57 S.E.2d 824
32755.Court of Appeals of Georgia.
DECIDED FEBRUARY 17, 1950.
Under the circumstances appearing from the petition and the contract sued on in this case, the sum stipulated to be paid by the defendant in the event of his breach of the contract terms was liquidated damages and not a penalty, and the trial court erred in dismissing the petition on general demurrer on the ground that the sum was “a penalty, [and] there being no allegation in said petition as to the amount of damages, if any, sustained by the plaintiff.”
DECIDED FEBRUARY 17, 1950.
Complaint; from Gordon Superior Court — Judge Paschall. August 23, 1949.
Fox Motor Company sued Ernest Dillard, alleging that the defendant purchased from the plaintiff a certain Ford automobile, and that in consideration of the sale to the defendant of the automobile, the parties entered into a contract, the material portions of which were as follows: “Whereas, the dealer has this day sold to the purchaser one Ford, 1949 Club Coupe, 6489, for the authorized price of $1754.81; and, Whereas, said purchaser, as a part of the consideration of said sale, has agreed
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with the dealer not to sell or transfer the said unit as indicated above during the period of one year beginning with the date of this contract, except upon the terms and conditions herein set forth: Now, Therefore, it is covenanted, agreed and understood by and between the dealer and the purchaser that the purchaser will not sell or transfer the said unit within the period of one year beginning with the date of this contract without first offering the said unit to the dealer for purchase at the price at which it was sold by said dealer to the purchaser, less depreciation at the rate of three percent (3%) per month for each month between the date of this contract and the date of such offering; and it is further understood and agreed by and between the parties that if the said purchaser shall violate any of the terms of this contract, expressed above, then the said purchaser shall owe the said dealer the sum of seven hundred fifty no/100 dollars ($750.00) in current money of the United States, as liquidated damages which amount shall be immediately due and payable, and with respect to which amount the said purchaser hereby waives his rights to any and all exemptions under the Homestead Bankrupt Laws.”
The plaintiff further alleged that the defendant sold the said automobile three or four days after the date of the purchase to parties unknown to the plaintiff and for a price unknown to the plaintiff, and in violation of the promises made in the contract. It was alleged that the plaintiff had, during the continuance of the post-war shortage of automobiles, attempted to deliver the new automobiles made available to it by the Ford Motor Company to persons who needed the automobiles and who would use them in their business, and that the plaintiff had endeavored to keep such automobiles off the black market that prevailed at that time, and that the purpose of the contract sued upon had been to effectuate that policy. The plaintiff alleged a demand for payment of the sum due under the contract, and prayed for damages in the amount of $750 with interest. The defendant demurred generally, and the court sustained the demurrer by entering the following order: “Upon consideration of the within demurrer the same is sustained, it appearing to the court that the contract sued upon wherein it recites the amount of $750.00 as liquidated damages is actually a penalty, there being
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no allegation in said petition as to the amount of damages, if any, sustained by plaintiff.”
Y. A. Henderson, for plaintiff.
Henry L. Barnett, for defendant.
WORRILL, J.
The sole question presented by this record is whether the provision for “liquidated damages” as set forth in the contract sued upon is in reality a provision for a penalty or is in fact a mere provision for liquidated damages. “Damages are given as compensation for the injury sustained. If the parties agree, in their contract, what the damages for a breach shall be, they are said to be liquidated, and unless the agreement violates some principle of law, the parties are bound thereby.” Code, § 20-1402. In Martin v. Lott, 144 Ga. 660-664 (87 S.E. 902), Justice Beck, speaking for the Supreme Court, in construing a contract whose terms were in substance similar to those in the case at bar, said: “In the case of Allison v. Dunwody, 100 Ga. 51 (28 S.E. 651), it was said `In the case of Lea v.
Whitaker, 8 L. R. C. P. 70, Keating, J., says: “The cases upon the subject of penalty or liquidated damages are very numerous. The result of them seems to be this, that what the courts look at is the real intention of the parties as it is to be gathered from the language they have used. No case that I am aware of has decided that if it be manifest that the parties meant the sum fixed to be liquidated damages, the court will interfere to frustrate that intention.” Much to the same effect as in the two cases thus quoted, is the tenor of the decisions of this court Sims v. Cox, 40 Ga. 76 [20 Am. R. 560]; Goodman v Henderson, 58 Ga. 567. And in this last case Justice Jackson lays especial stress upon the fact that “the damages were agreed upon by the parties themselves; they fixed them, not as a penalty, but as stipulated and liquidated, and so wrote it down in the agreement.” “The language of the instrument itself must of course be primarily looked to and considered, though the use of the words `penalty’ or `liquidated damages’ will by no means always be conclusive,” is the holding of this court in the case of Sanders Ables v. Carter, 91 Ga. 450 [17 S.E. 345], in which Justice Lumpkin deals with the subject of “penalties” and “liquidated damages” at considerable length. This and the other Georgia decisions upon this subject manifestly lean to that class of cases
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in which no “greater liberty is taken with the language of the parties” than is necessary to ascertain the true intent of the contract and to prevent the exaction of harsh penalties under the guise of liquidated damages.’ See also the case of Mayor c. of Washington v. Potomac Engineering c. Co., 132 Ga. 849
(65 S.E. 80).”
We think that under the rules of law as laid down in th Martin case, quoted above, the intent of the parties in the instant case to stipulate for liquidated damages and not provide a penalty, is manifest. The subject-matter of the contract was such that it made it doubtful if the amount of damages incurred by the plaintiff could have been accurately ascertained, and the situation was such that it was more expedient to stipulate the damages than to attempt to calculate them after a breach. Furthermore, the parties specifically denominated the sum as “liquidated damages,” and while we recognize the rule that such specification in the contract is not controlling, no sufficient reason is shown in this case why such stipulation should not be upheld. For these reasons we think that the trial court erred in sustaining the demurrer, and in dismissing the petition.
Judgment reversed. Sutton, C. J., concurs. Felton, J., concurs in the judgment.
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