Court Opinion

ID: 9573435
Source: CourtListenerOpinion
Date Created: 2023-08-21 20:55:10.036866+00
Date Added: 2024-06-11T12:40:18.545375
License: Public Domain

JUSTICE WHITING, with whom JUSTICE HASSELL joins,
concurring in part and dissenting in part.
I agree with the majority decision, with the exception of its ruling on the assignment of cross-error. I do not agree that the contractual provision requiring the buyer to pay $24,500 (10% of the purchase price) in the event of a default is a provision for liquidated damages.
I think that the principles articulated in Taylor v. Sanders, 233 Va. 73, 75, 353 S.E.2d 745, 747 (1987), should control our decision in this case. In Taylor, we said that “the construction of such stipulations [for liquidated damages] depends upon the intent of the parties as evidenced by the entire contract viewed in light of the circumstances under which the contract was made.” Id. And, if a contractual provision for a fixed sum to be paid as damages for a contractual breach would be “grossly in excess of actual damages, courts of law usually construe such a stipulation as an unenforceable penalty.” Id.
Moreover, in Colonna Dry Dock Co. v. Colonna, 108 Va. 230, 61 S.E. 770 (1908), we said that “where there is doubt whether the provisions of a contract constitute a forfeiture or a penalty, or liquidated damages, courts of equity strongly incline to that construction which declares it to be a forfeiture or a penalty, rather than liquidated damages.” Id. at 240, 61 S.E. at 774. Given the policy underlying Code § 8.01-422 which permits a defendant in an action on a contract to “file a pleading, alleging any matter which would entitle him to relief in equity, in whole or in part, against the obligation of the contract,” I would also apply the principle of equity articulated in Colonna to this action at law.
Paragraph 11 of the contract made the defaulting party liable for actual damages and “all expenses incurred,” including attorney’s fees, costs, and real estate broker’s fees. And paragraph 4 provided that 10% of the purchase price, or $24,500, “will be for*211feited in the event of buyer default.” (Emphasis added.). Although the use of the word “forfeited” does not render invalid what would otherwise be a valid provision for liquidated damages, I think that the word was used to reflect the Sellers’ intent to penalize the defaulting Buyers given (1) the entire contract viewed as a whole, (2) the circumstances when the contract was made, and (3) Mr. Brooks’s testimony quoted by the majority.
And, although the Sellers seek to justify their insertion of the $24,500 claim based on their real estate agent’s advice that they should receive this amount as compensation for the loss of less than four months of the “best selling season,” no such justification is found in the contract. Nor does the evidence indicate that the Sellers’ rationale for this compensation was communicated to the Buyers when the contract was signed. Accordingly, I conclude that the evidence does not support a finding that, at the time of contracting, the parties intended the “forfeit [ure]” to be a provision for payment of liquidated damages for the loss of a part of the “best selling season.”
Nor do I think that the Buyers’ payment of $24,500 is justifiable as liquidated damages solely for the Sellers’ loss of less than four months of what the seller’s real estate agent testified was the “best selling season.” The real estate agent did not indicate what sums, if any, the Sellers might have lost in withdrawing the property from the market during such a short period. And, in the event the Sellers sold the property, paragraph 11 of the contract gave them the right to claim any difference between the contract price and the price they ultimately received for the property as their actual damages, plus “all expenses incurred by the [Sellers].” This, of course, would include any losses and expenses incurred by the Sellers during the short period the property was off the market. In light of the fact that the Sellers reserved the right to claim actual damages in addition to the payment of $24,500,1 conclude that this additional sum was grossly in excess of the Sellers’ prospective actual damages for the loss of less than four months of “the best selling season.”
Accordingly, I would reverse the trial court’s judgment on this issue and enter a final judgment holding that the provision is unenforceable as a penalty or forfeiture.