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Herring v. Prestwood

Supreme Court of Alabama
1979 Ala. LEXIS 3296, 379 So.2d 548 (1979)
ELI5:

Rule of Law:

Unless a contract for the sale of land specifies otherwise, the buyer's payment of the purchase price and the seller's transfer of the deed are concurrent conditions that are to be performed simultaneously.


Facts:

  • Bennie Herring held an option to purchase 320 acres of land from Hubert and Mary Prestwood.
  • The contract stipulated a purchase price of $208,000, which included a $96,000 down payment.
  • The written option agreement did not specify when the down payment had to be paid in relation to the delivery of the deed.
  • Herring intended to finance the down payment by securing a loan using the 320 acres as collateral.
  • This financing plan required that the Prestwoods deliver the deed to Herring at the same time the lender paid the $96,000 down payment to the Prestwoods.
  • The Prestwoods refused to convey the deed simultaneously, insisting they must receive the $96,000 in cash as a condition precedent to transferring the deed.

Procedural Posture:

  • Bennie Herring (plaintiff) filed suit for a declaratory judgment against Hubert and Mary Prestwood (defendants) in the Circuit Court of Coffee County, Alabama (trial court).
  • Herring amended his complaint to add counts for breach of contract and fraud, alleging the written option was incomplete.
  • The trial court granted the Prestwoods' motion to strike allegations regarding an oral promise.
  • The Prestwoods moved for summary judgment, arguing Herring had failed to make an effective tender of the down payment.
  • The trial court granted summary judgment in favor of the Prestwoods.
  • Herring (appellant) appealed the summary judgment to the Supreme Court of Alabama.

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Issue:

In a real estate option contract that is silent on the timing of payment, does a buyer make an effective tender by arranging for the down payment to be paid simultaneously with the seller's delivery of the deed?


Opinions:

Majority - Torbert, Chief Justice

Yes, a buyer makes an effective tender by arranging for a simultaneous exchange of payment and deed. Absent a contractual provision to the contrary, the tender of a down payment and the transfer of a deed are concurrent conditions, not a condition precedent where payment must occur first. The court reasoned that this approach aligns with the uniform practice in real estate transactions and prevents the inequitable situation where a buyer must surrender a large sum of money without simultaneously receiving the property deed in return. Citing precedents like 'Cay v. Ferrell,' the court affirmed that when a contract is silent on timing, the law interprets the parties' obligations to be concurrent. Therefore, Herring's offer to pay upon simultaneous receipt of the deed was a valid and effective tender.



Analysis:

This case solidifies the default rule that payment and conveyance in real estate transactions are concurrent conditions unless explicitly stated otherwise. The decision is significant because it validates the common modern real estate financing practice where a buyer uses the subject property as collateral to obtain the funds for the purchase. By rejecting the argument that payment is a condition precedent, the court protects buyers from the risk of paying without an immediate guarantee of receiving title, thereby facilitating smoother and more secure property closings.

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