Opinion
No. 21453.
April 2, 1951.
APPEAL FROM THE CIRCUIT COURT, VERNON COUNTY, O. O. BROWN, J.
Farrington Curtis and E. C. Curtis, Springfield, for appellants.
Ewing, Ewing Ewing and Lynn M. Ewing, Nevada, Combs Combs and J. Carroll Combs, Lamar, for respondent.
This is a suit for money had and received. The plaintiffs seek to recover from defendant the sum of $1,500, representing a down payment made by plaintiffs under a written contract to buy a farm from defendant.
Defendant's answer admitted the execution of the contract, receipt of the $1,500 down payment, and then denied the remainder of plaintiffs' petition. Coupled with defendant's answer was a counterclaim seeking damages against plaintiffs. A jury was waived and the cause tried by the court. Judgment was entered for defendant and against plaintiffs on their petition and defendant's counterclaim was dismissed. Plaintiffs' motion for new trial was overruled and this appeal followed.
The admitted facts show that on October 29, 1946, plaintiffs and defendant entered into a contract, by the terms of which plaintiffs, who were then residents of the State of Colorado, agreed to buy and defendant, who was a resident of Barton County, Missouri, agreed to sell an 80-acre tract of real estate located in Barton County near Lamar. The contract was negotiated upon behalf of defendant by Rubey Ryder, a real estate agent, living in Lamar. It provided that the purchase price was to be $10,000, with the sum of $1,500 being paid down and the balance of $8,500 due on or before March 1, 1947. There was no provision in the contract that the down payment might be retained by defendant if plaintiffs failed to complete the purchase of the farm.
On January 20, 1947, plaintiff, Orey Bennett, wrote Mr. Ryder, asking if he could arrange for a thirty-day extension of time for the closing of the contract. Ryder discussed plaintiff's letter with defendant and defendant authorized Ryder to write, and Ryder did on January 28, 1947, write a letter to plaintiffs, agreeing to the extension provided plaintiffs would pay interest, insurance, and all other expenses for thirty days. On January 30, 1947, plaintiff, Orey Bennett, replied to Ryder's letter accepting defendant's offer of an extension and agreeing to pay the extra interest and other charges in connection with the extension. This information was transmitted to defendant by Ryder.
Ryder testified that he saw plaintiff, Florence Bennett, in Lamar around March 1, 1947, and told her that they (plaintiffs) would lose the place if they did not raise the money and offered to help them get a loan on their Colorado land to pay defendant, but that Mrs. Bennett replied that her husband would not do that. Thereafter, on March 8, 1947, plaintiffs wrote Ryder, asking if he could resell the farm and also inquiring how much money they could borrow on it. Plaintiff, Orey Bennett, testified that he received no reply to this letter, and Ryder stated that he was not sure whether he answered it.
The defendant testified that around the 11th day of March, 1947, he called plaintiff in Colorado and inquired if plaintiff was going to take the place. Plaintiff replied that he was if he could sell his place in Colorado. The defendant says he then stated to plaintiff that plaintiff had never sent him anything "to secure" him that he was going to take the place, and plaintiff replied that he would not pay another cent on it and hung up. Plaintiff, Orey Bennett's testimony was that in this conversation he stated that he thought he could go through with the contract by around the first of April and that defendant then asked for another $1,500 for the month's extension. Plaintiff replied that he would not give any more money until he had completed the deal on his Colorado place.
On March 15, 1947, and before the expiration of the extension period, the attorneys for defendant wrote plaintiff, Orey Bennett, notifying him that unless the balance of $8,500 and expenses were paid to defendant on or before March 22, 1947, defendant would assume that plaintiff was not going to carryout the terms of the contract and that defendant would retain the down payment of $1,500 as liquidated damages. Plaintiff did not answer this letter and did not make a tender of the balance of the purchase price and did not sell his Colorado farm until 1949.
