Beveridge v. West Side Construction Co., 130 A.D. 139

Clarke, J.:

Belle G-. Beveridge, plaintiff’s wife and assignor, entered into a contract in writing with the defendant West Side Construction Company for the purchase and sale of a piece of real estate, with a building thereon in process of construction, known as Beverly Hall, No. 316 West Ninety-fourth street, for $117,500, and defendant Axelrod, the president of said company, entered into a, separate аgreement, under which he guaranteed the faithful performance of the contract by the said company. The contract was éxecuted on the 26th 'day of August, 1902, and the date for closing was the 1st of December, 1902, with a proviso for an extension not exceeding sixty days from said date. Payment was provided for as follows : By the payment of $2,500 in cash upon the execution and delivery of the agreement, receipt whereof was acknowledged; by taking the premises subject to a first mortgage■ of $80,000 ; by the execution and delivery by the purchaser of a bond secured by a second purchase-money mortgage for $14,000; by the execution and delivery by the purchaser of a deed of the premises No. 244 West One Hundred and Second street, subject only to a mortgage of $24,000, the equity in said property being so fixed at the sum of $11,000; said deed was to be executed and delivered as'soon as a second and third mortgage, then liens upon said premises, should have been paid off and satisfied. The com tract provided that “ if said conveyance of said premises, subject to said mortgage of only $24,000 is not made on or before the 1st day of Oсtober, the party of the first part shall retain as liquidated damages for such failure the said sum of $2,500, and thereupon this contract shall terminate, and neither party shall have any further claim against the other by reason of the provisions of this agreement.” By the purchaser paying the balance, to wit, the sum of $10,000 in cash upon the execution and delivery of the deed to the prеmises No. 316 West Ninety-fourth street, interest and insurance, was. to be adjusted as to each of the premises above mentioned as of the dates of the conveyance of the title, but at the time of closing of the title to 316 West Ninety-fourth street. The contract- further set forth : “It is farther provided that if after the conveyance of said ¡premises 244 West 102nd Street to the party of the first рart by the party of the second part, the party of the second part shall fail to carry out the provisions of this contract on her part to be performed (provided a good marketable title to said premises 316 West 94th Street is tendered her) the party of the first part shall retain the said premises 244 West 102nd Street, and all payments in cash on account of the purсhase price of 316 West 94th Street as liquidated damages for the non-fulfillment of this contract, and thereupon neither party shall have any further claim against the other by reason of this agreement, which shall thereupon terminate. If, however, the party of the first part shall fail to perform and discharge the agreement on its part to be performed, or shall fail tó ténder a marketable title of the premises 316 Wést 94th Street, as herein-before provided, said party of the first part shall repay to the party of the second part all payments in cash theretofore made on account of the purchase of said premises 316 West 94th Street, and shall also reconvey to the party, of the second part the said premises i|244 West 102nd Street, subject tо said mortgage of $24,000, or if the said premises have been sold by a bona fide sale, the party of the first part shall account to the party of the second part for the proceeds of sale over and above the said mortgage of $24,000.” There was a further, provision in regard to taxes and also in regard to taking possession of the One Hundred ■ and Second street' house immediately by a caretaker, and the party of the second part was given the right by her agents to take charge of the renting of the apartments in the Ninety-fourth street house, all rents to be turned over to the party of the first part to be applied on this contract.

