Clair v. Noce

Oliver, P. J., This matter is before the court on plaintiff’s complaint in assumpsit and de [217] fendants’ preliminary objection thereto in the nature of a demurrer. Under the terms of a written agreement dated July 20, 1948, plaintiffs agreed to sell and convey, and defendants agreed to purchase and pay for certain real estate situated at 1516 Widener Place in the City of Philadelphia, at the price of $13,500. The covenants of the contract provide that the purchase money should be paid in the following manner: $500 at the time of executing the agreement; $500 on July 26, 1948; a first mortgage in the sum of $9,000 to be taken by the seller, payable within one year at five percent interest, and the balance in cash at settlement. Defendants paid plaintiffs the sum of $1,000 under the agreement, and subsequently informed plaintiffs of their inability to make settlement in accordance with the terms of the agreement of sale. Whereupon plaintiffs placed the aforesaid real estate upon the market for resale, and sold the same on April 20, 1949, to Milton and Sylvia Odenheimer for $11,750. In this action plaintiffs seek to recover from defendants the sum of $1,266.75, representing the loss on resale and certain costs connected therewith. Defendants’ preliminary objection attacks the complaint on the ground that the settlement clause in the agreement of sale precludes plaintiffs from maintaining the present action. That clause provides: “. . . Should the buyer fail to make settlement as herein provided, the sum or sums paid on account are to be retained by the seller, either on account of the purchase money, or as compensation for the damages and expenses he has been put to in this behalf, as the seller shall elect, and in the latter case this contract shall become null and void and all copies to be returned to seller for cancellation.” (Italics supplied.) [218] Plaintiffs contend that the settlement clause gives them the two remedies set forth therein, and that, in addition thereto, the presence of the words “as the seller shall elect” preserves their normal remedy of reselling the property and suing the purchaser for the difference between the original purchase price and the resale price. However, we find no merit in that contention. The applicable law is well settled to the effect that, in the absence of a forefeiture or liquidated damages clause in the agreement of sale, where a purchaser fails to make settlement under an agreement in writing for the purchase of real estate, the seller has a choice of remedies. He may tender the deed and sue for the balance of the purchase money (Heights Land Company v. Swengel’s Estate, 319 Pa. 298 (1935); Black v. American International Corporation, 264 Pa. 260 (1919); Keily v. Saunders, 236 Pa. 593 (1912); Sanders v. Brock, 230 Pa. 609 (1911); Tudesco et ux. v. Wilson, 163 Pa. Superior Ct. 352 (1948); Lichetti v. Conway, 44 Pa. Superior Ct. 71, 73 (1910)) or he may sell the property, after notice, upon the same or as advantageous terms as in the first sale and, if a loss results therefrom, he may recover the same from the defaulting purchaser: Sanders v. Brock, supra; Bowser v. Cessna, 62 Pa. 148 (1869); Ashcom v. Smith, 2 P. & W. 211 (1830); Goodritz v. McMahon, 64 Pa. Superior Ct. 479 (1916). A practice of long standing has grown up in our State and elsewhere of inserting a forfeiture or liquidated damages clause in the agreement of sale, in order to permit the seller to retain the deposit money and to call off the sale instead of invoking either of the remedies mentioned above. Such clauses usually provide that: “. . . in the event of a default . . . the deposit may (at the option of the party of the first part) he retained as liquidated damages. . . .” The parentheti [219] cal language frequently appears in the standard printed forms. Aside from the question of whether such a clause is one for liquidated damages or one for a penalty, the interpretation given clauses of this type as affecting the remedies .available to the seller has by no means been uniform. A majority of the decisions articulate the rule that, unless the agreement by clear and unequivocal language provides that a purchaser may terminate it for his own default, such effect will not be given to it so as to permit him to escape by merely forfeiting the deposit money: Korman et al. v. Trainer, 258 Pa. 362 (1917); Cape May Real Estate Co. v. Henderson, 231 Pa. 82 (1911); Boyd v. Hoffman, 241 Pa. 421 (1913); Weaver v. Griffith, 210 Pa. 13 (1904); Vito v. Birkel, 209 Pa. 206 (1904); Shermet v. Embick, 90 Pa. Superior Ct. 273 (1926); contra: Yoder v. Strong, 227 Pa. 432 (1910); Addesso v. Gargalli, 26 Dist. R. 169 (1916); Lichetti v. Conway, supra. Cf. Riling v. Idell, 291 Pa. 472 (1928). Many of the same decisions rest in part on the theory that such a clause is presumed to be for the benefit of the seller, who may elect either to assert and enforce the forfeiture, or to insist upon the performance of the contract. See for example, Korman v. Trainer, supra; Cape May Real Estate Co. v. Henderson, supra; Vito v. Birkel, supra, and Shermet v. Embick, supra. This result appears uniform where the clause in the agreement gives the seller an option or election to enforce the forfeiture provision. Where, however, the words “at the option of the party of the first part” or “as the seller shall elect” do not appear in the agreement, our courts have taken the view that the seller has specifically agreed to restrict his remedy to the forfeiture of the deposit money in lieu of any other remedy: Addesso v. Gargalli, supra; Lichetti v. Conway, supra. Cf. Riling v. Idell, supra. Contra, [220] Boyd v. Hoffman, supra. See Ladner, Conveyancing in Pennsylvania, vol. 1, §45 (c). While some of the cases referred to above are in apparent confusion, it is settled that parties to a contract may stipulate in advance the amount to he paid in compensation for loss or injury which may result in the event of a breach of the agreement: Kunkel v. Wherry, 189 Pa. 198 (1899). Similarly, where there is present in the agreement of sale a contractual stipulation for liquidated damages, the intention of the parties as stated therein is controlling, and courts are bound to give effect to the contract of the parties in the absence of fraud or unconscionable oppression: Tudesco v. Wilson, supra, and see Percy A. Brown & Co. v. Raub et al., 357 Pa. 271 (1947). The instant case because of its facts is not controlled by those decisions where the forfeiture clause was inserted in order to give the seller a third remedy, one which he could elect to waive. The problem before us is without precedent and we choose to be guided by the applicable canons used in the interpretation of contracts. “The cardinal rule ... is to ascertain the intention of the parties and to give effect to that intention if it can be done consistently with legal principles”: Percy A. Brown & Co. v. Raub, supra, at page 287. Here the parties chose to set forth the remedies of the seller. It is apparent from a reading of the clause that in the event of a default, “. . . the sum or sums paid on account are to be retained by the seller, either on account of the purchase money, or as compensation for the damages and expenses he has been put to in this behalf, as the seller shall elect. . . .” (Italics supplied.) It is to be noted that the italicized language is positive and mandatory. Plaintiffs’ contentions would have more appeal if the phrase “are to be retained” had read “may be retained”. April 10, 1950. It is understandable where the agreement gives the seller a third remedy, and also provides that he may exercise his option to enforce the particular remedy, or waive the same and resort to his law-given remedies, that the purchaser should be held to the terms of the agreement and the clause construed for the benefit of the seller. Cf. Tudesco v. Wilson, supra. But this rule, and the rule that a defaulting buyer cannot set up his own default to work a forfeiture of his own contract, must give way where the parties have expressly contracted in advance to limit the remedies of the injured party. To say that this result has not clearly been effected in the instant case would be tantamount to so interpreting the clause in this contract as to cause it to constitute a trap for the unsuspecting purchaser. For the reasons assigned herein the preliminary objection is sustained and the complaint dismissed. Judge Sloane concurs in this opinion.