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Oliver v. Lawson

Decided: October 17, 1966.

VINCENT T. OLIVER AND VINCENT T. OLIVER ENTERPRISES, INC., PLAINTIFFS-APPELLANTS,
v.
ALEXANDER E. LAWSON AND BEATRICE V. LAWSON, DEFENDANTS-RESPONDENTS, AND CHARLES SHAKARJIAN, SHAKARJIAN REALTY CO., JULIAN REALTY CORP., ALBERT B. STAVITSKY, NICHOLAS IGNELZI, ATLANTIC FUNDING CORPORATION AND ROLEHILL CORPORATION, DEFENDANTS



Goldmann, Kilkenny and Collester. The opinion of the court was delivered by Kilkenny, J.A.D.

Kilkenny

The Chancery Division decided that defendants Lawson, who agreed in writing to sell certain lands in North Bergen, New Jersey, to plaintiff corporation for $215,000, were entitled to retain as damages the contract deposit of $20,000 upon its finding that the buyer breached the contract and the failure to close title was not due to any fault on the part of the sellers.

Plaintiffs appeal from the judgment, contending that retention of the deposit would amount to a forfeiture and an unjust enrichment of the sellers, who, after plaintiffs' default, admittedly made a new contract to sell the property to a third party at substantially the same purchase price.

We are not concerned with the other defendants named in this litigation. The judgment in their favor has not been appealed by plaintiffs. We also agree with defendants that the individual plaintiff is not a proper party to this appeal, despite his control of plaintiff corporation, because the corporation was the purchaser under the contract and sued as plaintiff to recover the deposit. However, the misjoinder of the individual plaintiff as an appellant will not affect the necessity of deciding the appeal on its merits.

In order to avoid the cost of reproducing the entire record, the appeal has been limited to the single issue of defendants' right to retain the deposit. We must assume, therefore, that the trial court correctly determined that plaintiff buyer wrongfully breached its contract of purchase and that defendant sellers were without fault.

It has heretofore generally been held in New Jersey that in such instances the defaulting buyer may not recover his deposit, irrespective of the actual damages suffered by the seller and regardless of whether the contract contains a forfeiture provision or not. The instant contract contained no such provision. Steinbach v. Pettingill, 67 N.J.L. 36 (Sup. Ct. 1901); Katz v. Katz, 134 N.J.L. 303 (Sup. Ct. 1946); Bernstein v. Rosenzweig, 1 N.J. Super. 48, 54 (App. Div. 1948); Earlin v. Mors, 1 N.J. 336 (1949); McEnaney v.

Spedick, 13 N.J. Super. 37, 41 (App. Div. 1951). New Jersey follows the prevailing view in this regard. 31 A.L.R. 2 d 8, 96 and 98 (1953).

Even where efforts have been made by the buyer to invoke the aid of a court of equity on the theory of hardship which a retention of the deposit would allegedly entail, relief has generally been denied when the basis therefor has been, as allegedly here, the buyer's inability to raise the balance of the purchase price. Lincoln Bus Co. v. Jersey Mutual & Casualty Co., 112 N.J. Eq. 527 (Ch. 1933); Kingdon v. Sickler, 2 N.J. Super. 183 (Ch. Div. 1948).

Plaintiffs argue that the more modern view would allow the seller to retain only so much of the deposit as would compensate him for his actual damage sustained. Reference is made to Restatement, Contracts, § 357 (1932), and 5 Williston on Contracts (rev. ed. 1937), §§ 1473-1477. Undoubtedly, this is true in some jurisdictions but, as Williston points out in § 791 (3 d ed. 1961), "the great majority of decisions deny the buyer relief." The question was recognized by our court in Bernstein v. Rosenzweig and McEnany v. Spedick, supra, in each of which recovery of the deposit was denied. However, we found it unnecessary for decision in those cases because the deposit in each instance was not so proportionately large as to concern the court. The deposit was less than 1% of the purchase price in Bernstein and less than 4% of the purchase price in McEnaney.

In Moore v. Durnam, 63 N.J. Eq. 96, 98 (Ch. 1902), affirmed 69 N.J. Eq. 828 (E. & A. 1905), where a deposit of $450 on a $5,000 purchase price was agreed upon as a forfeiture upon a default, the court indicated that "[T]he sum to be forfeited was not unreasonably disproportioned to the subject-matter of the contract, being less than 10 per cent of the consideration to be paid." So, too, in the instant case the deposit, although substantial, was not relatively unreasonably disproportioned, being less than 10% of the purchase price. Moore v. Durnam reiterates:

"The rule is entirely settled that a part payment of the purchase money cannot be recovered by a purchaser if he causelessly refuses to execute ...


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