Case Title: Walker v. Graham

Citation: 346 So. 2d 213

Docket Number: 

State: louisiana

Court: Louisiana Supreme Court

Date: 1977-06-01T00:00:00Z

Document:
Walker v. Graham1985 WY 149706 P.2d 278Case Number: 84-310Decided: 09/26/1985ROBERT H. WALKER AND MARIAN J. WALKER, APPELLANTS (DEFENDANTS AND THIRD-PARTY PLAINTIFFS), 

v. 

ROBERT W. GRAHAM AND KRISTINA L. GRAHAM, APPELLEES (PLAINTIFFS AND THIRD-PARTY DEFENDANTS).
Supreme Court of Wyoming
ROBERT H. WALKER AND 
MARIAN J. WALKER, APPELLANTS (DEFENDANTS AND THIRD-PARTY PLAINTIFFS), 

v. 

ROBERT W. GRAHAM AND 
KRISTINA L. GRAHAM, APPELLEES (PLAINTIFFS AND THIRD-PARTY 
DEFENDANTS).

 
 
Appeal from the District 
Court, TetonCounty, Robert B. Ranck, 
J.

 
 
Lea Kuvinka of 
Kuvinka & Kuvinka, and W. Keith Goody, Jackson, for appellants.

Lawrence B. 
Hartnett of Hartnett & Moyer, Jackson, for appellees.

Before THOMAS, C.J., and 
ROSE, ROONEY, BROWN and CARDINE, JJ.

ROONEY, 
Justice.

[¶1.]     In an action for breach 
of contract, plaintiffs-appellees sought to recover damages and attorney's fees. 
A jury found no damages, but awarded appellees $14,700 in attorney's fees. The 
judgment awarded to appellees the attorney's fees and the $5,000 earnest money 
deposit given to appellees by appellants. Appellants raise the following issues 
on appeal:

"1. Did the District 
Court abuse its discretion by ordering the Appellees to retain possession of the 
earnest money deposit under the terms of the parties' contract when the 
Appellees elected to proceed in the basis that the contract had been affirmed 
rather than terminated?

"2. Did the District 
Court err by not granting the Appellants Motion for Judgment Not Withstanding 
the Verdict with respect to the attorney's fee award in favor of the 
Appellees?"

[¶2.]     We 
reverse.

[¶3.]     Appellants entered into 
a contract with appellees to purchase appellees' residence in Teton County, Wyoming, for the sum of $665,000. The contract 
was executed on August 30, 1982, with the closing date set for September 7, 
1982. On September 1, 1982, appellants informed appellees that they would not be 
purchasing the home. On September 9, 1982, appellees sold the home to a third 
party for $600,000.

[¶4.]     Appellees thereafter 
brought suit against appellants for breach of contract, asking for damages based 
on the difference between the contract price of $665,000 and the market value of 
the property on the date of the breach, which they alleged was the resale value 
of $600,000. In defense, appellants alleged that there were no damages suffered 
by appellees and that appellees were estopped from saying that the value of the 
property at the time of the breach was less than $665,000. Appellants also 
raised several counterclaims.

[¶5.]     After a trial by jury, 
the jury found, on a special verdict form, (1) that there was a contract between 
the parties (2) that was breached (3) by appellants; that the appellees did not 
(4) commit fraud or (5) violate a real estate duty; (6) that the market value of 
the home on the date of the breach was $665,000; (7) that the appellees are 
estopped from claiming the value of the home on that date was less than 
$665,000; and (8) that appellees are entitled to $14,700 in attorney's fees. In 
the judgment, the trial court also ruled:

"8. That, as a matter of 
law, the [appellees] are entitled to retain the $5,000.00 earnest money deposit 
according to the terms of the contract entered into by the 
parties."

EARNEST MONEY 
DEPOSIT

[¶6.]     The contract 
provided:

"15. Time is of the 
essence hereof, and if any payment or any other condition hereof is not made, 
tendered or performed by either the Seller or Purchaser as herein provided, then 
this contract, at the option of the party who is not in default or breach, may 
at that party's option, be terminated by such party, in which case the 
nondefaulting party may recover such damages as may be proper or such party may 
require specific performance of the other herein. In the event of such default 
by the Purchaser, and the Seller elects to treat the contract as terminated, 
then all payments made hereunder shall be forfeited and retained on behalf of 
the Seller. In the event, however, the nonbreaching or nondefaulting party 
elects to treat this contract as being in full force and effect, then nothing 
herein shall be construed to prevent its specific 
performance."

