Moritz v. Broadfoot

• Citation: 35 Wis.2d 343,151 N.W.2d 142
• Parties: Alfred F. MORITZ et al., Respondents, v. David W. BROADFOOT, Appellant.
• Decision Date: 06 June 1967
• Court: United States State Supreme Court of Wisconsin

Page 142

151 N.W.2d 142

35 Wis.2d 343

Alfred F. MORITZ et al., Respondents, v. David W. BROADFOOT, Appellant.

Supreme Court of Wisconsin.

June 6, 1967.

Gregory Gramling, Jr., Milwaukee, Roland J. Steinle, Jr., Milwaukee, of counsel, for appellant.

Ames, Riordan, Crivello & Sullivan, Milwaukee, John H. Ames, Milwaukee, of counsel, for respondents.

HEFFERNAN, Justice.

It is apparent from the clause in question that it is the seller who has the option of taking the earnest money as liquidated damages in the event of the buyer's default. As the trial judge correctly pointed out, the problem is one of ascertaining the intention of the parties, and it is clear that the intention of the parties was, by use of this clause, merely to give some security and assurance to the seller that the buyer would perform. It was not designed as an option to the buyer to pay liquidated damages as an alternative to performing the contract. The purpose of this clause is to protect the seller and not to provide an exculpatory method of avoiding the purchase of the real estate.

The clause also represents an attempt to predetermine damages in the event of the buyer's breach, as the extent of those damages are reasonably contemplated by the parties at the time of the contract. McCormick, Damages (hornbook series), p. 608, sec. 150. Assuming that they are reasonable, the seller may, upon breach, rely upon the sum fixed, and 'If he chooses liquidated damages he may retain the down payment without further fuss or bother.' Zimmermann v. Thompson (1962), 16 Wis.2d 74, 76, 114 N.W.2d 116, 117. In that same case, we held that a liquidated-damages clause to be exercised at the seller's option did not foreclose the seller from seeking his actual damages, though he could not keep the earnest money as liquidated damages and in addition seek actual damages. It is equally true that the presence of a liquidated-damages clause does not prevent the injured party from seeking equitable relief as a complete alternative to damages. The rule as stated in McCormick, Damages, p. 613, sec. 152, provides:

'The fact, however, that the damages have thus been agreed upon in advance, does not mean, in a case where * * * in the absence of a liquidated damage clause be entitled to specific relief in equity because money damages are not an adequate equivalent, that the agreed damages are 'adequate' in this sense. Despite the liquidated damage clause, the covenant may be enforced by decree of specific performance or injunction if the case is otherwise a proper one for such relief.'

As applicable to this case, the annotation appearing in 98 A.L.R. 890V(b) summarizes the rule thus:

'The cases are almost unanimous in support of the rule that a mere provision in a land contract that in case of default the vendee shall forfeit, as liquidated damages, the deposit made on the contract, does not preclude the vendor from maintaining a suit for specific performance.'

The law of Wisconsin follows that rule and, in the absence of a clause that permits the payment of a certain sum of money in lieu of and as a complete alternative to performance, ¹ at the buyer's option, the seller may insist upon specific performance of the contract even though the buyer wishes to be free of the contract upon relinquishment of his earnest-money payment.

In Dekowski v. Stachura (1922), 176 Wis. 154, 157, 185 N.W. 549, 550, this

court, although, on the facts, concluding that the case did not warrant specific performance, relied upon the following reasoning, which we deem correctly states the law:

'* * * whenever it appears that the intention of the parties was that the contract should be performed and that a stipulation for liquidated damages or a penalty was inserted merely as a security for such performance, then the contract will be specifically enforced, notwithstanding the contract is alternative in form.'

The above cited case stresses the it is the intention of the parties that governs. In the instant case there is nothing to indicate that the clause was inserted for the purpose of exculpating the buyer in case of breach. Rather, its apparent purpose was to assure performance of the contract, and, in the absence of further facts, we would conclude that the seller can nevertheless enforce the sale by the power of a court of equity to invoke a decree of specific performance.

However, the buyer claims on this appeal, as he did at trial, that the seller's retention of...