Shields v. Early

Decision Date23 April 1923
Docket Number23217
Citation95 So. 839,132 Miss. 282
CourtMississippi Supreme Court
PartiesSHIELDS v. EARLY

1 DAMAGES. Essence of "penalty" and "liquidated damages" defined; whether stipulation in contract penalty or liquidated damages to be determined from circumstances at time of execution: deposit for breach made in part performance of contract regarded as stipulated damages.

Whether a contract provides for a penalty for its breach or liquidated damages is often a question of much difficulty. The law inclines toward interpreting such a stipulation as a penalty. The essence of a penalty is a stipulation as in terrorem while the essence of liquidated damages is a genuine covenanted preestimate of such damages. Whether the sum stipulated is a penalty or liquidated damages is a question of construction to be decided from the terms and inherent circumstances of the particular contract judged as of the time of its execution and not as of the time of its breach. If the cash payment or deposit is made in part performance of the contract, it will generally be regarded as liquidated damagees, if not excessive. provided the actual damages are uncertain or difficult of computation.

2 DAMAGES. Stipulation in land contract on breach thereof held for liquidated damages.

Where two hundred and fifty dollars was paid in cash by the vendee to the vendor on the execution of a contract between them for the sale and purchase of land as a part payment on the purchase money thereof, and said contract provided: "It is agreed and understood that the two hundred and fifty dollars cash payment, above referred to, is to be considered a part of the purchase price of the said land, and deducted therefrom provided the party of the second part shall carry out the provisions of this contract otherwise it shall be, considered as liquidated damages accruing to the party of the first part," held, that the two hundred and fifty dollars referred to in said stipulation was not a penalty, but liquidated damages, and on a breach of said contract by the vendee the vendor was barred from recovering any further sum on account of said breach.

HON. S F. DAVIS, Judge.

APPEAL from circuit court of Sunflower county, HON. S. F. DAVIS Judge.

Suit by Mrs. Ollie Shields against W. R. Early. From a judgment dismissing the suit, plaintiff appeals. Affirmed.

Affirmed.

Everett & Forman, for appellant.

It will be noted that the contract in question here is not an option to purchase, but is a contract for the sale of the land on the part of the appellant, and for the purchase of the land on the part of the appellee; therefore, one of sale and purchase and not one of an option to purchase.

"A contract for the purchase of land which recites that the vendor has received a certain sum on account of the purchase money, and which then sets forth the terms of the sale which are to be complied with, is one of bargain and sale and not an option." James on Option Contracts, 108; Hamberger v. Thomas, 118 S.W. 770; Benson v. Shotwell, 87 Cal. 49.

If this contract is a contract of sale and purchase, then surely the demurrer should have been overruled. After the defendant had come into possession of the property and while in possession, to allow him to repudiate his contract would be to give the vendee power by his default to terminate the agreement to purchase without liability to the vendor. James on Option Contracts, section 109, page 21; Mason v. Caldwell, 10 Ill. 196, 48 Am. Dec. 330; Westervelt v. Huiscamp, 101 Ia. 196; Hamberger v. Thomas, 119 S.W. 770; Wright v. Suydam, 72 Wash. 587, 131 P. 239; Abel v. Gill, 95 Neb. 279; Hendrick v. Firke, 169 Mich. 549.

Again the demurrer should have been overruled, because the failure of the vendor to convey at the time appointed in the contract or the failure of the vendee to pay the purchase price stipulated in the contract, does not enable either party to avoid the contract without the consent of the other. Beatty v. Harkey, 2 S. & M. 563; Green v. Finucane, 5 Howard, 460, 468; Anderson v. Lincoln, 5 Howard, 279; Fletcher v. Wilson, S. & M. Ch. 376; Gale v. Green, S.W. 159, 12 Am. Dec. 548; Kent v. Stephens, 90 So. 241; McLaren v. Parker, 24 Miss. 509.

"A contract for the sale of land on deferred payments by the terms of which, time is made an essential ingredient, and which provides that, on default in payment, the contract shall be void and all payments made shall be forfeited, does not leave performance optional with the purchaser; but on default, the vendor may elect to insist upon the forfeiture or to waive it and enforce the contract, and the failure of the vendee to pay a purchase money note does not, of itself, terminate such contract and release him from liability upon said note." Westerveld v. Huiskamp, 101 Ia. 196.

