Elliott v. Henck

• Court: Texas Court of Appeals
• Writing for the Court: Cody
• Citation: Elliott v. Henck, 223 S.W.2d 292 (Tex. App. 1949)
• Decision Date: 14 July 1949
• Docket Number: No. 12109.,12109.
• Parties: ELLIOTT v. HENCK et al.

223 S.W.2d 292

ELLIOTT v. HENCK et al.

No. 12109.

Court of Civil Appeals of Texas. Galveston.

July 14, 1949.

Rehearing Denied September 29, 1949.

Markwell & Stubbs, Galveston, for appellant.

Dibrell, Dibrell & Greer, Galveston, for appellees.

CODY, Justice.

This suit was brought by appellant, a feme sole, to recover the sum of $2,200.00 which she deposited as earnest money in compliance with the terms of an earnest money receipt to bind the agreement of appellee Cecile Chambers to convey appellant certain real estate for the sum of $22,000.00, cash.

Appellant brought the suit against both the seller in the earnest money receipt contract, the aforesaid Cecile Chambers, and her agent, the real estate broker in the transaction, Arthur Henck. Appellant's pleadings raised the following issues: (1) that the provision in the earnest money contract to the effect that upon default the earnest money should be retained as liquidated damages, was, under the facts of the case, a penalty provision, and could not be legally enforced, (2) that the description in the contract was too vague to furnish the means of identifying any specific property, and so was not enforceable, (3) that the contract was drawn by the agent Henck, who was not an attorney, and that such act constituted the unlawful practice of law, and said contract was thereby rendered void and unenforceable.

The court, trying the case without a jury, rendered judgment that appellant take nothing. Thereafter, in response to appellant's request, the court filed conclusions of fact and law. The court found, among other things: That the earnest money receipt was, so far as is here material, as follows:

                "Earnest Receipt
                

"$2,200.00 Galveston, Texas May 5, 1948.

"Received from Mrs. Jessie Elliott Twenty Two Hundred and no/100 Dollars as Earnest Money to close sale to her of all ground as fenced and improvements thereon that we may now have title to, owned or represented by us and known as Number 3114 Boulevard Street, Galveston, Texas, at a total price of $22,000.00. Terms of payment; All Cash of which this Earnest Money is a part.

* * * * * *

"The sale is to be closed within a reasonable time by seller after title is pronounced good by Attorney for Buyer * * * and Arthur Henck, agent is to receive Five Per cent on 1st $10,000.00 and 2½ per cent on Balance of the sale price as agent's commission.

"Upon default of Buyer to carry out his part of this contract * * * this Earnest Money may then be divided between Seller and Arthur Henck, Agent, which in such cases is hereby agreed to be liquidated damages, or Seller may enforce specific performance of this contract in Galveston, Texas, at his or her option.

* * * * * *

"I accept the foregoing Contract of Sale:

        "/s/ Arthur Henck, Agent for
                               Cecile Chambers
                        "/s/ Mrs. Jessie Elliott
                            "Approved
                           "/s/ Miss Cecile Chambers."
                

The court further found, among other things, that at the signing of the earnest money receipt, appellant gave appellee Henck $2,200.00 as earnest money to be applied in accordance with the terms of the earnest money agreement, and that ten per cent of the purchase price is the usual and customary amount deposited as earnest money in real estate transactions in Galveston, Texas. That the Title company advised appellees that it was ready to issue its title policy to appellant. Appellant, however, refused to complete the transaction and demanded the return of the deposit, which was refused. The court further found that appellee Arthur Henck was a notary public for Galveston County; that he was not a licensed attorney; that the earnest money receipt was drawn in his office, and under his direction. The court declined to find Henck himself actually prepared the receipt.

The court further found "By custom and usage the term `Boulevard' as used in the City of Galveston, is understood to mean the Seawall Boulevard."

The court's conclusions of law, among other things, were to the effect: That because the description in the earnest money receipt was sufficient to enable an abstracter to determine the exact lot and block description by reference to the deed records, the description was not so vague, uncertain and indefinite "as to render it unenforceable under the Statute of Frauds". That the provision that the earnest money should be retained as liquidated damages if appellant defaulted was not a penalty provision. That the illegal act, if any, of Henck did not void the earnest money receipt contract because such illegal act was disconnected from the subject matter of the agreement. However, since Henck was a notary public, his preparation of the agreement did not constitute the illegal practice of law under Art. 430a, Vernon's Ann. Penal Code.

Appellant predicates her appeal upon three points which correspond to the three grounds urged by her below for holding the earnest money receipt illegal. Appellant makes no contention that she did not default, provided the earnest money contract was legally enforceable. We overrule her first point reading: "The provision in the earnest money contract that upon default the earnest money may be divided between seller and the agent is void and unenforceable as a penalty provision, and the appellees having failed to plead or prove actual damages the court erred in not giving judgment to the plaintiff for the return of the earnest money."

In the absence of any stipulation by the parties, the measure of damages for the breach of a contract for the purchase of real estate is of course the difference between the contract price and the market value of the property at the time of the breach. However, it is lawful for the parties, in lieu of such measure of damages, to agree upon a stipulated sum as liquidated damages. And if it appears that the stipulated sum was fairly estimated by the parties, and that the contract was breached in the circumstances contemplated by the parties "the courts will not apply another or different measure of damages." 13 Tex. Jur. pp. 114, 115. The mere fact that the stipulated damages may be in excess of actual damages, does not prevent the stipulation from being lawful, and in the construction of such a contract "as in all others, the intention of the parties must govern." Eakin v. Scott, 70 Tex. 442, 445, 7 S.W. 777, 778. The fact that the parties may designate a contract for a penalty as being a contract for "liquidated damages" will not prevent the court from holding the falsely so-called "liquidated damages" as being a penalty. But, "when it clearly appears from the terms of the contract that it was the intention of the parties thereto that the sum stated should be treated as providing for liquidated damages" such intention will be enforced. Magruder v. Poulton, Tex.Com.App., 257 S.W. 533, 534. "Nor can such agreements be treated as providing for a penalty, and not liquidated damages, if at the time of the...