On March 22, 1947, defendant entered into a contract obligating himself to sell the same 80-acre tract to George F. Finley for the sum of $10,000, a down payment of $2,000 being made by Mr. Finley on the same day and a general warranty deed was executed by defendant and deposited in escrow on the 31st day of March. Additional payments were made by Mr. Finley and the sale was completed on April 17, 1947, when the deed was delivered to Mr. Finley and the balance of the purchase price paid to defendant.
To sustain his counterclaim defendant testified that he had some plumbing in the house repaired at a cost of "something like twenty-some dollars"; that a stove he put in the house was stolen and that the stove was worth around $40; that he had water pumped out of the basement at a cost of around $15; that he paid $5.50 for drawing the contract with plaintiffs and preparing a deed; that he furnished oil for the stove at a cost of around $10; that he paid $1.85 for a phone call to plaintiff; and that he paid Ryder a commission of $500. However, in connection with the commission, defendant further testified that when he resold the farm to Finley, he received a price of $10,000 and paid no real estate commission.
Plaintiffs' contention is that they had a valid and binding agreement with defendant to extend the closing date under their contract to April 1, 1947; that defendant breached this agreement by writing them on March 15, 1947, stating that their down payment would be forfeited if the balance of the purchase price was not paid by March 22, 1947, and that when defendant breached the contract, plaintiffs were entitled to recover their down payment. Plaintiffs go a step further and say it is immaterial whether or not there was an extension agreement and whether the contract was first breached by plaintiffs or defendant; that even though it be conceded that plaintiffs breached the contract by failing to pay the balance of the purchase price within the time provided by the contract such a breach does not give defendant the right to retain the down payment of $1,500. The underlying reason for plaintiffs contention is that there was no provision in the contract that the down payment might be retained by defendant if plaintiffs failed to complete the purchase of the farm.
Under prior rulings of this court plaintiffs' position is correct. The leading case is Norris v. Letchworth, 141 Mo.App. 19, 124 S.W. 559; Id., 167 Mo.App. 553, 152 S.W. 421. The plaintiff in that case, who was the purchaser under a real estate contract, first sued the defendant, who was the vendor, on the theory that the defendant had breached the contract and that the plaintiff could then rescind the contract and recover his down payment. This court found that the plaintiff and not the defendant had breached the contract and that the plaintiff, therefore, could not rescind and could not recover his payment under that theory. At the end of the opinion this court said: "It does not follow from the views expressed that plaintiff necessarily must lose the $500 that he paid on the purchase price. The contract does not attempt to provide for the retention by defendant of the down payment as a forfeture or as liquidated damages for the breach of the contract by plaintiff; and, if defendant suffered no damages on account of the breach, plaintiff, under proper pleadings would be entitled to recover the full amount of the payment." 140 Mo.App. loc. cit. 26, 124 S.W. loc. cit. 560. (Italics ours.)
The plaintiff in that case refiled his suit as an action for money had and received, and alleged that the defendant had rescinded the contract. In holding that plaintiff was entitled to the return of his down payment this court said: 167 Mo.App. loc. cit. 557, 152 S.W. loc. cit. 422.
"The rule is well settled, and springs from the most elemental principles of justice that a party to a contract himself at fault in its performance cannot maintain an action for its rescission. To hold otherwise would be to allow a wrongdoer to take advantage of his own wrong. This rule has been recognized and applied in this state in a number of cases. Felix v. Bevington, 52 Mo.App. 403; Crews v. Garneau, 14 Mo.App. 505; Webb v. Steiner, 113 Mo.App. 482, 87 S.W. 618; Davis v. Barada [Ghio Real Estate Co.], 115 Mo.App. 327, 92 S.W. 113.
"But it has no application to cases such as the present, where the vendor having elected to rescind the contract on account of the default of the vendee, the latter, acquiescing in that action, sues to recover that portion of his part performance of the contract in excess of the damages actually sustained by the vendor on account of his breach.
