Ferguson v. Caspar
359 A.2d 17 (1976)
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Rule of Law:
A buyer in a real estate transaction is not entitled to the remedy of specific performance if their tender of payment imposes new conditions not agreed upon in the contract, such as unilaterally demanding that a portion of the purchase price be held in escrow. Such a conditional tender constitutes a failure to perform and a breach of the buyer's contractual duty.
Facts:
- Ida Caspar contracted to sell a house to the Fergusons for $23,000, with the contract stipulating that Caspar would convey the property free of any municipal violation notices.
- Prior to the contract, Caspar had been served with a notice of 126 housing code violations on the property.
- The Fergusons became aware of the violations and obtained a repair estimate of $6,125 but did not inform Caspar before the closing.
- At the closing meeting on February 1, 1973, the parties signed settlement statements, Caspar delivered the deed to the settlement officer, and the Fergusons delivered a check for the full balance due to the settlement officer.
- Immediately after the exchange of documents, the Fergusons' attorney presented a letter to the settlement officer demanding that $6,125 of the purchase price be held in escrow until the violations were corrected.
- The settlement officer stated he could not proceed with the closing under this new condition, as it was not part of the sales contract, and the parties dispersed without resolution.
- After the impasse, the title company returned the deed to Caspar and the check to the Fergusons.
- Caspar subsequently sold the property to another couple, the McAteers.
Procedural Posture:
- The Fergusons (appellants) filed a complaint against Ida Caspar (appellee) in the trial court, seeking a declaratory judgment and specific performance of the sales contract.
- The complaint was later amended to include the subsequent purchasers, the McAteers, as parties-defendant.
- After a trial without a jury, the trial court granted the appellees' motion to dismiss the complaint.
- The trial court entered a Judgment and Order of Dismissal, finding that the Fergusons had failed to make an unconditional tender of performance and had forfeited their right to specific performance.
- The Fergusons appealed the trial court's judgment to the District of Columbia Court of Appeals.
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Issue:
Does a buyer's tender of payment at a real estate closing, which is accompanied by a new, unilateral demand to withhold a portion of the purchase price in escrow, constitute a valid tender of performance entitling the buyer to specific performance of the sales contract?
Opinions:
Majority - Reilly, Chief Judge
No. A buyer's tender of performance is ineffectual and does not entitle them to specific performance when it contains conditions, such as withholding funds in escrow, that are not specified in the original contract of sale. The court reasoned that title does not pass to the buyer in an escrow arrangement until all conditions of the contract are fulfilled. The Fergusons' demand to withhold funds was a deviation from the contract, which required payment in cash. This new condition meant the Fergusons failed to make a valid, unconditional tender of performance. To be entitled to the equitable remedy of specific performance, a party must demonstrate they have performed or are ready and willing to perform all of their own obligations under the contract without imposing new conditions. By attempting to force an escrow arrangement not contemplated in the agreement, the Fergusons breached their contractual duty and forfeited their right to compel Caspar to sell them the property.
Analysis:
This case underscores the critical importance of unconditional tender in real estate transactions to preserve the right to specific performance. It clarifies that a real estate closing managed by a title company functions as an escrow arrangement, where title does not pass until all contractual conditions are met by both parties. The decision serves as a caution to buyers that they cannot use a seller's pre-existing breach (like failing to clear violations) as leverage to unilaterally alter payment terms at the closing table. Instead, a buyer's remedies are to either refuse to close and sue for damages, or close as agreed and then sue for damages under the contract's survival clause, rather than altering the performance itself.
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