Clark, 29 Neb. 385) 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 *324that 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. (Unof.) 681; Brennan v. Clark, 29 Neb. 385; Squires v. Elwood, 33 Neb. 126.
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, 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, and the cases which have followed that case, citing it as authority. Phœnix Ins. Co. v. Bohman, 28 Neb. 251; Phœnix Ins. Co. v. McEvony, 52 Neb. 566; and Hier v. Hutchings, 58 Neb. 334.
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 *325amount allowed as a penalty, and intimated that in the case of public officers a penalty could he provided. In the ease 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 he 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 Phœnix 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 Phœnix Ins. Co. v. McEvony, supra, and of Hier v. Hutchings, supra, the constitutionality of the statute was not reasoned or discussed, hut 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, 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 *326a 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, the court, in construing the statute involved in the Gram 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, *327due 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 thé 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 would resort to his common-law action for the full amount of his damages when he could show that the amount of actual damage was more- than that allowed by statute. The question of election, however, is not in the case before us, since, by the wording of the statute in question, no election is provided, but the shipper is expressly allowed to recover both the stipulated amount and the actual damages suffered.
It is true that the statute in question was held to be constitutional in the case of Sunderland Bros. Co. v. Missouri P. R. Co. 101 Neb. 119, but the only constitutional questions raised in that case were as to whether or not the statute imposed a burden on interstate com-, merce, and the questions now involved in the instant case were not raised.
The statute under consideration allows the shipper to recover both actual damages sustained by him, by reason of the delay in shipment, and in addition $1 per car for every day’s delay. It is manifest then that the $1 per car is an amount that much in excess of the actual damages sustained, and that much in excess of compensation to the shipper, and must be considered in the, nature of a penalty.
If the legislature had intended that the $1 should cover liquidated damages for all those injuries sustained by the shipper, due to the delay in shipment, that would *328have been an unjust provision, for in some cases the price of the commodity shipped would not fluctuate in value, and very little damages, if any, would accrue, while as to other commodities the price might fluctuate greatly and delay result in large injuries to the shipper.
In other words, the damages, resulting from delay in the shipment of various commodities, is so variable with regard to the different kinds of commodities to be shipped that the amount of liquidated damages fixed at $1 could not bear any reasonable relation to the damage sustained by the shipment of each of those respective commodities, and the legislature must have intended that, in addition to the $1 to be recovered for delay, the shipper could also recover all of his actual damages sustained by reason of the delay, together with the amount provided.
It is suggested that the rule in the case of Atchison & N. R. Co. v. Baty, supra, is out of line with the general holding in other states. We are unable to agree with that conclusion. It is true that in other states penalties have been imposed for a violation of statutory duty, and these penalties have been, in many instances, recoverable by the individual, instead of by the state. Those states, however, do not, so far as our attention has been called, have such a constitutional provision as the one we have in this staté, providing that all fines and penalties shall be appropriated exclusively to the use and support of common schools.
The cases in other jurisdictions discuss the validity of penalty statutes, as affected by general constitutional provisions, such as the requirement of due process of law and equal protection of the law, and under those constitutional provisions such penalty statutes are not prohibited.
It is further pointed out that the supreme court of Iowa has held directly contrary to the Baty case. Tredway v. The S. C. & St. P. B. Co., 43 la. 527. That case holds only that a statute allowing double damages does *329not deny equal ■ protection of the laws, and would not therefore be unconstitutional on that ground. The constitutional provision involved here was not involved in the Iowa case, and the Baty case was not cited nor referred to.
Cairo & St. L. R. Co. v. Peoples, 92 Ill. 97, is cited as holding directly contrary to the Baty case. In that case the Illinois court said (p. 102): “The case of Atchison and Nebraska Railroad Co. v. Baty, 6 Neb. 37, cited, cannot be regarded as a controlling authority. That case seems to regard ‘double damages’ for stock killed or injured as purely a penalty, a proposition to which we cannot fully yield our assent. Considering double damages as penalty, the conclusion reached by the court in the case cited was inevitable, as the Constitution of that state, as the opinion declares, provides that ‘all fines and penalties * # * shall be appropriated exclusively to the use and support of common schools,’ and hence the decision that no private individual could recover the penalty.” The court further pointed out that in-Illinois there was no such constitutional provision as the one in Nebraska.
It seems clear that our former opinion, holding that the statute provides a penalty, is right, under the numerous decisions of this court, and that the opinion should be adhered to.
The motion for rehearing is therefore
Overruled.
Aldrich, J., not sitting.