The West One Hundred and Second street house was conveyed on September 24, 1902, and so before the 1st day of- Octоber, 1902, the date fixed by the contract, and on November 11,1902, and before the date of closing, was sold for $28,500, subject to the mortgage of $24,000. An adjournment of the date of closing was had as provided in the contract, but the plaintifE’s assignor breached the contract, as found by the court in the following language: “That the said Belle GL Beveridge voluntarily and causelessly refused to comрlete on her part the performance of the said Beverly Hall contract, but defaulted in thé performance thereof.” The court also found : “ That the premises No. 316 West 94th Street, known as Beverly Hall, were completely and entirely finished by the ¡defendant West Side Construction Company prior to the 2nd day iof February, 1903, and in the manner .prescribed by the aforesaid .Beverly Hall contract of August 26th,, 1902.” It also found : “ That the'plain tiff, as the assignee of the said Belle G. ‍​‌​​‌‌‌‌​‌​‌‌​​‌‌​​​‌​‌​‌​‌​​​​​​‌​‌​​​‌​​​​​​‌​‍Beveridge, did not perform on his part the terms of the said Beverly Hall, com tract on either the 2nd, 4th or 7th days of February, 1903.” Although the court affirmatively found that plaintiff had breached the icon tract, -nevertheless it also found: “■ That the amount which the ¡said contract * * * required the plaintiff’s assignor to forfeit in the event of a breach upon her part,, viz., $13,500, is altogether disproportionate to the damages which the defendants sustained by reason of such breach. * * * That the damages which' the defendants actually sustained by reason of. the breach pf said contract are definitely .ascertainable and amount to $2,922.” And, as matter of law: “ That the aforesaid provisions * * 1 * prescribing thе penalty to be suffered by plaintiff’s assignor upon - . a breach thereof, are null and void,” and “ that after allowing for tlie . damages suffered by defendants amounting to the sum- aforesaid, I direét that a. judgment be entered in favor of the plaintiff and agaihst the defendants in the sum of $10,578.”

. ' That is, the -payments in an executory contract for the, sale of real-estate, the person making such pаyments having causelessly breached the contract, are created by this decision of the learned court penalties and forfeitures, and as such held to be excessive, invalid and void, and a judgment given to recover them back.

Iff brief the contract provided, first, for a payment on. its execution ¡ of $2,500; second, for a conveyance of 244 West One Hundred and Second street, subject'only to a mortgage of $24,000. Tf the ¡conveyance of the One Hundred and Second street house was not- made by October 1,-1902, the $2,500 should be retained as liquidated damages, the contract should terminate and neither party should have any further, claim against, the other.

If, after the conveyance of the One Hundred and Second street house, the purchaser should fail to carry out. the provisions of the contract, the vendor was to retain the One Hundred and Second street house, and all payments in cash on account of the purchase, price as liquidated damages for the non-fulfillment of the contract, and it should terminate. .

These were down payments, one to be made on execution of the contract, the other by October first. One in cash, the other by conveyance of specific property subject to a specified mortgage, the equity arbitrarily fixed at $11,000 ; both sums to be credited to the purchase price on completion of the contract, and both to belong to the vendor if the vendee failed to complete.

The fact that one sum was payable in cash on execution of the contract, and the other by a fixed estimated equity on a mortgаged property to be conveyed by a day. certain and long before the time set for the completion of the main contract, in no degree affects the well-settled principles of law governing payments on contracts to convey real estate.

Ketchum v. Evertson(13 Johns. 365) was an action of assumpsit by a vendee to recover from the vendor under a real estate ‍​‌​​‌‌‌‌​‌​‌‌​​‌‌​​​‌​‌​‌​‌​​​​​​‌​‌​​​‌​​​​​​‌​‍contract $700 paid by the former on account of the purchase price. The court said : “ It may be asserted, with confidence, that a party who has advanced money or done an act in part performance of an agreement and then stops short and refuses to proceed to the ultimate conclusion of the agreement, the other party being rеady and willing to proceed and fulfill all his stipulations according to the contract, has never been suffered to recover for what, has been thus advanced or done. The plaintiffs are seeking to recover the money advanced on a contract, every part of which the defendant has performed as far as he could by his own acts, when they have voluntarily and causelessly refused to proceed, and thus have themselves rescinded the contract. It would be an alarming doctrine to hold that the plaintiffs might violate the contract and because they chose to do so make their own infraction of the agreement the basis of an action for money had and received. Every man who makes a bad bargain and has advanсed money upon it would have the same right to recover it back that the plaintiffs have. The defendant’s subsequent sale of the land does not alter the case; the plaintiffs had not only abandoned the possession, but expressly refused to proceed and renounced the contract. To say that the subsequent sale of the land gives a right to the plaintiffs to recover back the money paid on the contract would, in effect, be saying that the defendant could never sell it without subjecting himself to an action by the plaintiffs. Why should he not sell ? The plaintiffs renounced the contract and peremptorily refused to fulfill it; it was in vain, therefore, to keep the land'for them. The plaintiffs cannot by their own wrongful act impose upon the defendant the necеssity of retaining propérty which his exigencies may require him to sell; this would be most unreasonable and unjust and is not sanctioned by any principle of law.”

