Olmo v. Matos, WORLD-CARBERRY

• Decision Date: 20 October 1994
• Docket Number: WORLD-CARBERRY
• Citation: 439 Pa.Super. 1,653 A.2d 1
• Parties: Luis OLMO and Antonio Disla v. Pedro MATOS and Magdalia Matos, h/w. Luis OLMO and Antonio Disla v. REALTY& HAAS, INC. Appeal of Pedro MATOS and Magdalia Matos. . Agreed
• Court: Pennsylvania Superior Court

Page 1

653 A.2d 1

439 Pa.Super. 1

Luis OLMO and Antonio Disla v. Pedro MATOS and Magdalia Matos, h/w.

Luis OLMO and Antonio Disla v. REALTY WORLD-CARBERRY & HAAS, INC.

Appeal of Pedro MATOS and Magdalia Matos.

Superior Court of Pennsylvania.

Agreed Oct. 20, 1994.

Filed Dec. 2, 1994.

Reargument Denied Feb. 9, 1995.

Jay Meyers, Philadelphia, for appellants.

Mark D. Mungello, Clementown, NJ, for Olmo, appellees.

Before CIRILLO, OLSZEWSKI and HESTER, JJ.

CIRILLO, Judge:

This is an appeal from an order of the Court of Common Pleas of Philadelphia County denying appellants Pedro and Magdalia Matos' post-trial motions. We affirm.

On July 15, 1988, appellants Pedro and Magdalia Matos (the Sellers) executed an Agreement of Sale (the Agreement) with Luis Olmo and Antonio Disla (the Buyers) for property located at 1840 South 5th Street, Philadelphia. The purchase price of the property and buildings situated thereon was $40,000.00. On the date of execution, Buyers paid to Sellers a deposit in the amount of $4,000.00, to be held in an interest bearing escrow account with Realty World-Carberry and Haas, Inc. (the Realtor). The Agreement stated that time was of the essence, and, particularly, that settlement was to be made on or before October 14, 1988. On or about August 2, 1988, Buyers made a payment to Sellers personally in the amount of $20,000.00 on account of the purchase price. ¹

Via an oral lease between Buyers and Sellers, Buyers were permitted to occupy the subject premises prior to settlement in order to commence the operation of a general/food store. In return, Buyers were required to make rental payments to the Sellers in the amount of $350.00 per month.

The parties did not complete the sale of the property pursuant to the terms of the Agreement, and Buyers filed separate actions against Sellers and Realtor in the Court of Common Pleas of Philadelphia County, seeking to recover the $4,000.00 deposit held in escrow by Realtor, and the $20,000.00 paid on account of the purchase price to Sellers, respectively. Sellers filed a counterclaim for compensation for breach of the Agreement, and damages caused to the property while it was in possession of Buyers pursuant to the oral lease agreement. The two matters were consolidated for purposes of trial.

A two-day bench trial was held before the Honorable John J. Chiovero. With respect to the monies tendered by Buyers, Judge Chiovero awarded $20,000.00 to Buyers, and $4,000.00 to Sellers. With respect to Sellers' counterclaim for damages, Judge Chiovero awarded Sellers $7,357.63. ² In sum, Judge Chiovero's order required Sellers to refund $12,642.37 to Buyers, approximately one-half the amount Buyers tendered to Sellers. Sellers filed post-trial motions, which were denied. This timely appeal followed. On appeal, Sellers present four issues for our consideration:

(1) Where the buyers fail to complete the purchase by failing to pay in the money required, may the sellers retain the deposits as liquidated damages?

(2) Where the [buyers] fail[ ] to appear in Court, are they entitled to an award?

(3) May the [buyers] assign their interest in the real estate and agreement of sale to one of their wives?

(4) Did the [sellers] establish the damage done by [buyers] and the loss of rents incurred?