Before trial, it 
was appellants' position that the earnest money deposit was all that appellees 
were entitled to. In their answer, appellants state:

"21. The contract 
attached to plaintiffs['] complaint as Exhibit A was drafted by plaintiffs and 
their agents. Paragraph 15 of said contract attached to plaintiffs' complaint as 
Exhibit A did, by its terms, specifically limit plaintiffs' damages to the 
forfeiture of the the [sic] earnest money held on the behalf of the plaintiffs 
or the plaintiffs' right to elect to pursue specific performance of the 
contract.

"22. Plaintiffs 
terminated the contract by electing to execute another sales contract on the 
same property on September 9, 1983.

"23. Defendants were not 
refunded their earnest money deposit.

"24. Plaintiffs are 
believed to be in exclusive control of the defendants' earnest money deposit of 
FIVE THOUSAND DOLLARS ($5,000.00).

"25. Plaintiffs elected 
their remedy for defendants' breach of contract by constructively accepting the 
earnest money deposit of the Plaintiffs pursuant to paragraph 15 of the 
contract."

Appellants 
further asserted that the acceptance of the earnest money deposit amounted to an 
accord and satisfaction of the damages to which appellees were entitled under 
the contract.

[¶7.]     Paragraph 15 of the 
contract, supra, clearly sets out two alternative remedies for a nonbreaching 
party in the event of a breach of contract: (1) Specific performance, or (2) 
such damages as may be proper. Appellees contend that the phrase "damages as may 
be proper" includes, but is not limited to, a forfeiture of the earnest money 
deposit in the event of purchaser's breach. A close reading of the paragraph 
shows that this is not true. It appears that the sentence, "In the event of such 
default by the Purchaser, and the Seller elects to treat the contract as 
terminated, then all payments made hereunder shall be forfeited and retained on 
behalf of the Seller," is not a part of the alternative remedies enumerated 
above, but is simply a forfeiture provision.

[¶8.]     It might be argued that 
that sentence refers to liquidated damages. It is not important whether the 
parties themselves have chosen to call a provision one for liquidated damages or 
have styled it a penalty. Truck 
Rent-A-Center, Inc. v. Puritan Farms 2nd, Inc., 41 N.Y.2d 420, 393 N.Y.S.2d 365, 369, 361 N.E.2d 1015, 1018 (1977). It is virtually the unanimous rule in 
all jurisdictions that whether a provision is one for liquidated damages or a 
penalty is a question of law for the court. Marcam Mortgage Corporation v. Black, 
Wyo., 686 P.2d 575, 580 (1984); Ruckelshaus v. BrowardCountySchool Board, 494 F.2d 1164, 1165 (5th 
Cir. 1974).

[¶9.]     A provision for 
liquidated damages is generally defined as follows:

"`* * * Generally 
speaking, it may be said that when the damages arising from the breach of the 
contract which the obligation is given to secure are uncertain in their nature 
and not readily susceptible of proof by the ordinary rules of evidence, and are 
not so disproportionate to the probable damages suffered as to appear 
unconscionable, and it is reasonably clear from the whole agreement that it is 
the intention of the parties to provide for liquidated damages and not a 
penalty, such a stipulation will be held to be one for liquidated damages.'" Mead v. Anton, 33 Wn.2d 741, 207 P.2d 227, 237, 10 A.L.R.2d 588 (1949) quoting from Madler v. Silverstone, 55 Wn. 159, 104 P. 165, 34 L.R.A., N.S., 1.

[¶10.]  In Ray v. Electrical Products Consolidated, 
Wyo., 390 P.2d 607, 608 (1964), we adopted that said in Restatement, Contracts, § 339, p. 552 
(1932):

"`(1) An agreement, made 
in advance of breach, fixing the damages therefor, is not enforceable as a 
contract and does not affect the damages recoverable for the breach, 
unless

"`(a) the amount so fixed 
is a reasonable forecast of just compensation for the harm that is caused by the 
breach, and

"`(b) the harm that is 
caused by the breach is one that is incapable or very difficult of accurate 
estimation.'"

[¶11.]  Damages for a breach of contract for sale 
of real property are not difficult of accurate estimation. They are measured by 
the difference between the contract price and the value of the property at the 
time of the breach of contract. Such damages represent the loss of the bargain. 
Reed v. Wadsworth, Wyo., 
553 P.2d 1024, 1035 (1976).

