Opinion
No. 10419.
February 7, 1980. On Rehearing September 9, 1980.
APPEAL FROM TWENTY-FOURTH JUDICIAL DISTRICT COURT, PARISH OF JEFFERSON, STATE OF LOUISIANA, HONORABLE ALVIN RUDY EASON, J.
Richard T. Regan, Francipane, Regan St. Pee, Metairie, for plaintiffs.
Steven K. Faulkner, Jr., Morphy, Faulkner, Simpson Dimaria, Metairie, for defendants.
Before SAMUEL, REDMANN and SCHOTT, JJ.
The parties to this litigation used a printed form, drafted for use in sale of land (including existing buildings), to embody an agreement relative to a house in the process of being constructed on the builder's land.
The builder-seller now appeals from a judgment which imposed upon him the printed form's penalties for noncompliance by awarding the buyers the return of their deposit plus an equal amount "as penalty" plus attorney's fees (as well as the cost of light fixtures and a stove hood the buyers had supplied to the builder). We eliminate the penalty and attorney's fees but otherwise affirm.
We agree that the builder did breach the contract. The house was "to be completed ready to move into for above price" and "Possession and occupancy [was to be given to] purchaser at passing of act of sale." The trial judge interpreted these two provisions together to require the house to be completed for the time of the act of sale and we agree that that is their intent. The house was not completed for the February 1, 1978 date provided by the contract. The parish building inspector noted several matters incomplete at that time. The parties agreed to an extension to February 13 and the act of sale was set for 4 p.m. At 10 a.m. February 13 the buyers found the house still incomplete. The builder said it would be completed by 3 p.m. At 3 p.m. they again met (with the buyers' attorney and the parish building inspector) and the house was still incomplete, and could not be moved into, in that lack of "fire blocking" around the return duct to the central heater plenum constituted a fire hazard, and prevented final connection of utilities and thus prevented their moving in. (Improper roof bracing had also not been corrected.) The buyers refused to take title or allow further time for performance.
The building was so nearly complete that, if this were a simple building contract for a building to be completed on plaintiff's land, the doctrine of substantial performance would have allowed the builder to recover the contract price less the minor cost of completion. The radical difference is that here the builder owned the land and therefore his building upon his own land did not unjustly enrich plaintiffs, as the building upon another's land enriches that other. The parties here made a contract providing that the builders were to have the house ready to move into at the time of the act of sale, and despite an extension of time after the first inspection by the parish building inspector and two more inspections by the buyers on the last day for the act of sale, the builder did not have the house ready.
Even Douglas Weber's testimony that he had been informed by Fred Weber at the 4 p.m. time set for the act of sale that the fire blocking and roof bracing (and other defects) had been corrected is contradicted by Fred Weber's testimony that he finished at 5 or 6 p.m. Moreover, by 6 p.m. on a February 13 in Jefferson parish sunset has occurred, and thus defendants cannot say they did not breach even on the theory that C.C. 2057 allows until sunset to perform; See Ducote v. Katz, La.App. 4 Cir. 1978, 361 So.2d 1320.
Ducote is similar to our case in that there the seller's nonfulfillment of a minor obligation (to afford an inspection) occasioned the buyer's refusal to perform at the time set for the act of sale. Ducote held the buyer justified in refusing to perform, but denied penalty and attorney's fees because there remained some hours before sunset during which the seller could have performed (although he did not in fact do so.) We conclude that our buyers, too, were entitled to refuse to take title at 4 p.m., but because the sellers had until sunset for completion and act of sale, our buyers were not entitled at 4 p.m. to demand return of their deposit, much less penalty and attorney's fees. On the other hand, as also in Ducote, the seller is not entitled to keep the deposit because he did not perform timely and his 4 p.m. tender of title was not a tender in compliance with the contract. We add that it is doubtful, in any case, that the parties intended that the penalty for the builder-seller's refusal to sell should apply to his lateness by an hour in being prepared to sell The usual 10% deposit plus an agent's usual commission of 6% would mean a 16% penalty plus substantial attorney's fees, and the magnitude of the overall cost suggests the unreasonableness of ascribing to a builder the intent to pay that penalty for mere delay.
Amended to eliminate penalty and attorney's fees; each party to bear his own costs.
ON REHEARING
We granted a rehearing on the application of plaintiffs-buyers, in order to reconsider their entitlement to penalty and attorney's fees and our assessment of court costs against both parties.
We reaffirm our original opinion to the extent that defendant failed to complete the house by sun down on February 13 and thereby breached their contract with plaintiffs, entitled plaintiffs to the return of their deposit.
The contract contains a reciprocal right to the same penalty of $2,000 and attorney's fees in the event of a breach by either party. In this case, the penalty and attorney's fees were demanded not only by plaintiffs in their main demand but also by defendants in their reconventional demand. Thus, both parties recognized that these provisions of their contract were subject to enforcement by the court. This position is consistent with LSA-C.C. Art. 1945's provisions:
"Legal agreement having the effects of Law upon the parties, none but the parties can abrogate or modify them. Upon this principle are established the following rules:
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Second — That courts are bound to give legal effect to all such contracts according to the true intent of all the parties;
Third — That the intent is to be determined by the words of the contract, when these are clear and explicit and lead to no absurd consequences;
Fourth — That it is the common intent of the parties that is, the intention of all that is to be sought for; if there was a difference in this intent, there was no common consent and, consequently, no contract."
