Eaton v. Sadler

• Court: Alabama Supreme Court
• Writing for the Court: SOMERVILLE, J.
• Citation: Eaton v. Sadler, 215 Ala. 161, 110 So. 10 (Ala. 1926)
• Decision Date: 10 June 1926
• Docket Number: 6 Div. 459
• Parties: EATON v. SADLER.

110 So. 10

215 Ala. 161

EATON v. SADLER.

6 Div. 459

Supreme Court of Alabama

June 10, 1926

Rehearing Denied Nov. 4, 1926

Appeal from Circuit Court, Jefferson County; W.M. Walker, Judge.

Bill in equity by W.H. Sadler, Jr., against J.J. Eaton, for specific performance of a written agreement. From a decree overruling demurrer to the bill, respondent appeals. Affirmed.

Smyer &amp Smyer and McClellan, Rice & Stone, all of Birmingham, for appellant.

V.J Nesbit, of Birmingham, for appellee.

SOMERVILLE J.

The points of objection to the bill of complaint, as presented by the demurrers, are thus clearly stated in the brief of counsel for appellant:

"(1) The erroneous nonjoinder of the McDavid Real Estate & Insurance Company, a necessary party to the cause, that company being, as appears, a party to the written contract performance of which is sought to be specifically enforced.

"(2) The absence of equity in the bill--as a bill for specific performance--for that the contract, itself, invested Eaton with the right, option, or election to either take the property as purchaser or to forfeit the cash payment of $500; 'the money so forfeited' being required to 'be divided between the other party to this contract and the agent,' i.e. the McDavid Company, which was stated in the agreement to be 'the agent.'

"(3) In view of the stipulation in the contract that the seller should 'pay all taxes and assessments to date,' and of the further stipulation in the writing that, in the event Eaton should fail or refuse to perform the terms of the agreement, he should forfeit the cash payment of $500, 'to be divided between' Sadler and the McDavid Company--the bill expressly averring Eaton's refusal to execute the contract by taking the property. The bill is faulty in the particulars pointed out in grounds of demurrer 13 to 16, inclusive, viz. that it is not specifically averred therein that the condition precedent to Eaton's alleged duty to perform had been met by the payment of the taxes and assessments by Sadler.

"(4) The contract provided that the seller, i.e., the complainant, 'shall furnish an abstract showing a good and merchantable title.' As this necessarily means a good and merchantable title in the seller, the bill is faulty, in the particulars pointed out in grounds of demurrer 7 to 14, inclusive, filed March 14, 1925, in that it is not specifically averred therein that such an abstract, showing the requisite title to be in complainant, was furnished."

These contentions, particularly those numbered 1 and 2, have been presented for the appellant with much force and ingenuity of argument.

It appears that the memorandum of the contract in question was prepared by the McDavid Company, as agent for the vendor, Sadler. It embodied a receipt for $500 paid to the agent by the proposed purchaser, Eaton, as earnest money and part payment on the purchase price. The acceptance of this payment by the agent, for the purpose and on the terms stated in the memorandum--approved by the purchaser by his indorsement thereunder--was expressly declared to be subject to the approval of the vendor, and this approval was expressed by the vendor's separate indorsement on the memorandum. These indorsements show a direct, unequivocal, and unconditional promise on the part of the purchaser to buy, and on the part of the vendor to sell, on the terms stated in the memorandum; and neither in form nor in substance do they suggest any option in favor of the purchaser.

Looking to the purpose and terms of this memorandum contract, and to the mode of its execution by vendor and purchaser, we are unable to concur in the view that the agent of the vendor was a party to the contract; certainly not in such a sense as to give to the agent an interest in the question of its forfeiture or enforcement under the principles of law to which it is subject. The argument in support of the contrary view is of course grounded on the provision of the contract that the default of the purchaser should forfeit the earnest money paid by him, and that "the money so forfeited shall be divided between the other party to this contract and the agent"; the bill of complaint showing that the purchaser has in fact failed or refused, after demand, to carry out his contract.

The latter clause of this provision was no doubt inserted by the agent merely to show what its compensation was to be and to show its authority to retain the amount of it out of the earnest money in its hands, in the event the contract of sale fell through by reason of the purchaser's default. It was, at most, a collateral agreement between the vendor and the agent, which in no way affected or concerned the purchaser, and was without any practical bearing upon the rights and obligations of the vendor or of the purchaser--the only real parties to the contract. The fact that the agent signed the paper is not significant, in view of the fact that it was a receipt for money received by the agent, whose signature was therefore appropriate and necessary.

But, if it be conceded that the agent was, in any material sense, a party to the contract, we are still of the opinion that the agent would not be a necessary party to this proceeding for specific performance. No relief could be had against the agent as a party respondent, and none in its favor as a co-complainant, and, so far as the fund of $500 is concerned, the agent's interest therein can in no wise be affected by the decree. If the decree denies the relief sought, the fund stands forfeited. If the decree grants the relief, it becomes a credit on the purchase money as between vendor and purchaser, the parties to this suit. In neither case can the purchaser recover the money; and in either case the right of the agent, as between agent and vendor, remains unprejudiced and unaffected. In short, the actual disposition of the money will be determined by the agreement between agent and vendor, and can in no contingency be a matter of concern to the purchaser.

Counsel for appellant fully recognize the principle that a stipulation for the payment of a penalty or liquidated damages by either party to an executory contract, in the event of his default in its performance, is not a bar to the remedy of specific performance in equity at the suit of the other party, unless the contract itself shows a contrary intention. Morris v. Legerfelt, 103 Ala. 609, 613, 15 So. 895; McCurry v. Gibson, 108 Ala. 451, 457, 458, 18 So. 806, 54 Am.St.Rep. 177; Harris v. Theus, 149 Ala. 133, 141, 43 So. 131, 10 L.R.A. (N.S.) 204, 123 Am.St.Rep. 17; Melton v. Stuart, 213 Ala. 574, 105 So. 659; Koch v. Streuter, 218 Ill. 546, 75 N.E. 1049, 2 L.R.A. (N.S.) 210, and note; Stewart v. Griffith, 217 U.S. 323, 30 S.Ct. 528, 54 L.Ed. 782, 19 Ann.Cas. 639, 25 R.C.L. 230, § 29.

The cases hold that it is a question of intention, to be deduced from the whole instrument and the circumstances; and, if it appears that the performance of the covenant was...