McGuckin v. Harvey

• Decision Date: 19 April 1929
• Docket Number: No. 26831.,26831.
• Citation: 225 N.W. 19,177 Minn. 208
• Parties: McGUCKIN v. HARVEY et al.
• Court: Minnesota Supreme Court

225 N.W. 19

177 Minn. 208

McGUCKIN v. HARVEY et al.

No. 26831.

Supreme Court of Minnesota.

April 19, 1929.

Appeal from District Court, Wilkin County; S. A. Flaherty, Judge.

Action by H. J. McGuckin against Thomas J. Harvey and another. Verdict for plaintiff, and, from an order denying their motion for a new trial, defendants appeal. Reversed.

Henry G. Wyvell, of Breckenridge, and Peterson & Oehler, of St. Paul, for appellants.

Lewis E. Jones, of Breckenridge, and Purcell & Heder, of Wahpeton, N. D., for respondent.

DIBELL, J.

Action to rescind a contract upon the ground of fraud and to recover $3,000 paid upon it. The court directed a verdict for the plaintiff. The defendants appeal from an order denying their motion for a new trial.

On August 31, 1926, the defendant Thomas J. Harvey was the owner of the Stratford Hotel at Breckenridge. The other defendant is his wife. On that day he and the plaintiff entered into a written contract for the sale to the plaintiff of the fixtures and furniture and all personal property pertaining to the hotel for $20,000 and a lease of the building for 15 years at $600 per month. At that time the plaintiff paid the defendant $3,000 to apply upon the sale. A lease and bill of sale were executed and deposited in escrow in the Breckenridge National bank. The $20,000 was to be paid by the $3,000 cash, $7,000 was to be paid on September 20, and the balance of $10,000 in installments. There was a provision in the contract that if the $7,000 was not paid $3,000 should be "held and retained by said Thomas J. Harvey [party of the first part] as liquidated damages herein."

At the close of the case the court held that there was not proof of fraud. This holding was favorable to the defendants appealing and is not subject to review. The directed verdict is sought to be sustained upon the ground that there was a rescission by consent, and that the provision for retaining the $3,000 was by way of penalty and not liquidated damages. These are the two questions.

1. By the agreement the plaintiff was given a limited joint possession with the defendants of the hotel, he conducting it and depositing the net proceeds in the bank pending the payment of the $7,000. On September 15, 1926, the plaintiff assumed to rescind for fraud, gave the defendants notice of his rescission, and abandoned possession. The defendants thereupon resumed control and management. Under these circumstances the defendants did not assent to a rescission. Nor did their taking the money deposited in the bank while the plaintiff operated the hotel amount to a consent. It was the agreement that they should have it in case of the plaintiff's default.

2. In Christianson v. Haugland, 163 Minn. 73, 203 N. W. 433, Judge Lees said:

"The purpose of a penalty is to secure performance, while the purpose of stipulating damages is to fix the amount to be paid in lieu of performance."

In 2 Dunnell Minn. Dig. (2d Ed.) §§ 2536, 2537, our holdings in part are paraphrased as follows:

"Liquidated damages are damages the amount of which has been determined by anticipatory agreement between the parties. * * *

"As a general rule, where the injury is susceptible of a definite measurement, as in all cases where the breach consists in the nonpayment of money, the parties will not be allowed to make a stipulation for a further amount, whether in the form of a penalty or liquidated damages. But where, on the other hand, the injury in question is uncertain in itself, and not susceptible of being reduced to a certainty by a legal computation, it may be settled beforehand by...