Shallow Brook Associates v. Dube

• Decision Date: 08 November 1991
• Docket Number: No. 90-503,90-503
• Citation: Shallow Brook Associates v. Dube, 599 A.2d 132, 135 N.H. 40 (N.H. 1991)
• Parties: SHALLOW BROOK ASSOCIATES v. Ronald DUBE and Pauline Dube.
• Court: New Hampshire Supreme Court

Page 132

599 A.2d 132

135 N.H. 40

SHALLOW BROOK ASSOCIATES v. Ronald DUBE and Pauline Dube.

No. 90-503.

Supreme Court of New Hampshire.

Nov. 8, 1991.

Cullity, Kelley and McDowell, Manchester (John G. Cronin, on the brief and orally), for plaintiff.

Wadleigh, Starr, Peters, Dunn & Chiesa, Manchester (Theodore Wadleigh, on the brief and orally), for defendants.

THAYER, Justice.

This is an appeal from the Superior Court's (Goode, J.) denial of the plaintiff's amended "Motion to Cite for Contempt and Sanctions," which motion argued that the defendants violated the court's earlier order to specifically perform a real estate purchase and sale contract. The plaintiff-buyer, Shallow Brook Associates, maintains that the court erred in ruling that it breached the contract when it failed to tender payment before a closing date set by the defendant-sellers, Ronald and Pauline Dube. The plaintiff also challenges the court's enforcement of the contract's liquidated damages clause to include a deposit made after the contract's formation. We affirm.

On December 18, 1984, the defendants agreed to sell a 45-acre parcel of land in Merrimack and Bedford to the plaintiff's predecessor in interest for $690,000. A $75,000 deposit was paid, and December 31, 1985, was set as the closing date. The buyer failed to perform at the appointed date, but paid an additional $75,000 deposit as consideration for extending the time for closing. Although further attempts to close were made on both sides, none succeeded. Finally, in 1989, the buyer filed a petition for specific performance and stated that it was ready, willing, and able to complete the sale. The Superior Court (Goode, J.) granted the petition, finding that time had not been "of the essence," and notified the parties of its decision on December 18, 1989. The court set no date for performance of the five-year-old contract. No appeal was taken from that court order.

In late January 1990, one of the plaintiff's principals, Michael Callahan, telephoned his loan officer and requested a loan of $150,000, the amount needed for closing the parties' contract. Callahan testified that he assumed the official would simply transfer the money to his account, as he had done several times before. Times had changed in the banking industry, however, and the official replied that Callahan would first have to obtain an appraisal of the property and an environmental survey, and then present his request to a bank committee. Callahan made no attempt to obtain either the appraisal or the survey, and abandoned his quest for bank financing.

The first communication between the parties following the court's order of specific performance occurred on February 7, 1990, when the defendants' counsel, Theodore Wadleigh, telephoned the plaintiff's counsel, William Kelley, to schedule a closing. Kelley declined to suggest a date, and in response Wadleigh wrote on February 14, 1990, that he had scheduled a closing for March 1, 1990. Kelley replied two days later that "Mr. Callahan is hopeful that he will be in a position to close on this transaction on or about April 1, 1990. He is not in a position to close on March 1, 1990...." When Wadleigh received this letter, he wrote back: "It still remains Mr. Dube's position that you close on or before March 1, 1990, or the contract will be terminated and the deposit forfeited."

March 1, 1990, saw no closing on the parties' contract, and a week later the plaintiff was still unable to predict when it would have the necessary funds to close. Wadleigh wrote to Kelley on March 9, maintaining that the defendants considered the contract terminated, but offering to return the $150,000 deposit if the plaintiff executed a release of the agreement by March 16. The plaintiff did not accept this offer, and instead notified the defendants on March 14 that it had finally obtained the needed funds and could close on March 16. The defendants, however, refused to close.

The plaintiff then filed a "Motion to Cite for Contempt and Sanctions," claiming that the defendants were in violation of the court's order of specific performance. The motion asked the court to hold the defendants in contempt, levy sanctions against them, and make "appropriate enforcement orders." The defendants objected to the motion, and a September hearing was scheduled. Just before the hearing, the plaintiff filed a motion to amend its previous motion. It alleged that, due to the defendants' refusal to close, the plaintiff had lost its financing commitment and was unable to secure alternative funding. The motion ended with a prayer to vacate the court's order of specific performance, re-open the case for a determination of damages, and order the defendants to refund the $150,000 deposit.

