McKeon v. Crump

Decision Date01 August 2002
Docket NumberNo. 20010121-CA.,20010121-CA.
Citation53 P.3d 494,2002 UT App 258
PartiesDaniel C. McKEON and Lisa McKeon, Plaintiffs, Appellants, and Cross-appellees, v. Kenneth CRUMP and Amy S. Crump, Defendant, Appellees, and Cross-appellants.
CourtUtah Court of Appeals

Nelson Abbott, Abbott Spencer & Smith LLC, Provo, for Appellants.

Richard D. Bradford, Bradford Brady & Johnson, Provo, for Appellees.

Before Judges BILLINGS, GREENWOOD, and THORNE.

OPINION

GREENWOOD, Judge:

¶ 1 Daniel and Lisa McKeon (the McKeons) appeal the trial court's grant of Kenneth and Amy Crump's (the Crumps) motion to dismiss with prejudice based on the McKeons' failure to return the earnest money deposit to the Crumps before filing suit. We affirm.

BACKGROUND

¶ 2 On October 25, 1999, the McKeons and the Crumps entered into a Real Estate Purchase Contract (the Purchase Contract) for the sale of the McKeons' home to the Crumps. As part of the Purchase Contract, the Crumps paid the McKeons $2,500 as an earnest money deposit. The Crumps invoked the appraisal condition under the Purchase Contract, whereby the Crumps' obligation to purchase the home was conditioned on the property appraising for not less than the purchase price. On December 3, 1999, the Crumps' attorney sent a letter to the McKeons' attorney alleging that the appraisal was "seriously flawed" and was rejected by the Crumps. The Crumps hired another appraiser, but the McKeons would not let the new appraiser inside their home. The second appraisal ultimately was less than the purchase price.

¶ 3 On December 2, 1999, the McKeons filed a lawsuit against the Crumps, seeking specific performance and damages. On December 6, 1999, the Crumps gave notice that they would not go through with the purchase based on the new appraisal and demanded return of the earnest money. The McKeons had not returned the earnest money deposit to the Crumps prior to filing suit. On February 16, 2000, the McKeons filed a Motion to Deposit Earnest Money into Court. The Crumps filed a Motion in Opposition to the Deposit of Earnest Money into Court based upon the proposition that "[i]f the plaintiffs keep the Earnest Money or pay it into Court, they have elected as their only remedy liquidated damages." On May 19, 2000, in an attempt to revive or preserve their claim for specific performance, the McKeons returned the earnest money to the Crumps.

¶ 4 On June 6, 2000 and August 29, 2000, the McKeons presented their case at trial. At the close of the McKeons' case, the Crumps made a motion to dismiss based upon the McKeons' failure to return the earnest money to the Crumps before filing suit. The trial court granted the Crumps' motion to dismiss with prejudice, concluding that failure to return the earnest money was an affirmative defense that could not be waived. The trial court also awarded the Crumps attorney fees. However, the trial court reduced the attorney fee amount, finding the Crumps had waited to raise the defense and had stipulated to waive it, thereby increasing costs of the suit. The trial court also required the Crumps to return the earnest money deposit to the McKeons. This appeal followed.

ISSUE AND STANDARD OF REVIEW

¶ 5 The sole issue presented is whether the trial court erred in granting the Crumps' motion to dismiss with prejudice for failure of the McKeons to return the earnest money deposit before filing suit.1 We review an appeal from a motion to dismiss for correctness and "accept the material allegations of the complaint as true, and the trial court's ruling [will] be affirmed only if it clearly appears the complainant can prove no set of facts in support of his or her claims." Hansen v. Department of Fin. Inst., 858 P.2d 184, 186 (Utah Ct.App.1993).

ANALYSIS

¶ 6 The McKeons argue neither the language of the Purchase Contract nor Utah case law requires that their claim be dismissed with prejudice because of their failure to return the earnest money deposit prior to filing suit. The Purchase Contract is a standardized real estate agreement. The default provision at issue reads:

If Buyer defaults, Seller may elect either to retain the Earnest Money Deposit as liquidated damages, or to return it and sue Buyer to specifically enforce this Contract or pursue other remedies available at law.

"When contract language is unambiguous, we interpret the contract as a matter of law. In so doing, [we] must attempt to construe the contract so as to harmonize and give effect to all of [its] provisions." Tretheway v. Furstenau, 2001 UT App 400, ¶ 9, 40 P.3d 649 (quotations and citation omitted) (alteration in original). Furthermore,

[I]t is pertinent to observe that the attempt to enforce this clause of the contract is almost invariably against a purchaser who has been induced to sign it and deposit money under the impression that its forfeiture will be the extent of his loss if he decides not to buy the property. And the suit is by a seller who wants to be sure to keep the money in hand, and also seek additional relief. This clause is for the benefit of the seller. He will obviously always choose the option to his advantage and to the disadvantage of the buyer. Under those circumstances the clause should be strictly applied against the seller and he should be held to meet its requirements with exactness.

Close v. Blumenthal, 11 Utah 2d 51, 354 P.2d 856, 857 (1960) (emphasis added). Because the McKeons, as sellers, had the benefit of choosing the language of the default clause in the Purchase Contract, they must "meet its requirements with exactness." Id.

