Minn. Stat. §480A.08, subd. 3 (1996).
STATE OF MINNESOTA
IN COURT OF APPEALS
Michael J. Jay, et al.,
Edina Realty, Inc., et al.,
Washington County District Court
File No. 82-CX-96-3305
M.T. Fabyanske, Michael J. Kinzer, Fabyanske, Svoboda, Westra & Hart, P.A., 920 Second Avenue South, Suite 1100, Minneapolis, MN 55402 (for Respondents)
Stanford Hill, Bassford, Lockhart, Truesdell & Briggs, 3550 Multifoods Tower, 33 South Sixth Street, Minneapolis, MN 55402 (for Defendants)
Considered and decided by Norton, Presiding Judge, Schumacher, Judge, and Willis, Judge.
Buyers contend the district court erroneously granted summary judgment for sellers and allowed them to void the purchase agreement the parties had entered. Summary judgment was improper where issues of material fact still exist over the buyers' willingness and ability to perform under the contract. We reverse.
The financing addendum that the parties had executed in conjunction with the purchase agreement also contained a provision wherein the Jays agreed to pay up to $1,000 in repairs as required by the Peltons' lender commitment. This provision also allowed the Jays to declare the agreement null and void if the lender required repairs that exceeded $1,000. Under the purchase agreement, the Jays agreed to provide a septic system certification if the lender required it. The mortgage broker, E.B.S. Mortgage Services, informed the Jays that the Peltons were approved for a loan on the condition that the lender receive a septic system certification. But Washington County had informed the Jays that the septic system could not be approved. The Peltons, in their complaint, estimated that the cost of repairing the septic system would be in excess of $10,000. Counsel for the Jays then informed the Peltons that, in addition to the reasons listed in the first letter for nulling and voiding the purchase agreement, the Jays were now seeking to void the purchase agreement due to the realization that the septic system would require at least $10,000 of repair before certification.
Because the Peltons had already spent considerable time and money working to improve the property before the purchase, they brought this action to enforce the real estate sales contract, reform the purchase agreement, and get specific performance. They also alleged misrepresentation, promissory estoppel, breach of contract, and negligence. The Jays moved for partial summary judgment on the reformation and specific performance claims, arguing that the terms of the purchase agreement were not sufficiently certain to allow specific performance; that the Peltons were not ready, willing, and able to perform under the contract; and that the statute of frauds prevented the enforcement of the agreement. The district court granted partial summary judgment for the Jays on the basis that the purchase agreement allowed them to declare the contract null and void if they were unable to provide the septic system's certification as required by the lender.
The Peltons moved to amend or vacate the order. The district court denied the motion, but amended the prior order to include the court's second memorandum addressing which of the Peltons' claims were still viable and which had been dismissed. The district court denied the motion for summary judgment on the basis of the statute of frauds because an issue of fact existed over whether access and drainage easements were to be part of the purchase agreement. Further, the court noted that no legal description existed for the property because sellers were still seeking final approval on their subdivision. The court affirmed its conclusion that summary judgment was proper on the reformation and specific performance claims because the Peltons were not ready, willing, or able to perform the purchase agreement due to the fact that they had no loan commitment and, even if they did, the purchase was conditioned upon certification of the septic system. Because the septic system required $10,000 in repairs, the Jays had the right to declare the purchase agreement null and void. The court also denied the Jays' motion to release the notice of lis pendens on the property. Thus, the court granted partial summary judgment under Minn. R. Civ. P. 54.02 on the claims of specific performance and reformation, but allowed the Peltons' other claims to stand.
In challenging the dismissal of their claim for specific performance, the Peltons argue that the Jays' repudiation of the contract two days prior to closing waived any right they had to insist that the Peltons prove at summary judgment that they were ready to close the sale. We agree. The law is well settled that the party seeking specific performance must be willing and able to perform under the contract. LaPanta v. Heidelberger, 392 N.W.2d 254, 257 (Minn. App. 1986). In seeking summary judgment on the specific performance claim, the Jays argued that the Peltons failed to show their willingness and ability to purchase the property when they failed to present evidence of their financing arrangements. The court agreed, finding, "Without a loan commitment, the Peltons are not able to proceed with the purchase of the property." This line of analysis fails for two reasons.
First, the parties' purchase agreement did not require that the Peltons take out a mortgage to finance the purchase. The very language of the mortgage application clause demonstrates that the clause exists as a benefit to the buyer. The clause allows the buyer to void the purchase agreement and recover earnest money if the buyer cannot secure a mortgage commitment. The language requiring the Peltons to secure a commitment for financing did not preclude them from paying cash for the property.
Second, and more importantly, because the Jays cancelled the closing two days before it was to occur, it is impossible to say whether the Peltons ultimately would have been willing and able to perform under the contract at the time of closing. For instance, in the two days remaining before the closing was to have taken place, the Peltons could have found a new lender, paid cash, or gotten a continuance on the closing. Essentially, the Peltons lost their opportunity to come forward with a new loan or other form of payment when the Jays cancelled the closing. We cannot judge the Peltons' willingness and ability to purchase at a time prior to the closing. These circumstances raise a question of fact regarding the Peltons' ability to carry out the purchase if the closing had occurred as originally planned.
These circumstances also bear on the septic system repair issue. The trial court determined the Jays had the right to declare the purchase agreement null and void because the purchase was conditioned on approval of the septic system and $10,000 of repairs were necessary before certification would be possible. This interpretation of the contract is based on the letter from EBS Mortgage, but, as we have discussed, an issue of fact exists over who or what lender would ultimately have financed the purchase had the closing occurred. The ultimate lender may not have required the septic system certification. Without resolution of the lender issue, the court could not grant summary judgment based on the septic system repair issue. Consequently, the district court erroneously granted summary judgment to the Jays on the reformation and specific performance claims.