Gala Homes, Inc. v. Fritz, 4382

• Decision Date: 19 August 1965
• Docket Number: No. 4382,4382
• Citation: 393 S.W.2d 409
• Parties: GALA HOMES, INC., Appellant, v. E. P. FRITZ, Appellee.
• Court: Texas Court of Appeals

Page 409

393 S.W.2d 409

GALA HOMES, INC., Appellant, v. E. P. FRITZ, Appellee.

No. 4382.

Court of Civil Appeals of Texas, Waco.

Aug. 19, 1965.

Rehearing Denied Sept. 9, 1965.

J. V. Hammett, Lampasas, for appellant.

Robert F. Salter, Byron L. McClellan, Gatesville, for appellee.

WILSON, Justice.

Appellant's suit was to require appellee's specific performance of an alleged contract of sale of realty, or the alternative refund of a down payment. A take-nothing judgment was rendered on the theory the agreement is an option contract, and it was decreed that title was vested in appellee. In our opinion the contract is one of sale of realty, and we reverse.

The written contract recites that appellee Fritz 'agrees to convey' and appellant Gala Homes, Inc. 'agrees to purchase' 31 city lots described. It provides that 'the consideration of said lots is $34,100', of which appellant paid $2585 'as part payment, which sum shall be applied toward the total consideration.' It is specified that 'the balance of the purchaser price is to be due and payable on or before June 30, 1964.' Appellee agreed to convey any of the described lots free and clear of encumbrances upon payment of $1100 per lot.

Paragraph IV of the contract provides: 'The $2585 down payment shall be construed as liquidated damages in the event Gala Homes fails or refuses to complete this contract on or before its date of maturity and that in any event such sum shall only be applied as part payment for the total contract price and not on any lesser portion. Should Gala Homes fail to purchase all 31 lots under the terms of this contract, then E. P. Fritz shall be entitlted to receive $1100 for each lot purchased by Gala Homes and in addition thereto E. P. Fritz shall be entitled to retain the $2585 as additional consideration and damages for the failure of Gala Homes to purchase all 31 lots.'

The trial court concluded, as appellee contends, that this was an option contract, and not a contract of sale as appellant urges. It was found that at various times from the execution of the contract in August, 1963 to April, 1964 Gala Homes tendered to Fritz the purchase price of $1100 per lot for 25 of the 31 lots, for each of which Fritz delivered a warranty deed; that Gala Homes failed to tender the purchase price for the remaining six lots there in controversy by June 30, 1964, and that the right to purchase terminated on the latter date, when the option expired. It was concluded that time was of the essence of the agreement because it was an option contract. On July 10, 1964, Gala Homes demanded conveyance of the remaining six lots, tendering $4007.85 in payment therefor. Fritz declined to convey.

Appellee relies on the subsequent conduct of the parties as evidencing their interpretation of the agreement as an option contract. 'Where the terms of the contract are plain and unambiguous the construction given it by the contracting parties is ordinarily immaterial.' Richardson v. Hart, 143 Tex. 392, 185 S.W.2d 563, 564. Acts of the parties cannot furnish an interpretation contrary to the plain meaning of the contract. Shropshire v. Commerce Farm Credit Co., 120 Tex. 400, 30 S.W.2d 282, 39 S.W.2d 11, 84 A.L.R. 1269, cert. den. 284 U.S. 675, 52 S.Ct. 130, 76 L.Ed. 571; Lone Star Gas Co. v. X-Ray Gas Co., 139 Tex. 546, 164 S.W.2d 504.

In the present case the question of whether the parties concluded a contract of sale or an option turns largely upon the contractual status of the $2585 down payment, and the consequent rights of the parties thereto upon failure of Gala Homes to purchase all 31 lots. The agreement is clearly a contract of sale except for the provisions concerning this payment. 'Its language throughout,' as said in Paramount Fire Ins. Co. v. Aetna Casualty & Surety Co., 163 Tex. 250, 353 S.W.2d 841, 843, 'is of sale and purchase.'

The test for determining the effect of the provisions relating to the down payment as liquidated damages is whether the seller is 'bound' to accept the sum 'for such damages as may be suffered by reason of the nonperformance of the contract' on the purchaser's part, said Chief Justice Gaines in Moss & Raley v. Wren, 102 Tex. 567, ...