It is insisted, that the referee erred in not awarding damages to the defendants by way of recoupment or set-off to the plaintiff's demand for the negligent and unskillful construction of the engines built, and in failing to make a decision upon the issue joined in reference to said damages.
The referee has made no special finding as to this claim, nor was there any request to make any such finding; but he has allowed an offset of $781.68 to the defendants. It does not appear of what items this amount is composed. Nor is it very material, in my opinion, as the evidence as to the amount of the defendants' set-off, including this claim for damages, was conflicting, and presented questions of fact for the consideration of the referee, which he has disposed of in his decision, and with which we are not at liberty to interfere. Questions of fact, on affirmance below, are not properly before this court, and the appellants, under the adjudications heretofore made, cannot urge, that the report of the referee was erroneous as to the facts. (Metcalf v. Mattison, 32 N.Y. 464;Loty v. Carolus, 31 id. 547; Wilcox v. Hawley, id. 648;Peterson v. Rawson, 34 id. 370.)
No exception was taken to the ruling of the referee, admitting the question put to one of the witnesses, whether the specification called for connecting the engines by a center shaft. I think, however, that the question was a proper one. The witness was an expert, and the subject of inquiry was in regard to a matter which was not familiar to the court. He looked at the diagram of the engine, the contract and specifications, and gave an opinion to explain technical terms in the contract, and the meaning of provisions contained *Page 73 in the specifications, which were properly susceptible of explanation in this manner. Such evidence, I think, was clearly admissible. (Smith v. Gregerty, 4 Barb. 614; The R. S.R.R.Co. v. Budlong, 10 How. 289; Curtiss v. Gano, 26 N.Y. 426. )
I also think, that the referee properly excluded evidence of what occurred between the parties prior to, and at the time of making, the contract. The rule is well settled, that all conversations had prior to the execution of a written instrument, become merged in the instrument when executed.
There was nothing in the offer to show, that the testimony was intended to explain what was otherwise obscure or unintelligible, and that such explanation was not inconsistent with the written contract. (1 Greenl. Ev. § 282.) Nor that the facts and circumstances, under which the contract was made, would give any light in the interpretation of the instrument. (Id. § 287.) Neither was it offered to explain a latent ambiguity. (Id. § 297.) If the evidence was in any respect admissible, and the referee erred in excluding it, I am inclined to think, that the difficulty was obviated by the withdrawal afterward, on the part of the plaintiff, of all objections to testimony of a similar character which was offered by the defendants.
It is further insisted by the defendants' counsel, that the stipulation in the contract to the effect, that the engines were to be completed and ready, on or before the fifteenth day of October, 1857, under a forfeiture of one hundred dollars a day, after the above day, until they were completed, which was on the fourteenth day of February afterward, provided for liquidated damages, and the referee erred in not allowing those damages at the rate of one hundred dollars a day. A point is taken by the plaintiff's counsel, that the appellants are not in condition to raise this question of damages on this appeal, because, as a question of fact, the affirmance of the referee's report by the General Term is conclusive, and, as a question of law, no request was made to the referee to rule on this point, or to find as a matter of law, and no specific exception taken to the findings of the referee for *Page 74 disallowing this item. Without discussing the validity of these objections, I am of the opinion, that this was not a case for the allowance of the forfeiture named in the contract, as liquidated damages.
The question, whether such damages as are stipulated in the gross amount fixed for a failure to perform a contract, is in the nature of a penalty, is one of considerable difficulty, and the authorities upon the subject are replete with contradictions. It is not necessary to review the various cases where the question is discussed, and it is enough to refer briefly to some of the principles by which cases of this character are to be determined. One of the rules of construction established is, that the courts are to be governed by the intention of the parties, to be gathered from the language of the contract itself, and from the nature and circumstances of the case. (Cotheal v. Talmadge, 5 Seld. 554; Crisbee v. Butler, 3 Car. P. 240.) And, in all the cases, the courts have treated it as a question as to the intention of the parties. (Reynolds v. Bridge, 37 Eng. L. Eq. 130.)
Having in view this rule, it is scarcely to be supposed, that the parties intended to fix an amount so extravagant, and which would be, if allowed as claimed, so grossly disproportionate to the actual damages, as liquidated damages for so trivial an omission or delay, and I cannot discover any sufficient and satisfactory reason for any such inference or conclusion. Nor is any such intention to be presumed, upon the hypothesis, that the damages resulting from a breach of this contract would be of such an uncertain amount as to be incapable of proof, and that it would be difficult to show the nature of the injury caused, and the actual damages arising from the delay. It may also be observed, that the language of the contract itself militates against any such theory. Not a single word is said about liquidated damages, and the word "forfeiture," which is equivalent to a penalty, is used, which manifests, that a penalty was intended. Nor should it be overlooked, that many of the cases decided sustain the doctrine, that, even where the term "liquidated damages" is incorporated in the instrument, the gross *Page 75 amount fixed is in the nature of a penalty. (Hoag v.McGinnis, 22 Wend. 165; Spear v. Smith, 1 Denio, 464;Bagley v. Peddy, 16 N.Y. 464; Lampman v. Cochran, id. 275; Staples v. Parker, 41 Barb. 468.)
Another view may also be invoked, and, I think, is applicable to the present case, and that is, that there is sometimes plausible ground for withholding the doctrine of liquidated damages, when the party might be responsible for the whole amount of damages for the breach of an unimportant part of a contract, and so be made to pay a sum, by way of damages, grossly disproportionate to the injury sustained. (5 Seld. 557, before cited; Clement v. Cash, 21 N.Y. 253.) Looking, then, at this provision of the contract, as it stands, with all the difficulties in the way of its construction, with which the numerous authorities on the subject invest it, and considering the severe consequences which would accrue from a strict and rigid enforcement of its conditions, and, with very much to show a different intention, I am constrained to hold, that there is not such a clear expression of the intent of the parties as would warrant the conclusion, that the amount named was designed as liquidated damages.
The views I have expressed dispose of all the questions presented, and the judgment of the General Term must be affirmed.