Krause v. York

APPEAL by the plaintiff from the judgment of the Appellate Division, Ontario (1), dismissing her appeal from the judgment of Garrow J. (1), dismissing her action. The plaintiff and defendant entered into a written agreement, dated June 26, 1925, for the sale by the plaintiff to the defendant of certain land in Kingsville, Ontario. The purchase price was $13,500, payable " $2,700 in cash on the date hereof and the balance as follows: in four equal annual consecutive payments on the 26th days of June in each year hereafter of $2,700 each together with interest thereon at 7o per annum payable on the amounts of principal from time to time due on the same dates as the said instalments."

The defendant had previously paid a deposit of $200, and at the time of execution and delivery of the agreement he paid the sum of $2,500, making up the cash payment of $2,700 under the agreement. In July, 1926, he paid another sum of $2,700.

The agreement contained a provision that unless the payments were punctually made " these presents shall be null and void and of no effect and vendor shall be at liberty to re-sell the said lands and all payments heretofore made are to be forfeited to the vendor as liquidated damages." In May, 1927, the plaintiff sued, alleging default by defendant in payment of interest and taxes, and claimed recovery of possession of the land and cancellation of the agreement. In August, 1927, the plaintiff entered into an agreement to sell the land to other parties.

The defendant delivered his defence in October, 1927, and counterclaimed for repayment to him of all amounts paid on account of the alleged contract together with interest thereon.

That action came on for trial before McEvoy J. Mc- Evoy J. (2), in his judgment, said that he was satisfied that the property was one of highly speculative value, and that the peculiar wording of the forfeiture clause was made for the purpose of providing what the parties considered would be a fair amount to be forfeited if the defendant should fail to carry out the agreement; and refused to relieve the defendant from the forfeiture of the cash payment of $2,700, in the circumstances revealed in the evidence. He gave judgment for the plaintiff for possession of the land and for a declaration that under the terms of the agreement the same had become null and void and of no effect. He held that the defendant was entitled to recover all amounts paid by him in excess of the sum of $2,700 together with interest thereon at 5% per annum from the date of the sale by the plaintiff to the other parties above referred to. He refused to make any allowance to the defendant for alleged improvements to the property, but did not charge him with any occupation rent.

The plaintiff appealed to the Appellate Division against the judgment of McEvoy J., in so far as he held defendant entitled to recover any sum from the plaintiff. The defendant cross-appealed, asking that the amount awarded him by the judgment be increased to the whole amount paid by him with interest.

The Appellate Division, without written reasons, allowed the plaintiff's appeal, and dismissed the defendant's crossappeal.

The defendant appealed to the Supreme Court of Canada, which (1) allowed his appeal to the extent of restoring the judgment of the trial judge.

On March 22, 1930, the plaintiff brought the present action, claiming damages in the sum of $2,500 for loss on re-sale of the property, the sum of $500 spent in repairing the premises and for interest thereon, and the sum of $114 paid by plaintiff for overdue taxes and for interest thereon. The action was dismissed by Garrow J. (2), whose judgment was sustained by the Appellate Division (2). The plaintiff appealed to this Court.

By the judgment now reported the appeal to this Court was dismissed with costs.

J.-We are of opinion that the action in the present case has resulted from a misunderstanding of what had been held by the trial judge, Mr. Justice McEvoy, in a former action between the parties. That action was for cancellation of an agreement for the sale of land and pos- I.uusE session, by reason of the defendant's default in the payment of interest and taxes. The defendant counterclaimed Lamont J. for the return of the instalments of purchase money paid. The agreement contained the following clause:

And it is expressly understood that time is to be considered the essence of this agreement and unless the payments are punctually made at the time and in the manner above mentioned these presents shall be null and void and of no effect and vendor shall be at liberty to re-sell the said lands and all payments heretofore made are to be forfeited to the vendor as liquidated damages.

There had been a previous agreement for the sale of the property for $12,500, with a cash payment of $2,500; but the purchaser, on surveying the property, found that an additional ten feet was necessary to include all the house. This ten feet was purchased for $1,000, $200 cash, and the balance in four payments.

The parties agreed that the present agreement should be substituted for the former one.

In his judgment Mr. Justice McEvoy said:- Under the terms of the agreement the defendant covenanted with the plaintiff, and the plaintiff covenanted with the defendant, that if the defendant should not make his payments promptly, that he should forfeit the cash payment of $2,700. Or in the words of the agreement dated the 26th of June, 1925, it was agreed that the plaintiff should be at liberty to sell the said lands, and all payments ",heretofore"

made are to be forfeited to the vendor as liquidated damages.

I am not overlooking the law that this might be considered as a penalty, and that the damages ought to be assessed independently of the amount named in the forfeiture clause; but I am satisfied that the property was a property of highly speculative value, and that the peculiar wording of the clause was made for the purpose of providing what the parties considered would be a fair amount to be forfeited if the defendant should fail to carry out the agreement.

That judgment was affirmed by this court (1).

In the present action the plaintiff claims:

(a) damages in the sum of $2,500 for loss on the resale of the property;

(b) $500 spent in repairing the premises;

(c) interest and taxes which, in the agreement, the defendant covenanted to pay.

S.C.R.]