Williams v. Dakin.

tion on the part of Dakin and Bacon, and which the other parties agreed to, was substantially this: "We will pay the $3000 which you demand for the good will and patronage of your paper, in addition to the actual value of the press and types and printing apparatus, if you will agreee to refund to us the $3000 as stipulated damages in case you interfere in any way with that good will and patronage, or aid or assist others in the establishment or publication of any paper which may interfere with it."

There is undoubtedly a class of cases in which courts have been in the habit of considering a certain specified sum as a penalty, whatever may be the language of the agreement. Such is the case wherever such specified sum is evidently intended as a mere collateral security for the payment of a different sum which is the real debt, or where it was evidently intended to be in the nature of a mere penalty; and there is another class, where, from the language. of the agreement, it was difficult to ascertain what the parties really intended, in which the courts have taken the reasonableness of the provision as liquidated damages into consideration, for the purpose of determining whether it was intended as such or only as a comminatory sum. Where the specified sum is declared by the parties to be a penalty, or wherever it appears to have been only intended to secure the payment of the real debt which is specified and ascertained, so that the court is legally bound to consider it as comminatory merely, the plaintiff must assign breaches, and have his damages assessed under the statute, except where the condition of the obligation is for the payment of a specific sum which is capable of being ascertained by mere computation.

In the case of Astley v. Weldon, 2 Bos. & Pull. 346, the £200 specified in the agreement was evidently intended to secure the payment of the smaller sums, and therefore, upon the settled rules of construction, it was considered as a penalty. Lord Eldon put his decision upon that ground alone, as he distinctly recognized the right of parties to contract for stipulated damages for the non-performance of agreements, like the present, where the damages were in

Williams v. Dakin.

their nature uncertain, or a mere matter of fancy. The case of Randall v. Everest, 2 Carr. & Payne, 577, was an action of assumpsit upon an agreement not under seal, and Lord Tenterden said that he wished his observations in that case not to be understood as applying to agreements under seal. Whether his lordship was right in supposing that parties were not authorized to make a valid agreement for stipulated damages, without the formality of affixing a seal to it, is a question which it is not necessary for us now to consider. Kemble v. Farren, 6 Bing. R. 144, which was also an action upon an agreement without a seal, was like Astley v. Weldon, in many respects, as the £1000, which was stated to be stipulated damages, was intended to secure the smaller sums which the plaintiff had agreed to pay as wages to the defendant, as well as to insure to him the services of the defendant for the four seasons. And it could not be considered as a penal sum as to one part of the agreement without construing it to be such as to the whole. But, even in that case, Tindall, C. J. admits, that if the £1000 had been limited to those breaches of the agreement which were uncertain in their nature and amount, the whole sum would have been recoverable as liquidated damages. The same difficulty existed in the case of Davies v. Penton, 6 Barn. & Cress. 216; as the £500 was intended to secure the payment of £574 by the plaintiff, as well as the covenant not to prosecute, on the part of the defendant; and it could not be considered as an agreement for liquidated damages as to one party, without considering it so as to the other. In addition to this, the parties in their agreement had called the £500 a penal sum, as well as liquidated damages. Looking to the whole agreement, therefore, the court came to the conclusion that the parties did not intend to contract for stipulated damages. The case of Reilly v. Jones, 1 Bing. R. 302, was like the case under consideration in one respect, as the sum which was agreed upon as stipulated damages was payable upon the non-performance of any part of the agreement; and as it was evidently the intention of the parties that the whole sum should be payable upon any breach of the agreement, the plaintiff was permitted to recover the whole amount as liquidated

Williams v. Dakin.

damages. In Hubbard v. Grattan and wife, Alcock & Nap. R. 389, in which an action was brought to recover the stipulated damages which the defendant had agreed to pay if he did not remove a lime kiln adjacent to the plantiff's premises, Bushe, Ch. J. says: "The stipulation consists of two parts, one affirmative that the lime kila should be prostrated before a particular day; the other negative that the assignee shall not at any future time erect another lime kiln; and, upon those the breaches are assigned. Both bear on one object, to be relieved from the lime kiln altogether, and both are essential to that object being accomplished; and both parties agree in measuring beforehand the damages consequent upon a breach of either agreement. Such stipulations as to damages are upheld by courts of law upon two grounds: 1st. Because a man may set a value not only upon matters connected with his property, which value is capable of being estimated, but also upon matters of taste or fancy, such as prospect or ornament, which he alone can appreciate; and 2d. Because even in matters capable of ascertainment, great difficulties might occur in some cases; and, in all cases, it is prudent in both parties to provide against the trouble and expense of a future investigation. The cases which seem to have interfered with such compacts, are those in which the subject matter of the stipulation shows that, whatever the form of it may be, the parties could not have contemplated any thing more than a penalty to secure against actual damage.