The court denied the plaintiff's requests for relief, ruling that "[t]he plaintiff having conceded his financial inability to proceed on March 1, or at any reasonably certain time in the foreseeable future, such an admitted inability constituted a material breach justifying defendants' termination of the agreement." In reaching this conclusion, the court found that "the selection of March 1, 1990 finalizing a transaction that commenced in December of 1984 and by any reasonable standard should have concluded, as originally scheduled, in December of 1985 was fair, just and appropriate under the circumstances." It is noteworthy that the court found incredible the plaintiff's assertion that it "was ready, willing and able to perform [its] obligations under the agreement from March 16, 1990, through September 1, 1990."

Turning to the issue of liquidated damages, the court ruled enforceable the contract's provision allowing forfeiture of "all deposits" upon the buyer's breach, because:

"(1) the damages resulting from plaintiff's breach are uncertain and difficult to prove; (2) there was an intent, by virtue of its inclusion in the agreement, on the part of the parties to liquidate such damages in advance; and (3) the amount agreed upon (i.e. "all deposits") was reasonable and not disproportionate to the presumable loss or injury. See Langlois v. Maloney, 95 N.H. 408, 412-413 [64 A.2d 697]."

"[A]ll deposits," the court concluded, meant both $75,000 deposits.

On appeal, the plaintiff argues first that defendants' position is tantamount to a collateral attack on the court's original order for specific performance. We disagree, and hold instead that the plaintiff forfeited its right to specific performance by failing to tender payment within a reasonable time after the court's order.

"Where the decree is that the purchaser shall receive a deed when he makes a tender of the price, but no time is fixed for such tender, a reasonable time is intended...." 81A C.J.S. Specific Performance § 217, at 205 (1977); see also Lancaster v. Simmons, 621 S.W.2d 935, 943-44 (Mo.Ct.App.1981) (when specific performance is ordered, successful party must timely tender performance; reasonable time is implied when court gives no deadline). "Where the party in whose favor the decree is rendered fails to perform a condition thereof on which the rights decreed depend, he is not entitled to enforce such rights against the opposite party and the latter is entitled to be relieved of the decree...." 81A C.J.S. Specific Performance § 217, at 204 (1977); see also Delray Beach Whitehouse Apts., Inc. v. Hoffmann, 257 So.2d 550, 556 (Fla.1972); Lancaster v. Simmons, supra at 944; Rosenstein v. Burr, 83 N.J.Eq. 491, 492-93, 90 A. 1037, 1038 (1914); Clark v. Hall, 7 Paige Ch. 382, 385 (N.Y.Ch.1839); Bennett v. Copeland, 149 Tex. 474, 480, 235 S.W.2d 605, 608 (1951).

We agree with the trial court that March 1, 1990, was a reasonable deadline for performance of the plaintiff's part of the contract. The plaintiff's award of specific performance was based on its declaration that it was ready, willing, and able to tender payment. See Lancaster Development Corporation v. Kattar, 110 N.H. 163, 167, 262 A.2d 278, 280-81 (1970) (decree of specific performance properly entered where plaintiff was ready, willing, and able to perform its part of the agreement). Moreover, the purchase and sale contract was not made contingent on the plaintiff's securing financing. Thus, lack of funds was no excuse for non-performance. See Lancaster v. Simmons, supra at 943 (court found especially egregious that buyer, who won order of specific performance, appeared unable to tender payment). Once the trial court entered an order in the plaintiff's favor, the plaintiff should have been able to tender payment within a short period of time. Cf. C & M Realty Trust v. Wiedenkeller, 133 N.H. 470, 475-76, 578 A.2d 354, 357 (1990) (court upheld trial court's ruling that buyer breached purchase and sale contract when buyer failed to perform by date unilaterally set by seller; buyer given five days' notice of closing date). We consequently hold that the plaintiff forfeited its right to specific performance.

We also uphold the trial court's ruling that the plaintiff's failure to meet the March 1, 1990 deadline constituted a breach of the purchase and sale agreement. The plaintiff argues that because the trial court once found that time was not of the essence, the plaintiff could not have breached the contract simply by missing a closing date. Although it is "the general rule ... that time is not of the essence unless a contract specifically so states, ... [e]ven if time is not made of the essence in the original contract, it may be made of the essence by the parties' subsequent conduct." Wiedenkeller, 133 N.H. at 475, 578 A.2d at 357.

In Wiedenkeller, the buyer wrote on December 5, 1986, that the closing date could be "either in the year 1986 or 1987." Id. The seller responded on December 26 that closing would " 'take place on or before December 31, 1986.' " Id. We stated:

"Based on the December letters' express references to the date of closing, together with the practical interpretation by the...