Marshall v. Patzman, 81 Ariz. 367, 306 P.2d 287 (Ariz. 1957)
Legal information, not legal advice. Verify against the cited opinion.
- Citation: 81 Ariz. 367, 306 P.2d 287 (1957)
- Court / Year: Arizona Supreme Court, January 15, 1957
- Topic tags: forfeiture · liquidated_damages · penalty_doctrine
- Facts: A buyer contracted to purchase corporate stock (Bill Edel Motors, Inc.) under an installment contract with a forfeiture-of-payments clause. On the buyer’s default the trial court declared a forfeiture to the seller of all monies the buyer had paid — 4,000 figure) on a total purchase price of $16,502.68.
- Holding: A contractual provision for forfeiture / liquidated damages is enforceable only if reasonable; otherwise it is not. Forfeiting 4,000 — as liquidated damages on a $16,502.68 purchase price was unconscionable on these facts: the sum was not a reasonable forecast of just compensation for the breach, and the actual harm was capable of accurate determination. The forfeiture therefore operated as an unenforceable penalty, not as valid liquidated damages.
- Reasoning: Arizona applies the general liquidated-damages/penalty test: a stipulated forfeiture is honored only where the amount is a reasonable pre-estimate of damages that are difficult to ascertain. Where the forfeited sum grossly exceeds the provable loss and the loss is readily measurable, the clause is a penalty and equity will not enforce it.
- Practical impact for CFD operators/buyers: The leading Arizona statement of the unconscionable-forfeiture / penalty doctrine. Although it arose from a stock-sale installment contract rather than a land contract, the rule it states is the general Arizona forfeiture principle and is routinely invoked when a contract-for-deed seller seeks to retain a buyer’s substantial payments. It supplies the equitable backstop alongside the graduated statutory cure periods of A.R.S. § 33-742(D): a forfeiture that strips a buyer of large accrued equity risks being recharacterized as an unenforceable penalty.
- Good-law status: Good law as a statement of Arizona’s liquidated-damages / penalty rule.
- Source (retrieved): https://www.courtlistener.com/opinion/1392029/marshall-v-patzman/ (citation and holding corroborated via https://www.leagle.com/decision/195744881ariz3671390 and the State Bar of Arizona Civil Jury Instructions contracts materials) · Verified: 2026-06-08
Jurisdictions that follow / cite: arizona
Disclaimer. Legal information, not legal advice. Confirm the opinion is still good law before relying on it.