Court Opinion

ID: 9445381
Source: CourtListenerOpinion
Date Created: 2023-08-03 21:27:12.877372+00
Date Added: 2024-06-11T17:30:14.170429
License: Public Domain

MURRAH, Circuit Judge
(dissenting).
Of course the law does not favor penalties or forfeitures, and equity will unhesitatingly relieve against them when they are sought to be exacted for the breach of a contract. One is entitled only to just compensation for the breach. But, without derogating from this fundamental concept, the courts also encourage parties to stipulate with respect to the amount of damages to be suffered in the event of breach, and where the parties have so agreed, the court will not hesitate to enforce it, unless it is shown to be wholly disproportionate to the damages suffered. See Consolidated Flour Mills Co. v. File Bros. Wholesale Co., 10 Cir., 110 F.2d 926; Ely v. Wickham, 10 Cir., 158 F.2d 233; Owen v. Christopher, 144 Kan. 765, 62 P.2d 860; Kansas City v. Industrial Gas Co., 138 Kan. 755, 28 P.2d 968; Beck v. Megli, 153 Kan. 721, 114 P.2d 305, 135 A.L.R. 1124.
In the latter case, the Kansas Court, considering the question whether the contractual agreements were to be treated as penalties or liquidated damages, said two considerations were decisive, namely, “first is that the amount stipulated is conscionable, that it is reasonable in view of the value of the subject matter of the contract and of the probable or presumptive loss in case of breach; and the second is that the nature of the transaction is such that the amount of actual damage resulting from default would not be easily and readily determinable.” Beck v. Megli, supra, 114 P.2d at page 308.
Looking at this whole transaction, we have two oil companies involved in a two-million dollar transaction; the title to ten oil and gas leases are at stake. And, there is an admitted substantial defect in the title to one. The value of that lease is approximately $55,000; the parties agree in effect that if the title is not cured within one year, the sum of $55,000 will be deducted from the purchase price. While the parties undoubtedly had in mind the Worcester litigation then pending in the Supreme Court, it is certain that the Worcester litigation did not cure the defect. Indeed, the defect was not cured until after the Supreme Court settled the specific question presented. The very nature of the litigation leaves no doubt of the uncertainty of the validity of the title, for each case rested upon its own peculiar facts. In the first Worcester case, the Supreme Court held the title defective; the title was ultimately sustained on an amended petition, which alleged peculiar facts. In the last Worcester case, *808two judges concurred specially, and three judges dissented in the Maune case, which ultimately established the validity of the title in this particular case.
From the evidence before it and in this setting, the trial court specifically •found that the title defect, about which the parties contracted, was not cured until about December 16, 1950, upon the conclusion of the Maune litigation, and four months after this suit was filed; that in view of the substantial title defect existing at the time of the contract, and in view of the litigation involving this title, the appellee • was unable for over two and one-half years after acquiring the Maune Lease to further develop or protect it from drainage, or to offer a good title to a prospective purchaser or mortgagee; that in view of all the circumstances, it would be most difficult and practically impossible for the appellee to prove the actual damage which it suffered by reason of the substantial defect in the lease; and that the amount of damages stipulated was, in view of all the circumstances, not unreasonable or disproportionate to the actual damages sustained. The court concluded therefore, that it was not a penalty and entered judgment for the stipulated amount. I cannot imagine more appropriate circumstances for the stipulation of damages. Certainly I cannot believe that the trial court’s findings are clearly erroneous and I would affirm the judgment.