U.S. Supreme Court

SUN PRINTING & PUBLISHING ASS'N v. MOORE, 183 U.S. 642 (1902)

183 U.S. 642

SUN PRINTING & PUBLISHING ASSOCIATION, Petitioner,v.

WILLIAM L. MOORE.

No. 49.

Argued October 24, 25, 1901.

Decided January 13, 1902.

The yacht Kanapaha, the property of the respondent Moore, was let on April 1, 1898, for the term of two months, by a charter party, in which Chester S. Lord was recited to be the hirer, but which was signed by him as follows: 'Chester S. Lord, for The Sun Printing & Publishing Association.' At the time Mr. Lord was, and for many years prior thereto had been, the managing editor of the Sun newspaper, and had special charge of the collection of news for the Sun Printing & Publishing Association, the publisher of the newspaper aforesaid. We shall hereafter speak of this corporation as the Sun Association, and of the newspaper as the Sun.

In the body of the charter party the hirer agreed to furnish security, and contemporaneously with the execution of the contract a paper was signed, which is described in the body thereof as the 'understanding or agreement of suretyship' required by the charter party. This paper recited on its face that it was made by 'the Sun Printing & Publishing Association,' and it also was signed by Lord exactly as he had signed the charter party. Before the time fixed in the charter party had expired, that is to say, about the middle of May, 1898, a second charter party and a second agreement of suretyship were executed.

These agreements were substantially identical with the previous ones, except they provided for a new term to begin at the expiration of the previous one and to continue for four months thereafter, that is, up to October 1, 1898

On the execution of the first papers the yacht was delivered to the Sun Association, was by it immediately manned, equipped, and provisioned, and one or more of its reporters were placed on board with authority to direct the movements of the vessel, and she was sent to Cuban waters, to be used as a despatch boat for the purpose of gathering news concerning the events connected with the hostilities between the United States and Spain.

Early in September, 1898, the yacht was wrecked, and became a total loss. For a breach of an alleged covenant to return the vessel, asserted to be contained in the charter party, this libel in personam was filed against the Sun Association, and the damages were averred to be the value of the vessel, which it was alleged was fixed by the charter party at the sum of $75,000. The district court held that the writings were contracts of the Sun Association through Lord, its authorized agent, and were virtually one agreement; that by them that corporation was responsible for the nonreturn of the ship, whether or not the vessel had been lost by the fault of its agents or employees; and that there was a liability to pay the value of the vessel as fixed by the charter. Construing the two writings as a whole, this value, it was held, was subject to be diminished by the extent of the charter hire, paid when the charter party was executed. A judgment was entered for the sum of $65,000, with interests and costs. 95 Fed. 485. On appeal the circuit court of appeals coincided with the district court except it disapproved the conclusion that the value of the vessel should be reduced by the sum of the charter hire. The decree of the district court was reversed, and the cause remanded with instructions to enter a decree for $75,000, with interest and costs. 41 C. C. A. 506, 101 Fed. 591. The case was then brought here by certiorari.

Messrs. James Russell Soley and Franklin Bartlett for petitioner.

Messrs. George Zabriskie and J. Archibald Murray for respondent.

Mr. Justice White, after making the foregoing statement, delivered the opinion of the court:

All the issues involved are to be determined by ascertaining the nature of the writings, the obligations which arose from their execution, and the conduct of the parties in connection therewith. It is essential, then, to bear in mind the exact form of the writings and their text. They are annexed in the margin. [^{Footnote 1} ]

It would seem to be necessary on the threshold to ascertain whether there was both a principal contract and an accessory contract of suretyship. The two writings are both signed by

Lord in exactly the same character. Judging by the signatures alone, it is impossible to conceive of two contracts, the one principal and the other accessory thereto, as, in the nature of things, if the first evidenced the obligations of the one who hired and the second manifested the agreement of the same person to fulfil his own duty resulting from the hiring, there could be no accessory contract of suretyship, since both documents but expressed pressed the covenants of the same person relating to one and the same transaction. There is, however, this difference between the two papers. In the body of the first 'Chester S. Lord' is recited to be the hirer, while in the body of the second paper it is recited that it is made by the Sun Printing & Publishing Association.

The first question to be determined is, assuming for the present that Lord had authority to bind the Sun Association, Was the first document the individual contract of Lord or that of the Sun Association?

