Roxann Robar v. Patricia McCoy Jones

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

14-1299

ROXANN ROBAR

VERSUS

PATRICIA MCCOY JONES

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APPEAL FROM THE
BUNKIE CITY COURT
PARISH OF AVOYELLES, NO. 2013-26
HONORABLE JAMES HOWARD MIXON, CITY COURT JUDGE

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JOHN D. SAUNDERS
JUDGE

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Court composed of John D. Saunders, James T. Genovese, and Phyllis M. Keaty,
Judges.

REVERSED AND RENDERED.

Dan B. McKay, Jr.
Attorney at Law
404 Walnut Street
Bunkie, LA 71322
(318) 346-2336
COUNSEL FOR PLAINTIFF/APPELLANT:
Roxann Robar

Cory P. Roy
Brandon J. Scott
Benjamin D. James
Roy & Scott Law Offices
P. O. Box 544
Marksville, LA 71351
(318) 240-7800
COUNSEL FOR DEFENDANT/ APPELLEE:
Patricia McCoy Jones

SAUNDERS, Judge.

Plaintiff, Roxann Robar (hereafter “Robar”), appeals the judgment of the

trial court in favor of Defendant, Patricia McCoy Jones (hereafter “Jones”). For

the following reasons, we reverse the judgment of the trial court and render

judgment in favor of Plaintiff.

FACTS AND PROCEDURAL HISTORY:

The facts giving rise to the instant appeal are not in dispute. Jones owned a

building and business named La De Da Boutique. Robar and Jones orally agreed

that Robar would purchase the building, together with the inventory within, for

$35,000. The parties did not execute a written contract. In connection with that

oral agreement, Robar gave Jones a check dated December 5, 2012, for $5,000, and

requested that Jones hold the check. Jones then removed the “For Sale” sign from

the property and informed a potential lessee that she would not be leasing the

boutique. On December 10, 2012, Robar gave Jones permission to deposit the

check. Subsequently, in late December 2012 or January 2013, Robar informed

Jones that she did not wish to complete the sale and requested a return of the

$5,000. By certified mail dated March 14, 2013, Robar demanded return of the

$5,000. Jones did not return the $5,000; Robar filed suit against Jones on April 18,

2013, for the return of the $5,000.

A bench trial was held on November 6, 2013. At the conclusion of trial, the

matter was taken under advisement. On February 12, 2014, written reasons were

issued, followed by a signed judgment on April 14, 2014, which denied Robar;s

claims and dismissed her suit. Robar filed a Motion for New Trial, which the trial

court denied. Robar appealed. On appeal, Robar asserts the trial court committed

legal error in relying on jurisprudence predating the current version of La.Civ.Code

art. 2624; therefore, the trial court legally erred in finding that the $5,000 given to

Jones was forfeited under La.Civ.Code art. 2624 because the parties had no oral or

written agreement designating the $5,000 as earnest money. We find that this

assertion has merit. For the following reasons, we reverse the judgment of the trial

court and render judgment in favor of Robar.

STANDARD OF REVIEW:

It is well settled in Louisiana that the findings of fact of the trial
court will not be disturbed on appeal unless they are manifestly
erroneous or clearly wrong. Stobart v. State, through D.O.T.D., 617
So.2d 880 (La.1993); Rosell v. ESCO, 549 So.2d 840 (La.1989);
Lawson v. White, 01-1173 (La.App. 3 Cir. 2/6/02); 815 So.2d 958. As
long as the findings of the trial court are reasonable in light of the
record, the appellate court may not reverse even if it would have
weighed the evidence differently as a trier of fact. Sistler v. Liberty
Mut. Ins. Co., 558 So.2d 1106 (La.1990); Lawson, 01-1173; 815
So.2d 960-61.

On the other hand, when reviewing a question of law, the
appellate court must simply decide whether the trial court was legally
correct or incorrect. Jim Walter Homes, Inc. v. Jessen, 98-1685
(La.App. 3 Cir. 3/31/99); 732 So.2d 699 (citing Ducote v. City of
Alexandria, 95-1269 (La.App. 3 Cir. 7/17/96); 677 So.2d 1118.) “If
the trial court’s decision was based on its erroneous application of law,
rather that on a valid exercise of discretion, the trial court's decision is
not entitled to deference by the reviewing court.” Kem Search, Inc. v.
Sheffield, 434 So.2d 1067, 1071-72 (La.1983); Jim Walter Homes,
Inc., 98-1685, p. 5; 732 So.2d at 702. In fact, the appellate court must
conduct a de novo review of the entire record when it finds a
reversible error of law or manifest error. Rosell v. ESCO, 549 So.2d
840 (La.1989); Lasha v. Olin Corp., 625 So.2d 1002 (La.1993); Jim
Walter Homes, Inc., 98-1685; 732 So.2d 699.