The case under consideration was one of uncertain damages which the parties evidently foresaw could not be ascertained by proof, with any degree of certainty, as the amount of injury to the plaintiffs by the establishment of a rival paper even for a few weeks might destroy the value of the good will and patronage of the paper they were about to purchase; and as they contracted with each other. upon the faith of that liquidated sum, as the utmost that the one party was to pay, and the least that the other was to receive, in case of a breach of the agreement, it would be manifestly unjust for us to attempt to make a better or a different agreement for them than that which they intended

Williams v. Dakin.

to make for themselves; by compelling them to abandon the amount of damages which they had agreed upon in anticipation of the breach of the contract which has occurred, for the purpose of submitting the question of amount to the chance of what a jury might suppose was proper from hearing the conflicting opinions and vague conjectures of ignorant or prejudiced witnesses.

The cases in our own courts, which were referred to on the argument, are all in accordance with this view of the subject; and it is, therefore, unnecessary that I should attempt to analyze them particularly. It is perfectly clear, therefore, if the plaintiffs in the court below were entitled to recover any thing for the breach of this agreement, they were entitled to the whole $3000 which had been agreed upon by the parties as stipulated damages for any breach of the cov

enant.

For these reasons I think the judgment of the supreme court ought to be affirmed.

On the question being put, Shall this judgment be reversed? the members of the court divided as follows:

In the affirmative-Senators FURMAN, HAWKINS, HULL, MAYNARD, PECK-5.

In the negative-The PRESIDENT of the Senate, The CHANCELLOR, and Senators BEARDSLEY, CLARK, HUNT, HUNTINGTON, JOHNSON, JONES, LEE, H. A. LIVINGSTON, NICHOLAS, PAIGE, POWERS, SKINNER, SPRAKER, STERLING, VAN DYCK, VERPLANCK-18.

Whereupon the judgment of the supreme court was AF

FIRMED.

S. & M. ALLEN US. THE MERCHANT'S BANK OF THE CITY

OF NEW-YORK.

A bank receiving for collection a bill of exchange drawn here, upon a person residing in another state, is liable for any neglect of duty occurring in its collection, whether arising from the default of its officers here, its correspondents abroad, or of agents employed by such correspondents.* This liability may be varied, however, either by express contract or by implication arising from general usage in respect to such paper; it is competent, therefore, for the bank to show an express contract, varying the terms of its liability, or in the absence of a judicial determination upon the point, to show that by the usage and custom of the place, a bank thus receiving foreign paper is liable only for its safe transmission to some competent agent, and is not responsible for the acts or omissions of such agent, or of any subordinates employed by him.

The inquiry, however, in such case is not as to the opinion of merchants, however general, as to the law of the case, but as to the usage and practice in respect to such transactions, or the general understanding of merchants as to the nature of the contract evidenced by their acts, so as to enable the court to give the contract a correct interpretation. Where a debt was lost by the omission of a notary to give notice of the nonacceptance of a bill presented before maturity, IT WAS HELD, not to excuse a bank which had received the same for collection, that, by the law merchant of the place where the bill was presented, notice of non-acceptance was deemed unnecessary; but that on the contrary, as the lex loci contractus governed in a case like it, it was the duty of the bank to have given the necessary instructions to its correspondents. The omission to give notice of non-acceptance happening through the default of a commissioned public officer, a notary, does not vary the rights of the parties pro hac vice, he acted merely as the agent of his employers, and not in his official capacity.

*Upon the principal point decided in this case, the court divided 14 to 10. Senator VERPLANCK, delivering an opinion for reversal, in which he was supported by thirteen of his brethren, and the CHANCELLOR delivering an opinion in favor of an affirmance of the judgment of the supreme court and nine senators concurring with him. It is worthy of remark, that in a late case, decided in the supreme court of errors of the state of Connecticut, the report of which was published probably since the argument in this court, the same doctrine was held by the judges of that court that was held by the supreme court and by the chancellor of this state as to a bank receiving a note for collection, not being liable for the default of a foreign agent: see East Haddam Bank v. Scovil, 12 Conn. R. 303.