Opinion
No. 13462.
December 15, 1980. Rehearing Denied February 11, 1981.
APPEAL FROM TWENTY-SECOND JUDICIAL DISTRICT COURT, PARISH OF ST. TAMMANY, STATE OF LOUISIANA, HONORABLE STEPHEN A. DUCZER, P. J.
Dan A. Smetherman, New Orleans, for plaintiff-appellant.
Howard R. Fussell, Covington, for C. Derbes Smith, Inc., defendant-appellee.
Elaine W. Guillot, Slidell, for Guildcraft Homes, Inc., defendant-appellee.
Before ELLIS, CHIASSON, PONDER, COLE and WATKINS, JJ.
Plaintiff-appellant, Emile R. Poissenot, appeals the decision of the trial court dismissing his suit for the return of a $2,000.00 deposit made by him in accordance with a purchase agreement and granting judgment in favor of the defendants-appellees, Guildcraft Homes, Inc. and C. Derbes Smith, Inc., on their respective reconventional demands.
The plaintiff entered into a written contract on June 30, 1977, to purchase a lot and home which was to be constructed by Guildcraft Homes, Inc. in Yester Oaks Subdivision located in Slidell, Louisiana. The agreement is evidenced by a standard real estate contract furnished by Ms. Smith, a realtor with C. Derbes Smith, Inc., and by a supplement to the contract executed on July 2, 1977. The contract provided that an act of sale would be passed before the lender's notary between September 15, 1977 and October 1, 1977.
The agreement for the sale of the lot and house was conditioned on the ability of Mr. Poissenot to secure a loan in the amount of $27,000.00 at a rate of interest not to exceed nine percent (9%). The suspensive condition was met by the receipt of a loan commitment from the First Homestead and Savings Association of New Orleans on July 5, 1977.
In addition, the agreement required that Guildcraft be furnished a certificate of reasonable value (CRV) from the Veterans Administration. This was accomplished by a CRV dated August 5, 1977 from the Veterans Administration. With all of plaintiff's obligations met, construction on the house began.
October 1, 1977 passed without any action being taken by either party. On November 2, 1977, Cynthia D. Smith, president of C. Derbes Smith, Inc., the realtor handling the sale, wrote a note to Guildcraft pointing out some irregularities in the still unfinished house. These had been brought to her attention by the plaintiff.
A similar note was sent on November 25, 1977. On November 11, 1977, Mr. Poissenot had signed a request sheet giving specifications for the color and decoration scheme of the house. He stated that this was necessary due to the fact that the original had been lost.
On or about December 1, 1977, Ms. Smith advised plaintiff that the house would probably not be ready until after Christmas. Plaintiff then consulted counsel, who directed the following letter to C. Derbes Smith, Inc. on December 7, 1977:
"Mr. Emile Poissenot has requested my assistance in securing the return of his deposit in the sum of $2,000 for the purchase of the subject realty. The Act of Sale for this property was to be passed under the terms of the contract not later than October 1, 1977. Mr. Poissenot had performed his part under the Agreement to secure financing and stood ready to purchase this property as of such date. "As the time for completion of construction has long since passed, it is our position the Seller has breached the bargain. If payment of the $2,000 is not received within 15 days, we intend to file suit in St. Tammany Parish for the return of the deposit plus an equal amount to be paid as penalty by the Seller and all reasonable attorney's fees and costs which we incur."
The purchaser in this agreement, the plaintiff in this action, now seeks the return of the $2,000.00 deposit and in addition an equal amount as penalty, plus reasonable attorney's fees and costs of this action according to the terms of the contract. The defendant, C. Derbes Smith, denied the allegations of the plaintiff and reconvened for $2,345.00, representing the agent's commission. The defendant, Guildcraft Homes, denied the plaintiff's allegations and reconvened for $6,345.00, the amount of the deposit, penalties, attorney's fees, costs and the agent's commission.