Love v. E.L. Habetz Builders, Inc., 01-1625, p. 4 (La.App. 3 Cir. 6/26/02), 821

So.2d 756, 760-61. “[W]hen appellate courts find that a reversible error of law or

manifest error of material fact was made in the lower court, appellate courts are

required to redetermine the facts de novo from the entire record and render a

judgment on the merits.” Bennett v. State Farm Ins. Co., 03-1195, p. 3 (La.App. 3

Cir. 3/24/04), 869 So.2d 321, 325.

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DISCUSSION:

Louisiana Civil Code Article 2623 provides, in pertinent part (emphasis

added):

An agreement whereby one party promises to sell and the other
promises to buy a thing at a later time, or upon the happening of a
condition, or upon performance of some obligation by either party, is
a bilateral promise of sale or contract to sell. Such an agreement gives
either party the right to demand specific performance.

Louisiana Civil Code Article 2624 defines earnest money in connection with a

contract to sell and provides:

A sum given by the buyer to the seller in connection with a
contract to sell is regarded to be a deposit on account of the price,
unless the parties have expressly provided otherwise.

If the parties stipulate that a sum given by the buyer to the seller
is earnest money, either party may recede from the contract, but the
buyer who chooses to recede must forfeit the earnest money, and the
seller who so chooses must return the earnest money plus an equal
amount.

When earnest money has been given and a party fails to
perform for reasons other than a fortuitous event, that party will be
regarded as receding from the contract.

Comment (a) to La.Civ.Code art. 2624 (emphasis added) states , in pertinent

part:

This Article is new. Though it restates the principle contained
in Civil Code Article 2463 (1870), it departs from the former
jurisprudential rule according to which a sum of money given in
connection with a contract to sell, even when named a “deposit” by
the parties, must be regarded as earnest money. See Maloney v.
Aschaffenburg, 143 La. 509, 78 So. 761 (1918). See also Breaux v.
Burkenstock, 165 La. 266, 115 So. 482 (1928). Under this Article,
thus, when the parties’ intention is that a sum of money be given as
earnest they must clearly express that intention.

In addition, we refer to the discussion of Professors Dian Tooley-Knoblett and

David Gruning pertaining to earnest money, which explains:

Though the Civil Code’s provision on earnest money has
always been clear as to the legal effects of earnest, it did not originally
provide criteria by which to determine whether an amount given by
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the buyer to the seller in connection with a contract to sell should be
classified as earnest money or as a true deposit. The 1995 sales
revision filled this legislative gap by providing that any sum given by
the buyer to the seller in connection with a contract to sell will be
considered earnest money only if the parties have expressly provided.
The Code now makes clear the parties are required to opt into earnest
money. If the parties have not expressly stipulated that a sum given
by the buyer to the seller is earnest money, it is not considered earnest
money, but a true deposit.

The adoption of this rule in the 1995 sales revision was
intended to legislatively overrule contrary pre-revision jurisprudence
that had treated any amount given by the buyer to the seller as earnest
money, unless the parties had expressly reserved their right to specific
performance. . . . Since 1995, any amount given to the seller by the
buyer in connection with a contract to sell is merely a deposit which
neither negates the availability of specific performance nor fixes the
amount of damages that might be recovered from a party who has
breached the contract.

24 D. Tooley-Knoblett & D. Gruning, Louisiana Civil Law Treatise: Sales §5:11

(2014)(footnotes omitted)(emphasis added).

