Voin v. Szabo

913 P.2d 717, 139 Or. App. 590, 1996 Ore. App. LEXIS 389

• Court: Court of Appeals of Oregon
• Decided: March 20, 1996
• Docket: 9407-04798; CA A86744
• Status: Published

Opinions

LANDAU, J.

Plaintiffs initiated this action to compel specific performance of an earnest money agreement for the purchase of a residence. The trial court granted plaintiffs the relief they requested, and defendants appeal. On de novo review, ORS 19.125, we reverse and remand.

Although the negotiations between the parties were extended and complex, the facts relevant to the disposition of the appeal are straightforward. Defendants owned a home in Portland in which they resided and operated a licensed adult foster care business. They decided to sell their home in late 1993. Plaintiffs were interested in purchasing the home and, perhaps, the business as well. On April 1, 1994, the parties executed an earnest money agreement. The agreed price was $145,000, with $1,000 down, $28,000 at or before closing and the balance of $116,000 at closing. The agreement required the parties to close the sale on or before July 1, 1994.

Plaintiffs later paid defendants $10,000. Next, they consulted with a mortgage broker to obtain financing. The broker told plaintiffs that they would qualify for a maximum loan of 80 percent of the presumed $145,000 value of the house, that is, $116,000, if they could pay $10,000 down and if defendants would carry a second mortgage of $5,000. Meanwhile, plaintiffs sold their own home, moved into defendants’ residence and began paying rent to them.

On June 2, 1994, the mortgage broker received an appraisal for the house at $130,000. That meant that the maximum loan amount could be only $104,000, not the $116,000 the parties expected. Plaintiffs decided to proceed with the purchase anyway, based on their expectation that they would obtain enough money from the sale of their own house to make up the difference.

At that point, a dispute ensued over whether the $145,000 purchase price included the sale of the adult foster care business that defendants had been operating in their home. Defendants contended that plaintiffs owed them an additional $15,000 for the sale of the business, while plaintiffs insisted that the sale price of $145,000 included the business.

On July 12, 1994, after the deadline for closing, plaintiffs initiated this action for specific performance. Defendants answered, alleging as affirmative defenses the failure of plaintiffs to pay either the $28,000 or the $116,000 amounts required under the earnest money agreement. The trial court found that defendants had repudiated the earnest money agreement and that, but for the repudiation, plaintiffs were ready, willing and able to pay the $28,000 and $116,000 payments by the closing date. The court ordered defendants to sell their home for $145,000 and ordered plaintiffs to pay defendants $1,300 per month for the longer of six months or until they no longer operate the business to compensate them for the business.

On appeal, defendants argue that the trial court erred in finding that they had repudiated the earnest money agreement and that plaintiffs were ready, willing and able to perform. There is, argue defendants, no evidence to support either finding. Plaintiffs argue that, by insisting on an additional $15,000 to close the transation, defendants effectively repudiated the earnest money agreement. They also argue that there is, in fact, evidence of their readiness, willingness and ability to perform. They point to the testimony of their mortgage broker, who testified at trial that, after learning that plaintiffs had approximately $31,000 in various savings accounts, he was of the opinion that they “would have qualified for a loan, yes. It would have been very close.” Plaintiffs rely on.no other evidence to establish that they were ready, willing and able to perform.

We assume, without deciding, that defendants repudiated the earnest money agreement. We nevertheless conclude, on de novo review, that plaintiffs failed to demonstrate that they were ready, willing and able to perform the earnest money agreement.

A party seeking the remedy of specific performance must establish

“not only that he has a valid, legally enforceable contract, but also that he has complied with its terms by performing or offering to perform on his part the acts which formed the consideration of the undertaking on the part of the defendant, or that he is ready, able, and willing to perform his obligations under the contradi.]”