The trial court found that the supplement to the contract had modified the initial contract since it was typewritten in regards to when the contract was to be carried out. In addition, the court found that the purchaser, plaintiff, could not cancel the agreement unless he could not secure the specified loan. Having secured the loan, he was unable to cancel the agreement without facing the consequences of a breached contract. Finding further that the plaintiff breached the contract by the December 7, 1977 letter, the trial court held the plaintiff to be indebted to Guildcraft in the amount of $2,000.00, plus $250.00 attorney's fees and for all costs of the proceedings. In addition, plaintiff was indebted to C. Derbes Smith in the amount of $2,345.00, plus $250.00 in attorney's fees.
The trial court found that the contract entered into was a printed form contract and the supplement was a typewritten agreement. The significance of this distinction is that the Louisiana jurisprudence has favored the typewritten provisions of a contract over a printed provision of a contract when there is a conflict between the two. Executive House Bldg., Inc. v. Optimum Systems Inc., 311 So.2d 604 (La.App. 4th Cir. 1975) cert. denied 313 So.2d 847 (La. 1975).
Notwithstanding this rule, we find that the two provisions which are alleged to be in conflict, lines 26 through 28 of the contract and paragraph 1 of the supplement, are both typewritten. The reason that this is so is that the date the act of sale was to be passed is typed in the blanks provided in the form contract. We deem this to be a typewritten provision of the contract and of equal importance with paragraph 1 of the supplement since the parties are the ones that provided the substance of what is typed therein.
The following excerpts of these provisions from the agreement are as follows:
"26. Act of sale at expense of purchaser to be passed before lenders, Notary, at any time after
"27. Sept. 15 19 77, and not later than Oct. 1, 19 77. In the event bonafide curative work in connection with title
"28. is required, the parties herewith agree to and do extend the time for passing of act of sale by forty-five days."
* * *
"1) If the house is not substantially complete within 130 days from date of Seller's receipt of a V.A. copy of an approved C.R.V. and firm written commitment for a permanent loan to purchaser from a mortgage lender in conformity to lines 13 and 14 of contract, then damages at the rate of $5.00 per day will be assessed against the seller and deducted from the sale price of the property until substantial completion."
In addition to that fact, we do not find the two provisions of the contract to be in conflict. Lines 26 through 28 establish a time frame, mutually agreed to by both parties, in which an act of sale was to be passed before the lender's notary. Paragraph 1 of the supplement refers to a penalty clause imposed on the seller if he fails to complete the house within 130 days of receipt of a CRV from the Veterans Administration. This paragraph is in no manner a substitute time frame for the passing of an act of sale.
Counsel for appellee, in oral argument, has asked us to assume that the date for passing an act of sale would be 130 days after seller's receipt of a CRV. We do not need to assume a date for passing an act of sale if there is one already provided for in the contract. The construction of the contract in this manner will give meaning to all the provisions of the contract. La.C.C. art. 1955 and Farrell v. Hodges Stock Yards, Inc., 343 So.2d 1364 (La. 1977).
The next contention is that appellant could not sue for return of his deposit since there was no putting in default of the defendant on the part of the plaintiff-purchaser. A thorough review of the circumstances of this case reveals that a putting in default was practically impossible on the part of Mr. Poissenot.
In this commutative contract, plaintiff must have been willing and able to perform his part of the contract. Louisiana Civil Code Article 1913 states:
"In commutative contracts, where the reciprocal obligations are to be performed at the same time, or the one immediately after the other, the party who wishes to put the other in default, must, at the time and place expressed in, or implied by the agreement, offer or perform, as the contract requires, that which on his part was to be performed, otherwise the opposite party will not be legally put in default."
Since the contract did not state that the nonexecution of the sale at that time would automatically place the other party in default under La.C.C. art. 1911(1), the only other method left was under article 1911(2), which requires a demand by one of the parties. But between September 15, 1977 and October 1, 1977, the house was in no condition to be sold by the seller to the purchaser. Therefore, the seller could not deliver the house to Mr. Poissenot. In turn, Mr. Poissenot, who had obtained the loan commitment and CRV, was not able to fully perform since no lending institution would have lent him money for an uncompleted house.