'Where the question of agency in making a contract arises, there is a broad line of distinction between instruments under seal and stipulations in writing not under seal, or by parol. In the former case the contract must be in the name of the principal, must be under seal, and must purport to be his deed, and not the deed of the agent covenanting for him. Stanton v. Camp, 4 Barb. 274. The rule of law to be applied in the determination of this question is thus expressed in Whitney v. Wyman (1879)  101 U.S. 392, 395 , 25 S. L. ed. 1050, 1051:

'The intent developed is alone material, and when that is ascertained it is conclusive. Where the principal is disclosed, and the agent is known to be acting as such, the latter cannot be made personally liable unless he agreed to be so.' In the latter cases the question is always one of intent; and the court, being untrammeled by any other consideration, is bound to give it effect. As the meaning of the lawmaker is the law, so the meaning of the contracting parties is the agreement. Words are merely the symbols they employ to manifest their purpose that it may be carried into execution. If the contract be unsealed and the meaning clear, it matters not how it is phrased nor how it is signed, whether by the agent for the principal or with the name of the principal by the agent, or otherwise.

Now, while Lord is referred to in the body of the first writing as an individual, he signed the agreement 'for the Sun Printing & Publishing Association.' Clearly this was a disclosure of the principal, and an apt manner of expressing an intent to bind such principal. Bradstreet v. Baker, 14 R. I. 546, 549; Tucker Mfg. Co. v. Fairbanks, 98 Mass. 105.

It results that the first paper or charter party manifested the intent to bind the Sun Association as hirer, if Lord possessed the authority which he assumed to exercise, and consequently that the two papers are in legal effect but one contract, must be interpreted together, and the obligations of the parties arising from them be enforced according to their plain import, seeking always to give effect to the intention of the parties.

It is not denied that Lord was in some respects the agent of the corporation; but it is asserted that he had not the power or authority to make a contract of the character here involved. The charter of the Sun Association provided for no other officers to manage its concerns but a board of trustees. In the by-laws provision was made for the election of a president and secretary, whose duties were not prescribed, except as to the signing of certificates of stock and the transferring of stock on the books of the company. An examining committee, as also an executive committee, were provided for in article VII.

of the by-laws, as amended June 27, 1893, a copy of which is excerpted in the margin. [^{Footnote 2} ] The provisions relating to such committees, however, were omitted in the by-laws as amended June 28, 1898.

'By the general rules of evidence, presumptions are continually made in cases of private persons of acts even of the most solemn nature, when those acts are the natural result or necessary accompaniment of other circumstances.' At the time of the hiring of the Kanapaha, Mr. Paul Dana was the president of the Sun Asociation, he having been elected to that office on October 26, 1897. Long prior to the last-mentioned date, however, from about 1879, Lord had been the managing editor of the Sun. As such, the evidence establishes, he exercised an unlimited discretionary authority in the collection of news for the Sun, making all pecuniary and other arrangements in respect thereto. Prior to the hiring of the Kanapaha he had, solely on his own volition, hired vessels for the use of the Sun for periods of a week at a time. By whom he was vested with this authority does not appear with certainty, but in the absence of direct evidence we are authorized to presume that the authority was conferred, either directly or indirectly, by the trustees of the association, in whom was lodged the power to manage the concerns of the company. Bank of United States v. Dandridge (1827) 12 Wheat. 64, 6 L. ed. 552. In the Dandridge Case, speaking through Mr. Justice Story, the court said (p. 69, L. ed. p. 554):

After illustrating the application of the principle to cases of public duty and many others, it was said (p. 70, L. ed. p. 554):

'The same presumptions are, we think, applicable to corporations. Persons acting publicly as officers of the corporation are to be presumed rightfully in office; acts done by the corporation, which presuppose the existence of other acts to make them legally operative, are presumptive proofs of the latter. Grants and proceedings beneficial to the corporation are presumed to be accepted; and slight acts on their part, which can be reasonably accounted for only upon the supposition of such acceptance, are admitted as presumptions of the fact. If officers of the corporation openly exercise a power which presupposes a delegated authority for the purpose, and other corporate acts show that the corporation must have contemplated the legal existence of such authority, the acts of such officers will be deemed rightful, and the delegated authority will be presumed. If a person acts notoriously as cashier of a bank, and is recognized by the directors, or by the corporation, as an existing officer, a regular appointment will be presumed, and his acts as cashier will bind the corporation, although no written proof is or can be adduced of his appointment. In short, we think that the acts of artificial persons afford the same presumptions as the acts of natural persons. Each affords presumptions, from acts done, of what must have preceded them, as matters of right or matters of duty.'

See also Jacksonville, M. P. R. & Nav. Co. v. Hooper (1896)  160 U.S. 514, 519 , 40 S. L. ed. 515, 521, 16 Sup. Ct. Rep. 379, and cases cited.

'An agency may be established by proof of the course of business between the parties themselves, by the usages and practice which the company may have permitted to grow up in its business, and by the knowledge which the board, charged with the duty of controlling and conducting the transactions and property of the corporation, had, or must be presumed to have had, of the acts and doings of its subordinates in and about the affairs of the corporation.' As said in Mahoney Min. Co. v. Anglo-California Bank,  104 U.S. 192 , 26 L. ed. 707, speaking through Mr. Justice Harlan:

As, therefore, the trustees of the Sun Association must be presumed to have exercised a supervision over the business of the corporation, they are to be charged with knowledge of the

extent of the power usually exerted by its managing editor, and must be held to have acquiesced in the possession by him of such authority, even though they had not expressly delegated it to him.

