Court Opinion

ID: 9740250
Source: CourtListenerOpinion
Date Created: 2023-08-26 20:30:57.611711+00
Date Added: 2024-06-11T07:24:15.072534
License: Public Domain

HENDERSON, Justice
(dissenting).
I dissent and would affirm the trial court upon the basis that the trial court justly found the clause in question to be a penalty.
Shortly after the submission by plaintiff of its bid on March 4, 1974, and continuing through the time of the contract, unanticipated and serious material shortages developed in the entire national economy, and particularly in the automotive and heavy equipment industries which made it impossible for plaintiff to timely deliver the airport crash, fire and rescue trucks as required in the contract.
The trial court found that it was uncon-troverted that the reasons for the delay in performing the contract were beyond the control of the plaintiff. Those reasons indicated:
(1) A reduction in the production of Rockwell axles for light rescue crash trucks;
(2) Inability to obtain dry chemical systems due to shortages of foundry components for a period of three months;
(3) A fire at the foundry producing Hale pumps which cut production by 50%; and
(4) A number of spot shortages of a more minor nature.
The facts establish that these shortages could not have reasonably been foreseen by the plaintiff at the time of the contract documents, due to the then prevailing economic conditions.
South Dakota was in trouble meeting the federal deadline when the bids were let. The parties knew that an additional extension of time would be necessary and the federal government would grant it. In fact, South Dakota had already received one extension of time from the original deadline of May 1, 1973, to May 1, 1974. Bids were not requested until January or February of 1974.
It is important to note, when considering damages, that no airports were closed down due to respondent’s inability to produce firetrucks; no persons complained about the airports failing to have crash trucks; no carrier refused to land or complained about the lack of crash equipment; and all cities were able to receive waivers or extensions of time for compliance from the federal government. In essence, there were no *326damages. Defendants contend that stipulated damages may be recovered in the event of a breach even though no actual damage occurs. This presupposes that the’ clause . qualifies as a liquidated damage clause.
This lawsuit arose because of the fact that the Division of Aeronautics, heeding its counsel’s advice, expressed that it could not-legally extend the time for performance and could not modify the contract to exonerate appellant from the penalty clause. The trial court disagreed and rightly so. As stated in 64 Am.Jur.2d Public Works and Contracts § 108 (1972):
Although parties to a contract for public work may agree that time shall be of the essence of their contract, and, if proper legal conditions exist, may stipulate for damages and the measure of them, they may subsequently change their views and requirements and consider that performance within the stipulated time is unimportant. The prescribed date for the completion of the public contract may be waived by the public authorities. Either or both parties may waive a breach of the terms of the contract and have and allow a performance thereafter. A waiver of the time limit for performance releases any claim to damages for the delay.
I do not agree that there was a reasonable endeavor by the parties to fix fair compensation. The real purpose of the penalty clause was to insure prompt delivery of the safety equipment. Compensation was never contemplated; it was not within the realm of the parties’ thoughts or their dealings. Damages were not contemplated since it was reasonably assured that F.A.A. waivers would be procured to cure any late delivery of equipment.
Under the circumstances here, I cannot agree that the amount stipulated bore a reasonable relation to probable damages. The amount stipulated, $50 per day per truck, was disproportionate to damages supposedly to be anticipated. The only resultant damage or hypothesis of inconvenience is: that if the crash trucks were not delivered on schedule, the airports would somehow be deprived of equipment or services which were previously unavailable to them. Damages, therefore, were a legal phantom. We are not here legally trafficking with essential highways or runways that adversely and vitally affect the public interest. Cf. Dave Gustafson & Co. v. State, 83 S.D. 160, 156 N.W.2d 185 (1968). The United States Supreme Court has held that a contract provision for liquidated damages in case of a breach which can produce no possible damages is, in fact, a penalty and therefore, unenforceable. Priebe & Sons, Inc. v. United States, 332 U.S. 407, 68 S.Ct. 123, 92 L.Ed. 32 (1947).
A $63,950 judgment is being taken from the plaintiff without fault on its part. A technical construction takes the fruits of labor without recompense.