As time progressed, the putting in default was still unavailable to the purchaser either to sue for damages or to sue for rescission, if there is such a requirement, because of the seller's failure to finish the house. Neither party contemplated that this contract would be for an indefinite period of time without some way of being exculpated from it.
The question of whether a putting in default is a prerequisite for suit for dissolution or rescission of a contract is a hotly contested subject. See La.C.C. arts. 1912, 2046, 2047, 2485, 2516 2561. Murray v. Barnhart, 117 La. 1023, 42 So. 489 (1906); Jennings-Heywood Oil Synd. v. Houssiere-Latreille Oil Co., 119 La. 793, 44 So. 481 (1907); Hibbert v. Mudd, 294 So.2d 518 (La. 1974) (Justice Barham's dissenting opinion); J. Denson Smith, The Cloudy Concept of Default, Twelfth Annual Institute on Mineral, La. (1965). Compare Watson v. Feibel, 139 La. 375, 71 So. 585 (1916); A Theoretical Evaluation of Louisiana Default Law in Conventional Obligations, 46 Tul.L.Rev. 948 (1972).
A similar situation was presented in the case of Kennedy v. Pope Park, Inc., 109 So.2d 514 (La.App.Orl. 1959) in which the court stated:
"We think that it would be absurd to hold that Kennedy, on April 1st should have demanded title when, as a matter of fact, not only had the building which he was to buy not been completed, but he could not have paid for it because Pope had not obtained for him the necessary loan.
"We agree with the following statement which the District Judge made to counsel for defendants:
`* * * This contract was conditioned on a loan being secured and until the loan was secured in the usual way so you could pass the act of sale he couldn't take title. If it wasn't completed until after April 1st and there was no written contract, then the contract falls as a matter of law.'
"We feel certain that when the District Judge stated that if there was no written contract, the contract falls, he meant that if there was no `extension' of the written contract."
It is the jurisprudential rule that any modification or extension of time to a written purchase agreement or contract to sell immovable property must be in writing. La.C.C. arts. 2275 and 2440; Di Cristina v. Weiser, 215 La. 1115, 42 So.2d 868 (1949); Hoth v. Schmidt, 220 La. 249, 56 So.2d 412 (1951); Parker Mead, Inc. v. Cutrer, 239 So.2d 729 (La.App. 1st Cir. 1970). Distinguish Luna v. Atchafalaya Realty, Inc., 325 So.2d 835 (La.App. 1st Cir. 1976).
The same rationale is expressed in Jaffe v. Wood, 247 So.2d 229 (La.App. 4th Cir. 1971). There the court held:
See also Fox v. Doll, 221 La. 427, 59 So.2d 443 (1952).
". . . Since neither party placed the other in default as provided for in the agreement, the agreement lapsed by its own terms and purchaser is not entitled to attorney's fees as provided for in the contract. Purchaser had only a right to demand the return of his deposit of ten percent or $5,800.00.
"A demand was made by suit being filed and seller did not tender the amount of the deposit. Purchaser was required to litigate for the return of his own money. Therefore purchaser is entitled to all costs in this suit."
Following the guidance of these two cases, we deem that the terms of this contract before us have lapsed on its own, since neither party was able to or did place the other party in default and no written extension of time was granted. The purchaser is entitled to the return of his deposit in the amount of $2,000.00 with legal interest from date of judicial demand.
Judgment is rendered herein in favor of Emile R. Poissenot and against Guildcraft Homes, Inc. in the sum of $2,000.00, together with legal interest thereon from date of judicial demand and all costs. The reconventional demands of Guildcraft Homes, Inc. and C. Derbes Smith, Inc. are dismissed at their costs.
REVERSED AND RENDERED.
