Arky v. Floyd

Smith, C. J., delivered the opinion of the court. In November, 1905, appellant and appellee entered into a written contract whereby appellant agreed to sell to appellee, for a consideration named therein, a certain stock of goods, wares, and merchandise owned by him, and to rent to appellee, for a series of years, the house in which he was then doing business. This contract was to be executed, and possession of the house given, on the 15th of the following January. One of the provisions of this contract was as follows: “It is further understood and agreed that, in order to guarantee the faithful carrying out of this contract, each of the parties thereto have this day deposited with Edwin McMorries, president of the First National Bank, two thousand and five hundred dollars and a copy of this contract, and that said two thousand and five hundred dollars shall be forfeited by whichever party may fail to carry out this contract; and in case of failure of either party to carry out the same as agreed upon, the said Edwin McMorries is hereby directed and authorized to pay over said money so deposited to the other party. ’ ’ Each party, pursuant to this provision of the contract, deposited the sum of two thousand and five hundred dollars with McMorries. In August, 1911, appellee filed his bill in the court below, making McMorries and appellant defendants thereto, alleging that appellant had failed to comply with his contract that McMorries declined to pay to him the five thousand dollars deposited with him as hereinbefore set out, and praying that he be decreed so to do. To this bill McMorries answered, admitting possession of the money, alleging that appellant was unwilling for him to pay the same over to appellee, and prayed that the court direct him what to do with it. Appellant’s anwser set up the fact that prior to the institution of this suit he had filed a bill against appellee in the chancery court of Lauderdale county, alleging that he (appellee) had broken the contract hereinbefore referred to, and praying, in effect, for [371] a specific performance thereof, to which bill appellee filed an answer and cross-bill, alleging the contract had been broken by appellant, and praying a decree against him for the damages alleged to have been sustained by appellee by reason thereof, which cause in due course resulted in a final decree adjudging that appellee was without fault in the matter, that the contract had been broken by appellant, and awarding appellee the actual damages sustained by him by reason thereof. This answer further alleged that appellant had obeyed this decree by paying to appellee the amount awarded him therein. Appellant’s answer was excepted to by appellee as being insufficient in law, the exception sustained, and upon appellant’s failure to plead over a decree pro confesso was entered against him, and then a final decree in accordance with the prayer of appellee’s bill. This method of procedure was pursued without objection on the part of appellant. • It is wholly immaterial whether or not the money deposited by appellant with McMorries under the agreement that it should be paid to appellee in event appellant should fail to carry out his contract be deemed a penalty or liquidated damages for the reason that in either event appellee has waived any right he may have had thereto by having elected in the former suit to recover his actual damges. It was clearly not the intention of the parties to this contract that in event of its breach the one in-default should forfeit his deposit, and in addition thereto be liable to the other for all actual damages sustained by him. Reversed, and decree here for appellant for the two thousand and five hundred dollars deposited by him with McMorries. Reversed.