Emery v. Boyle , 200 Pa. 249 ( 1901 )

Opinion by

Mb. Justice Fell,

Whether a sum named as compensation for a breach of a contract is to be deemed a penalty to secure its fulfilment or damages liquidated by the parties themselves, is primarily a question of intention to be gathered from the agreement with the aid of such light as can be derived from circumstances. Equity will regard a penalty as intended to secure the fulfilment of a contract and will limit a recovery to the loss actually sustained, notwithstanding the stipulation of the parties, on the principle that one party should not be allowed to profit by the default of another. Compensation, not forfeiture, is the equitable rule'; but effect will be given to the intent of the parties as ascertained unless it conflicts with some rule of law or equity. It cannot be said to do this merely because the amount on which the parties have agreed exceeds that which the court may consider an adequate compensation for the injury. The rule established by our cases was thus stated in March v. Allabough, 103 Pa. 335: “ The question ... is to be determined by the intention of the parties, drawn from the words of the whole contract, examined in the light of its subject-matter and its whole surroundings; and in the examination we must consider the relation which the sum stipulated bears to the extent of the injury which may be caused by the several breaches provided against, the ease or difficulty of measuring a breach in damages and such other matters as are legally or necessarily inherent in the transaction.” This as pointed out by our Brother Mitchell in Keck vs. Bieber, 148 Pa. 645, is substantially a restatement of the rule as given in Streeper v. Williams, 48 Pa. 450, with more prominence given to the intention of the parties as a controlling element.

The difficulty of measuring the damages which would result from a breach of contract is always an important element, if not a controlling one, in determining whether the intention of the parties was to fix a sum certain as the just amount to be recovered instead of leaving the question to the uncertain estimate of a jury: Powell v. Burroughs, 54 Pa. 329; Wolf Creek Co. v. Schultz, 71 Pa. 180; Kelso v. Reid, 145 Pa. 606. Generally where the covenant is for the performance or the nonperformance of a single act or of several acts, damages for the breach of which cannot be measured by any fixed standard, the sum named if reasonable in amount will be considered as liquidated damages. The fact that there are a number of stipulations of different degrees of importance does not vary the rule, if the measure of damages for all of them is uncertain, but regard should be had to it in ascertaining the intention. “ The mere circumstance that the contract contains various stipulations will not, however, justify the inference that a stipulation for the liquidation of damages does not mean what it says and should be disregarded as an empty threat . . . . ; although it may be ground for adopting such an interpretation when the meaning of the parties is not distinctly expressed:” Notes to Peachy v. Duke of Somerset, 2 Leading Cases in Equity (White & Tudor), 2064.

The rule where one sum is stipulated for the breach of a contract securing several things is thus given in Sedgwick on Damages, section 413. “ A sum fixed as security for the performance of a contract containing a number of stipulations of widely different importance, breaches of some of which are capable of accurate valuation, for any of which the sum stipulated is an excessive compensation, is a penalty.” In discussing the rule it is said : “ But it is very difficult to see how a mere difference of degree in the importance of the stipulations can of itself affect the question, provided the damages are uncertain or difficult of computation, unless indeed the difference creates that glaring sort of a disproportion between the injury likely to arise from a breach and the stipulated remedy, which enables the court to say at once that the parties could not have intended such a result or that it would be unjust to allow this expressed intention of the parties to govern. Where a contract consists of several important stipulations, and damages cannot be adequately assessed for a breach of any of the stipulations, the court (except no doubt, in case of great disproportion between the stipulated-sum and the actual loss) will enforce the payment of the stipulated sum as liquidated damages.”

The consideration of the contract in this case was the settlement of an action for libel. The defendant covenanted that he would “ not publish or cause or allow to be published in the Oil City Derrick or any other paper with which he is connected or over which he has any control, nor will he write or cause to be written in any paper whatsoever any libelous or defamatory article concerning the said Lewis Emery, Jr., or any article reflecting in any way upon the business, social or personal character of the said Lewis Emery, Jr., nor any libelous or defamatory article concerning or affecting any business firm or corporation with which the said Lewis Emery, Jr., is concerned.”

The plaintiff was engaged in producing oil in five different states. The defendant was the editor and publisher of a newspaper which had a wide circulation and was read in all the communities where the plaintiff had “ business, social and personal relations.” As stated by the defendant: “It circulated wherever oil is produced.” His power to injure the reputation and business of the plaintiff was very great and it was impossible to estimate with accuracy the extent of the injury which might be caused by a libelous or defamatory publication concerning him personally or his business interest. Under these circumstances the parties contracted and their agreement leaves no room for doubt as to their meaning. There is nothing ambiguous about it. It is clear and distinct in all of its provisions and the sum for which judgment was to be confessed in case of its violation is “ five thousand dollars, liquidated damages.” This sum cannot be regarded as a penalty nor relieved against on the ground that it is grossly disproportionate to the injury.

To entitle the plaintiff to judgment in pursuance of the terms of the agreement, it is not necessary that the publication should be libelous. It was within the letter and meaning of the covenant if it reflected in any way upon the business, social or personal character of the plaintiff. But it violated the agreement in both respects. It charged an indictable offense which seriously reflected on the character of the plaintiff and on its face it was libelous. Even if it would have been a defense under this covenant, the defendant on whom the burden of proof rested on the hearing of the rule to open the judgment, failed to show that the publication was made from a proper motive or in a proper manner or upon reasonable or probable information as to its truth. It is therefore unnecessary to consider the other question raised in this appeal by the defendant.

The order of the court making absolute the rule to open the judgment and to stay proceedings is reversed and set aside.