It being then within the scope of the general authority possessed by Lord to hire the yacht, the contention that in its exercise he must be assumed to have been without right to incur an absolute liability for the return of the vessel or become responsible for the value thereof, and to stipulate as to such value, is without merit. As Lord was charged with the full control of the business of collecting news, and impliedly vested with power to enter into contracts in respect thereto, he was in effect a general officer of the corporation as to such matters; and it is well settled that the president or other general officer of a corporation has power prima facie to do any act which the directors or trustees of the corporation could authorize or ratify. Oaks v. Cattaraugus Water Co. 143 N. Y. 430, 436, 26 L. R. A. 544, 38 N. E. 461, and cases cited. The burden was on the Sun Association to establish that Lord did not possess the authority he assumed to exercise in executing the contracts. Patterson v. Robinson, 116 N. Y. 193, 200, 22 N. E. 372, and cases cited. As the trustees of the Sun Association were unrestrained by the charter, and might have authorized Lord to execute the writings in question, and the association failed to rebut the prima facie presumption, he must be held to have been vested with such power.

The argument that if it be granted that the writings embodied an absolute obligation to return and a stipulation as to value in the event of nonreturn, such conditions were so extraordinary that it must be assumed that authority had not been conferred to agree to them, is equally unfounded. The proposition must rest on the assumption that to charter a yacht upon the conditions referred to was ultra vires of the corporation, which, as we have seen, is not correct. Certainly an authority to charter a yacht for the purpose of collecting news was clearly within the corporate powers of the Sun Association; the mere signing of a charter party in execution of such a contract was not illegal, nor can it, we think, with any plausibility be said where, in a case like this, the vessel chartered was to be manned, equipped,

and operated by the hirer, to be taken far from her home port, in time of threatened or actual war, on a presumably hazardous venture, that the agreement to absolutely return, or, in default, to pay a fixed value, was so beyond the means incidental to the exercise of the power to charter as to cause the act to be beyond the corporate power. For if the corporation could have done these things, the agent having the broad powers possessed by Lord had a similar right.

But the case in this regard does not depend upon legal presumptions arising from the general course of business in other matters, for the following reasons: The evidence clearly justifies the inference that the president and secretary and the other trustees of the Sun Association knew that Lord had exercised the authority to hire the vessel in question, that the possession of the vessel was pursuant to a contract, and that some obligation had been entered into for its safe return. Mr. Hitchcock was one of the four trustees and the secretary of the Sun Association. It was his duty to affix the seal of the corporation to instruments directed by the trustees to be executed in a formal manner. He was requested by Lord to execute the writings in question, but he declined to do so. The reasons actuating him in refusing do not appear; but as he testified that he had nothing to do with the collection of news, it may well be that he felt he could not execute formal documents in a matter not within his department. He does not, however, appear to have regarded the signing of such documents by Lord as improper; for he subsequently, in conjunction with the business manager, who was also a trustee of the Sun Association, signed a check on behalf of the corporation for a $10,000 payment, as recited on the books of the association, for 'charter Kanapaha to October 1.'

President Dana testified that he was not consulted in regard to the drawing of the papers, and did not in April or May, 1898, know of their execution. He, however, was aware in those months that despatch boats were being used by the Sun to obtain news in regard to the progress of events in Cuban waters, such information having been acquired from several sources, including Mr. Lord. President Dana testified that Lord had

charge of the getting of information as to the progress of events in Cuban waters and in connection with the war; that he had talked with him about the matter early in April, 1898, and had inquired if his arrangements were satisfactory. He further testified that if the arrangements made were satisfactory to Lord, they were to the witness, and that that was understood in the Sun office, and by the other trustees. Lord attempted no concealment of his actions in respect to the hiring of the Kanapaha. The payments for the hire of the boat, the expenses connected with its management, sundry premiums paid out of the moneys of the Sun Association for insurance upon the yacht, in the sum of nearly $60,000, covering the first five months of the use of the vessel,-the later policies expiring only a few days before the loss of the ship,-were entered in the books of the Sun. Besides, the association received, under arrangements made by its business manager and trustee, Laffan, money from various newspapers for accommodations furnished to their reporters on board the Kanapaha. All these matters must be presumed to have been brought to the notice of the board, whose duty it was to manage the concerns of the association. The deductions fairly to be drawn from them are susceptible only of the construction that full discretion in the premises had been vested in the managing editor. The strongest possible confirmation of this arises from the fact that Lord, who under oath acknowledged when executing the alleged agreement of suretyship that he possessed the authority to do so, and who was at the time of the trial below in the service of the defendant, and able to be produced in court, was not called to the witness stand.

