Benya v. Gamble

• Decision Date: 31 May 1984
• Docket Number: No. 0256,0256
• Citation: 321 S.E.2d 57,282 S.C. 624
• Parties: Barbro I. BENYA, Appellant, v. Gary E. GAMBLE, Respondent. . Heard
• Court: South Carolina Court of Appeals

Page 57

321 S.E.2d 57

282 S.C. 624

Barbro I. BENYA, Appellant, v. Gary E. GAMBLE, Respondent.

No. 0256.

Court of Appeals of South Carolina.

Heard May 31, 1984.

Decided Sept. 10, 1984.

Ronald R. Norton, of Bethea, Jordan & Griffin, Hilton Head Island, for appellant.

James M. Herring and Curtis I. Coltrane, of Herring & Meyer, Hilton Head Island, for respondent.

GOOLSBY, Judge:

The appellant Barbro I. Benya brings this action against the respondent Gary E. Gamble alleging a breach of contract to purchase real estate. The trial court directed a verdict for Gamble. We reverse the judgment of the trial court and remand the case for a new trial.

The principal issues on appeal involve whether the evidence created a jury question concerning the existence of an enforceable contract between the parties and whether a provision in a real estate sales contract providing for the forfeiture of earnest money should be considered a penalty provision rather than a provision for liquidated damages as a matter of law. Other issues relate to the admission in evidence of the subsequent sales price of the subject property, to the refusal by the trial court to allow the introduction of evidence concerning Gamble's motive in failing to close the transaction, and to the refusal by the trial court to permit Benya to amend her complaint to conform to the proof at trial.

Benya's complaint alleges that on or about March 3, 1980, she entered into a written contract to sell to Gamble real property described as Lot No. 32 in Gull Point Subdivision on Hilton Head Island. According to the complaint, the sum of $10,000 "earnest money" was to be deposited and the closing date was to be no later than thirty days from March 3, 1980. Gamble, the complaint concludes, "failed and refused to effectuate closing," thus entitling Benya to recover from Gamble as liquidated damages the sum Gamble was to deposit as earnest money. In his answer, Gamble, among other things, denies the existence of the contract, asserts the statute of frauds as a bar to the enforcement of the contract, and alleges that the forfeiture provision was unenforceable because it constituted a penalty.

Upon the trial of the case and at the close of the evidence, the trial court directed a verdict in Gamble's favor finding that all the evidence, when viewed in the light most favorable to Benya, compelled the conclusion that no enforceable contract between the parties exists and that, in any event, the forfeiture provision as a matter of law constitutes an unenforceable penalty provision.

In reviewing a directed verdict, the Court of Appeals must consider the evidence and all reasonable inferences in the light most favorable to the party against whom the directed verdict was granted; and if the evidence is susceptible to more than one reasonable inference, a jury issue is created and the motion should be denied. Claytor v. General Motors Corp., 277 S.C. 239, 286 S.E.2d 129 (1982); see Cudd v. John Hancock Mutual Life Ins. Co., 279 S.C. 623, 310 S.E.2d 830 (S.C.App.1983).

Our first inquiry concerns whether the evidence is susceptible of the inference that an enforceable contract exists between Benya and Gamble.

A contract exists where there is an agreement between two or more persons upon sufficient consideration either to do or not to do a particular act. McCraw v. Llewellyn, 256 N.C. 213, 123 S.E.2d 575, 94 A.L.R.2d 914 (1962). The essentials of a contract include an offer and acceptance. Pierce v. Northwestern Mutual Life Ins. Co., 444 F.Supp. 1098 (D.S.C.1978).

Because of the statute of frauds, certain contracts must be in writing to be enforceable. Section 32-3-10 of the South Carolina Code of Laws (1976) sets forth this State's statute of frauds. It provides in part:

No action shall be brought whereby:

* * *

(4) To charge any person upon any contract or sale of lands, tenements or hereditaments or any interest in or concerning them; ...

* * *

Unless the agreement upon which such action shall be brought ... shall be in writing and signed by the party to be charged therewith or some person thereunto by him lawfully authorized.

A trial court should submit to the jury the issue involving the existence of a contract where its existence is questioned and the evidence is either conflicting or admits of more than one inference. Capital City Garage & Tire Co. v. Electric Storage Battery Co., 113 S.C. 352, 101 S.E. 838 (1920); 17A C.J.S. Contracts § 611a at 1225 (1963). Likewise, a trial court should submit an issue concerning the statute of frauds to the jury if there is evidence on which a finding either way might reasonably be made. 37 C.J.S. Frauds, Statute of § 291 at 833 (1943); see Thompson v. Thompson, 141 S.C. 56, 139 S.E. 182 (1927).

