Bourland v. Huffhines

• Decision Date: 25 October 1922
• Docket Number: (No. 2015.)
• Citation: 244 S.W. 847
• Parties: BOURLAND et al. v. HUFFHINES.
• Court: Texas Court of Appeals

244 S.W. 847

BOURLAND et al. v. HUFFHINES.

(No. 2015.)

Court of Civil Appeals of Texas. Amarillo.

October 25, 1922.

Rehearing Denied November 15, 1922.

Appeal from District Court, Deaf Smith County; Reese Tatum, Judge.

Suit by C. C. Huffhines against W. S. Bourland and another. Judgment for plaintiff, and defendants appeal. Reversed and remanded.

Bonner, Storey & Storey, of Vernon, and Turner & Dooley, of Amarillo, for appellants.

W. H. Russell, of Hereford, for appellee.

HALL, J.

On the 19th day of August, 1920, the appellant, as the proposed purchaser of certain real estate, entered into a written contract with C. C. Huffhines, through the latter's agent, E. A. Johnson, which contains the following material stipulations:

"In consideration of the sum of $25.00 per acre, to be paid as herein stated, the first party (Huffhines) agrees to sell, and second party agrees to purchase, all of sections Nos. 99 and 100, in block M-7, Castro county, Texas.

"The sum of $9,000.00 to be paid in cash when deal is consummated. The sum of $1,000.00 of said cash payment is hereby made and is deposited in escrow in the First State Bank & Trust Company of Hereford, Texas, at which place this deal is to be closed, and said $1,000.00 to be delivered to first (party) when the deal is closed, but in case first party complies with all the terms of this contract and if second party fails or refuses to comply on his part, then said $1,000.00 shall be paid to first party as agreed liquidated damages. The balance of said consideration to be paid as follows: Second party to assume the now existing indebtedness against said land, amounting to about $5,000.00, the same to be deducted from the purchase price going to first party, and the balance due first party to be evidenced by second party's five promissory notes of equal amounts of even date with deed and due in one, two, three, four, and five years from date of deed, and all drawing 8 per cent. interest, the interest payable annually and notes to provide for the usual maturing and attorney's fees clauses.

"The first party shall furnish to second party an abstract of title showing a merchantable title in himself, clear of liens save such as assumed and first party to pay all taxes for 1920, and second party to have said abstract examined and report any defects in writing and first party to have a reasonable time to cure such defects.

"This deal to be closed at any time that first party is able to give possession of said premises, but first party agrees to give second party thirty days' notice of the time in which he can deliver possession, and second party shall have thirty days from the receipt of such notice to make his arrangements for consummating this contract and the same to be executed by first party executing and delivering a proper warranty deed, at which time second party shall make such cash payments and execute and deliver said notes."

The sale was never completed, and Huffhines instituted this suit for specific performance, making the First State Bank & Trust Company of Hereford a party defendant, because the said $1,000 had been deposited with the contract in the bank. A trial before a jury resulted in a verdict in favor of appellee, decreeing specific performance, requiring him to take the land and pay the purchase price and execute the notes as provided in the contract within 30 days from the date of judgment, and decreeing in the alternative that appellee should have judgment for the full purchase price of $33,290, together with interest and costs; that the $1,000 deposited in the bank be applied as a cash payment and foreclosing the vendor's lien upon the lands. In response to special issues the jury found: (1) That Bourland requested Ed Johnson to deliver the abstracts of title to the land in controversy to Dave Thompson; (2) that Dave Thompson instructed Johnson to deliver the abstracts to Rolason; (3) that Rolason examined the abstracts; and (4) that Dave Thompson requested Rolason to examine the abstracts and pass upon the title. It appears that Dave Thompson is the son-in-law of Bourland and resided at Hereford; that Bourland himself resided in Wilbarger county; and that F. T. Rolason is an attorney residing in Hereford.