The contract, then, being that of the Sun Association, made by its agent duly empowered to that end, and inuring to its benefit, we are not concerned with the questions of ratification discussed at bar, and we are thus brought to consider the obligations which the contract imposed, and, before passing from the subject just considered, it is to be observed that the facts to which we have referred, if there by ambiguity in the writings, confirm the conclusion that the two writings embodied but one contract made by the agent of the Sun in its behalf and for its benefit. This is manifest because the taking charge

of the ship by the employees of the association, the payment of all the expenses of the vessel, the payment of the rent, the charging of the amount thereof in the books of the association, the use of the vessel for the purposes of the association, the receipt of revenues derived from such use, and the other facts previously stated, when considered together,- cause it to be impossible in reason to assume that the relation of the Sun Association to the hiring was simply that of a security for Lord as a hirer of the yacht on his personal account.

'A bailee for hire is only responsible for ordinary diligence and liable for ordinary negligence in the care of the property bailed. This is not only the common law, but the general law on the subject. See Jones, Bailm. p. 88; Story, Bailm. 398, 399; Domat, Lois Civiles, lib. 1, title 4, 3, pars. 3, 4; 1 Bell, Com. 7th ed. pp. 481, 483.' It is elementary that, generally speaking, the hirer in a simple contract of bailment is not responsible for the failure to return the thing hired, when it is has been lost or destroyed without his fault. Such is the universal principle. This rule was tersely stated by Mr. Justice Bradley in Clark v. United States,  95 U.S. 539 , 24 L. ed. 518, where it was said (p. 542, L. ed. p. 519):

'The complainant's common-law responsibility as bailee exempted him from liability for loss of the consigned goods arising from inevitable accident. A bailee may, however, enlarge his legal responsibility by contract, express or fairly implied, and render himself liable for the loss or destruction of the goods committed to his care-the bailment or compensation to be received therefor being a sufficient consideration for such an undertaking.' But it is equally true that where by a contract of bailment the hirer has, either expressly or by fair implication, assumed the absolute obligation to return, even although the thing hired has been lost or destroyed without his fault, the contract embracing such liability is controlling, and must be enforced according to its terms. In Sturm v. Boker (1893)  150 U.S. 312 , 37 L. ed. 1093, 14 Sup. Ct. Rep. 99, both the elementary principles above stated were clearly expressed by the court, through Mr. Justice Jackson. It was said (p. 330, L. ed. p. 1100, Sup. Ct. Rep. p. 105):

'It is a well-settled rule of law that if a party by his contract charge himself with an obligation possible to be performed, he must make it good, unless its performance is rendered impossible by the act of God, the law, or the other party. Unforeseen difficulties, however great, will not excuse him.' This statement of the binding effect of contracts upon those who enter into them was, in substance, but a reiteration of the principle clearly announced in Dermott v. Jones (1865) 2 Wall. 1, sub nom. Ingle v. Jones, 17 L. ed. 762, where it was said:

Among the cases approvingly referred to in Dermott v. Jones were Bullock v. Dommitt, 6 T. R. 650, and Brecknock Nav. Co. v. Pritchard, 6 T. R. 750, holding that an agreement to keep the property in repair created a binding obligation to rebuild and restore the property, even though its destruction had been caused by inevitable accident.

It is to be observed in passing that the principle sustained by these last-mentioned authorities is supported by many adjudications. Young v. Leary, 135 N. Y. 578, 32 N. E. 607, and cases cited.

We approach, then, the contract for the purpose of determining whether by express agreement or by fair implication it put the positive duty on the hirer to surrender the vessel at the expiration of the charter and to be responsible for the value, even although impossibility of return was brought about without his fault. The obligation was expressly imposed upon the hirer to keep 'said yacht in repair, and to pay all its running expenses, and to surrender said yacht with all its gear, furniture, and tackle, at the expiration of this contract, to the owner or his agent . . . in as good condition as at the start, fair wear and tear from reasonable and proper use only excepted.' Not only this, but the charter party contained the further provision that the hirer 'shall be liable and responsible for any and all loss and damage to hull, machinery, equipment, tackle, spars, furniture, or the like.' This provision is immediately followed by a reiteration of the duty to repair, previously stated, by again stipulating 'that the hirer, during the continuance of this agreement, shall at all times and at his own cost and expense keep the said yacht, its hull, machinery, tackle, spars, furniture, gears, boats, and the like, in repair.'