In Havens v. Patterson (43 N. Y. 218) the court said: “ There is no principle of law or equity which will sustain such a claim, and I have been unable to find any authority to favor it. It would sanction the doctrine of allowing a party to. recover back money paid upon an executory agreement which he had neglected and refused to perform on his part. This is never permitted either in law or in equity.” (Ketchum v. Evertson, 13 Johns. 365; Battle v. Rochester City Bank, 3 N. Y. 88; Haynes v. Hart, 42 Barb. 58 ; Lawrence v. Simons, 4 id. 354.)

In Page v. McDonnell (55 N. Y. 299), Grover, J., said: “ But the defendants were ready and willing, and tendered full performance on their part. The plaintiff neglected and refused to perform on his part, for which reason the contract was terminated by the defendants. Under these facts the plaintiff is not entitled to recover the money he had paid thereon.”

In Lawrence v. Miller (86 N. Y. 131), Folger, Ch. J., said: “ It is ingeniously argued that, though the vendee has made breach of his contract, all that the law will give for that is the damage that the vendor has suffered thereby; and that, therefore, he has no right to keep the $2,000, though it be granted that he had a right to rescind the contract. * * * It is declared by this court in '

Havens v. Patterson (supra) that it is never permitted either at law or in equity for one to recover back money paid on an executory contract that he had refused or neglected to perform. The plaintiff in the action before us sues for the whole amount of the money paid by the vendee. The defendant came by it rightfully,, in pursuance of a contract lawfully made between competent parties. He has made no breach of that contract. He has failed in no duty to the vendee. Wherefore, then, should he give up that which was rightfully his own ? When and whereby did it cease to be his and to be due to the vendee ? If the contract had been kept by both parties, the money paid would still be his .of right. The contract would have been kept but for the breach of it by the vendee. To allow a recovery of this money would be to sustain an action by a party on his own breach of his own contract, which the law does not ‍​‌​​‌‌‌‌​‌​‌‌​​‌‌​​​‌​‌​‌​‌​​​​​​‌​‌​​​‌​​​​​​‌​‍allow. * * * Nor can the specious view be taken, presented by the plaintiff, that the defendant is entitled to no more than he has actually been damaged. That was substantially the question in Stephens v. Beard (4 Wend. 604), and the answer was against it.”

In Lakoschowsky v. Utopia Land Co. (125 App. Div. 827), where the action was brought to recover back an amount which had been paid upon the execution of a contract to purchase land, and in monthly installments, the vendee having failed to continue his payments as agreed, this court said: “When he sued, therefore, he was in the position of a vendee who has declined to pay the pur- ■ chase money in the manner and at the times specified in the contract. He has, therеfore, no cause of action either to recover back the money already paid of to ask for damages for defendant’s refusal to go on with the contract.”

This being, then, the well-settled- rule of law- that payments upon an executory contract for the sale of land may not be recovered by the vendee, if'the contract has been breached by the vendee, that the vendor is entitled to retain tlie whole thereof, and not merely his actual damages, what effect can it have upon the legal or equitable relations of the parties that they agreed in writing for that which the law would have provided without special agreement?" The statement that these sums shall be retained upon breach as liquidated damages doеs not affect the law which so provides without agreement. The argument that so characterizing the legal right to retain these moneys as liquidated damages transformed them into penalties and forfeitures, and, therefore, no more than the actual damage, to be alleged and proved, can be retained, has no support.

The respondent relies upon Scott v. Montells (109 N. Y. 1); Chaude v. Shepard (122 id. 397), and Caesar v. Rubinson (174 id. 492).. No one of these cases applies. In.each the question involved was a sum deposited as security for the performance of the terms of a lease where after breach the landlord had re-entered and, then sought also to retain the security. In those cases the rule applying to payments on executory contracts for the sale of real estate was recognized and supported. As in Chaude v. Shepard (supra), the court said“ It is, however, urged by the learned counsel for the .defendant that, as the money was actually placed in the possession of the defendant pursuant to the contract at the time of the execution of the lease, the disposition of it is governed by a different rule than that which would have been applicable if the claim to it had beeni founded upon the executory agreement of the plaintiff to pay it. That would have been so if the money had been paid upon the contract by way of partial performance by the plaintiff. In such case the party so paying, and afterwards by reason of his default is ■ deprived' of or denied the benefits of his contract, cannot recover back the money so paid by him upon it.” (Citing Page v. McDonnell; Lawrence v. Miller; Havens v. Patterson, supra.)

