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Sexton v. Sewell

Court of Appeals of Georgia, Second Division

June 28, 2019

SEXTON et al.
v.
SEWELL et al.

          MILLER, P. J., RICKMAN and REESE, JJ.

          REESE, JUDGE.

         In the case involving the breach of a real estate sales contract, the prospective purchasers of the property at issue ("Property"), Zachary and Carrie Sexton ("Buyers"), appeal from the grant of summary judgment to the sellers of the property, Russell and Linda Sewell ("Sellers") and the Sellers' broker, Beacham & Company, LLC, d/b/a Beacham & Company Realtors ("Broker"). The Buyers contend that the trial court erred in ruling that the Sellers were entitled to specific performance of the sales contract as a matter of law and that the Broker was entitled to its full commission as liquidated damages.[1] For the reasons set forth, infra, we reverse the grant of summary judgment to the Sellers on their claim for specific performance of the sales contract. In addition, we reverse the court's grant of summary judgment to the Broker on its claim for its commission under the sales contract.

         Viewed in the light most favorable to the Buyers, [2] the record shows the following undisputed facts. In March 2017, the Buyers were searching for a home in the Kingswood neighborhood of Atlanta, and their real estate agent learned that the Sellers were preparing to place their Property up for sale in the near future. Before the Property was listed for sale, however, the Buyers toured the home March 31, 2017, and offered to purchase it for $1, 775, 000. The Buyers' agent drafted a purchase and sales agreement (the "Contract"), which the parties executed the same day, March 31, 2017, and the Buyers put down $40, 000 in earnest money. The Contract provided a two-week due diligence period, during which the Buyers could cancel the Contract without incurring a penalty. During that period, the Property was appraised for $1, 850, 000, or $75, 000 more than the Contract price. The closing on the Contract was scheduled for June 22, 2017.

         On May 13, about one month after the two-week due diligence period had expired, and almost six weeks before the closing date, the Buyers notified the Sellers that they were moving to North Carolina for "personal, family reasons." The Buyers, however, assured the Sellers that they still intended to close on the Property. Under the circumstances, the Buyers intended to purchase and then resell the Property, and they asked the Sellers to accommodate them by allowing them to show the Property to other potential buyers. The Sellers allowed the Buyers to show the Property to potential buyers on one day, Wednesday, May 17, from 10 a.m. to 5:00 p.m., but no re-sale resulted. Other than on that day, the Sellers did not allow the Buyers to show the Property to other potential buyers or to list the Property for sale.[3]

         On May 22, the Buyers notified the Sellers that they intended to unilaterally terminate the Contract, and they relinquished the $40, 000 in earnest money.[4] The Sellers refused the offer, and, on May 24, the Sellers' attorney informed the Buyers that, if they failed to appear at the closing on June 22, the Sellers would pursue an action seeking specific performance of the Contract and/or money damages. When the Buyers failed to close on the Property, the Sellers filed the instant action in June 2017, seeking specific performance of the Contract, incidental damages, and attorney fees.[5] In the same suit, the Broker asserted claims for its sales commission, pursuant to the Contract, and for attorney fees.

         The Sellers filed a motion for partial summary judgment, and the Buyers filed a cross-motion for partial summary judgment. Following hearings, the trial court granted the Sellers' motion and denied the Buyers' motion, but it reserved a ruling on the claims for "ancillary damages" and attorney fees. This appeal followed.

In order to prevail on a motion for summary judgment under OCGA § 9-11-56, the moving party must show that there exists no genuine issue of material fact, and that the undisputed facts, viewed in the light most favorable to the nonmoving party, demand judgment as a matter of law. Moreover, on appeal from the denial or grant of summary judgment[, ] the appellate court is to conduct a de novo review of the evidence to determine whether there exists a genuine issue of material fact, and whether the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law.[6]

         With these guiding principles in mind, we turn now to the Buyers' specific claims of error.

         1. The Buyers contend that the trial court erred when it ruled that the Sellers were entitled to specific performance of the sales contract, despite the fact that the Sellers had an adequate remedy at law. Thus, they argue that the trial court erred in granting summary judgment to the Sellers and in denying their (the Buyers') motion for summary judgment. We agree.