We now turn to the fifth ground of demurrer, which is to the effect that the cash payment of two hundred and fifty dollars was by the terms of the contract considered liquidated damages, and should the contract be breached, there would be no further liability on the part of the defendant. This seems to be the ground relied upon by the appellee in the argument of the demurrer in the court below, and the ground on which the lower court sustained the demurrer. In all contracts for the sale of land, for the erection of buildings and generally in contracts for the performance of some act, is provided a penalty of some kind. It is immaterial as a general rule whether the contract stipulates for a "penalty" or "liquidated damages," and in support of this statement, I refer the court to the following authorities; 8 R. C. L. 564, par. 114; Hensy v. Metger, 152 Ill. 505; Bilz v. Powell, 50 Colo. 482, 38 L. R. A. (N. S.) 847; Scofield v. Tompkins, 95 Ill. 190, 34 A. R. 160; Foley v. McKegan, 4 Ia. 1, 66 Am. Dec. 107; Condon v. Kempter, 47 Kan. 126, 13 L. R. A. 671; Mason v. Calendar, 2 Minn. 350, 72 Am. Dec. 102; Mammoth Park v. Wallace Iron Works, 55 N.J.L. 132, 39 Am. St. 626; Wilhelm v. Eaves, 21 Ore. 194, 14 L. R. A. 297; Currery v. Larer, 7 Pa. St. 470, 49 Am. Dec. 298; Crawford v. Heatwole, 110 Va. 358, 34 L. R. A. (N. S.) 587; Modler v. Silvertone, 55 Wash. 159, 35 L. R. A. (N. S.) 1st; Wilkes v. Bierden, 68 W.Va. 82, 31 L. R. A. (N. S.) 837; Jaquith v. Wadsworth, 125 L. R. A. 607.

It is the tendency and preference to regard a sum in a contract as a penalty and not as liquidated damages, for by so doing, the sum can be apportioned to the actual damages sustained for the breach of the contract. 13 Cyc., page 95; Bright v. Roland, 3 Howard (Miss.) 398; Coker v. Brevard, 90 Miss. 64, 43 So. 178; Condon v. Kempter, 47 Kan. 126, 13 L. R. A. 671; Peggra v. Wheeler, 24 Ore. 532, 21 L. R. A. 726.

We call the court's attention to the case of Headrick v. Firke, 169 Mich. 549. A case very similar to the one at bar except stronger in favor of the defendant than the one now under consideration. We also call the court's special attention to the case of Strode v. Smith, 66 Ore. 164. Therefore, we submit that the fifth ground of the demurrer was not well taken and the court erred in so holding.

Where, in an action to recover damages retained for delay in completing a building under a clause of the contract providing for liquidated damages, the evidence puts in issue the intention of the parties in using such clause, the question of the parties' intention is for the jury and not for the determination of the court." Kelly & Mahon v. Fejervay, 111 Ia. 693.

Again we say that a demurrer will not lie in contracts of the character involved here, because in addition to ascertaining the intention of the parties you must ascertain the measure of damages, because if the damages stipulated for be out of proportion to the damages sustained, it is necessary to ascertain the damages by proof. Tripp v. Bishop, 56 Pa. St. 427; Headrick v. Kirke, 168 Mich. 149; Garrard v. Dollar, 67 Am. Dec. 271.

Therefore, we submit that the demurrer should be overruled and this cause should be reversed.

Chapman & Johnson, for appellee.

We shall discuss only the fourth ground of the demurrer; the other grounds have been fully and clearly argued by our associate, Hon. J. Holmes Baker. From his argument it is manifest that the demurrer should have been sustained. The fourth ground of the demurrer which is also decisive of the case, is as follows: "A cash payment of two hundred and fifty dollars was made, which it was agreed between the parties to said contract should be considered as, and was, liquidated damages to accrue to the plaintiff, should the said contract be breached by the defendant, and there is, and could be, no further liability on the part of the said defendant."

The contract filed as Exhibit "A" to the declaration recites that for and in consideration of the sum of two hundred and fifty dollars to the party of the first part this day paid, the receipt whereof is hereby acknowledged, the party of the first part agrees to sell and convey by warranty deed to the party of the second part, certain land in Sunflower county, Mississippi, described in the contract; how the said sum of two hundred and fifty dollars is to be applied and used is provided for in the paragraph of the contract quoted below: "It is agreed and understood that the two hundred fifty dollars cash payment, above referred to, is to be considered a part of the purchase price of the said land, and deducted therefrom, provided the party of the second part shall carry out the provisions of this contract, otherwise, it shall be considered as liquidated damages accruing to the party of the first part."

The contract filed as an exhibit to the declaration is a part thereof and is to be so considered for all purposes. See 735 Miss. Code 1906 (Hemingway's Code sec. 518); ...

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