Even assuming that a putting in default is necessary, that can be done by the commencement of the suit. C.C. Art. 1911. Because of the apparent inconsistency between Arts. 1911 and 1912 the jurisprudence is quite confused. It has been argued that the putting in default by the filing of suit should apply only to demands for specific performance but I find no such limitation in the Code. The filing apprises the debtor that further delay is prejudicial to the creditor, the primary purpose of the default requirement. See Comment, A Theoretical Evaluation in Conventional Obligations, 46 Tulane L.R. 948; Smith, The Cloudy Concept of Default, 12 Inst.Min.L.3, 8. Under C.C. Arts. 2046 and 2047, the court, considering the circumstances, could dissolve the contract or could give further time for performance.
However, I do not believe that a putting in default should be required at all.
C.C. Art. 1912 says that a putting in default is a prerequisite to the recovery of damages and of profits and fruits or to the rescission of the contract in the cases hereinafter provided. Even if it be said that the words refer to the remainder of the Civil Code, we find no articles that unquestionably require the putting in default a prerequisite to a demand for resolution. Instead the articles seem to be directed toward monetary damages only. See Smith, supra, and Comment 46 Tul.L.R. 948.
The illogic of the requirement of an offer of perform before being entitled to dissolution has been pointed out in some of the cases. See Jennings-Heywood Oil Synd. v. Houssiere Latreille Oil Co., 119 La. 793, 44 So.2d 481 (1907).
I am mindful that some jurisprudence would lead to a contrary result. See Luna v. Atchafalaya Realty, Inc., 325 So.2d 835 (1st Cir. 1976). However, I am also mindful of the Supreme Court's statement that, Louisiana being a Code State, we are required to consult the code for guidance in our work. See Ardoin v. Hartford Accident Indemnity Co., 360 So.2d 1331 (La. 1978). After a study of the above codal articles, of some of the cases (see the Jennings-Heywood case cited above) and some of the commentaries (see Smith, cited above Comment 46 Tul.L.R. 949, cited above and Monroe, The Implied Resolutory Condition for Non-Performance of a Contract, 12 Tul.L.R. 376, and 12 Tul.L.R. 509 (1938), I conclude a putting into default in a case asking for resolution such as this, leading to such an inequitable result, is not required by the code and that the error of so doing should not be continued.
On June 30, 1977, plaintiff Emile R. Poissenot entered into a contract with Guildcraft Homes, Inc., to purchase Lot 63 of Yester Oaks Subdivision near Slidell, Louisiana. The contract provided for a purchase price of $46,900.00 and was conditioned on plaintiff obtaining a loan for $27,000. 00 on specified terms. The contract contained the following provisions pertinent to this lawsuit:
"Possession and occupancy by purchaser at passing of act of sale or on see supplementary condition item one (1).
"Act of sale at expense of purchaser to be passed before lender's Notary, at any time after Sept. 15, 1977, and not later than Oct. 1, 1977. . . ."
The supplement to the contract contained these provisions:
"1) If the house is not substantially complete within 130 days from date of Seller's receipt of a V.A. copy of an approved C.R.V. and firm written commitment for a permanent loan to purchaser from a mortgage lender in conformity to lines 13 and 14 of contract, then damages at the rate of $5.00 per day will be assessed against the seller and deducted from the sale price of the property until substantial completion.
"2) Purchaser agrees that should this contract be cancelled by the purchaser, his assigns or heirs, for any reason whatsoever irrespective of any other conditions herein except those on lines 13 and 14, then seller shall receive as liquidated damages the amount of $2,000.00. This amount will be paid by the Broker directly to the seller from the buyer's deposit as shown on line 30 of this contract."
Mr. Poissenot made a $2,000.00 deposit and obtained the required loan commitment, and construction of the house was begun. The certificate of reasonable value (CRV) was issued on August 5, 1977.
October 1, 1977, passed without any action being taken by either party. On November 2, 1977, Cynthia D. Smith, president of C. Derbes Smith, Inc., the realtor handling the sale, wrote a note to Guildcraft pointing out some irregularities in the still unfinished house. These had been brought to her attention by plaintiff.
A similar note was sent on November 25, 1977. On November 11, 1977, Mr. Poissenot signed a sheet giving specifications for the color and decoration scheme of the house. He stated that this was necessary because the original had been lost.
