Langlois v. Langlois

• Decision Date: 01 March 1949
• Docket Number: No. 3812.,3812.
• Parties: LANGLOIS v. MALONEY (two cases). LANGLOIS v. SWEENEY.
• Court: New Hampshire Supreme Court

64 A.2d 697

LANGLOIS

v.MALONEY (two cases).

LANGLOIS

v.SWEENEY.

No. 3812.

Supreme Court of New Hampshire.

March 1, 1949.

COPYRIGHT MATERIAL OMITTED.

Exceptions from Superior Court, Sullivan County; Grimes, Judge.

Actions of covenant and assumpsit by Maynard G. Langlois against Gordon Maloney, Mary Maloney, and Nellie A. Sweeney, respectively, to recover the amount of a deposit on the purchase price of a hotel corporation's capital stock. Verdict for plaintiff after trial by the court, and all parties bring exceptions.

Exceptions overruled.

Actions of covenant, each with a count in assumpsit added by amendment. The plaintiff seeks to recover twenty thousand dollars paid to the defendants upon execution of a contract dated October 31, 1946 by which they undertook to sell and he to purchase for forty-five thousand dollars all of the capital stock of Claremont Hotel Company, Incorporated, a hotel business then owned and operated by the defendants at Claremont. It is not disputed that the plaintiff breached the contract and has no further claim to the stock or the business.

The actions were tried by the Court, under a restrictive agreement the nature of which appears from the following excerpt from the findings and rulings: ‘The plaintiff * * * agreed that if the amendments were allowed, the plea would be restricted on the matter of proof to an implied promise and that the sole issue before the Court was whether the plaintiff could recover the sum of twenty thousand dollars or nothing at all, and that the question of any benefits which the plaintiff may have given the defendants or any claim they might have for benefits given were not to be considered.’ Pursuant to this agreement, evidence of actual damage suffered by the defendants was excluded.

The Court ruled that the contract should be construed to prevent a forfeiture of the plaintiff's deposit of twenty thousand dollars, and interpreted the ninth clause of the contract to require forfeiture of installment payments made on account of the balance of the purchase price, but not of the original deposit, and entered a verdict for the plaintiff for twenty thousand dollars. The pertinent provisions of the contract are stated in the opinion, where other facts appear.

The defendants seasonably excepted to the denial of their motions for nonsuits and directed verdicts, to the verdict returned, and to denial of their motion for leave to present evidence of damage suffered. The plaintiff excepted to the denial of his motion for judgment. All questions of law presented by these exceptions are reserved and transferred by the Presiding Justice (Grimes, J.).

Buckley, Zopf & Hamlin, of Claremont (Robt. B. Buckley, of Claremont, orally), for plaintiff.

Leahy & Denault, of Claremont (Albert D. Leahy, of Claremont, orally), for defendants.

DUNCAN, Justice.

Pursuant to the terms of the contract, upon its execution the plaintiff made the down payment of twenty thousand dollars which he now seeks to recover, and received forty of the one hundred shares of stock which he undertook to buy. The unpaid balance of twenty-five thousand dollars he agreed to pay in monthly installments of five hundred dollars each, with interest at five percent per annum. The balance of the stock was to be delivered, ten shares when an additional ten thousand dollars had been paid, and the remaining fifty shares on final payment of the balance of purchase price. The crucial clauses of the contract provide in part as follows:

‘9. In case of default in any of the monthly payments of principal and/or interest when due, and for thirty (30) days thereafter, this contract shall thereupon, at the option of the Sellers, be forfeited and determined and terminated and all payments of principal and interest which shall have been made hereon, shall be retained by the Sellers by way of liquidated damages for breach of contract on the part of the Purchaser to consummate said purchase, and the said Peoples National Bank shall return to the Sellers all certificates of stock together with their resignations as directors and officers of said corporation * * *

‘10. The Purchaser further agrees, in case of default in paragraph 9 above, to transfer and deliver up to the Sellers the certificate or certificates of capital common stock for forty (40) shares which was delivered to him by the Sellers upon the execution of this agreement; and he shall also transfer and deliver up to the Sellers certificate or certificates of capital common stock which may have been transferred to him under paragraph 7 of this agreement.’