The appellant excepted to the plaintiff's petition because it appeared therefrom that the $1,000 deposited in the bank should be paid to the first party as agreed liquidated damages in the event Bourland "fails or refuses to comply with his part of the contract, and that such provision precluded appellee from maintaining an action for specific performance; that the effect of such stipulation in the contract was to give Bourland the right to elect whether he should complete the purchase or permit appellee to take the $1,000 as agreed liquidated damages in lieu of performance and to necessarily restrict appellee to a suit for the recovery of the $1,000 alone. The court overruled this exception, and such ruling is made the ground of the first assignment and proposition thereunder. The general rule is that whether such a stipulation in a contract is to be considered as a penalty or as liquidated damages is a question of law for the court. Kollaer v. Puckett (Tex. Civ. App.) 232 S. W. 914; Farrar v. Beeman, 63 Tex. 175; Gillespie v. Williams (Tex. Civ. App.) 179 S. W. 1101. No evidence was admitted throwing any light upon the question, and we must therefore determine from the face of the contract whether there is any merit in appellant's contention. The contract is before us with the amount of damages clearly expressed. The real amount of actual damages recoverable under it would be difficult to measure, and, so far as we are concerned, we are unable to determine that the sum named is unreasonable. It is said in 17 C. J. 956, § 254:

"The actual damages arising from the breach of a contract for the purchase or sale of real estate have been frequently held to be of such an uncertain and unreasonable nature as to warrant the construction that a sum named to be paid on a breach is liquidated damages, and not a penalty. If, however, the damages are readily ascertainable, the provision will be construed as for a penalty. Where it is stipulated that as a part of the consideration the purchaser shall perform a specific act or in default pay a stated sum of money, the latter is generally held to be liquidated damages rather than a penalty."

There are no alternative agreements in the contract under consideration. The provision is that, if Bourland failed or refused to complete the deal, the $1,000 in the bank should be forfeited, and such provision is not collateral in its character, but under the provisions of the contract is within the terms of the rule stated in 17 C. J. 948, § 242, as follows:

"An actual deposit by a party to a contract pursuant to a provision thereof and a stipulation that the amount shall be paid to or retained by the other party in case of default is held as a rule to import an intent to liquidate damages and will be so enforced."

As sustaining the text the writer cites Yetter v. Hudson, 57 Tex. 604; Reinhardt v. Borders (Tex. Civ. App.) 184 S. W. 791; Goshorn v. Daniel (Tex. Civ. App.) 169 S. W. 1071; Miller v. Schmidt, 28 Tex. Civ. App. 386, 67 S. W. 429; Thorpe v. Lee, 25 Tex. Civ. App. 439, 62 S. W. 93. We find that the decisions of the various Courts of Civil Appeals in this state upon this question are hopelessly irreconcilable, and after as full an investigation as we have been able to make of the holdings by our Supreme Court the correct rule to be announced in this case is in considerable doubt, which we think accounts for the act of the Supreme Court in recently granting a writ of error in the case of Wall v. Texlouana Pro. & Ref. Co. (Tex. Civ. App.) 241 S. W. 521, where the matter was discussed by Chief Justice Huff.

"In general, where the contract is for the performance or nonperformance of some act other than the payment of money, and there is no certain measure of the injury which will be sustained from a violation of the agreement, the parties may, by an express clause inserted for that purpose, fix upon a sum in the nature of liquidated damages which shall be payable as compensation for such violation." 1 Pomeroy's Eq. Jur. (4th Ed.) § 440.

This general principle is laid down by the author as one of the rules which should guide the courts in such an inquiry, in the following language:

"Where an agreement is for the performance or nonperformance of only one act, and there is no adequate means of ascertaining the precise damage which may result from a violation, the parties may, if they please, by a separate clause of the contract, fix upon the amount of compensation payable by the defaulting party in case of a breach, and a stipulation inserted for such purpose will be treated as one for liquidated damages unless the intent be clear that it was designed to be only a penalty." Id. § 442.

The liberty accorded contracting parties to so stipulate is stated in 8 R. C. L. 559, § 110, as follows:

"As a general rule the parties to a contract may stipulate in advance as to the amount which shall be paid in compensation for loss or injury which may result in the event of a breach of the agreement; at least in those cases where the damages which would so result are not fixed by law and where the amount stipulated does not manifestly exceed the injury which will be suffered. The damages so fixed are terms `liquidated' or `stipulated'; the distinction between a penalty and liquidated damages being that the one is a surety for and the other is to be paid in the event of nonperformance of the act to be done. The purpose in permitting a stipulation for damages as compensation is to render certain and definite that which appears to be uncertain and not easily susceptible of proof."

Mr. Pomeroy (section 446) says that, if the sum stipulated to be paid is a penalty, equity will not permit its payment in order to...