The defendant sold out his liquor business in New Bern to the plaintiff and stipulated that he would not engage in said business in the limits of said town for the space of twenty years. He executed his bond in the sum of $1,000, conditioned that if he should violate that stipulation, "then this bond to be in full force and effect . . . otherwise, to be null and void." The first issue was whether such bond was in substance an agreement to "pay the plaintiff the sum of $1,000 as stipulated damages for the breach" of such stipulation. The court charged that the question for the jury was whether such contract (to pay stipulated damages), "the language of which is the substance of the bond entered into between the parties," was entered into at the time of contract of sale made by the defendant to the plaintiff, that is, whether it was part of the trade and understanding between the parties. This was error. It was not merely essential that such contract should be made, as a part of the contract of sale, but it must appear that the $1,000 was for stipulated damages, and not a penalty.
When the case was here before (134 N.C. 254) the Court pointed out that the $1,000 bond did not state that it was intended to cover stipulated damages; that the presumption was that it was a penalty, and this could be overcome only by evidence. And in Wheedon v. Bondand Trust Co., 128 N.C. 69, it was held that even if it had been stated that it was for "liquidated damages," that it would not be conclusive, but the true intention of the parties must be ascertained, whether in truth the sum stated was not in fact a penalty against which the courts would relieve upon ascertainment of the true damages. (491) It is true, the second issue left it to the jury to determine whether stipulated damages were intended, but the judge on the first issue had already told them that was the purport of the bond. There are other exceptions, but it is not necessary to discuss them.
Error.