Pausing for a moment to consider the foregoing stipulations, it is difficult to conceive how language could more aptly express the absolute obligation, not only to repair and keep in good order to the end of the hiring and to return, but, moreover, to be responsible for any and all loss and damage to the vessel, her fixtures and appointments. These stipulations seem to us to leave no doubt of the absolute liability to return; in other words, of the putting of the risk of damage or loss of the vessel upon the hirer. But if there could be doubt after considering the provisions just above referred to, such doubt is dispelled when it is considered that the contract proceeds to say that 'for the purpose of this charter the value of the yacht shall be considered and taken at the sum of $ 75,000. And the said hirer shall procure security or guarantee to and for the owner' in the sum stated, 'to secure any and all loss and damage which may occur to said boat or its belongings, which may be sustained by the owner by reason of such loss or damage, and by reason of the breach of any of the terms or conditions of this contract.' In other words, having provided for all repairs, having stipulated absolutely for the return of the vessel in full repair, having put the risk of any and all loss on the hirer, the contract then in express terms fixes the value of the vessel, and makes provision for security to protect against any and all loss or damage sustained by a failure of the hirer to fulfil each and all of the positive obligations which the contract imposed.

Concluding as we do that by the charter party the absolute obligation to return was placed on the hirer, and that by that contract the risk was hence cast upon him of loss, even be it without his fault, we are led to determine the amount which the owner of the yacht is entitled to recover.

Before passing to this question, however, we remark that we have not entered into any extended review of the case of Young v. Leary, 135 N. Y. 569, 32 N. E. 607, and the conflict of view asserted in argument to exist between the ruling in that case and that made in Steele v. Buck, 61 Ill. 343, 14 Am. Rep. 60; Drake v. White, 117 Mass. 10, and Harvey v. Murray, 136 Mass. 377. We have not done so, because, as we have seen in

the opinion in Young v. Leary, the absolute duty to repair and keep in repair was conceded to import an obligation to restore the property, even if the impossibility of doing so was brought about without the fault of the bailee. Whatever differences there may be, if any, in the opinions in the cases referred to, arises, not because they expound a discordant view of the law of bailment, but from different applications made of that law to the contract which was under consideration in the particular case. But not only the legal principles announced in the cases referred to, but also the application made of such principles in each and all of the cases, render it necessary to construe a contract like the one we have before us as meaning that which we find it to mean.

Recurring to the amount of liability, it appears that there are two inquiries involved in deciding it; the first was the obligation imposed by the first writing to pay the agreed value of the vessel in the event of her nonreturn, and, second, if yes, did any modification thereof arise from the second writing? The answer to the first inquiry is afforded by what we have already said in discussing the nature of the obligations assumed by the hirer. As they were to return the vessel in any event, and in default to make good any and all loss arising from a failure to return, the fixing of the value of the vessel can have but one meaning; that is, that the value agreed on was to be paid in case of default in returning. Unless the agreement as to the value meant this, it had no import whatever, and its presence in the contract is inexplicable. That the obligation to return or pay the agreed value was not modified by the second writing we think is clear.

In that writing it is provided that the Sun Association bound itself that the hirer would faithfully fulfil and perform all the obligations expressed in the previous writing. Certainly, because of the contract that all the previous agreements are to be fulfilled, it cannot be that some of them were destroyed. But proceeding to make its significance if possible clearer, the second writing adds that the intention of the parties to it is to hold the Sun Association 'primarily liable' for the obligations

created by the prior writing. To stipulate primary liability for prior obligations cannot be so construed as to destroy them.

True, the provisions just referred to are followed by the stipulation that 'all our liability hereunto shall in no case exceed the sum of $75, 000.' This cannot mean that the obligations expressly assumed were destroyed, but that in case they were not fulfilled, the damage brought about by each and every breach should not exceed $75,000. The contrary cannot be said without holding that a provision which was manifestly intended to add sanction to the obligations in effect abrogated them. And the import of the clause under consideration is demonstrated by the provision in the first writing by which it was agreed that the second paper should be signed. The provision is, 'The said hirer shall procure security or guarantee, in and for the Sun, in the sum of $75,000, to secure any and all loss and damage which may occur to said boat or its belongings, which may be sustained by the owner, by reason of such loss or damage, and by reason of the breach of any of the terms or conditions of the contract.'

The second writing unquestionably stipulated a penalty for the performance of each and all the obligations, but fixing a penalty in case of a default did not extinguish them. The meaning of the provision becomes quite clear when all the provisions are taken into view in their proper connection. They all naturally divide themselves into two classes, the one relating to the payment of the hire, the payment of the expenses of the operation of the vessel, the making of repairs, etc.-from which we may eliminate the hire, as it was to be paid on the execution of the contract; and the other to the duty to return, or pay in default the value agreed on. We say they naturally so divide themselves, because in no reasonable probability could a default in both cases simultaneously exist. Thus, if the vessel was not returned, and the owner got the value as fixed in the contract, he could suffer no loss for any default of the hirer in failing to pay for repair, etc., or for a breach of the covenant to pay the running expenses of the vessel, as no personal liability therefor could attach to him. And in the event of a return of the vessel, lessened in value by the failure to repair,

or burdened with charges, because of default in paying running expenses, no loss could come to the owner if he was indemnified up to the extent of $ 75,000, the value of the vessel, which, it will be seen, was, hence in any probable event, the maximum sum of liability which the parties supposed might result from a breach of the covenants contained in the charter party.

