Phelps v. Brown

Beatty, C. J.

This is an action by the vendee in a contract for the purchase and sale of lands to recover back the sum of five hundred dollars, paid at the date of the contract as a forfeit. The decision of the superior court was against the plaintiff, and she appeals from the judgment on the judgment roll.

The following are the material facts disclosed by the record: “In June, 1887, one Horton and wife owned a tract of land in Santa Clara County, which was encumbered by a mortgage for nine thousand dollars, and the plaintiff, a married woman, owned a house and lot in the city of San José. The Hortons wished to exchange their land for the lot of plaintiff, and to negotiate the exchange they employed the defendants, who were real estate agents doing business in San José, as partners under the firm name of Brown & Ensign, and orally agreed to pay them five hundred dollars as a commission if the exchange should be made. The proposition of the Hortons was, that they would convey their land to the plaintiff for twenty thousand dollars, and that in payment thereof she should assume and pay the mortgage on the land, and should convey her lot to them for six thousand five hundred dollars, and pay to them the balance of four thousand five hundred dollars in cash when the deeds should be executed. This proposition was put in writing and given to the defendants, and they delivered it to the plaintiff. She was willing to accept the proposition and make the trade if she could realize $6,750 for her lot, and not otherwise. The defendants then agreed to pay her $250 out of their commissions when the trade should be consummated. This arrangement was satisfactory, and she thereupon drew her check upon a local bank for five hundred dollars, payable to the Hortons, and handed the same to the defendants as a deposit or first payment. The defendants on the same day gave the check to the Hortons, who executed a receipt therefor, closing with the words, ‘ trade to be finished within two weeks from date, or this deposit to be forfeited without recourse. Title to prove good or no sale, and this deposit to be returned.’ A few days later the defendants handed back to the plaintiff her check, and she thereupon gave to them, in place of the check; five hundred dollars in money, which they at once paid over to the Nortons. Subsequently it appeared from the abstract of title furnished by the plaintiff that an attachment issued in an action against her husband had been levied on her property; and on learning this the Nortons refused to accept her deed, or to carry out the proposed exchange, unless she would have the attachment removed. She offered to give them a warranty deed, but refused to procure the discharge of the attachment. The Nortons were ready and willing to complete the trade, and tendered a deed of their property to plaintiff, but she never offered to convey to them an unencumbered title to her property, and never tendered or offered to pay the balance of the purchase-money. Thereupon the Nortons abandoned the trade, and without the knowledge of plaintiff, and without any directions as to the disposition to be made of the money, returned the five hundred dollars to the defendants, and the latter returned to them their receipt, with an indorsement thereon as follows:—

‘“Money returned, and their receipt is canceled. “‘July 25, 1887. Brown & Ensign.’

“‘We agree to release the signers of this receipt from any expense, legal or otherwise.

“‘Brown & Ensign.’”

Upon these facts two questions arise: 1. Was the plaintiff entitled to receive her money back when the Nortons abandoned the trade? 2. If so, can she recover it back from these defendants?

It is assumeed throughout the argument, and we shall so assume without deciding, that the failure or refusal of plaintiff to clear her land of an attachment levied upon it in a suit against her husband was a failure or refusal to do .something which her contract bound her to do; and that she thereby placed herself in default exactly the same as if she had refused to pay an installment of the purchase price when due. But assuming this to be so, and that the Nortons were not in default when they abandoned the trade and put an end to the contract, the plaintiff nevertheless immediately became entitled to receive back the five, hundred dollars which she had paid, less the actual damage caused by the breach of her contract. This proposition is fully sustained by two recent decisions of this court. (Cleary v. Folger, 84 Cal. 316; 18 Am. St. Rep. 187; Drew v. Pedlar, 87 Cal. 443; 22 Am. St. Rep. 257.) Respondents, however, insist that these decisions are in conflict with later as well as earlier decisions of this court; citing England v. Rogers, 41 Cal. 420; Scott v. Glenn, 87 Cal. 221; Dennis v. Strassburger, 89 Cal. 583; Easton v. Montgomery, 90 Cal. 307; Newton v. Hull, 90 Cal. 487; Anderson v. Strassburger, 92 Cal. 38.

