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Lee Builders, Inc. v. Wells

Court of Chancery of Delaware, New Castle County

March 17, 1954

LEE BUILDERS, Inc.
v.
WELLS et al.

Purchaser's action for specific performance of contract for sale of realty wherein vendors counterclaimed for damages. On reversal of specific performance decree, the case was remanded for decision relative to counterclaim. The Chancery Court, Bramhall, Vice-Chancellor, held that agreement to forfeit deposit of 5 per cent of purchase price for realty was not so unreasonable as amount to provision penalty rather than provision for liquidated damages, and therefore would be enforced against defaulting purchaser.

Order in accordance with opinion.

[34 Del.Ch. 308] This is a decision relative to the counterclaim of defendants for which this suit was remanded to this court by the supreme court.

Albert W. James and H. James Conaway, Jr. (of Morris, James, Hitchens & Williams), Wilmington, for plaintiff.

Daniel O. Hastings and Clarence W. Taylor (of Hastings, Stockly & Walz), Wilmington, for defendants.

BRAMHALL, Vice Chancellor.

This suit has been remanded to this court by the supreme court for the purpose of determining defendants' counterclaim for damages. More complete statements of the essential facts will be found in the opinion of the supreme Court, Wells v. Lee Builders, Inc., Del.Ch., 99 A.2d 620, and the former opinion of this court, Lee Builders, Inc. v. Wells, Del.Ch., 92 A.2d 710.

Plaintiff and defendants entered into a written agreement dated May 12, 1950, providing for the sale to plaintiff's agent by defendants of their residence in Elsmere, New Castle County, Delaware, for the sum of $19,000. At the time of the execution of the agreement plaintiff delivered to defendants a check for $1,000 as a deposit. It was stipulated in the agreement that in the event of default by plaintiff all deposits should be forfeited as liquidated damages. This check, for reasons not here important, was never used. Among other things, the agreement provided for the removal by plaintiff of defendants' house to another part of the lot on which it was situated, and for certain other work to be done after the house had been removed, prior to the settlement for the property.

Shortly after the execution of the agreement defendants became dissatisfied with

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their bargain and indicated to the plaintiff's agents [34 Del.Ch. 309] on at least two occasions that they were not going to comply with the terms of the agreement. However, on September 1, 1950, the parties entered into another written agreement, in which they renewed their obligations as set forth in the agreement of May 12, 1950, and provided for settlement on or before November 15, 1950. Difficulties continued to exist between the parties after the execution of the later agreement. Plaintiff did not move the house or do the other work in connection therewith as provided by the agreement prior to settlement. Plaintiff contended that defendants never gave it permission to go on the premises for the purpose of moving the house and doing the work which it was required to have performed. Finally, plaintiff made legal tender of the purchase price upon defendants and demanded a deed. Defendants refused to comply with plaintiff's demand, alleging that plaintiff had breached the contract by failing to move the house and do the work incidental thereto prior to settlement.

Plaintiff resists defendants' counterclaim, contending: that the provision in the agreement relative to the deposit constitutes a penalty rather than liquidated damages and that, since defendants have proven no actual damages, they can have no recovery; that the actions of defendants, while not sufficient to entitle plaintiff to specific performance, were sufficient to give plaintiff a good defense to the counterclaim of defendants for damages; and, that there has been no showing that plaintiff has failed to meet its obligations which under the contract could give a right of action under the provisions of the agreement relative to the deposit of $1,000.

It was stated in the agreement that the payment or payments made on account should at the seller's option, ‘ be forfeited as liquidated damages for the failure of the buyer to settle’ . Where the damages are uncertain and the amount agreed upon is reasonable, such an agreement will not be disturbed. In re Ross & Son, Inc., 10 Del.Ch. 434, 95 A. 311. The injury caused by breach of a contract for the conveyance of land is usually not capable of such reasonably exact measurement as to prevent enforcement of an agreement that is not unconscionable. Corbin on Contracts, Vol. 5, Sec. 1064; Williston on Contracts, Vol. 3, Sec. 789. The agreed price was $19,000. The deposit of $1,000 is a little more than 5% of the total [34 Del.Ch. 310] purchase price. The agreement involved the sale of real estate. In the absence of evidence leading to a contrary conclusion, I cannot say that in an agreement involving the sale of real estate a deposit of approximately 5% of the total purchase price is unreasonable.

I conclude that the deposit of $1,000 was liquidated damages and not a penalty.

Were the actions of defendants sufficient to give plaintiff a good defense to the counterclaim of defendants? Plaintiff suggests that both before and after the execution of the extension agreement dated September 1, 1950, there was ample evidence of manifestation on the part of defendants that they did not intend to carry out the term of the contract. As to the actions of defendants prior to September 1, 1950, the Supreme Court has already ...


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