         "Specific performance is an extraordinary, equitable remedy, which will be granted only if the complainant does not have an adequate remedy at law. It is not a remedy that either party can demand as a matter of absolute right and will not be granted in any given case unless strictly equitable and just."[7] Thus, even when specific performance might otherwise be appropriate, it should be denied "if it would cause unreasonable hardship or loss to the party in breach or to third persons."[8]

         "As a general rule, a party to a contract may seek specific performance of a contract upon a showing that [monetary] damages recoverable at law would not constitute adequate compensation for another parties' nonperformance."[9] Thus, "[e]quitable relief is improper if the complainant has a remedy at law which is adequate, i.e., as practical and as efficient to the ends of justice and its prompt administration as the remedy in equity."[10] It necessarily follows that, in order to obtain an award of specific performance, the plaintiff must present evidence to show his "entitlement to the extraordinary remedy of specific performance"[11] by, inter alia, demonstrating that he has no adequate remedy at law.[12] Therefore, the threshold question in the instant case is whether the Sellers met their burden of showing that they did not have an adequate remedy at law available to them that would have compensated them for the Buyers' breach of the Contract. The undisputed evidence clearly shows that they failed to meet this burden.

         First, the Sellers could have accepted the Buyers' tender of the $40, 000 in earnest money when the Buyers notified them that they wanted to unilaterally terminate the Contract on May 22, which was about seven weeks after the Contract was executed on March 31. The Sellers would then have been able to immediately put the Property back on the market to sell to someone else while retaining the Buyers' $40, 000.[13] The Sellers have failed to explain why $40, 000, plus the proceeds of the sale, would not have constituted an "adequate remedy" for them under the circumstances presented.[14]

         Further, the undisputed evidence shows that, if the Sellers had placed the Property on the market soon after the Buyers expressed their intent to terminate the Contract, the Sellers would have been able to quickly sell the Property for at least the Contract price. For example, in a June 16 text message to the Sellers, the Broker's agent told them, "I absolutely can sell your house again. There is no question about that."[15] And it is undisputed that, in April 2017, the Property was appraised at $1, 850, 000, or $75, 000 more than the Contract price. Thus, if the Sellers had pursued this option, they would have been able to keep the $40, 000 in earnest money and the proceeds from the sale of the Property.[16] There is nothing in the record to suggest that this would not have constituted an adequate remedy at law that would have precluded an award of specific performance to the Sellers under the circumstances presented.

         Second, between May 22, when the Buyers notified the Sellers that they intended to terminate the Contract, and the proposed closing date, June 22, the Buyers offered to pay the Sellers twice the amount of the earnest money, i.e., $80, 000, to release the Buyers from the Contract. Yet, the Sellers did not respond to the offer or make a counter-offer. As above, there is nothing in the record that would support a finding that $80, 000, plus the proceeds of the sale of the Property to a different party, would not have constituted an adequate remedy at law under the circumstances presented.

         Third, the Sellers could have immediately sued the Buyers for money damages arising from the breach.

[I]f the real estate sales contract is silent on the remedy to be provided, the non-breaching seller is entitled to his proven actual damages. The ordinary measure of damages is the difference between the contract price and the market value of the property at the time of the buyer's breach. If the non-breaching seller sues for actual damages, the earnest money then becomes a fund out of which those damages are partially paid if the proven damages exceed the amount of the earnest money.[17]

         Therefore, this was an objective method for calculating the Sellers' damages that constituted another adequate remedy at law.[18]

         Despite this, the Sellers argue that they were automatically entitled to specific performance as a matter of law because monetary damages would never constitute an adequate remedy at law, relying on the general principle that, when the contract to be enforced involves the sale of real property, "all real property is considered unique." Under the circumstances presented here, this argument lacks merit.

         With one exception, all of the cases cited by the Sellers for this proposition involved facts and/or law that clearly distinguished them from the instant case, in that they involved: a buyer or renter seeking specific performance of a contract to sell or lease property; a contract involving the sale of personal property (to which different rules apply); or the grant of an injunction prohibiting a tenant from selling pornographic materials.[19] The exception is Hampton Island, LLC v. HAOP, LLC, [20] a case wherein this Court affirmed the trial court's order granting summary judgment to the sellers on their claim for specific performance of a real estate sales contract. The essential facts in Hampton Island, however, are clearly distinguishable from the instant case. In Hampton Island, the seller had originally purchased the property ("Agreement 1") from a company that was a predecessor entity of the purchaser.[21]Following the original sale, the company defaulted on its obligations under Agreement 1, and, in an effort to resolve the resulting dispute, the purchaser agreed to buy back the property from the seller for $1, 000, 000.[22] The parties negotiated the conditions of a new sales contract ("Agreement 2"), which included a provision that, if the purchaser defaulted on that payment obligation, the seller had the right to seek specific performance of Agreement 2.[23] When the purchaser defaulted on Agreement 2, the seller sued, and the trial court granted the seller's request for specific performance.[24]

