On October 21, 1927, appellants entered into a contract to purchase from respondents certain real estate, paying $1,000 at the date of the purchase and agreeing to pay $1,000 each February thereafter, together with interest, until the total sum of $32,000 had been paid. Appellants, after making a number of payments on principal and certain payments of interest, defaulted and on the first day *Page 763 of February, 1932, moved off the premises, breached and abandoned the contract. On February 3, 1932, respondents took possession and on February 4, 1932, appellants leased the premises to one Mason who took possession on February 5, 1932. Thereafter respondents instituted the present action against appellants to recover damages. The action was tried before the court and a jury and a verdict was rendered in favor of respondents. Appellants made a motion for a judgment nonobstante veredicto and also made a motion for a new trial, both of which were denied, whereupon appellants prosecuted this appeal from the judgment and from the order denying the motions above mentioned. The facts are enlarged upon in the dissenting opinion and in view of the disposition to be made of this appeal we have concluded that it is unnecessary to make a more lengthy statement of the facts.
Appellants have specified numerous assignments of error that need not be set out in haec verba for the reason that the first error assigned presents the controlling question, namely: whether "The verdict of the jury is against the law and the evidence." If the trial court erred in its application of the law to the facts the judgment must be reversed. Whether the court did so err depends upon the interpretation and construction of the terms of the contract entered into between the parties. The trial court instructed the jury that: "under the law plaintiffs are entitled to recover in this action. The only matter left before you for determination is the amount of the damages suffered by plaintiffs."
The court then instructed the jury that: "you will assess the plaintiffs' damages at the difference between the contract price and the value of the premises at the time of the abandonment thereof by the defendants and re-entry by the plaintiffs, less what has been paid by the defendants. In other words, the measure of plaintiffs' damages would be the difference between the balance remaining unpaid under the terms of the contract and the reasonable market value of the premises, at the time of the abandonment." *Page 764
The material portion of the contract provides:
"Time is of the essence of this contract, and in case said buyer shall refuse or neglect to pay said installments of purchase price promptly as agreed herein, it shall be optional with the said seller to declare this contract forfeited, and upon the making of such declaration all right of the said buyer to complete said purchase or to continue in possession of said premises shall immediately terminate, and said buyer shall also forfeit all moneys paid to the said seller as purchase money, unless said seller shall otherwise elect.
"The said buyer shall be entitled to the possession of said premises so long as the terms of this agreement are complied with, but a failure to comply with the same shall, at the option of the said seller, terminate the right of possession, and the said buyer shall surrender the possession of said land and improvements thereon, if any, to the said seller, and any money paid by the said buyer by virtue of this agreement shall be retained and shall remain the property of said seller, as liquidated damages, and said buyer shall thenceforth be regarded as a tenant holding over after the expiration of his term and shall be liable to dispossession under the law relative to forcible entry and detainer."
The vendors, upon breach of the contract by the vendees, had three remedies: (1) The vendors might have mutually rescinded, which would terminate the contract; (2) the vendors could sue for specific performance, and have judgment for unpaid instalments past and future when due; or (3) the vendors could sue for damages, which is the case here, and their damages would be the difference between the contract price and the market value of the premises at the time of the breach, unless by the contract the parties have otherwise stipulated. The clauses in this contract relating to liquidated damages are probably not self-executing, that is, the contract requires an election on the part of the vendors. Undoubtedly the elections the vendors had were those enumerated above. A differentiation must be made between rescission on the part of the vendors and *Page 765 election or the exercise of the option of the vendors. As is pointed out in the following cases, a clause such as is contained in the contract herein — not self-executing, but optional with the vendors — while it may ordinarily require a notice of election on the part of the vendors, does not require a notice of election when the vendees specifically abandon the contract. In any event the bringing of suit for damages constitutes the election of the option, which is not a rescission of the contract by the vendors. (Epplett v. EmpireInvestment Co., 99 Or. 533, 194 P. 461, 700; Kemmerer v.Title Trust Co., 90 Or. 137, 175 P. 865; Jensen v. CorningFarms Co. et al., 49 Cal. App. 681, 194 P. 83; Buckley v.McGraw, 206 Cal. 541, 275 P. 221; 39 Cyc. 1383, 1384.) True, the vendors did not elect to rescind the contract and terminate it by their action, but the vendors did elect to put into execution the clause in the contract providing that:
"A failure to comply with the same shall, at the option of the said seller, terminate the right of possession, and the said buyer shall surrender the possession of said land and improvements thereon, if any, to the said seller, and any money paid by the said buyer by virtue of this agreement shall be retained and shall remain the property of said seller, asliquidated damages."
In Weatherford v. Adams, 31 Ariz. 187, 251 P. 453, in a situation like that presented herein, the court held:
"Upon the breach of a contract, the party not at fault, ordinarily, has the choice of three remedies. (1) He may rescind, with the usual rights and duties of such an action. (2) He may refuse to recognize the breach and compel its performance. (3) He may treat the breach as terminating the contract and sue for damage. (13 C. J. 653; 6 Rawle C. L. 389.) In the case at bar, the breach of the contract is admitted, and that it is the third remedy which is being pursued. What then is the measure of damages?
"It is claimed by plaintiff that they may recover the damages which they have actually and necessarily suffered by reason of defendant's default, and that the payment of *Page 766 the $4,000 to the Clarks falls within that category, in view of our holding in Lewis v. Hornback, 28 Ariz. 546, 237 P. 952. Defendants, on the other hand, urge that the contract itself fixes the measure of damages at the retention by plaintiffs of the amount already paid by defendants.
"The language of the contract bearing particularly on the issue reads as follows:
" 'And at the option of said parties of the first part, the said parties of the second part shall forfeit all rights thereto, and all interest of the parties of the second part in and to said lands by reason of this agreement shall thereupon cease and determine, and all moneys theretofore paid under the terms of this agreement to the parties of the first part shall be forfeited to and retained by said parties of the first part."
. . . . . . . . . . .
The Clarks have expressly waived the balance of their purchase price, the mortgage, which by its terms secured that only, was necessarily waived also. Their only remedy, as elected by themselves, was to recover what damages were legally due them, without reference to the mortgage, and by the termsof their contract they have limited themselves to the paymentsalready made as liquidated damages."
We therefore conclude that under the terms of the contract respondents' damages are limited and were liquidated and fully paid when they exercised their option under the provisions of that portion of the contract to which reference has heretofore been made, and the measure of respondents' damage was not the difference between the contract price and the market value of the premises at the time of the breach, but their measure of damage is, under the contract, the amount of the payments already made upon the contract. (17 C. J. 966, sec. 266.)
The judgment must be reversed and it is so ordered, with instructions to the trial court to enter judgment in accordance with the views herein expressed. Costs awarded to appellants.
Givens and Wernette, JJ., concur. *Page 767