Rego v. Decker
482 P.2d 834 (1971)
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Rule of Law:
When a contract for the sale of land is silent as to the security for the buyer's long-term performance, a court may grant specific performance but condition it on the buyer either paying the purchase price in full or providing adequate security for their future payments.
Facts:
- Joseph Rego and his wife (the Regos) leased a service station property to Robert Decker for one year, starting in 1966.
- The lease agreement included an option for Decker to purchase the property for $81,000 at any time during the lease or its renewal.
- The option specified that the terms for payment of the purchase price balance would be identical to the rent terms, which involved a monthly base amount plus a percentage of fuel sales, potentially extending for many years.
- The purchase option did not contain any provision requiring Decker to provide security, such as a mortgage or deed of trust, for his long-term payment obligation.
- Under the lease, the Regos agreed to pave the service station grounds but failed to do so.
- Decker renewed the lease for an additional four-year period.
- In February 1967, Decker formally notified the Regos that he was exercising his option to purchase the property.
- The Regos refused to sell the property to Decker and instead sold it to other individuals.
Procedural Posture:
- Robert Decker sued Joseph Rego and his grantees in the Superior Court of Alaska, a trial court of general jurisdiction.
- Decker sought specific performance of the option to purchase and damages for the Regos' failure to pave the property.
- After a trial without a jury, the superior court entered a judgment granting specific performance to Decker, ordering the Regos to convey the property.
- The trial court also ordered the Regos to pave the premises by a specific date or, alternatively, to pay Decker $15,000 in damages.
- The Regos, as appellants, appealed the superior court's judgment to the Supreme Court of Alaska.
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Issue:
Is a court required to deny specific performance of a real estate option contract where the agreement is silent on the security for the buyer's long-term installment payments?
Opinions:
Majority - Rabinowitz, Justice
No. A court is not required to deny specific performance due to the absence of a security term; instead, it has the equitable power to grant specific performance conditioned upon the buyer providing adequate security. While a contract must be reasonably certain to be specifically enforceable, courts should fill gaps to realize the parties' reasonable expectations, especially where there has been reliance. The lack of a security provision for Decker's long-term payments created a risk of hardship for the Regos. Citing the modern reformulation of the mutuality of remedy doctrine, which requires that the defendant's performance be well-secured, the court found that the trial court erred in ordering unconditional specific performance. The appropriate remedy is to grant specific performance but require Decker either to pay the purchase price in full or to provide adequate security for his installment payments, the terms of which can be determined by the trial court on remand.
Analysis:
This decision illustrates the flexibility of specific performance as an equitable remedy, allowing courts to fill significant gaps in contracts to achieve a just result. It moves away from a rigid application of the certainty requirement, under which the absence of a material term like security would have been fatal to enforcement. By conditioning the remedy on the plaintiff providing security, the court balances the plaintiff's expectation interest with the need to protect the defendant from the risk of the plaintiff's future non-performance. This approach reinforces the modern view that 'mutuality of remedy' means ensuring the defendant will receive the agreed-upon exchange, empowering courts to fashion decrees that are fair to both parties.