On about December 1, 1977, Ms. Smith advised plaintiff that the house would probably not be ready until after Christmas. The 130 day time limit for completion of the house would have expired on December 13, 1977. Plaintiff then consulted counsel, who on December 7, 1977, directed the following letter to C. Derbes Smith, Inc.:
"Mr. Emile Poissenot has requested my assistance in securing the return of his deposit in the sum of $2,000 for the purchase of the subject realty. The Act of Sale for this property was to be passed under the terms of the contract not later than October 1, 1977. Mr. Poissenot had performed his part under the Agreement to secure financing and stood ready to purchase this property as of such date.
"As the time for completion of construction has long since passed, it is our position the Seller has breached the bargain. If payment of the $2,000.00 is not received within 15 days, we intend to file suit in St. Tammany Parish for the return of the deposit plus an equal amount to be paid as penalty by the Seller and all reasonable attorney's fees and costs which we incur."
Thereafter, efforts to adjust the difference amicably were unsuccessful, and this suit was filed against Guildcraft and C. Derbes Smith, Inc., seeking the return of the $2,000.00 deposit from both parties and a $2,000.00 penalty from Guildcraft, and attorney's fees. Smith answered and reconvened for a commission allegedly due on the sale and attorney's fees. Guildcraft answered and reconvened for $2,000.00 allegedly due it under the supplement to the contract and attorney's fees.
This is clearly not a contract in which time is of the essence and neither party was in default under its terms when October 1, 1977, came and went. See Article 1911, Civil Code; Fortenberry v. Decay, 279 So.2d 725 (La.App. 1st Cir. 1973). It was, therefore, necessary for either party formally to put the other in default. The rules applicable are as follows:
"Art. 1911. The debtor may be put in default in three different ways: by the term [terms] of the contract, by the act of the creditor, or by the operation of law:
"1. By the terms of the contract, when it especially provides that the party, failing to comply, shall be deemed to be in default by the mere act of his failure.
"2. By the act of the party, when at or after the time stipulated for the performance, he demands that it shall be carried into effect, which demand may be made, either by the commencement of a suit, by a demand in writing, by a protest made by a notary public, or by a verbal requisition made in the presence of two witnesses."
* * * * * *
"Art. 1913. In commutative contracts, where the reciprocal obligations are to be performed at the same time, or the one immediately after the other, the party who wishes to put the other in default, must, at the time and place expressed in, or implied by the agreement, offer or perform, as the contract requires, that which on his part was to be performed, otherwise the opposite party will not be legally put in default."
"Art. 1914. Although the contract be either not commutative, or, if commutative, the reciprocal obligations are not to be performed at the same time, yet the party wishing to put the other in default, must be himself ready, and must offer to receive the performance at the time and place stipulated in the contract or implied from the nature of the act to be done, and he can not avail himself of any demand at any other time or place; but if the obligation be to do or give any thing that may as well be given, or done at one time and place as at another, then the party failing may be put in default as well after as at the time the obligation becomes due. Promissory notes and bills of exchange are not governed by this rule, but by those of commercial law."
Plaintiff's effort to put the defendant in default did not comply with the requirements of the foregoing articles in two respects. First, the letter was written prior to the time fixed for the completion of the house by the supplement to the contract. Second, plaintiff did not offer to perform or to receive performance of the contract. In effect, the demand letter was an effort to withdraw from the contract without having first placed the defendants in default. This act, and the filing of this suit for the return of the deposit, amount to a breach of the contract by plaintiff, and defendants are therefore entitled to recovery on their reconventional demand. It is clear that the only reason plaintiff wished to withdraw from the contract was that he had been told by Mrs. Smith that the house was not going to be completed until after Christmas, 1977. He attempted to withdraw from the contract before the date on which the house was to be completed under its terms. At trial, no showing was made that plaintiff was, in fact, ready, willing and able to receive title prior to the completion of the house. Since financing was involved, it would appear doubtful that the mortgage money would have been available prior to completion of the house, in any event.
The majority is ignoring the settled law relative to default in reaching its result. I believe that this law is dispositive of the case, and, therefore dissent.