The respondent also cites Broadbooks v. Tolles (114 App. Div. 646). In that case there was a сovenant not to engage in business within a stipulated, territory for a stipulated period, with stipulated damages for violation thereof. It was of such stipulation that the court said : “ If there is a breach of the covenant of stipulation, the vendee may recover his actual damages; or, if they have been stipulated by the parties, the sum thus agreed upon may ordinarily be recovered as liquidated damages, * * * unless the sum specified is manifestly disproportionate to any damages accruing from the breach of the agreement,” and cited Ward v. Hudson River Building Co. (125 N. Y. 230),. which involved damages for delay in completion stipulated in a building contract; Curtis v. Van Bergh (161 id. 47), which also involved a stipulation for ‍​‌​​‌‌‌‌​‌​‌‌​​‌‌​​​‌​‌​‌​‌​​​​​​‌​‌​​​‌​​​​​​‌​‍damages for delay in a building contract; Hicks v. Monarch Cycle Mfg. Co. (176 id. 111), which considered a stipulation as to the value of a bicycle which had been delivered for examination and return, and Caesar v. Rubinson (174 id. 496), a deposit by way of security for the faithful performance of a lease.

Blewett v. Hoyt (118 App. Div. 227) was an action on a collateral bond given by the defendants as security for the payment of an unpaid balance on the purchase price of certain mines, and like the other cases above alluded to, has no application to that at. bar.

We have searched in vain to find any cases in this State affecting the rule that a vendee who has made a payment on an executory contract for the purchase of real estate, who has causelessly breached the contract, which has been fully performed by the vendor, cannot recover back the amounts paid.

The respondent claims that the appellants did not fully perform on their part, but the court has found: “ That the said Belle Gr. Beveridge voluntarily and causelessly refused to complete on her part the performance of the said Beverly Hall contract, but defaulted in the performance thereof.”' This finding is utterly inconsistent with any other conclusion than that the appellants had performed, because if not, she could not have defaulted. Further, the learned court found: “ That the damages which the defendants actually sustained by reason of the breach of said contract are definitely ascertainable and amount to $2,922,” and in the conclusions of law: “ That the damages suffered upon the breach ‍​‌​​‌‌‌‌​‌​‌‌​​‌‌​​​‌​‌​‌​‌​​​​​​‌​‌​​​‌​​​​​​‌​‍by plaintiff’s assignor of the contract (designated as plaintiff’s exhibit 1) are ascertainable and amount to the sum of ’$2,922.” Of course, this finding could only be made upon the ground that the appellants had performed. The court also found that the building was completely and entirely finished prior to the adjourned day of closing in the manner prescribed by the contract, and the evidence established that the vеndors were ready, willing and able to complete and had with them, at the adjourned day of closing the deed, prepared, signed and acknowledged, and the other necessary papers.

■ We do not deem it necessary to consider any other of the questions raised upon this appeal and for the reasons stated, and as we are of the opinion that the clauses in the contract providing for payments on the execution thereof, and by the 1st bf October, 1902; were not clauses providing for. a penalty this judgment declaring said provisions to be void and that plaintiff recover the sum of $10,578, with interest and costs, should be reversed and a new trial ordered, with costs, to the appellants to abide the event.

Patterson, P. J., Ingraham, Laughlin and Scott, JJ., concurred.

Judgment reversed, new trial ordered, costs to appellants to abide event.

Case Details

Case Name: Beveridge v. West Side Construction Co.

Court Name: Appellate Division of the Supreme Court of the State of New York

Date Published: Jan 22, 1909

Citations: 130 A.D. 139; 114 N.Y.S. 521; 1909 N.Y. App. Div. LEXIS 161

Court Abbreviation: N.Y. App. Div.