Court Opinion

ID: 3998831
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:56:17.059373+00
Date Added: 2024-06-11T07:44:31.197171
License: Public Domain

Appellant Brewster Orchards Corporation filed its answer to respondent's complaint, and by way of a cross-complaint asked for cancellation of respondent's lease and option. Appellant American Fruit Growers, Inc., in its answer, also by way of cross-complaint, asked for cancellation of the option, and by its second and third cross-complaints asked respectively for judgment against respondent for the sums of four thousand dollars and ten thousand dollars, because of respondent's alleged failure to turn over to appellant American 140,000 boxes of apples which appellant alleged respondent should have turned over to appellant for handling. In appellant's cross-complaint it also asked for general relief. Both in its pleadings and during the course of the action and during the prosecution of its appeal, appellant American relied, as the basis for the recovery sought upon its second and third cross-complaints, only upon those portions of its contracts with respondent providing for the payment of ten cents a box as alleged liquidated damages for any breach on the part of respondent of its contract to deliver apples. I do not find that anywhere during the prosecution of the action, appellant American asked for damages on the basis of two and one-half cents per box. The portion of the contract providing for such a payment was, of course, discussed and noted by the trial court in its memorandum opinion, but it seems to me that appellant American at all times stood upon the proposition that it was entitled to recover, under the liquidated damages paragraphs of the contract, ten cents a box for all apples not delivered to it by respondent.
Appellant's cross-complaints were, of course, based upon the contract, in that appellant sought to recover liquidated damages as provided therein.
It is my opinion that, in providing for the payment by respondent to appellant American of ten cents per box in accordance with the terms of the contract set forth in the majority opinion, the payment called for constituted a penalty and not liquidated damages. Appellant American was to receive from respondent the same amount for not *Page 309 
handling boxes of apples as it received for handling. It clearly appears from the evidence, and indeed is admitted, that each box of apples handled by American cost the latter several cents per box, certainly as much as four cents a box.
In the early case of Krutz v. Robbins, 12 Wash. 7,40 P. 415, 50 Am. St. 871, 28 L.R.A. 676, this court said:
"The courts, however, have deduced from the authorities certain general rules, `each having more or less weight according to the peculiar circumstances of each case.' Among these rules is one which is almost universally recognized and acted on, and which is that where the payment of a smaller sum is secured by an agreement to pay a larger sum, the larger sum will be held a penalty and not liquidated damages."
In the case at bar, there is no question concerning an agreement to secure by a larger sum the payment of a smaller sum, but the principle is the same, as, if appellant American is allowed to recover ten cents a box as liquidated damages, it will secure and retain a considerably larger amount than it would have earned as profits by the carrying out of the contract.
The cases of Madler v. Silverstone, 55 Wash. 159,104 P. 165, 34 L.R.A. (N.S.) 1, and Smith v. Lambert Transfer Co.,109 Wash. 529, 187 P. 362, are also in point.
While in the instant case it may be conceded that the actual damages suffered by appellant American upon breach of the agreement to deliver fruit for marketing would be difficult to ascertain, and that in such a contract as that of the parties to this action it would be proper to agree upon a certain sum as liquidated damages, nevertheless the amount fixed by the contract, which bears no relation whatever to the actual loss of profits by American, is so disproportionate to the actual damage which could possibly have been suffered by appellant American from any breach of the contract that the agreement must be held to call for the payment of a penalty, rather than for the payment of liquidated damages.
It should also be noted that in one instance the payment sought by appellant American is directly referred to in the contract as "penalty for breach of contract." *Page 310 
It is the rule that, if the meaning of a provision in a contract for the payment of damages is doubtful, it will be considered that the payment of a penalty is intended. Tayloe v.Sandiford, 7 Wheat. (20 U.S.) 13, 5 L. Ed. 384; Sedgwick on Damages (9th ed.), vol. 1, p. 780, §§ 407-8.
In the case at bar, appellant American cross-complained for damages in accordance with the terms of the contract, claiming contract, and not actual, damages. Concerning this phase of the case, the trial court found:
"The relief claimed by American for failure of the plaintiff to market 51,415 boxes in the year 1940 is to recover the sum of ten cents per box as alleged liquidated damages. Such sum of ten cents per box, on the evidence submitted to the court, manifestly exceeds the compensation said defendants would have recovered if such fruit had been sold thru said defendant and is, therefore, found and determined to be a penalty and not liquidated damages, and the amount of such penalty is so disproportionate to the actual damages suffered as to be unconscionable and there is a failure of proof as to any damages suffered by said defendant."
This finding is amply supported by the evidence. It appears from the testimony of appellant's officers that on many of the cars of apples which it sold in the east it paid out of the ten cents a box which it received from respondent a brokerage charge averaging between three and four cents a box; that on other carloads not sold through a broker it paid an auction charge in about the same amount; that besides these expenses there were other sale costs connected with the actual marketing of the apples which could not properly be considered part of the general sales campaign expense.
I am of the opinion that appellant American, by its second and third cross-complaints, sought recovery which the trial court correctly held to amount to a penalty, and in no sense liquidated damages, and that, in holding that the amount specified in the contract constituted a penalty rather than liquidated damages, the trial court was right.
I concur with the majority in holding that the trial court properly decreed specific performance in respondent's *Page 311 
favor of the contract upon which it sued, and I concur also with the majority in affirming the decree appealed from, dismissing appellant American's cross-complaints.
SIMPSON, C.J., and BLAKE, J., concur with BEALS, J.