Minor v. Rush
2007 Mo. App. LEXIS 388, 2007 WL 654232, 216 S.W.3d 210 (2007)
Rule of Law:
The defense of impossibility of performance is strictly limited and generally does not excuse a contractual duty when the inability to perform arises from a third party's refusal to act, unless that contingency was unforeseeable or specifically provided for in the contract by the party seeking to be excused.
Facts:
- Robin and Delann Rush (Sellers) operated a 230-acre farm and experienced financial difficulties, leading them to list their property for sale.
- The farm was encumbered by seven liens: six held by Horizon State Bank (the Bank) (jointly with or guaranteed by the Farmer’s Home Administration (FHA)) and one privately held by McQuinn.
- Gary Minor and Gina Carter (Buyers) offered $1,000 per acre for the land.
- Sellers inquired with the Bank, which informally indicated that the sale at that price 'looked like' it would clear the liens held by the Bank.
- Sellers accepted Buyers' offer and entered into a contract to sell the land, agreeing to provide title in fee simple, but the contract did not include any contingencies for insufficient proceeds to clear liens.
- While preparing for closing, the Bank discovered an additional $25,000 in deferred payment outstanding from the FHA, which had not been included in prior information.
- The Bank also became aware that over $50,000 would be required to retire the McQuinn lien.
- Given the total debt, the Bank determined the sale price was insufficient to clear all liens and refused to release its liens on the property.
Procedural Posture:
- Gary Minor and Gina Carter (Buyers) filed a lawsuit against Robin and Delann Rush (Sellers) in the trial court for breach of contract, seeking specific performance of the real estate sale agreement.
- Sellers defended the lawsuit by arguing that their performance was impossible due to the Bank's refusal to release its liens.
- The trial court found that Sellers had breached the contract of sale and entered a judgment ordering specific performance of the contract.
- Sellers appealed the trial court's judgment to the Missouri Court of Appeals, Western District.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a third party's (a bank's) refusal to release liens due to unexpectedly high debt constitute impossibility of performance sufficient to excuse a seller's contractual obligation to provide fee simple title, where no such contingency was included in the contract?
Opinions:
Majority - Ronald R. Holliger
No, a bank's refusal to release liens due to unexpectedly high debt does not constitute impossibility of performance to excuse a seller's contractual obligation to provide fee simple title, especially when the contingency was foreseeable and not provided for in the contract. The court affirmed the trial court's judgment, emphasizing that the impossibility defense is narrowly applied. Performance is only excused if rendered impossible by an Act of God, the law, or the other contracting party. When a party unconditionally agrees to perform an act that requires the consent or action of a third party, and that third party fails to acquiesce, performance is not excused if the contingency was foreseeable and not addressed in the contract. The Sellers failed to condition their contract on the Bank releasing its liens. Both the Bank and Sellers had access to information regarding the Sellers' financial condition and loans, making them better positioned than the Buyers to anticipate the outstanding debt and the Bank's potential refusal. By not including a contingency in the contract, Sellers assumed the risk that the debt might exceed the sale proceeds, and therefore, their performance was not impossible under Missouri law.
Dissenting - Harold L. Lowenstein
No, while there is no dispute that the Sellers breached the sales contract by failing to obtain a Deed of Release and provide fee simple title (implicitly agreeing the impossibility defense failed), the remedy of specific performance granted by the trial court was inappropriate because it would cause an unreasonable and disproportionate loss to the Sellers. Specific performance is an equitable remedy, not a right, and courts have discretion to withhold it when its enforcement would inflict undue burden or hardship upon the defendant, even without mistake or fraud. In this case, specific performance would lead to the 'complete financial undoing' of the Sellers. It would require them to liquidate virtually all their assets, potentially still leaving them with substantial liabilities and unsecured debt, which does not achieve 'complete justice' between the parties. The dissent argues that the case should be remanded to the trial court to determine damages for the breach instead of ordering specific performance.
Analysis:
This case reinforces the strict interpretation of the impossibility of performance defense in contract law, particularly in Missouri. It places a significant burden on contracting parties to conduct thorough due diligence regarding their own circumstances and to include specific contingencies for foreseeable risks. The ruling highlights the importance of precise contract drafting and warns against assuming third-party cooperation without explicit contractual protections. The dissent, while not challenging the breach, offers a robust argument regarding the equitable limits of specific performance, suggesting that courts should balance the equities and potential hardship to defendants, especially in real estate transactions, even when a breach is established.