[¶12.]  It is clear, therefore, that the sentence 
in question is a provision for a forfeiture, or penalty.

[¶13.]  While provisions for liquidated damages 
are valid and enforceable, courts avoid the enforcement of a provision for 
liquidated damages if it is actually in the nature of a penalty. American Financial Leasing and Services Co. 
v. Miller, 41 Ohio App.2d 69, 70 Ohio Op.2d 64, 322 N.E.2d 149, 151 (1974).

"If the stipulation in 
the contract is deemed to be one for a penalty, it is not enforceable, and no 
sum can be recovered or allowed other than that which will compensate for the 
actual loss sustained and proved." 22 Am.Jur.2d Damages § 232, p. 319 
(1965).

"Under a provision 
construed to be a penalty nothing can be recovered for a breach of the contract 
where no actual damages appear." 22 Am.Jur.2d Damages § 234, p. 321 
(1965).

[¶14.]  We said as far back as 1952 
that:

"It is now well 
established in law and in equity that forfeitures are not favored. Before one 
can declare a forfeiture it must appear that he has a clear right and then too 
he himself must be free from blame in the premises. Every reasonable presumption 
is against a forfeiture and every intendment and presumption is against a person 
seeking to enforce it. 17 C.J.S., Contracts, § 407, . `Provisions for forfeiture 
may be waived and the courts are quick to take advantage of circumstances 
indicating such an intention.' 17 C.J.S., Contracts, § 409, . * * 
*

"In line with the 
holdings of other courts, this court has taken the opportunity to say that, 
`Forfeitures are not favored, and it is said that slight evidence of the 
lessor's intention to relinquish his right is sufficient to warrant the finding 
of waiver.'" Baker v. Jones, 69 Wyo. 
314, 240 P.2d 1165, 1171-1172 (1952).

[¶15.]  We repeated this in Younglove v. Graham & Hill, Wyo., 
526 P.2d 689, 692 (1974), where we said that forfeitures are not favored and 
equity abhors a forfeiture. We went on to say that whether a forfeiture will be 
permitted depends on the facts of the particular case.

[¶16.]  Based on the facts of this case, we hold 
that the forfeiture clause should not be enforced. The record indicates that the 
appellees waived their right to the earnest money deposit. They at no point 
asked to be awarded said amount, even in the face of appellants' answer and 
various other filings of appellant. The court apparently just awarded the 
deposit to appellees out of the blue, and of course appellees attempted to argue 
that they deserved such award after the fact, but by then the right, if indeed 
appellees ever had such a right, was waived.

[¶17.]  In addition, in light of the failure by 
appellees to prove any actual damages whatsoever, we refuse to here enforce said 
forfeiture even had there not been a waiver.

"We think there can be no 
quarrel with the rule that a provision in a contract will be construed as a 
penalty or forfeiture and hence unenforceable if it bears no reasonable 
relationship to the amount of actual damages. In re Grodnik's, Inc., D.C.Minn., 128 F. Supp. 941, 943 [(1955)]; Fox Chicago 
Realty Corporation v. Zukor's Dresses, Inc., 50 Cal. App. 2d 129, 122 P.2d 705, 708 [(1942)]; Electrical Products 
Corporation v. Ziegler Drug Stores, Inc., 141 Or. 117, 10 P.2d 910, 15 P.2d 1078, 1081. This is simply another way of stating the rule which we previously 
quoted from A.L.I. Restatement, Contracts." Ray v. Electrical Products Consolidated, 
supra, 390 P.2d  at 609.

ATTORNEY'S 
FEES

[¶18.]  The jury awarded $14,700 to appellees for 
attorney's fees. The general rule is that each party must bear his or her own 
costs and fees incurred in litigation. Alyeska Pipeline Service Company v. 
Wilderness Society, 421 U.S. 240, 95 S. Ct. 1612, 44 L. Ed. 2d 141 (1975). See 
critique of Alyeska in "Attorney's Fees in Public Interest Litigation," comment 
by Mark Quiner in 16 Land and Water L.Rev. 727 (1981). One exception, however, 
is that attorney's fees are generally not available unless provided for by 
statute or a contract. Coulter v. City of 
Rawlins, Wyo., 662 P.2d 888, 904 (1983). The parties' contract states in 
pertinent part:

"16. In the event that 
any party shall become in default or breach of any of the terms of this 
Agreement, such defaulting or breaching party shall pay all reasonable 
attorneys' fees and other expenses which the nonbreaching or nondefaulting party 
may incur in enforcing this Agreement, with or without suit. * * 
*"