Percy v. Miller et al., 197 Or 230, 239-40, 251 P2d 463 (1953). Actual tender of performance may be excused if the defendant has repudiated the contract, but the plaintiff still must establish that he or she was ready, willing and able to perform. Aurora Aviation v. AAR Western Skyways, 75 Or App 598, 604, 707 P2d 631 (1985); Cook v. Desler, 52 Or App 5, 13, 627 P2d 885, rev den 291 Or 368 (1981).¹

To establish that a party is ready, willing and able to perform, more is required than speculation that, but for a defendant’s repudiation, a contract might have been performed. In Aurora Aviation, for example, the plaintiff contracted to purchase an airplane for $115,000. It was able to secure $95,000 but had difficulty coming up with the $20,000 balance. The defendant sold the plane to a third party. The plaintiff then sued for breach of contract and was awarded damages. The defendant appealed, arguing that there was no evidence that the plaintiff had been ready, willing and able to pay the entire $115,000. The plaintiff argued that there was evidence that, but for the sale to the third party, it would have obtained the remaining $20,000 from an anticipated sale of the plane to another party. We rejected that argument and reversed because

“the record is devoid of any showing that plaintiff was either able to pay the $20,000 balance or that the amount was available to be paid to defendant.”

Aurora Aviation, 75 Or App at 605 (emphasis in original).

In this case, there is no evidence that plaintiffs were able to pay either the $160,000 that defendants argue was due under the earnest money agreement or the lesser amount of $145,000 that plaintiffs argue was owing. The evidence shows that plaintiffs had paid defendants $11,000 and that they had cash in several savings accounts totaling approximately $31,000. They had consulted with a mortgage broker about obtaining a $104,000 loan for the balance, but they never actually obtained the financing. Indeed, the best the broker could say on behalf of plaintiffs was that he believed that they “would have qualified for a loan, yes. It would have been very close.” There is no evidence that the mortgage broker or anyone else obtained credit reports on either plaintiff. There is no evidence that any particular financial institution had made a commitment to provide financing and that plaintiffs, in fact, had funds available to them. There is only evidence that, at least in the view of the broker, they had sufficient funds to go forward with the process of obtaining financing.²

Thus, as in Aurora Aviation, there is no evidence that plaintiffs were able to pay defendants the $104,000 balance or that the funds even were available to them. There is only the speculation of the broker that plaintiffs probably would have been able to pay. Particularly in the light of the fact that the financing was, in the words of plaintiffs’ own broker, “very close,” it is difficult for us to understand how the mere possibility of obtaining financing from a hypothetical lender satisfies the requirement that plaintiffs actually are able to pay the money owed. We conclude that plaintiffs failed to establish an essential prerequisite to obtaining the extraordinary remedy of specific performance, and the trial court erred in reaching a contrary conclusion.

Reversed and remanded.

1 The dissent argues that Aurora Aviation is distinguishable, because plaintiffs’ inability to perform in this case was caused by defendants’ repudiation. In support of its contention, the dissent relies on Benedict v. Harris, 158 Or 613, 77 P2d 442 (1938), and Schucking v. Young, 78 Or 483, 153 P 803 (1915). A review of those cases, however, discloses that the dissent confuses excusing actual tender of performance with excusing proof that a party is ready, willing and able to perform. Both Benedict and Schucking speak to the former and say nothing about the latter. As Aurora Aviation and the other authorities we have cited bear out, repudiation excuses tender, but it does not excuse proof that one was ready, willing and able to perform.

2 The dissent takes us to task for insisting on more proof than the testimony of the broker that plaintiffs had sufficient funds to seek financing. According to the dissent, that would require the fruitless expenditure of some $5,913. The dissent is mistaken. There is no evidence that establishing that funds were, in fact, available would have cost plaintiffs $5,913. That figure is drawn from the mortgage broker’s estimate of closing costs, which were to be paid only if the transaction actually closed. Indeed, the figure includes property tax impounds, hazard insurance impounds, mortgage insurance premiums, interim interest, title insurance fees, transfer fees, settlement fees, tax related service fees, recording fees and document delivery fees, none of which plaintiffs would be required to pay simply to demonstrate that they were ready, willing and able to obtain financing.