Initially, we note our standard of review in this case. The role of an appellate court in reviewing the trial court's final judgment is to determine whether the findings of the trial court are supported by competent evidence and whether the trial court committed error in the application of law; findings of the trial judge in a non-jury case must be given the same weight and effect on appeal as a verdict of a jury and will not be disturbed on appeal absent error of law or abuse of discretion. Stahli v. Wittman, 412 Pa.Super. 281, 603 A.2d 583 (1992); Reuter v. Citizens & Northern Bank, 410 Pa.Super. 199, 599 A.2d 673 (1991); Porter v. Kalas, 409 Pa.Super. 159, 597 A.2d 709 (1991). When this court reviews the findings of the trial judge, the evidence is viewed in the light most favorable to the victorious party below and all evidence and proper inferences favorable to that party must be taken as true and all unfavorable inferences rejected. Short v. Metropolitan Life Ins. Co., 339 Pa.Super. 124, 488 A.2d 341 (1985).

Generally, there are three remedies available to a seller when a buyer defaults under an agreement of sale for real property. Bafile v. Borough of Muncy, 527 Pa. 25, 30, 588 A.2d 462, 464 (1991) (citing Trachtenburg v. Sibarco Stations, Inc., 477 Pa. 517, 384 A.2d 1209 (1978)). First, a seller can sue for damages, measured by the contract price minus the fair market value at the time of the breach, less any payments already tendered. Second, a seller may sue for specific performance of a contract, provided that the seller can demonstrate that without this equitable relief he or she will not be in the same position as if the buyer had not breached the contract. Third, a seller can sue for the purchase price of the property as stated in the agreement and other damages, conditioned upon the transfer of the property. Id.

Paragraph 14 of the Agreement is entitled DEFAULT-TIME OF THE ESSENCE, and provides in pertinent part:

Should the Buyer:

(a) Fail to make any additional payments as specified in paragraph # 3, ³ or

* * * * * *

then in such case, all deposit money and other sums paid by the Buyer on account of the purchase price, whether required by the agreement or not, may be retained by the Seller:

(1) On account of the purchase, or

(2) As monies to be applied to the Seller's damages, or

(3) As liquidated damages for such breach,

as the Seller may elect, and in the event that the Seller elects to retain the monies as liquidated damages ..., the Seller shall be released from all liability or obligations and this agreement shall be NULL AND VOID and all copies shall be returned to the Seller's agent for cancellation.

(emphasis added). For reasons that are not readily apparent, Buyers failed to tender the balance of the purchase price on the date scheduled for settlement. The Sellers retained the amounts already tendered $4,000.00 and $20,000.00, as liquidated damages.

Traditionally, a seller may elect to retain deposit money as liquidated damages pursuant to a contractual stipulation, as did Seller in this case, insofar as the amount retained was the sum agreed upon. Tudesco v. Wilson, 163 Pa.Super. 352, 60 A.2d 388 (1948). In fact, " '[n]o rule in respect to the contract (for the sale of real estate) is better settled ... than this: that the party who has advanced money, or done an act in part performance of the agreement, and then stopped short and refuses to proceed to its ultimate conclusion, the other party being ready and willing to proceed and fulfill all his stipulations according to the contract, will not be permitted to recover back what has thus been advanced or done.' " Sanders v. Brock, 230 Pa. 609, 614, 79 A. 772, 773 (1911) (quoting Hansbrough v. Peck, 72 U.S. (5 Wall.) 497, 506, 18 L.Ed. 520 (1866)).

A liquidated damages clause is not enforceable, however, where such enforcement would amount to a penalty. See, e.g., Laughlin v. Baltalden, Inc., 191 Pa.Super. 611, 159 A.2d 26 (1960); Kraft v. Michael, 166 Pa.Super. 57, 70 A.2d 424 (1950). Whether a provision for the retention of cash payments amounts to a penalty must be determined from the language of the contract, the intentions of the parties, the subject of the contract and its surroundings, the ease or difficulty in measuring the amount of damages, and the sum stipulated. Laughlin, 191 Pa.Super. at 618, 159 A.2d at 29; Kraft, 166...