         On appeal, this Court ruled that it was "well established that monetary damages are not an adequate legal remedy where . . . the contract sought to be performed involved the sale of unique real property[, ]" and also held that the rule applied regardless whether it was the seller or the purchaser who was seeking specific performance.[25] Then, noting that Agreement 2 specifically provided that the seller had the right to seek specific performance if the purchaser defaulted on its payment obligation, this Court concluded that the trial court "correctly determined that the [seller] did not have an adequate remedy at law."[26]

         In this case, the Sellers contend that the Hampton Island decision established a rule that automatically entitles them to specific performance, arguing that the case stands for the proposition that monetary damages never constitute an adequate remedy at law following the breach of a real estate sales contract, regardless of the circumstances. To the extent that the ruling could be so construed, it would be dicta because it would constitute an overly broad and conclusory rule that was not adequately tailored to the unique facts presented in that case.[27]

         This is because, even assuming that each and every parcel of land, house, apartment, condominium, etc, is, in fact, "unique," there is nothing "unique" about cash, or more specifically, the cash of potential purchasers. As shown above, the undisputed evidence in this case shows that the Sellers could have sold the Property to other purchasers for a price comparable to that in the Contract (or more) if they had listed the Property for sale after the Buyers notified the Sellers of their (the Buyers') intent to terminate the Contract. Then, the Sellers could have kept the proceeds of the sale and the $40, 000 in earnest money paid by the Buyers. One of the Sellers even admitted in her deposition that, around the time the Buyers backed out of the Contract, if someone other than the Buyers had given her a check for $1, 775, 000 to purchase the Property, that would have been satisfactory to her.

         Further, it is undisputed that the Sellers did not make any changes to the Property to accommodate these specific Buyers that caused the Sellers to incur additional expenses[28] or that made the Property less attractive to other potential purchasers. Simply put, there was nothing "unique" about the Buyers in this case that would support an order requiring these specific Buyers to purchase the Property.[29] Thus, we reject the assertion that, simply because real property is generally considered to be "unique," the Sellers in this case were automatically entitled to specific performance of the Contract.

         The Sellers also argue that, under the decisions of the Supreme Court of Georgia in Laseter v. Brown, [30] Golden v. Frazier, [31] and Holloway v. Giddens, [32] a contract that is "in writing, signed by the parties, [is] certain and fair, [provides] for adequate consideration, and [is] capable of being performed[, is] specifically enforceable."[33] While those cases hold that specific performance is an "appropriate" remedy under such circumstances, [34] none of them hold that a court of equity must order that a contract be specifically performed simply if the contract meets such criteria. More importantly, in none of those cases did the appellate court address whether the plaintiffs had an adequate remedy at law that would have precluded specific performance.[35] Thus, while the cases hold that a plaintiff may seek specific performance if the sales contract meets certain requirements, they do not stand for the proposition that the plaintiff is automatically entitled to specific performance absent a showing that no adequate remedy at law exists.[36]

         Finally, the Sellers argue that, because the Contract did not require them to accept the earnest money if the Buyers defaulted, [37] but instead allowed them to choose "any lawful remedy" for the breach, [38] they "had the absolute right" to choose specific performance. However, because the Sellers could have obtained an award of monetary damages that adequately compensated them for the Buyers' breach, then specific performance was not a "lawful remedy" for them to choose, because they had an adequate remedy at law available to them.

         Thus, we conclude that the Sellers failed to meet their burden of showing that they had no adequate remedy at law and, as a result, failed to demonstrate that they were entitled to the equitable award of specific performance of the Contract.[39]Consequently, the trial court erred in granting summary judgment to the Sellers on their claim for specific performance and in denying summary judgment to the Buyers on that claim.

         2. The Buyers contend that the Sellers were not entitled to specific performance of the Contract because they (the Buyers) had no notice prior to executing the Contract that the Sellers could seek specific performance as a remedy if they (the Buyers) breached the Contract. It is undisputed that the Contract does not refer to specific performance as a remedy for a breach, [40] and the record shows that the first time the Buyers had notice that the Sellers might seek specific performance was on May 24, shortly after the Buyers had notified the Sellers that they wanted to terminate the Contract and relinquish the earnest money.

         The Buyers present a compelling argument that, absent some notice in the sales contract, it is unlikely that a typical purchaser of real property would understand that they could still be compelled to purchase the property if they decided to back out of the Contract (versus simply forfeiting the earnest money). However, the Supreme Court of Georgia has held that specific performance is an available remedy for the breach of a contract for the sale of real property, even if the contract does not say so, unless the contract expressly excludes specific performance as an option.[41] Thus, even though the Contract in this case did not expressly exclude specific performance as a remedy for the Buyers' breach, the Sellers were not barred from seeking specific performance.

         As explained in Division 1, supra, however, the Sellers failed to show that they were entitled to specific performance due to the lack of an ...


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