In its written reasons, the trial court stated (emphasis added):

Under the previous law, particularly Article 2483 of the
Louisiana Civil Code, a sum of money given in connection with a
contract to sell, even when named a “deposit” by the parties, must be
regarded as earnest money. Under the new Article 2624 of the
Louisiana Civil Code, a sum given by the buyer to the seller in
connection with a contract to sell is regarded to be deposit on account
of the price, unless the parties expressly provided otherwise. In the
instant case, the Plaintiff agreed to sell both movable and immovable
property. They agreed on a price. There was no written contract
between the parties and no mention of the right of specific
performance or earnest money. In fact both parties testified that they
were not familiar with earnest money. The Plaintiff/Buyer did deposit
the sum of $5,000[] and it was designated as such on her check.
Under the old law the money would have been regarded as earnest
money. Under the new law, the money is regarded as a deposit on
account of the price. The parties would have to expressly provide
otherwise. In the instant case, the Court is of the opinion that the
Plaintiff/Buyer receded from the contract. There was no fortuitous
event which caused her to recede. The decision to purchase another
property is not a fortuitous event. So, what remedy does the
Defendant/Seller have? To force specific performance, that remedy
must be expressed by the parties in the contract to sell. The question
of earnest money is a little more complicated. Under the old law, a
deposit was presumed to be earnest money. Under the new law, the
parties must express themselves as to earnest money. Two Third
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Circuit cases which have not been reversed seem to shed some light.
The Court in [Bounds v. Makar, 493 So.2d 268 (La.App. 3 Cir. 1986)],
stated that money deposited on account of the purchase price is
earnest money. The Court also stated that earnest money is the
equivalent to stipulation for liquidated damages which bars the
remedy of specific performance should either party decide to recede
and thereby forfeit the amount of the deposit. The Court in the case of
[Sunbelt One v. Melian, 509 So.2d 705 (La.App. 3 Cir. 1987] found
that purchaser’s deposit was earnest money because there was no
provision indicating that the deposit was not earnest money.

So, the jurisprudence seems to say that for the remedy of
specific performance to apply it must be expressly provided for by the
parties. If there is a deposit, then it seems to be earnest money unless
the parties expressly provide that it is not. One could also argue that
as to the movable property, once the price and the object of the sale is
agreed upon, the sale has taken place. However since this matter
involved immovable property as well and the price was not broken
down as to so much for movables and so much for immovable, it
would seem that specific performance would not be a viable remedy
for the Defendant/Seller since it was not expressed by the parties.
Earnest money is liquidated damages should one party recede from a
contract to sell. In the instance [sic] case, the Defendant/Seller did
take the property off the market and testified that she had passed up
on a lease with an option to purchase.

The trial court’s written reasons clearly indicate that the judgment was based on

jurisprudence that has been that was legislatively overruled by the 1993

amendment of La.Civ.Code art. 2624, which became effective in 1995. The error

of law is plain. Accordingly, we review the record, apply La.Civ.Code art. 2624,

as amended, and conclude that the $5,000 check was not designated earnest money

and is, therefore, refundable.

Both Robar and Jones testified that they were not familiar with the concept

of earnest money prior to the instant matter. In her testimony, Jones indicated to

the examining attorney that they had not discussed whether the deposit was to be

considered earnest money. Robar testified that the parties did not discuss whether

the $5,000 would be returned or forfeited if the sale was not completed. Clearly, if

the parties had not discussed the concept of earnest money at all, then they could

not have expressly provided that the $5,000 would be considered earnest money.
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Additionally, Robar testified that she intended the $5,000 to be for “[t]he purchase

price of the building. Part of the purchase price of the building. And Thirty

Thousand ($30,000) due at signing. Total was Thirty-five Thousand ([$]35,000).”

Moreover, Jones testified that, when Robar informed her on January 21, 2013, that

she no longer wished to conclude the sale, Jones told Robar to “think about it . . .

and let me know, I will still put it . . . it will go towards the purchase price.”

Additionally, on the face of the check, “Deposit for La De Da” is written. Jones

testified the notation on the check was written by Robar.

Jones asserts that, because the Civil Code does not recognize an oral

agreement to buy and sell, La.Civ.Code art. 2624 does not apply. She asserts that

the agreement should not be viewed as an agreement to buy and sell, but as an

option, whereby Robar “retain[ed] the sole right to purchase [the] property” and

Jones agreed to remove the property from the market in exchange for consideration

of $5,000. Jones argues that such an agreement need not be in writing, as

“retention of the availability of the movable property . . . provided Ms. Robar with

the consideration she sought by paying the $5,000.00.”