Pursuant to other provisions of the contract, the plaintiff took possession of the business on November 1, 1946. He continued in possession until December 1947. He was made a director of the corporation, the defendants Maloney continuing as the other two directors. Nine installments were paid by the plaintiff pursuant to the terms of the contract. The tenth having been in default for more than thirty days, on or about October 14, 1947, the defendants made an examination of the books of the company, and on or before December 26, 1947, the plaintiff surrendered the forty shares of stock which he held. An annual meeting of the corporation occurred on December 26, 1947. Following it a new contract was executed, by which it was agreed that the prior contract was terminated for material breach by the plaintiff, and that the plaintiff would buy and the defendants would sell the one hundred shares of stock for $25,000, to be paid on January 2, 1948. The plaintiff failed to perform the second contract and on January 3, 1948, through his attorneys demanded repayment by the defendants of the twenty thousand dollar deposit made by him on October 31, 1946.

The Trial Court ruled that ‘the reference to principal in Clause Nine refers to the monthly payments on the unpaid balance and does not include the twenty thousand dollars' and that ‘it may be implied from the language used in the contract itself, that the plaintiff shall not lose the twenty thousand dollars, and that, therefore, the defendant should return it to him since he has surrendered the forty shares of stock.’ Accordingly a verdict was returned for the plaintiff.

The rulings of the Trial Court appear to have been made out of deference to the principle that forfeitures ‘are not favored in the law,’ and in consequence of the conclusion that ‘if a construction could be adopted which would prevent a forfeiture of the twenty thousand dollars, then such a construction should be adopted.’ They turn upon a holding that the provisions of the ninth clause of the contract are ambiguous, and should be construed to permit the sellers to retain only the monthly payments made by the plaintiff.

The net effect of the Trial Court's action, limited as it was by the agreement of the parties, was to find the plaintiff entitled to the return of his twenty thousand dollar deposit, less whatever actual damage the defendants may be able to establish. This appears to us to be the necessary effect of the ruling that ‘in case it is finally determined that the plaintiff is entitled to a return of all or any part of the twenty thousand dollars * * * then it is found that the defendants have not had a fair opportunity to present * * * a defense and they should be given an opportunity to do so.’ In this view, the plaintiff's motion for judgment was properly denied. If the defendants are not entitled to retain the deposit as liquidated damages, it is obvious that judgment should not be entered against them until their damages have been adjudicated.

No exceptions to the findings and rulings of the Court are presented by the reserved case. The defendants' exceptions to the denial of their motions for nonsuits and directed verdicts present the issue of the sufficiency of the evidence to support the action of the Court. Their general exception to the verdict adds nothing to the exceptions previously taken. See Eastman v. Waisman, 94 N.H. 253, 51 A.2d 151 and cases cited.

While we do not find ourselves wholly in accord with the Trial Court's construction of the contract of October 31, 1946, we are nevertheless of the opinion that the Court was warranted in holding the plaintiff's deposit to be in the nature of a penalty, or security for performance of the contract, rather than a forfeiture representing a genuine and reasonable pre-estimate of damages for breach of the contract.

In Hurd v. Dunsmore, 63 N.H. 171, 172, the law as laid down by our decisions was thus stated: ‘Whether the sum mentioned * * * is to be treated as a penalty or as liquidated damages, is a question to be decided upon a consideration of the whole instrument. It is a question of intent, to be ascertained from the language of the instrument, the nature of the agreement, and from the circumstances of the parties, and not by technical rules of law * * *.’

The language of the instrument in this case motivates against the conclusion reached by the Trial Court. In abbreviated form, it was this: ‘In case of default in any of the monthly payments of principal and/or interest * * * this contract shall * * * be forfeited and * * * terminated and all payments of principal and interest * * * made hereon shall be retained by the Sellers by way of liquidated damages * * *.’ Literal compliance with this provision would permit the defendants to retain the plaintiff's deposit. The phrase ‘all payments of principal * * * made hereon’, refers to payments made on ‘this contract’; and the words ‘all payments' are...