Graves v. Cupic
| Decision Date | 20 July 1954 |
| Docket Number | No. 8034,8034 |
| Citation | 75 Idaho 451,272 P.2d 1020 |
| Parties | GRAVES v. CUPIC et al. |
| Court | Idaho Supreme Court |
Fred F. Kondo, Priest River, Stephen Bistline, Sandpoint, for appellant.
McNaughton & Sanderson, Coeur d' Alene, Bandelin, Bandelin & Ponack, Sandpoint, for respondents
On November 3, 1952, the plaintiff and one H. O. Johnson entered into a contract to purchase from the defendants certain real and personal property in Bonner County for the sum of $50,000. Three thousand dollars earnest money was paid on the date of the agreement. Eleven thousand five hundred dollars was to be paid on or before December 1, 1952, and the balance in monthly installments. The property consisted of a small tract of land, together with the buildings thereon, furniture and fixtures, and the business known as the 'Ron-D-Voo Club', where the selling of beer, liquor and food, and the operation of slot machines, was being conducted by the defendants. The contract of November 3rd provided for possession by the purchasers on December 1, 1952, when the further payment of $11,500 was due. Johnson, having no money or assets, the $3,000 was paid by the plaintiff. Sometime in the latter part of November, Johnson and plaintiff disagreed and Johnson withdrew. Plaintiff then asked defendants to rescind the contract and repay the $3,000 to her. This defendants refused. On December 4th a new contract was entered into by the parties by which plaintiff alone agreed to purchase the property for the same price and upon the same terms as previously agreed. The $3,000, paid upon the first contract, and $11,500 additional, paid upon the execution of the new contract, constituted the down payment of $14,500. The balance was to be paid $400 on the 4th day of each month thereafter, beginning January 4, 1953, with interest at 6% per annum. The contract provided for possession on the date thereof, but no formal delivery of possession ever actually occurred. The facts are, defendants offered possession on December 4th, but plaintiff advised them she would not be ready until Monday, December 8th. To this defendants agreed. On Sunday, December 7th, she brought a cook to the place and arranged with defendant John Cupic for a place for him to sleep on the premises. John Cupic had been living upstairs in the club building, and was there on the 7th, 8th and 9th. He testified that he delivered the keys to his own attorney at Newport, Washington, on December 9th. This attorney testified he delivered the keys to plaintiff's attorney, Fred F. Kondo.
On December 8th the plaintiff went to Sandpoint to apply for retail license. The county commissioners, on learning she had been a resident of Alaska, and had been and was a nonresident of the state of Idaho, informed her she was ineligible for such a license and advised her to see a lawyer. On December 12, 1952, she commenced this action for cancellation of the contract and recovery of the down payment. She alleges that at the time of the negotiations and making of the contracts she was mentally incompetent as a result of shock and anguish arising out of the suicide of her husband, which occurred at Ketchikan, Alaska, October 9, 1952. Prior to that time plaintiff and her husband had been living at Ketchikan and operating a tavern there. H. O. Johnson had been employed by them as bartender. She alleges that after her husband's death, Johnson purported to befriend her in her bereavement, counseled her to purchase another tavern and accompanied her on a tour of north Idaho looking for such an opportunity; that she fell under his influence and, being incompetent and acting upon his advice, she entered into the contract of November 3rd. Plaintiff further alleges that the defendants fraudulently represented to her that she could acquire the necessary liquor and beer retail licenses, and operate the business, knowing that because of her nonresidence she could not qualify for such licenses and that she could not lawfully operate the business; that such representations were made falsely and for the purpose of inducing her to enter into the contract; and that she did so in reliance thereon. She also alleges that, through her attorney-in-fact, Kondo, she took possession of the property and retains possession as security for the repayment of the $14,500.
Plaintiff made no further payments upon the contract and on March 10, 1953, the defendants filed their answer and cross-complaint. In their cross-complaint they allege the default of the plaintiff in failing to make the payments falling due on the 4th days of January, February and March, 1953; and based thereon, defendants, by their cross-complaint, declare a forfeiture and cancellation of the agreement. They allege the value of the rents and profits to be $1,000 per month and pray for cancellation of the contract; possession of the property; the money paid on the contract as liquidated damages; $3,000 damages for the loss of rents and profits for the months of January, February and March; and damages at the rate of $1,000 per month thereafter until possession is restored to them.