The record does not support the conclusion that the parties agreed to such a

contract. Robar testified that she understood the oral agreement to bind her to

purchase the building from Jones and to bind Jones to sell her the building. She

further testified that Jones promised her the $5,000 would be applied to the

purchase price of the building, but that the building would not be sold to anyone

else. Jones testified that, when she first learned Robar no longer wished to

complete the sale, she requested that Robar “think about it” and promised Robar

that she would “still put it . . . towards the purchase price.” The record is clear that

the parties intended that the $5,000 to be a deposit on the purchase price and that

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they did not contemplate that Jones would remove the property from the market in

exchange for $5,000.

Alternatively, Jones asserts that, as it pertains to the movable inventory, the

sale was perfected at the time the parties agreed on the thing and the price, despite

the facts that the inventory had not yet been delivered to Robar or the price paid.

She additionally asserts that “an oral agreement purporting to transfer both

movable and immovable property is only unenforceable as it concerns the

conveyance of the immovable property but remains valid relating to the sale of the

movable property if the transfer of the immovable property was not a principal

cause of the contract[,]” citing Dunham v. Dunham, 467 So.2d 555 (La.App. 1

Cir.), writ denied, 469 So.2d 989, and writ denied, 469 So.2d 990 (La.1985), and

Crain v. Dore, 578 So.2d 555 (La.App. 3 Cir.), writ denied, 581 So.2d 694

(La.1991). We disagree. The record does not support the conclusion that the

parties agreed to a current sale as it pertained to the inventory. The testimony

referenced above clearly indicates that the parties contemplated a future sale and

that the $5,000 was a deposit on the purchase price of that future sale. It is clear

that the parties did not contemplate that ownership of the movables would be

immediately transferred in exchange for $5,000. Moreover, we find that the

testimony establishes that the parties’ primary cause in entering into the oral

agreement was to bind one another to buy and sell the building. The record is

replete with references to the building but very few to the inventory. Thus, Jones’

reliance on the cited cases is misplaced.

In light of the foregoing, we find that the record establishes that the parties

intended the $5,000 to be a deposit on the purchase price of the building, together

with the inventory and was not intended to be earnest money, an option contract, or

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a current sale of the movable inventory. We now turn to whether Jones,

nonetheless, is entitled to keep the $5,000.

A contract to sell “gives either party the right to demand specific

performance.” La.Civ.Code art. 2623. However, the parties may negate the

availability of specific performance by contracting that money paid in connection

with such a contract is earnest money. Professors Tooley-Knoblett and Gruning

further explain:

Louisiana’s earnest money provision imparts two principles. First,
earnest money serves to quantify the liability of a party who recedes
from a contract to sell. Second, earnest money implicitly negates the
availability of specific performance by designating (and assessing)
damages as the liability of the party who recedes.

Since earnest money fixes the quantum of damages owed by the
party who recedes from a contract to sell, it functions in the same
manner as stipulated damages.

....

The 1995 sales revision treats any sum given to the seller by the
buyer in connection with a contract to sell as a deposit. Under this
suppletive or default scheme, an aggrieved party may seek either
specific performance or dissolution upon the other party’s breach. If
the aggrieved party elects dissolution, then that party may seek
compensatory damages. The claimant must prove that he has
sustained damages which are recoverable in accordance with general
contract principles.

24 D. Tooley-Knoblett & D. Gruning, Louisiana Civil Law Treatise: Sales §5:11

(2014)(footnotes omitted)(emphasis added).

Jones may seek the remedy of specific performance or dissolution of the

contract and compensatory damages. However, Jones has neither pled nor proved

the existence of the obligation, 1 as is required by La.Civ.Code art. 1831, the

grounds for non-performance, or damages. Therefore, we find that, in connection

1
Although the parties do not dispute that there was an oral agreement to buy and sell, we note
that a contract to purchase or sell immovable property must be in writing to be enforceable. See
La.Civ.Code art. 2623; La.Civ.Code art. 1839.
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with the oral agreement to buy and sell the building known as La De Da Boutique

and the inventory therein, Robar is entitled to a return of the $5,000.

DECREE

In accordance with the principles above, we find that the trial court

committed legal error in finding the $5,000 was forfeited by Robar. Therefore, we

reverse the judgment of the trial court and render judgment in favor of Plaintiff,

Roxann Robar, and against Defendant, Patricia McCoy Jones, in the amount of

$5,000. All costs of this proceeding are taxed to Defendant, Patricia McCoy Jones.

REVERSED AND RENDERED.

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