Daily Development for Friday, December 26, 2003 by: Patrick A. Randolph, Jr. Elmer F. Pierson Professor of Law UMKC School of Law Of Counsel: Blackwell Sanders Peper Martin Kansas City, Missouri dirt@umkc.edu VENDOR/PURCHASER; SELLER'S REMEDIES; SPCIFIC PERFORMANCE:. Vendor's failure mitigate consequences of buyer's breach of purchase agreement precluded specific performance by purchaser. Kesler v. Marshall, 792 N.E.2d 893 (Ind.App. 2003) In 1990, Kesler entered into a contract to buy real property from Marshall, but the sale was not consummated. Nearly six years later, Marshall brought suit for specific performance of the purchase agreement and won at the trial court level. The court not only ordered specific performance but granted $91,000 in incidental damages for lost profits and maintenance costs in the intervening years. The Indiana Court of Appeals of Indiana reversed the trial court's award of specific performance. It first held that in fact Marshall, and not Kesler, had failed to perform the contract to begin with. The agreement was subject to Marshall's performance of certain conditions precedent, including that Marshall provide in writing that the property could be used in any manner pursuant to certain zoning regulations. Kesler was unsatisfied with the letter Marshall presented to satisfy this requirement and refused to close on the transaction. The court found that Kesler's dissatisfaction was justified and that Marshall should have supplemented the letter. But the court went further in an apparently extraneous discussion of the propriety of the remedy given in this case. First, it noted that when specific performance is awarded, there are no other damages, as the contract is deemed to have been performed. Consequently, the court should not have ordered other damages. Second, the court noted that there was an inadequate case for the equitable remedy of specific performance here, where the seller waited six years to bring his case without apparent equitable excuse. Then, and most importantly from a precedential standpoint, the principle opinion questioned whether specific performance ever should be awarded as a seller's remedy. .The Court began its discussing by recognizing that Indiana courts order specific performance for the purchase of real estate as a matter of course because each piece of real estate is considered unique. It noted, however, that specific performance is an equitable remedy, which is not available as a matter of right. Courts generally will not exercise the power of specific performance when an adequate remedy at law exists. In the case at hand, the Court found that none of the trial court's findings supported the conclusion that monetary damages would be insufficient to fully compensate Marshall. The Court noted that in the lengthy interval before Marshall brought his suit, Marshall could have kept Kesler's earnest money and terminated the contract, or could have resold the property and held Kesler liable for the difference between the actual sale price and the price under the contract. In either case, Marshall would have been fully compensated for Kesler's failure to perform. The traditional rationale underlying the grant of specific performance in real estate transactions, that each piece of property is unique, did not apply in the case at hand to enable Marshall to obtain specific performance, because Mashall, as seller is not obtaining the property in the transaction, but rather only the money. Under these circumstances, the Court held that the trial court abused its discretion in ordering Kesler to specifically perform the contract. A special concurrence, joined in by one other judge, noted that the traditional rationale for the seller's remedy of specific performance is mutuality of remedy, and that since buyers are entitled to the remedy, sellers normally should not be barred simply because money damages are also available. Comment 1: Since the West reporter system, at least, no longer tells us what judges sit on panels, or even how many there are, we are unable to report whether the two judge concurrence represented in fact the majority opinion of the court, or whether the panel was larger than three appellate judges. If this case indeed represents the opinion of a substantial appellate panel, it is big news, even though it is dicta, because sellers often find the specific performance remedy a useful option and a valuable threat. Comment 2: Although it is theoretically true that property can be resold and loss of profit established, in fact the marketing of real estate is a difficult and time consuming process for the very reason that real estate is not fungible. If a seller should resort to resale, and the process takes a significant period of time, the seller may discover when all is said and done that the original buyer is no longer available to sue or is otherwise "judgment proof" when it comes to a damages claim. If, to avoid this problem, the seller sues for damages immediately, based upon market value evidence, it will find that ascertaining market value with any accuracy is quite different, especially when the only recent sale of this unique parcel is in fact one in which the buyer didn't perform. If this is the true value, and there is no higher, then the seller has no damages, even though the seller may discover later that it is unable to sell for that price. Often, in fact, the declining prospects for the property, although difficult to prove in court, are the motive for the buyer's reluctance to buy. Were the buyer faced with a continuing threat of specific performance, the buyer might be more willing to come to the table, since with each day the buyer's potential loss will grow. Comment 3: In a nutshell, then, even though the seller's remedy is damages, uniqueness of real estate is nevertheless relevant because that quality makes damages computations quite difficult and the availability of specific performance more meaningful. Although the editor concurs that the "mutuality of remedy" notion is not one that often is seen in other contexts, and may not be the best argument for preserving specific performance for sellers, the editor nonetheless feels that there is a rationale argument for keeping the remedy available. Certainly it seems inappropriate to dump it as throwaway dicta in which there are a number of other reasons for reversing the lower court's granting of the remedy in the subject case. Comment 4: In Humphries v. Ables, 789 N.E.2d 1025, (Ind. App. 2003) another case decided this year by the same panel, the dissenting judge in this case had the majority, arguing for the preservation of the 'mutuality of remedy" notion and the recognition of the remedy of seller's specific performance. We clearly have a "split within the Circuit." Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. The same is true of all commentary provided by contributors to the DIRT list. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA. 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