The cause was tried to the court in equity. Judgment was entered in favor of the defendants on the 31st day of March, 1953, for the cancellation of the contract, possession of the property, and the retention of the payments made thereon as liquidated damages.
On the issue of plaintiff's competency, considerable evidence was introduced on both sides, including testimony of medical, neurological, and psychiatric experts. From this it appears that following the sudden death of her husband and the shocking nature thereof, the plaintiff suffered a severe reactive depression. The experts disagree as to whether her experiences rendered her incompetent to transact business. However, it appears from the entire record that she understood what she was doing and was not incompetent in a legal sense. The court so found, and its finding is conclusive of this issue.
On the issue of fraud, although somewhat conflicting, there is ample evidence to support the court's finding that the defendants did not fraudulently represent to the plaintiff that she could obtain beer and liquor retail licenses. The evidence is to the effect, she was told by the defendants and others that a year's residence in Idaho was qualification required by the law for such licenses. However, defendant John Cupic testified that he told plaintiff she could operate the business under the licenses held by defendants until the end of December, and in the meantime, by incorporating the business, or employing a bartender who could qualify, she could in that way obtain licenses to carry on thereafter.
The Cupic brothers had been residents of Idaho for some years and had owned and operated the Albeni Falls Club, a short distance from the Ron-D-Voo, before they acquired the Ron-D-Voo Club, and they were the holders of retail liquor and beer licenses. It must, therefore, be presumed that they were familiar with the laws of this state relating to the issuance of such licenses, and the qualifications of licensees. They were dealing with a party whom they knew had been a resident of Alaska, a nonresident of Idaho, and unfamiliar with the licensing requirements. If the other elements of fraud had been established, the relationship of these parties was such as to entitle the plaintiff to relief on that ground, even though the misrepresentations charged were representations of law. 37 C.J.S., Fraud, § 55; 23 Am.Jur., Fraud and Deceit, §§ 48 and 49. However, deeming it unnecessary, we do not consider further the question of fraud. It is sufficient here to say that John Cupic, in making the representations or suggestions, which he says he did make, put himself in the position of representing to plaintiff that she could carry on the business in violation of the law, and of encouraging her to do so. §§ 23-910, 23-1010, I.C. Such conduct does not commend defendants' cause to a court of equity.
The ultimate and decisive question is as to whether, under the circumstances, the defendants are entitled to forfeit the money paid on the contract. 'Equity abhors forfeitures.' Stringer v. Swanstrum, 66 Idaho 752, 168 P.2d 826, 830. 'Equity will not grant specific performance of a forfeiture unless the failure to do so would lead to an unconscionable result.' Sullivan v. Burcaw, 35 Idaho 755, 208 P. 841. The contract provision, here involved, makes time the essence of the agreement, and in case of purchaser's default, 'any payments theretofore made hereunder by the purchaser shall be retained by the seller in liquidation of damages sustained by reason of such failure.' Generally speaking, parties to a contract may agree upon liquidated damages in anticipation of a breach, in any case where the circumstances are such that accurate determination of the damages would be difficult or impossible, and provided that the liquidated damages fixed by the contract bear a reasonable relation to actual damages. But, where the forfeiture or damage fixed by the contract is arbitrary and bears no reasonable relation to the anticipated damage, and is exorbitant and unconscionable, it is regarded as a 'penalty', and the contractual provision therefor is void and unenforceable. The applicable principle is set out in 1 Restatement of the Law, Contracts, § 339, as follows:
'Liquidated Damages and Penalties.
'(1) An agreement, made in advance of breach, fixing the damages therefor, is not enforceable as a contract and does not affect the damages recoverable for the breach, unless
'(a) the amount so fixed is a reasonable forecast of just compensation for the harm that is caused by the breach, and
'(b) the harm that is caused by the breach is one that is incapable or very difficult of accurate estimation.'
The question was posed by the supreme court of Utah in a similar case as follows:
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Ellis v. Butterfield, 12086
... ... Thus, Ellises do not seek restitution of amounts paid on the theory that the liquidated damages were exorbitant and a penalty, see e. g. Graves v. Cupic, 75 Idaho 451, 272 P.2d 1020 (1954), but they seek to retain the property. 2 ... The issues in this case are very ... ...
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