Reiter v. Bailey

• Court: Washington Supreme Court
• Writing for the Court: GERAGHTY, Justice.
• Citation: Reiter v. Bailey, 180 Wash. 230, 39 P.2d 370 (Wash. 1934)
• Decision Date: 26 December 1934
• Docket Number: 25040.
• Parties: REITER et al. v. BAILEY et ux.

39 P.2d 370

180 Wash. 230

REITER et al. v. BAILEY et ux.

No. 25040.

Supreme Court of Washington

December 26, 1934

Department 2.

Appeal from Superior Court, King County; Chester A. Batchelor Judge.

Action by Julia Reiter, individually, and Julia Reiter and the Seattle Trust Company, as coexecutors of the estate of Carl Reiter, deceased, against Carl Bailey and wife. From a judgment of dismissal, plaintiffs appeal.

Reversed with directions.

McMicken Ramsey, Rupp & Schweppe, of Seattle, for appellants.

C. A Schneider, of Seattle, for respondents.

GERAGHTY Justice.

This action was brought by plaintiffs to recover of the defendants damages for their breach and abandonment of an executory contract to purchase real property. The facts as found by the court are as follows:

Julia Reiter, one of the plaintiffs, and her husband, since deceased, entered into a contract with the defendants, by the terms of which they agreed to sell to the defendants, and the defendants agreed to purchase, certain real property in the city of Seattle. The agreed purchase price was $4,371.30, payable in installments. After having made several payments under the contract, the defendants notified the plaintiffs that they did not intend 'to take such real estate or be bound by said contract, and thereupon abandoned said property and refused to abide by the terms of said contract,' without the consent or acquiescence of the plaintiffs. At the time of such abandonment, there remained unpaid upon the principal of the contract the sum of $3,248.91. The fair market value of the property at the time of the abandonment was $2,500. The court found that, among other things, the contract provided as follows:

'Time is the essence of this contract and in case the purchaser shall fail to make any payments of the said purchase price, promptly at the time the same shall fall due an hereinBefore specified, or promptly to perform any covenant or agreement aforesaid, the seller may elect to declare a forfeiture and cancellation of this contract and upon such election being made, all rights of the purchaser hereunder shall cease and determine and any payments theretofore made hereunder by the purchaser shall be retained by the seller in liquidation of all damages sustained by reason of such failure.'

The trial court, having reached the conclusion that the stipulation for liquidated damages contained in the above provision was applicable to the case and binding upon the plaintiffs, entered a judgment of dismissal, from which the plaintiffs have appealed.

We have presented here for solution the sole question whether the provision for liquidated damages is limited in its application to a case arising out of the election of the vendors to declare a forfeiture and cancellation of the contract, or is general in its application and forecloses the right of the vendors to sue for full damages resulting from breach of the contract.

The appellants contend that the clause has no application in this case, because they did not 'elect to declare a forfeiture and cancellation,' but, on the contrary, are seeking an affirmance of the contract, not to the extent of requiring its specific performance, but as the basis for a recovery of their actual damage, being the difference between the balance unpaid on the contract price and the present market value of the property. They argue that the quoted clause is for the benefit of the vendors, to be taken advantage of by them at their election, and that, since they did not elect to exercise the right to declare a forfeiture, with the attendant limitation of damages to the amount theretofore paid by the vendees, the provision for liquidated damages does not become operative.

On the other hand, the respondents contend that the appellants are suing for breach of the contract, and therefore the provision that 'any payments theretofore made by the purchaser shall be retained by the seller in liquidation of all damages' fixes the sole measure of damages; that the parties have a right to so stipulate; and that it is the duty of the court to give effect to the stipulation.

If we correctly understand respondents' further contention, it is that as to the appellants' right of election they were limited either to sue for specific performance or to terminate the contract, keeping the payments made as liquidated damages.

The clause of the contract here in question makes time of the essence, and in requiring prompt payment by the purchasers and granting the vendors the right to declare a forfeiture it is clear that it is the intention to give an additional security or benefit to the vendors, in the event of a forfeiture, by the right to retain payments made upon the purchase price. If no declaration of forfeiture is made, the rights and liabilities thereunder are not called into operation; in other words, it is not agreed that in all events the measure of damages for any breach of the contract shall be the payments theretofore made, but that if the vendors elect to declare a forfeiture, this shall be the measure of damages. That such a forfeiture clause is for the benefit of the vendor and may be waived is supported by numerous authorities. In...