Lewis v. Premium Inv. Corp., 25510.
Court | United States State Supreme Court of South Carolina |
Citation | 568 S.E.2d 361,351 S.C. 167 |
Docket Number | No. 25510.,25510. |
Parties | William LEWIS, Respondent, v. PREMIUM INVESTMENT CORPORATION, Petitioner. |
Decision Date | 05 August 2002 |
Linda Weeks Gangi, of The Thompson Law Firm, of Conway, for petitioner.
William Paul Young, of North Myrtle Beach, for respondent. Justice BURNETT.
The Court granted a writ of certiorari to review the Court of Appeals' decision in Lewis v. Premium Investment Corp., 341 S.C. 539, 535 S.E.2d 139 (Ct.App.2000). We affirm as modified.
FACTS
On October 29, 1976, Respondent William Lewis (Purchaser) entered into an installment sales contract to purchase real estate in North Myrtle Beach from Petitioner Premium Investment Corporation (Seller). The contract contains the following default provision:
In the event the Purchaser should fail to make any due installment, and such default shall continue for a period of thirty (30) days, the Seller shall have the right to declare this contract terminated and all amounts previously paid by the Purchaser will be retained by the Seller as rent.
Four months after executing the contract, Purchaser placed a mobile home on the lot and his family moved in. Purchaser made all payments through July 1988.1 After July 1988, no further payments were made.
In October 1989, one year after Purchaser's default, Seller mailed Purchaser a notice canceling the contract. The notice was returned "unclaimed" to Seller. Although sent by certified mail to the correct address, Purchaser asserts he did not receive the notice.
In 1992, Purchaser's wife contacted Seller's representative to determine if he would allow her to assume the payments. The representative passed away without making a commitment.
On August 27, 1996, Purchaser's attorney forwarded Seller a check for $2,451.34. Seller refused to accept the check.
At the time of default (August 1988), Purchaser had made 141 of the approximately 182 monthly payments and owed $2,440.14. The balance as of August 31, 1998, was $7,726.33. Purchaser brought this action for breach of contract and specific performance. In its amended answer and counterclaim, Seller alleged Purchaser was in default and sought an order terminating the contract. Alternatively, Seller sought judgment in the amount of $7,443, reasonable attorney's fees, and foreclosure of any equitable interest Purchaser may have obtained as a result of the transaction.2
The master-in-equity determined Purchaser was in default of the agreement and Seller had the right to terminate the agreement pursuant to its terms. The Court of Appeals reversed, holding Purchaser had an equitable interest in the property and, therefore, Seller's right to seek forfeiture or to foreclose was subject to Purchaser's right of redemption which could not have been waived by the agreement. Id.
DISCUSSION
Whether an equitable right of redemption exists in spite of a strict forfeiture provision in an installment land contract has not been specifically decided by this Court. In deciding the answer to this question, we must determine whether equitable principles may alter the clear and unambiguous terms of the parties' contract.
15 RICHARD R. POWELL, REAL PROPERTY '84D.01 at 3 (2000); Ellis v. Butterfield, 98 Idaho 644, 570 P.2d 1334, 1336 (1977) ( ).3 Contrary to existing mortgage protections, a seller may typically avoid foreclosure procedures by including a forfeiture remedy in the installment land contract. See Matthew Cole Bormuth, note, Real Estate B The Wyoming Installment Land Contract: A Mortgage in Sheep's Clothing? Or What You See Isn't What You Get, 28 LAND AND WATER LAW REVIEW 309 (1993); Juliet M. Moringiello, A Mortgage by Any Other Name: A Plea for the Uniform Treatment of Installment Land Contracts and Mortgages under the Bankruptcy Code, 100 DICK. L.R. 733 (1996) ( ).
Basic contract law provides that when a contract is clear and unambiguous, the language alone determines the contract's force and effect. C.A.N. Enterprises, Inc. v. South Carolina Health & Human Servs. Fin. Comm'n, 296 S.C. 373, 373 S.E.2d 584 (1988). It is not the function of the court to rewrite contracts for parties. See Gambrell v. Travelers Ins. Cos., 280 S.C. 69, 310 S.E.2d 814 (1983)
.
Parties to a contract may stipulate as to the amount of liquidated damages owed in the event of nonperformance. Tate v. Le Master, 231 S.C. 429, 99 S.E.2d 39 (1957). Where, however, the sum stipulated is plainly disproportionate to any probable damage resulting from breach of contract, the stipulation is an unenforceable penalty. Id.; Kirkland Distributing Co. of Columbia, S.C. v. United States, 276 F.2d 138 (4th Cir.1960). Equity will not enforce a penalty for breach of contract. South Carolina Dep't of Health and Envtl. Control v. Kennedy, 289 S.C. 73, 344 S.E.2d 859 (Ct.App.1986). "Equity does not favor forfeitures or penalties and will relieve against them when practicable in the interest of justice." Lane v. New York Life Ins. Co., 147 S.C. 333, 374, 145 S.E. 196, 209 (1928) citing Bangert v. John L. Roper Lumber Co., 169 N.C. 628, 86 S.E. 516, 517 (1915).
The above-stated principles of contract law are consistent with the conclusion that a provision in an installment land contract declaring forfeiture in the event of purchaser default can, in particular circumstances, constitute a penalty. In those circumstances, as in other contractual instances where a stipulated sum amounts to a penalty, we conclude it would be inequitable to enforce the forfeiture provision without first allowing the purchaser an opportunity to redeem the installment contract by paying the entire purchase price.
Our conclusion is supported by authority from other jurisdictions. In numerous other states, courts claim an equitable power to "deny or delay forfeiture when fairness demands." Freyfogle, supra 620; see Hatfield v. Mixon Realty Co., 269 Ark. 803, 601 S.W.2d 894 (Ct.App.1980)
; Cedar Lane Investments v. American Roofing Supply of Colorado Springs, Inc., 919 P.2d 879 (Colo.Ct.App.1996); Ellis v. Butterfield, supra; Nelson v. Robinson, 184 Kan. 340, 336 P.2d 415 (1959); Perkins v. Penney, 387 A.2d 205 (Me.1978); Rothenberg v. Follman, 19 Mich.App. 383, 172 N.W.2d 845 (1969); O'Meara v. Olson, 414 N.W.2d 563 (Minn.Ct.App.1987); Beck v. Strong, 572 S.W.2d 484 (Mo.Ct.App.1978); Sharp v. Holthusen, 189 Mont. 469, 616 P.2d 374 (1980); Martinez v. Martinez, 101 N.M. 88, 678 P.2d 1163 (1984); Lamberth v. McDaniel, 131 N.C.App. 319, 506 S.E.2d 295 (1998); Straub v. Lessman, 403 N.W.2d 5 (N.D.1987); T-Anchor Corp. v. Travarillo Assocs., 529 S.W.2d 622 (Tex.Civ.App.1975); Call v. Timber Lakes
Corp., 567 P.2d 1108 (Utah 1977); Bailey v. Savage, 160 W.Va. 523, 236 S.E.2d 203 (1977); see also 4 Richard R. Powell, REAL PROPERTY § 37.21[1][c] at 132 (2001) (). In fact, the authoritative treatise on real property law provides, "no state today is likely to condone a purchaser forfeiture that greatly exceeds the vendor's loss." 15 Powell, REAL PROPERTY § 84D.01[4] at 12.
As discussed at length in Bartles v. Livingston, 282 S.C. 448, 319 S.E.2d 707 (Ct.App.1984), the common law recognized an equitable right of redemption in the context of mortgages well before any statutory right was granted. The mortgagor was given an equitable right to redeem the property...
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