Asia Inv. Co. v. Levin

• Decision Date: 23 February 1922
• Docket Number: 16794.
• Court: Washington Supreme Court
• Parties: ASIA INV. CO. v. LEVIN.

204 P. 808

118 Wash. 620

ASIA INV. CO. v. LEVIN.

No. 16794.

Supreme Court of Washington

February 23, 1922

Department 2.

Appeal from Superior Court, Pierce County; W. O. Chapman, Judge.

Action by the Asia Investment Company against Louis Levin, with cross-action by defendant. Judgment for defendant on cross-action, and plaintiff appeals. Affirmed.

Walter M. Harvey, of Tacoma, for appellant.

Harold L. Levin, of San Francisco, Cal., and A. O. Burmeister, and J. H. Gordon, both of Tacoma, for respondent.

MACKINTOSH J.

The appellant and respondent entered into the following contract:

'Los Angeles, Cal. Feb. 17, 1920.

'Received of Asia Investment Company, a Washington corporation, the sum of five hundred dollars lawful money of the United States on account of the full purchase price of $10,000 of the real property hereinafter described and hereby sold to said Asia Investment Company by the undersigned. The purchaser shall have thirty (30) days within which to search the title, and the seller shall have fifteen (15) days within which to perfect the same and correct any defects reported in writing by the purchaser to the seller. Grant, bargain and sale warranty deed to be delivered on receipt of balance of purchase price in cash. Taxes to be prorated for year 1919-20. Failure of purchaser to complete purchase within time stated, except for defect of title, shall operate as a forfeiture of sum hereby deposited, the same being in settlement of an being hereby fixed as liquidated damages.

'The real property herein referred to is described as follows: * * * All * * * that certain lots and parcels of land situated in the city of Taxoma, state of Washington, and described as follows: Lots 1 and 2 in block 408, being the southwest corner of Fourth and St. Helens avenue, free and clear of all incumbrances.'

The appellant paid the $500 called for in the contract and afterwards began this suit to recover the same, alleging that it had tendered the balance due on the contract and demanded the deed, which respondent had refused to deliver. The respondent in its answer denied the refusal to deliver the deed, and the court upon the trial found that the respondent had tendered to the appellant a proper warranty deed, and had demanded compliance with the terms of the contract, which the appellant had refused. As a cross-complaint the respondent alleged the tender of the deed, and demanded judgment for the balance of $9,500, and for specific performance of the contract. The trial court found for the respondent on his cross-complaint, and entered judgment in the sum of $9,500, with interest, and directed that the deed be delivered to the appellant upon the satisfaction of the judgment. The appellant has appealed from that judgment against it.

There is no question before us upon the appellant's cause of action stated in its complaint. It is conceded that it is not entitled to the return of the $500, the only question being as to whether the judgment based upon the respondent's cross-complaint can be sustained.

The first point to be determined is as to the effect of this contract, it being the claim of the appellant that it is not a contract of purchase and sale, but merely an option of purchase, for the reason that there is no provision in the contract making it obligatory upon the appellant to purchase the property. Jurisdictions have differed from one another and in themselves in the interpretation of contracts such as that here before us, and it is difficult to harmonize all the decisions, as they are naturally based upon the interpretation which courts have given to differing facts. This court has had before it several contracts more or less resembling the one in this case, and in Arthur D. Jones &amp Co. v. Eilenfeldt, 28 Wash. 687, 69 P. 368, Lawrence v. Pederson, 34 Wash. 1, 74 P. 1011, and Neeson v Smith, 47 Wash. 386, 92 P. 131, has held that the contracts were contracts of option, and not such as compelled the vendee to complete the purchase. In the cases of Anderson v. Wallace, etc., Co., 30 Wash. 147, 70 P 247, Conner v. Clapp, 42 Wash. 642, 85 P. 342, Newell v. Lamping, 45 Wash. 304, 88 P. 195, and Wright v. Suydam, 72 Wash. 587, 131 P. 239, it had for consideration contracts which it has held were contracts not of option, but under which the vendee could be compelled to take title and pay the purchase price. It is difficult to lay down a hard and fast rule which will properly classify a given contract. But the law seems to be that, although the contract does not expressly provide that the vendee agrees to consummate the sale by paying the balance and accepting the deed, yet, where it appears that the general intention was to consummate a sale the absence of an express agreement does not limit the contract merely to one of option, but that it will be held to be a contract of purchase and sale. As was stated in Anderson v. Wallace, etc., Co., supra:

'It purports to be an express agreement to convey the timber land, was so accepted by the defendant, and was so construed by the parties thereto; and a deed was thereafter drafted in pursuance thereof, by direction of defendant's officers, and executed by plaintiff; but defendant refused to receive the same'

--the court holding that the contract was not an option to purchase.

In Wright v. Suydam, supra, the contract was held not to be an option for the reason that it stated, as does the contract before us, that the first payment was received as part payment upon the purchase price, and in that contract, as in the one here, there followed provisions which clearly contemplated the consummation of the sale, and the court held such an agreement amounted to an agreement to sell on the part of the vendor and an agreement on the part of the vendee to purchase. It was further said in that case the fact that the vendor's remedy was limited expressly by the contract to the recovery of liquidated damages did not change the fact that the contract was a contract of purchase and sale on the part of the party, and the promise to purchase on the other. The court said:

'An agreement in a contract, specifying and limiting the particular remedy available to a party to the contract upon the breach thereof by the other, does not change the respective mutual promises which constitute the substance of the contract. Wright did not contract and pay for a mere privilege to purchase land at a future time, but he agreed to purchase and paid part of the purchase price. We are of the opinion that the contract is one for the sale of land, both parties being bound thereby as seller and purchaser, respectively, though the remedy of Suydam upon breach by Wright may be confined to liquidated damages.'

Upon this point, therefore, we hold that in this case there was a contract of purchase and sale, which raises another point, and that is whether the contract by its terms limited the respondent's right to the retention of the $500 in full settlement of the entire matter. It is the claim of the appellant that the stipulation, 'failure of purchaser to complete purchase within the time stated except for defective title shall operate as liquidated damages,' is a provision for full settlement of all the rights under the contract, and prevents the respondent from resorting to specific performance.

It is necessary, first, to determine whether this provision is a contract is one for a penalty or for liquidated damages. The law seems to be settled that provisions in contracts of sale calling for penalties do not exclude the right of the vendor to require specific performance. Howard v. Hopkyns, 2 Atk. 371; Raymond v. Caton, 24 Ill. 123; Newton v. Hull, 90 Cal. 494, 27 P. 429; Cartwright v. Gardner, 5 Cush. (Mass.) 273; Whitney v. Stone, 23 Cal. 275. This is also the rule in those cases where the...