[¶19.]  The words "enforcing this Agreement" can 
only logically be read to mean "successfully enforcing the terms of this 
Agreement." One cannot be said to have "enforced" an agreement if one is not the 
prevailing or successful party. The United States Supreme Court has said that 
one formula used in determining whether a party has prevailed 
is:

"`* * * if they succeed 
on any significant issue in litigation which achieves some of the benefit the 
parties sought in bringing suit.' * * *" Hensley v. Eckerhart, 461 U.S. 424, 103 S. Ct. 1933, 1939, 76 L. Ed. 2d 40 (1983), quoting from Nadeau v. Helgemoe, 581 F.2d 275, 
278-279 (1st Cir. 1978).

[¶20.]  They have also said that the prevailing 
party must "`essentially succeed[] in obtaining the relief he seeks in his 
claims on the merits.'" Ruckelshaus v. 
Sierra Club, 463 U.S. 680, 103 S. Ct. 3274, 3278, 77 L. Ed. 2d 938 (1983), 
quoting from Bagby v. Beal, 606 F.2d 411, 415 (3rd Cir. 1979).

[¶21.]  While it is true that the jury found that 
appellants breached the contract, and this is some evidence of appellees' 
success, the jury also found that appellees suffered no damage and were estopped 
to assert that the value of the property was less than the contract price. The 
benefit appellees sought to achieve was damages based on the breach, not just 
that there was a breach which resulted in no damage. 

[¶22.]  This court has said that the 
reasonableness of attorney's fees must always depend upon the facts and 
circumstances of the litigation. Anderson 
v. Meier, Wyo., 641 P.2d 187, 192 (1982). The award of attorney's fees was 
not appropriate in this case because the contract provided for such only in the 
event of enforcement of the contract, and such was not accomplished inasmuch as 
appellees failed to prove that they were in any way 
damaged.

[¶23.]  In light of the foregoing, we reverse the 
trial court both as to the retention by appellees of the earnest money deposit 
and as to the award to appellees of their attorney's fees.

CARDINE, Justice, partially 
dissenting, with whom ROSE, Justice, 
joins.

[¶24.]  I would affirm the judgment of the 
district court insofar as it awards the earnest money deposit in the amount of 
$5,000 to appellees. The parties entered into a purchase, offer and acceptance 
agreement under which appellees agreed to sell their residence and appellants 
agreed to purchase the same for $665,000. Appellants paid appellees $5,000 as 
earnest money and as consideration for appellees' promise to sell at the price 
and upon the terms and considerations stated. Appellees were obligated to sell; 
appellants were obligated to buy. Within a few days, appellants informed 
appellees that they would breach the agreement and would not purchase the 
residence at the price stated. Appellees treated the agreement as terminated and 
sold the residence to a third party for the sum of 
$600,000.

[¶25.]  The portion of the agreement that deals 
with the rights and remedies of the parties upon breach 
provides:

"15. Time is of the 
essence hereof, and if any payment or any other condition hereof is not made, 
tendered or performed by either the Seller or Purchaser as herein provided, then 
this contract, at the option of the party who is not in default or breach, may 
at that party's option, be terminated by such party, in which case the 
nondefaulting party may recover such damages as may be proper or such party may 
require specific performance of the other herein. In the event of such default 
by the Purchaser, and the Seller elects to treat the contract as terminated, 
then all payments made hereunder shall be forfeited and retained on behalf of 
the Seller. In the event, however, the nonbreaching or nondefaulting party 
elects to treat this contract as being in full force and effect, then nothing 
herein shall be construed to prevent its specific 
performance."

The opinion of 
the court correctly holds that the right of a nonbreaching party 
to

(a) "recover such damages 
as may be proper"

and

(b) to retain on behalf 
of seller "all payments made hereunder"

are separate 
remedies, each available to the nonbreaching seller. That the sellers did not 
recover damages should not prevent them from the benefits of the written 
agreement with respect to the earnest money deposit. The buyers in this action 
did not seek to recover the $5,000 deposit. Buyers candidly admitted that, per 
the agreement, it should be retained by sellers. The question of the right to 
this deposit, which this court seeks to answer, was never presented to the jury 
nor decided. I do not see how this court can now direct entry of a judgment 
against appellants in the amount of $5,000 - the earnest money deposit - when 
appellees did not pray for nor seek this relief in this 
litigation.

[¶26.]  I concur with the majority disposition as 
to the attorney's fee.