Romig v. DeVallance

Rule of Law:

When a party to a land sale contract has reasonable grounds for insecurity regarding the other party's ability to perform, they may demand in writing adequate assurance of due performance and may suspend their own performance until such assurance is received. This principle is extended by analogy from Article 2 of the Uniform Commercial Code, which governs the sale of goods.

Facts:

• On January 7, 1976, Romig (Seller) entered into an agreement of sale to sell a residential condominium to Mr. and Mrs. de Vallance and Video Network Productions, Inc. (Buyers) for $130,000, to be paid in installments over several years.
• In March 1976, the Buyers' attorney notified the Seller of eighteen construction and appliance deficiencies and stated an intent to withhold payments until they were corrected.
• Sometime after September 1976, the Buyers discovered through a survey that the condominium dwelling encroached on an adjacent lot, creating a title defect.
• The Buyers informed the Seller of the encroachment and stated the condition must be corrected before they could transfer good title to a third party.
• The Buyers stopped making their monthly payments in November 1976 and also failed to make a large payment of $20,000 plus interest that was due on April 1, 1977.
• On April 20, 1977, the Buyers' attorney wrote to the Seller's attorney inquiring whether the Seller had resolved the property line encroachment problem.
• In an exchange of letters in April and May 1977, the Buyers agreed to waive 'all claims for property damage and construction faults' in exchange for an extension of time to make the overdue payments. The Seller never corrected the encroachment.

Procedural Posture:

• Romig (Seller) sued the Buyers in the trial court on October 11, 1977, seeking cancellation of the agreement of sale for failure to make payments.
• The Buyers filed an answer and a counterclaim alleging breach of contract and warranties due to the encroachment and other defects, seeking rescission or damages.
• The trial court granted the Seller's motion for partial summary judgment, cancelling the agreement and restoring possession of the property to the Seller, but reserving the issue of entitlement to monies paid.
• The Seller later filed a second motion for summary judgment, arguing the Buyers had waived their claims and that the Seller was entitled to retain all payments as damages.
• On September 27, 1979, the trial court granted the Seller's motion for summary judgment, dismissing the Buyers' counterclaim and allowing the Seller to retain all funds paid.
• The Buyers (appellants) appealed the final summary judgment order to the Intermediate Court of Appeals of Hawaii.