We repudiate the suggestion that the penalty is unreasonable in this case. Aside from the law which binds parties to their contract, the penalty in this case amounts to liquidated damages which were agreed to in order to save the parties from the difficult task of proving actual damages. Since their intention was clear, the contract should be enforced. C.C. Art. 1963.
We distinguish this case from Ducote v. Katz, 361 So.2d 1320 (La.App. 4th Cir. 1978) on the facts. In the Ducote case the court did not award penalties and attorney's fees because the purchases had indicated that they were unwilling to proceed with the sale even if the inspection took place on the last day by the agreement. The court noted that the seller had until sunset on June 28, 1976, to meet the inspection condition. In the instant case, there is evidence that the seller had not completed the work before sunset on the last day provided for the sale so that the seller alone was at fault in failing to comply with the agreement.
In accordance with our internal rules this case was submitted to the court en banc at the request of the dissenting judge because of his view that the case was in conflict with Ducote v. Katz A majority of the court en banc were of the opinion that no conflict existed between the cases because they were factually distinguishable.
Accordingly, the judgment appealed from is affirmed and defendants are to pay all costs, including the cost of the appeal.
AFFIRMED.
REDMANN, J., dissents in part.
One problem with the majority's literal-mindedness about the penal clause is that it would entitle the seller to forfeit the deposit and collect attorney's fees because, quite expressly the seller can forfeit the deposit "without formality beyond tender of title" to be so entitled, and our seller did tender title. (This is a piece of nonsense, of course, arising from the questionable use of a standard buy-sell form instead of an appropriate contract.)
The correct result is that neither party should pay penalty and attorney fees. A party who invokes a penalty clause bears the burden of proving facts entitled that party to the penalty, and neither party here bore that burden of proof.
The seller cannot collect from the buyers because the seller did not prove that its 4 p.m. tender of performance was that impliedly required by the contract ("ready to move into for above price"). and the seller did not make a later tender before sunset that day when the fire blocking had been completed.
Douglas Weber testified that he was informed by telephone by Fred Weber that the fire blocking was completed while the parties were at the act of sale: "At the act of sale I assure the Jordans that if they would like to go out and go back and inspect and let them be sure the fire blocking was done. Their counsel advised them that that wasn't necessary. They had been there for the inspection as agreed upon and that they didn't need to go back and inspect. We did have all that completed by 4 o'clock."
Fred Weber also testified that he was doing the fire blocking as the buyers left the site after their 3 p.m. inspection and that he completed in right away. However, he also testified that he "[went] home that night [about] 5 or 6 o'clock. Q. That is when you finished up? A. Pretty much." The trial judge could have concluded that, notwithstanding the other testimony to the contrary, the seller did not prove that the fire blocking was finished before 5 or 6 p.m., much less before the 4 p.m., time set (set that day) for the act of sale. (One could even conclude it was not proven that the blocking was finished before sunset — 5:47 p.m. in New Orleans that day — but that is immaterial because neither party attempted to put the other in default except at the 4 p.m., act of sale.
Accordingly (unless the substantial performance doctrine applies to the building contract aspect of a buy — sell contract on a building being built) the buyers had the right to refuse the 4 p.m. tender. But at 4 p.m. they had no right to demand penalty and attorney fees because the seller had until 5:47 p.m. (sunset) to perform, and, rather than demand performance by 5:47 p.m., they refused to accept any performance after their 3 p.m. inspection. Our original opinion therefore correctly followed Ducote v. Katz, La.App. 4 Cir. 1978, 361 So.2d 1320.
The buyers equally cannot collect penalties from the seller because the buyers admittedly did not "offer to receive the performance at the time and place stipulated in the contract. . ., and he cannot avail himself of any demand at any other time . . ." La.C.C. 1914. The time for performance is "until sunset of the last day. . .," La.C.C. 2057, which was 5:47 p.m. on February 13, 1978, in the New Orleans area, and a demand for performance by 3 p.m. (or even by the 4 p.m. act) does not avail the buyers.
One who reads this record will know that this is not a case of buyers who wanted to buy against a seller who did not want to sell. Quite the contrary. The buyers did not want to buy the house because the builder (rightly or wrongly) would not rebuild an interior wall that was not geometrically true. The buyers seized upon the missing fire blocking (and other trifles) as an easy escape from their obligation, rather than accept the house and then fight over the tolerances within which a less-than ideal wall must be accepted by a buyer.
Thus the first-and most difficult-question in this case is whether the buyers succeed at all in escaping their obligation to buy (under penalty of forfeiture of their deposit). The factual and legal issues are both close, but a court of appeal can permit to stand the trial judge's factual conclusion that fire blocking was not completed as of the 4 p.m. act of sale (see note 1), and we have reached the important legal conclusion that the doctrine of substantial performance does not apply to the obligation to build contained within a buy-sell contract for a house being built on the builder's land.
But it is absurd to treat the buyers as if they were ready and willing to perform, and the seller as if it were the villain in this piece. It is the buyers who were willing to perform; they refused title at 4 p.m. on a flimsy but (we find) justifiable pretext, and they refused to allow completion or even to verify completion of the fire blocking after their 3 p.m. inspection. The builder was somewhat dilatory in not having the fire blocking completed by the 3 p.m. inspection he agreed to: but 3 p.m. was not the last time for performance of his obligation under the contract which provided the penalties here imposed.
Our original decree should be reinstated.