¶ 7 This court analyzed a similar default provision in Palmer v. Hayes, 892 P.2d 1059 (Utah Ct.App.1995). The issue before the Palmer court was, "[D]id the [seller's] failure to release the Earnest Money Deposit to the [buyers] before commencing their action for damages constitute, as a matter of law, an election of the remedy for liquidated damages[?]" Id. at 1061. For guidance, the Palmer court looked to four prior Utah Supreme Court cases that had analyzed whether failure to return the earnest money deposit precludes a seller from pursuing other remedies under the Purchase Contract.

¶ 8 In Palmer, we first looked to the analysis in Andreasen v. Hansen, 8 Utah 2d 370, 335 P.2d 404 (1959), which held that the plaintiffs who failed to return the earnest money deposit to defendants before filing "`must be deemed to have kept it for the purpose indicated in the contract, that is, as liquidated damages.'" Palmer, 892 P.2d at 1061 (quoting Andreasen, 335 P.2d at 408). We concluded that Andreasen and those cases that followed stood for the proposition that "a seller's failure to offer to return earnest money deposits precludes the seller from pursuing other remedies." Id. (citing Dowding v. Land Funding Ltd., 555 P.2d 957, 957 (Utah 1976) (holding that because neither seller nor his agent offered to return deposit, seller's damages were limited to deposit amount); Close, 354 P.2d at 857 (holding sellers who did not offer to return deposit opted for liquidated damages and were precluded from seeking specific performance); McMullin v. Shimmin, 10 Utah 2d 142, 349 P.2d 720, 721 (1960) (same)). Accordingly, we concluded that the sellers "had an affirmative duty to release their interest in the deposit money to the [buyers] before they filed their suit for damages." Palmer, 892 P.2d at 1062. Therefore, the trial court was correct in granting the buyers summary judgment because "by failing to release the deposit money, the [sellers] elected to retain it as liquidated damages." Id.

¶ 9 The McKeons argue their case is distinguishable because they eventually returned the earnest money deposit to the Crumps. The McKeons argue that the plain language of the contract does not require one event to occur before the other, as long as "both events ... occur before the seller actually obtains the specific performance." As we have already discussed, the language and reasoning of Palmer indicate otherwise.

¶ 10 For example, in Palmer, we stated that the issue before us was whether "the [seller's] failure to release the Earnest Money Deposit to the [buyers] before commencing their action for damages constitute[s], as a matter of law, an election of the remedy of liquidated damages." Id. at 1061 (emphasis added). Again, in dicta, the court found that "the [Andreasen line of] cases uniformly hold that before a seller may pursue a remedy other than liquidated damages, the seller must release any claim to the deposit money." Id. at 1062 (emphasis added). In answering the seller's argument that the Andreasen line of cases were not dispositive because of changes in the rules governing escrow accounts, we stated that the sellers "needed only to indicate to [the agency holding the deposit], in writing, that they released the deposit money to the [buyers]. Then they could have proceeded with their suit for damages." Id. (emphasis added). Thus, we held as a matter of law that the sellers "had to tender release of the earnest money deposit before pursuing other remedies." Id. at 1063 (emphasis added). Therefore, the McKeons' argument fails.

¶ 11 Next, the McKeons argue that the defense of failure to return the earnest money deposit is an affirmative defense that can be and was waived by the Crumps. However, the trial judge determined that the McKeons' failure to return the Crumps' earnest money deposit before filing suit was an election to keep the money as liquidated damages and was an election that could not be waived. We agree.

¶ 12 In Palmer, the sellers argued that the holdings in the Andreasen line of cases were inconsistent with the election of remedies doctrine defined in Angelos v. First Interstate Bank of Utah, 671 P.2d 772, 778 (Utah 1983). In Angelos, the Utah Supreme Court defined election of remedies as a

"technical rule of procedure and its purpose is not to prevent recourse to any remedy, but to prevent double redress for a single wrong. Said doctrine presupposes a
...

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  • Selvig v. Blockbuster Enters., LC
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    • Utah Supreme Court
    • 27 Septiembre 2011
    ...(describing a party's default under a standard real estate purchase contract as failure to pay amounts when due). 8. See, e.g., McKeon v. Crump, 2002 UT App 258, ¶¶ 8–10, 53 P.3d 494 (noting that under the election of remedies clause contained in a standard real estate purchase contract, se......
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    ...damages by failing to return the deposit before filing suit. In making its argument, Buyer relied on the court of appeals’ decision in McKeon v. Crump ,1 which interpreted an identical default provision to require dismissal if a seller retained an earnest money deposit at the time it filed ......
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    ...v. Shimmin , 10 Utah 2d 142, 349 P.2d 720, 721 (1960) ; Andreasen v. Hansen , 8 Utah 2d 370, 335 P.2d 404 (1959) ; McKeon v. Crump , 53 P.3d 494, 497–98 (Utah Ct. App. 2002).The Utah Court of Appeals decision in Palmer is instructive. In that case, the defendants entered a contract to purch......
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    • United States
    • Utah State Bar Utah Bar Journal No. 2003-04, April 2003
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    ...post signs or carry on any activity that would raise questions about the seller's title to the property. McKeon v. Crump, 2002 UT App 258, 53 P.3d 494. Retention of earnest money by a seller constitutes election to retain the deposit as liquidated damages. Once a seller has elected a remedy......

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