The contract arsing from the two writings having this import, the court below correctly decided that the sum due, as a consequence of a default in the return of the ship, was not to be diminished by the amount of the hire which had been paid at the inception of the contract. To have otherwise ruled would have destroyed in part the express agreement that the failure to return should be compensated by the payment of the agreed value. Such would have been its inevitable result, as it would have reduced the sum due for the default in not returning the ship, by crediting the hirer with the amount of the hire he had paid without default on an independent and distinct liability.

The foregoing considerations are adequate to dispose of the case, if it be that the rights of the parties are to be administered according to the contract into which they voluntarily entered. In substance, however, it is pressed with much earnestness, and sought to be supported by copious reference to authority, that the intent of the contracting parties should not be given effect to, because it is our duty to disregard the contract and substitute our will or our conception of what the parties should have done for that which they did plainly do. This contention thus arises.

Upon the trial the Sun Asociation introduced some evidence tending to show that the value of the yacht was a less sum than $75,000, and it claimed that the recovery should be limited to such actual damage as might be shown by the proof. The trial judge, however, refused to hear further evidence offered on this subject, and in deciding the case disregarded it altogether. The rulings in this particular were made the subject of exception, and error was assigned in relation thereto in the circuit court of appeals. That court held that the value fixed in the contract was controlling, especially in view of the fact that a yacht had no market value.

The complaint that error in this regard was committed is

thus stated in argument: 'The naming of a stipulated sum to be paid for the nonperformance of a covenant is not conclusive upon the parties merely in the absence of fraud or mutual mistake; that if the amount is disproportioned to the loss, the court has the right and the duty to disregard the particular expressions of the parties and to consider the amount named merely as a penalty, even though it is specifically said to be liquidated damages.' Now it is to be conceded that the proposition thus contended for finds some support in expressions contained in some of the opinions in the cases cited to sustain it. Indeed, the contention but embodies the conception of the doctrine of penalties and liquidated damages expressed in the reasoning of the opinions in Chicago House- Wrecking Co. v. United States (1901) 53 L. R. A. 122, 45 C. C. A. 343, 106 Fed. 385, 389, and Gay Mfg. Co. v. Camp (1895) 13 C. C. A. 137, 25 U. S. App. 134, 65 Fed. 794, 15 C. C. A. 226, 25 U. S. App. 376, 68 Fed. 67, viz.: that 'where actual damages can be assessed from testimony,' the court must disregard any stipulation fixing the amount, and require proof of the damage sustained. We think the asserted doctrine is wrong in principle, was unknown to the common law, does not prevail in the courts of England at the present time, and it is not sanctioned by the decisions of this court. And we shall, as briefly as we can consistently with clearness, proceed to so demonstrate.

At common law, prior to the statute of 8 & 9 Wm. III. chap. II, in actions 'upon a bond or on any penal sum, for nonperformance of any covenants or agreements contained in any indenture, deed, or writing,' judgment, when entered for the plaintiff, was for the amount of the penalty, as of course. Watts v. Camors, 115 U.S. 360, 29 L. ed. 408, 6 Sup. Ct. Rep. 91; Story, Eq. Jur. 1311. Equity, however, was accustomed to relieve in cases of penalties annexed to bonds and other instruments, the design of which was to secure the due fulfilment of a principal obligation. Story, Eq. Jur. 1313. The effect of the passage of the statute was to restrict suitors in actions for penalties to a collection of the actual damages sustained. As a result, also, courts of law were thereafter frequently under the necessity of determining whether or not an agreed sum stipulated in a bond

or other writing to be paid, in the event of a breach of some condition, was in reality a penalty or liquidated damages.