Although there is evidence in the record to support the conclusion that no enforceable contract exists between the parties there is also sufficient evidence in the record to support the conclusion that one does exist.

According to Benya, Tom Jacoby, the Vice President of Lighthouse Realty, contacted her about the possibility of selling Lot 32 in Gull Point. At that time, the property was not listed for sale. Benya understood that Jacoby was representing Gamble, the President of Lighthouse Realty. On March 3, 1980, Jacoby came to her home and presented to her a written offer signed and dated that day by Gamble to purchase the property for $108,000. The offer was reflected upon a form prepared by Lighthouse Realty and was entitled "Contract of Sale Offer and Accept" [sic ]. Typewritten terms of the offer required Gamble to deposit $10,000 as earnest money and to pay the balance due "at closing on or before May 15, 1980." The latter date, however, was stricken through by a single handwritten line and just above it the figure and word "30 days" appeared, also in handwriting. Benya signed and dated the document. At Jacoby's request, she initialed below the space where "May 15, 1980" was marked out and "30 days" substituted.

Benya's husband testified that on March 3, 1980, Jacoby telephoned to "fix a time" for him "to come over" for the purpose of obtaining Benya's signature upon the sales contract. He inquired of Jacoby whether the contract incorporated a thirty-day closing provision discussed by them earlier. Jacoby told him the provision was not in the contract but he would add it. When Jacoby arrived at the Benya home, the provision was in the contract.

Clearly, the trial court erred in concluding that the evidence could not support a finding that an enforceable contract exists between Benya and Gamble. Here, the jury could have found that Benya accepted a written offer from Gamble to purchase her property for $108,000 within thirty days from March 3, 1980, and that a memorandum of the agreement was signed by Gamble, the party charged with making it.

We next consider whether the trial court correctly held that the contract's forfeiture provision constitutes a penalty as a matter of law and is therefore unenforceable.

The parties to a real estate contract may by express provision stipulate that a particular sum shall be paid by the purchaser to the seller in the event the purchaser fails to perform. See 77 Am.Jur.2d Vendor and Purchaser § 490 at 616 (1975). A breach of the contract by the purchaser, however, often gives rise to the question of whether a forfeiture provision provides for liquidated damages or prescribes a penalty. If the provision creates a penalty, it will not be enforced against the purchaser and the seller's recovery will be measured by the amount of actual damage sustained by the seller as a result of the breach. Tate v. LeMaster, 231 S.C. 429, 99 S.E.2d 39 (1957).

The question of whether the sum fixed in a case of nonperformance is a penalty or liquidated damages does not necessarily depend upon the language used by the parties in the stipulation. Ould v. Spartanburg Realty Co., 94 S.C. 184, 77 S.E. 866 (1913). Rather, the question "depends on the nature of the contract, (considered in the light of all its circumstances,) and the attitude of the parties under it." Moorer v. Kopmann, 11 Rich.Eq. 225, 231 (1860); see 77 Am.Jur.2d Vendor and Purchaser § 490 at 616 (1975); 25 C.J.S. Damages § 102a at 1034 (1966). Irrespective of its terminology, a stipulation will be held to constitute a penalty "where the sum stipulated is so large that it is plainly disproportionate to any probable damage resulting from [a] breach of the contract." Tate v. LeMaster, supra, 99 S.E.2d at 46; 22 Am.Jur.2d Damages § 219 at 305-06 (1965); Id. § 222 at 308; see Fritz, "Underliquidated" Damages as Limitation of Liability, 33 TEX.L.REV. 196 (1954).

Whether the sum mentioned in a contract is liquidated damages or a penalty, however, can be either a question of law to be determined by the trial judge [see, e.g., Retailer's Service Bureau v. Smith, 165 S.C. 238, 163 S.E. 649 (1932) ] or a question of fact to be determined by the jury. See, e.g., Tate v. LeMaster, supra.

The provision in question is recited in a form that originated, not with Benya, but with Lighthouse Realty, Inc., a real estate company that Gamble served as President. It reads:

In the event this offer is accepted by Seller, the earnest monies deposited with Lighthouse Realty, Inc. shall be applied toward the purchase price. If Purchaser fails to fully perform his obligation hereunder, he shall forfeit the earnest money deposit, which shall be divided equally between Seller and Lighthouse Realty, Inc., provided, however, that the amount to be received by Lighthouse Realty, Inc. shall not exceed...