It is true that in the case of Cleary v. Folger, 84 Cal. 316, 18 Am. St. Rep. 187, which was decided in Department, and never brought under review of the court by petition forbearing in Bank, it was held, contrary to the earlier and later decisions, that in case of mutual and dependent stipulations to be concurrently performed, both parties are in default if the time of performance passes without tender of performance on either side, and that the contract is at an end. As to this proposition, that case has been expressly overruled in Newton v. Hull, 90 Cal. 492, and the correct rule of the earlier cases re. stored; but the further proposition involved and decided in that case, and in Drew v. Pedlar, 87 Cal. 443, 22 Am. St. Rep. 257, viz., that when a contract of sale and purchase of lands is abandoned or rescinded by the parties, the vendee, though in default, may recover back installments paid of the purchase-money, less the actual damage to the vendor occasioned by his breach of contract, has never been reversed or modified. In Drew v. Pedlar, 87 Cal. 443, 22 Am. St. Rep. 257, the parties expressly stipulated that one thousand dollars, paid at the date of the contract, should be retained by the vendor as liquidated damages in case of failure by the vendee to compíete the purchase, and this stipulation was held void under the statute. In Cleary v. Folger, 84 Cal. 316,18 Am. St. Rep. 187, it was held, and we think correctly, that a stipulation to forfeit the first payment in case of failure by the vendee to complete the purchase was in effect a stipulation for liquidated damages, and void. In both cases it was held that the vendee could recover, subject to the right of the vendor to recoup his actual damage.

In this case the plaintiff’s right to recover does not depend on the proposition erroneously decided in Cleary v. Folger, 84 Cal. 316, 18 Am. St. Rep. .187; for the contract with the Nortons was ended by their voluntary abandonment of it in consequence of her failure to clear the title to the property which she was to convey in the exchange. The contract was at an end, and the Nortons were left with plaintiff’s money in their hands. There is no claim in the pleadings or finding by the court that they were actually damaged by the failure of plaintiff to complete the transaction; they could not retain the five hundred dollars as liquidated damages, and therefore it became their duty to pay it back.

There is not the slightest conflict in the decisions of this court as to these points. In each of the several cases cited and relied on by respondents in which the vendee of land was defeated in an action to recover purchase money, the decision went upon the ground that the vendee was not only not in default, but the contract was still in force. (Scott v. Glenn, 87 Cal. 221; Dennis v. Strassburger, 89 Cal. 583; Easton v. Montgomery, 90 Cal. 307; Anderson v. Strassburger, 92 Cal. 38.)

The respondents endeavor to distinguish Drew v. Pedlar, 87 Cal. 443, 22 Am. St. Rep. 257, from this case, upon the ground that there it appeared that the vendee, long after he was in default, and the vendor had elected to treat the contract as abandoned and rescinded, had made a tardy offer of performance. But while the fact was as the respondents claim, the decision did not proceed upon that distinction, but upon the broad ground above stated, as to which this case is practically the same. We are entirely satisfied with the correctness of the decision in Drew v. Pedlar, and upon that authority hold that when the Nortons abandoned their contract the plaintiff was entitled to receive her five hundred dollars back.

As to the second question above stated, the respondents claim that there can be no recovery against the defendants, even if the Nortons were liable to refund the purchase-money paid; and they rely upon the decision in Bogart v. Crosby, 80 Gal. 195. But this case is very different from that. There the defendants .were agents for the vendors exclusively, and they claimed the money as their own against both parties to the contract. They did not receive it under any agreement, express or implied", to pay it over to the vendee or to assume the-liability of the vendor. Here the facts found by the superior court fully justified its conclusion, “ that the defendants, on receiving the five hundred dollars from theNortons, took their place as to the money and assumed all liabilities as to the plaintiff that the Nortons had incurred.”

But more than this, the-findings show clearly that the-defendants received the money as plaintiff’s agent and for her use. They held the receipt of the Nortons as her agents, and when they gave it up they canceled it as-her agents. Unless they were her agents for that purpose, they had no right to deliver up and cancel that receipt on return of the money; and having assumed to represent her for one purpose, they cannot be heard to say they did not represent her for the other.

The judgment is reversed and the cause remanded, with directions to the superior court to enter a judgment for the plaintiff on the findings.

De Haven, J., McFarland, J., Sharpstein, J., Paterson, J., Harrison, J., and Garoutte, J., concurred.