'He perfectly well knew that whatever had been the doctrine of equity at one time, it was not then the doctrine of equity to give relief on the ground that agreements were oppressive, where the parties were of full age and at arm's length. It is very likely, and I believe it is true historically, that the doctrine of equity did arise from a general notion that these acts were oppressive. At all events, long before his time, it had been well settled in equity that equity did relieve from forfeiture for nonpayment of money, and I think I may say, in modern times, from nothing else.' Of course courts of common law, merely by reason of the statute of 8 & 9 Wm. III. referred to, did not acquire the power to give relief in cases of contract, where a court of equity would not have exercised a similar power. Now courts of equity do not grant relief in cases of liquidated damages-that is, cases 'when the parties have agreed that in case one party shall do a stipulated act, or omit to do it, the other party shall receive a certain sum as the just, appropriate, and conventional amount of the damages sustained by such act of omission.' Story, Eq. Jur. 1318. And as long ago as 1768, Lord Mansfield, in Lowe v. Peers, 4 Burr. 2225, said-italics in original (p. 2228): 'Courts of equity . . . will relieve against a penalty, upon a compensation; but where the covenant is 'to pay a particular liquidated sum;' a court of equity can not make a new covenant for a man; nor is there any room for compensation or relief.' Commenting upon the judgment of Lord Eldon in one of the leading cases on the subject of liquidated damages (Astley v. Weldon, 2 Bos. & P. 346, 350), Jessel, Master of the Rolls, in Wallis v. Smith, L. R. 21 Ch. Div. 256, said (p. 260):

The doctrine of equity, as respects the withholding of or granting relief against a contract because of inadequacy of consideration, illustrates the conservative disposition of equity not to interfere unnecessarily declines to grant relief because of inadequacy of price or any other inequality in the bargain; the bargain must be so uncon-

scionable as to warrant the presumption of fraud, imposition, or undue influence. Story, Eq. Jur. 244, 245.

While the courts of the United States, in actions at law, undoubtedly possess the power conferred upon the courts of common law by the statute of 8 and 9 Wm. III., and while recognition of such power was embodied in the judiciary act of 1789, reproduced in 961 of the Revised Statutes, the duty of such courts to give effect to the plainly expressed will of contracting parties is as imperatively necessary now as it was at common law after the adoption of the English statute, as will be made manifest by a reference to some of the adjudications of this court.

'In general, a sum of money in gross, to be paid for the nonperformance of an agreement, is considered as a penalty, the legal operation of which is to cover the damages which the party in whose favor the stipulation is made may have sustained from the breach of contract by the opposite party. It will not, of course, be considered as liquidated damages, and it will be incumbent on the party who claims them as such to show that they were so considered by the contracting parties. Much The decisions of this court on the doctrine of liquidated damages and penalties lend no support to the contention that parties may not bona fide, in a case where the damages are of an uncertain nature, estimate and agree upon the measure of damages which may be sustained from the breach of an agreement. On the contrary, this court has consistently maintained the principle that the intention of the parties is to be arrived at by a proper construction of the agreement made between them, and that whether a particular stipulation to pay a sum of money is to be treated as a penalty, or as an agreed ascertainment of damages, is to be determined by the contract, fairly construed, it being the duty of the court always, where the damages are uncertain and have been liquidated by an agreement, to enforce the contract. Thus, Chief Justice Marshall, in Tayloe v. Sandiford, 7 Wheat. 13, 5 L. ed. 384, although deciding that the particular contract under consideration provided for the payment of a penalty, clearly manifested that this result was reached by an interpretation of the contract itself. He said (p. 17, L. ed. p. 385):

stronger is the inference in favor of its being a penalty, when it is expressly reserved as one. The parties themselves denominate it a penalty; and it would require very strong evidence to authorize the court to say that their own words do not express their own intention. These writings appear to have been drawn on great deliberation; and no slight conjecture would justify the court in saying that the parties were mistaken in the import of the terms they have employed.'

'The plaintiff in error relies on the case of Fletcher v. Dyche, reported in 2 T. R. 32, in which an agreement was entered into to do certain work within a certain time, and if the work should not be done within the time specified, 'to forfeit and pay the sum of ž10 for every week,' until it should be completed.

'But the words 'to forfeit and pay' are not so strongly indicative of a stipuation in the nature of a penalty as the word 'penalty' itself; and the agreement to pay the specified sum weekly during the failure of the party to perform the work partakes much more of the character of liquidated damages than the reservation of a sum in gross.' And, after having thus established that on the face of the contract it stipulated a penalty and not liquidated damages, the opinion proceeded to refute the construction relied on to sustain the contrary view that the contract manifested the intention to assess liquidated damages. In connection therewith the Chief Justice observed (p. 18, L. ed. p. 386):

'The clause of the contract providing for the forfeiture of 10 per centum on the amount of the contract price, upon failure to complete the work by a given day, cannot properly be regarded as an agreement or settlement of liquidated damages. The term 'forfeiture' imports a penalty; it has no necessary or natural connection with the measure or degree of injury which may result from a breach of contract, or from an imperfect performance. It implies an absolute infliction, regardless of the nature and extent of the causes by which it is superinduced. Unless, therefore, it shall have been cxpressly adopted and declared by the parties to be a measure of injury or compensation, it is In Van Buren v. Digges, 11 How. 461, 13 L. ed. 771, also construing a building contract, it was said (p. 477, L. ed. p. 777):

never taken as such by courts of justice, who leave it to be enforced where this can be done in its real character, viz., that of a penalty.' [ Italics not in original.]