"The cardinal rule in the assessment of damages for the violation of a contract is actual compensation to the injured party. Punitive damages are unknown to the law of private contracts, and will not be awarded even when the parties stipulate for them. On what principle then, may a vendor who has rescinded the contract on account of the vendee's default be allowed to retain punitive damages from the mere fortuitous circumstance that he has received money in excess of his damages paid by the vendee in part performance of the contract?
"If plaintiff had made no payment before default, defendant in an action for damages brought after rescission would have been limited to his recovery to compensation for his loss, and that is all he should be entitled to retain out of the proceeds of plaintiff's part performance.
"The default of plaintiff afforded defendant a choice of remedies. He was not compelled to rescind the contract, but could have recovered from plaintiff the amount due on the purchase price. He did not take this course, but elected to rescind and to hold plaintiff for his damages. In so doing he voluntarily restricted himself to compensation for his actual loss and his present contention, which, in effect, is the assertion of a right to punitive damages, is inconsistent with that position. A single illustration will serve to emphasize the injustice of defendant's contention. The purchase price of the land was $6,700. Suppose plaintiff had paid all but $100, and then had breached the contract. He could not have maintained an action based on a purpose to rescind, since he would not be allowed to found a cause on his own wrong or to deprive defendant of his choice of remedies, but after defendant had exercised his choice, and had elected to rescind, would any one have the hardwood to argue, in an action brought by plaintiff for money had and received, that defendant could not be compelled to return all of the purchase money paid in excess of just compensation for the loss he had sustained in consequence of the breach? The principle for application in such cases is the same whether the part performance is 10 or 90 per cent. of full performance. We are aware that authorities may be found and are cited in the brief of counsel for defendant that support his position, but we think the rule we have stated is the only one that can be harmonized with the demands of reason and justice and with the fundamental principle of damages to which we have referred, and we find our views are well supported by authority."
Two later cases by this court which are squarely in point are Chamberlain v. Ft. Smith Lumber Co., Mo.App., 179 S.W. 740, and Sandusky v. Waller, Mo.App., 272 S.W. 1045.
The admitted facts are that on March 15, 1947, defendant wrote plaintiffs to the effect that defendant would terminate the contract unless the balance of the purchase price, plus expenses, was paid by the 22nd day of March and that he would retain the down payment as liquidated damages; and that on March 22nd, he entered into a contract to sell the farm to a third person (Finley), placed Finley in possession on March 28, and executed a deed to him and placed it in escrow on March 31st. Such action is universally held to constitute a rescission of the contract. This court held in the Chamberlain case, supra, that a declaration of intention to declare a contract forfeited and to retain the down payment, followed by a sale to a third person, amounts to a rescission of the contract by the vendor.
None of the cases cited by defendant involved a rescission by the vendor after, or prior to, a breach by the vendee, and hence they are not applicable to the case at bar. And, as this court stated in the Norris case, supra, cases such as Sample v. Bank of Poplar Bluff, 239 Mo.App. 1152, 207 S.W.2d 55, upon which the trial court relied, holding that a party in default in the performance of a contract cannot maintain an action for its rescission, have no application to cases where the vendor has by word or act elected to terminate the contract after a breach by the purchaser.
The rule permitting plaintiffs to recover under the facts of this case is founded on reason and justice. To allow defendant to retain plaintiffs' money after he has resold the farm for the same price plaintiffs agreed to pay would permit him to unjustly enrich himself at the expense of plaintiffs. It is neither the intent nor purpose of the law to punish a person for the violation of a private contract, or to unjustly enrich one person at the expense of another.
Defendant suffered no loss, with the exception of the items of expense mentioned in his testimony, totaling $92.35. Plaintiffs are willing to give him credit for that amount.
The case is reversed and remanded with directions to enter judgment for plaintiffs in the sum of $1,407.65, with interest thereon at 6% from February 11, 1949. All concur.