See also Quinn v. United States,  99 U.S. 30 , 25 L. ed. 269; Clark v. Barnard,  108 U.S. 436, 454 , 27 S. L. ed. 780, 786, 2 Sup. Ct. Rep. 878; Watts v. Camors,  115 U.S. 353, 360 , 29 S. L. ed. 406, 408, 6 Sup. Ct. Rep. 91; Bignall v. Gould,  119 U.S. 495 , 30 L. ed. 491, 7 Sup. Ct. Rep. 294. The last-cited case illustrates the character of disproportion apparent on the face of a contract which has influenced a court when endeavoring to ascertain the meaning of parties to a contract in a stipulation for the payment of a designated sum for the breach of a condition. There the penal sum was $10,000, several breaches of the conditions of the bond might be committed, to each of which the stipulated sum would be applicable, and one such breach might be the failure to obtain a release of a claim of but $ 10.

The courts in England, as already intimated, consistently maintain the right of individuals, when contracting with each other, to estimate the value of property, or otherwise determine the quantum of damages for a breach of an agreement, where the damage is of an uncertain nature. Irving v. Manning (1847) 1 H. L. Cas. 287, 307, 308; Ranger v. Great Western R. Co. (1854) 5 H. L. Cas. 72, 94, 104, 118; Dimech v. Corlett (1858) 12 Moore, P. C. C. 199, 229; Elphinstone v. Monkland Iron & Coal Co. (1886) L. R. 11 App. Cas. 332, 345, 346; Price v. Green (1847) 16 Mees. & W. 346, 354.

'There is no doubt that where the doing of any particular act is secured by a penalty, a court of equity is in general anxious to treat the penalty as being merely a mode of securing the due performance of the act contracted to be done and not as a sum of money really intended to be paid. On the other hand, it is certainly open to parties who are entering into contracts to stipulate that, on failure to perform what has been agreed to be done, a fixed sum shall be paid by way of compensation.' We content ourselves with a few brief excerpts from some of the decisions just referred to. In Ranger v. Great Western R. Co., in the course of his opinion Lord Cranworth said (p. 94):

In Elphinstone v. Monkland Iron & Coal Co. (1886) L. R. 11

'I am not aware that there is any enactment in force in Scotland corresponding to our statute of 8 and 9 Wm. III. chap. 11, 8; nor does the Scotch law seem to have required such aid. We may take it, then, that by the law of Scotland the parties to any contract may fix the damages to result from a breach at a sum estimated as liquidated damages, or they may enforce the performance of the stipulations of the agreement by a penalty.

'In the first instance the pursuer is, in case of a breach, entitled to recover the estimated sum as pactional damages, irrespective of the actual loss sustained. In the other the penalty is to cover all the damages actually sustained, but it does not estimate them, and the amount of loss (not, however, exceeding the penalty) is to be ascertained in the ordinary way. In determining the character of these stipulations, we endeavor to ascertain what the parties must reasonably be presumed to have intended, having regard to the subject-matter, and certain rules have been laid down as judicial aids.' App. Cas. 332-a Scotch appeal-Lord Fitz Gerald, in the course of his opinion, said (p. 346):

'The ž5,000 is expressly declared by the covenant to be 'as and by way of liquidated damages, and not of penalty.' It is a sum named in respect of the breach of this one covenant only, and the intention of the parties is clear and unequivocal. The courts have indeed held that in some cases the words 'liquidated damages' are not to be taken according to their obvious meaning; but those cases are all where the doing or omitting to do several things of various degrees of importance is secured by the sum named, and, notwithstanding the language In Irving v. Manning (1847) 1 H. L. Cas. 287, it was recognized that a policy of assurance was a contract of indemnity, but it was declared that in a valued policy the agreed value was conclusive, and each party must be held to have conclusively admitted that the sum fixed by agreement should be that which the other was entitled to receive in case of a total loss. In that case the opinion of the judges was delivered by Mr. Justice Patterson, and we excerpt from the opinion of that justice in Price v. Green (1847) 16 Mees. & W. 346, on error from the court of exchequer, as follows (p. 354):

used, it is plain from the whole instrument that the real intention was different.'

In Wallis v. Smith (1882) L. R. 21 Ch. Div. 256, the leading cases in England on the subject of penalties and liquidated damages were commented upon by the court of appeal. Jessel, Master of the Rolls, classified the decisions and dicta on the subject. His summary will be found in the margin,3 and measuring the contract in this case by the rules which are embodied in the recapitulation, it follows that the stipulated sum is embraced in the category of liquidated damages.

In Strickland v. Williams