Warner v. Denis
1997 Haw. App. LEXIS 15, 84 Haw. 338, 933 P.2d 1372 (1997)
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Rule of Law:
A vendor who contracts to sell jointly-owned property is liable for damages for breach of contract if they are unable to convey marketable title due to a co-owner's refusal to consent to the sale. The seller's own inability to provide marketable title by the closing date does not justify their rescission of the contract; rather, it gives the buyer the option to terminate or seek performance.
Facts:
- Frank Denis and his wife, Vetra Denis, jointly owned several lots of land, including Lot 256.
- In December 1988, Frank Denis entered into a contract to sell Lot 256 to Cynthia Warner and Mark Sheehan (Plaintiffs). His co-owner wife, Vetra Denis, did not sign any of the contract documents.
- In March 1989, during an on-site inspection, Frank Denis disclosed that a utility line, light poles, a roadway, and a fence from his adjoining property encroached upon Lot 256.
- The parties signed an addendum in March 1989 extending the closing date to May 9, 1989, wherein Frank Denis agreed he would survey the boundary, note any encroachments, and submit the findings to the buyers for their review.
- The Plaintiffs properly exercised their contractual right to extend the closing date to June 8, 1989.
- By the June 8, 1989 closing date, Frank Denis had not performed the promised survey nor had he taken any steps to remove the encroachments to provide marketable title.
- On June 26, 1989, while the contract with Plaintiffs was pending, Frank Denis accepted a higher, all-cash offer for Lot 256 from a different buyer, Michael Mangana.
- On July 12, 1989, Frank Denis instructed the escrow agent to cancel the sale to Plaintiffs, stating that they had not complied with the time schedule and that he did not wish for the sale to go any further.
Procedural Posture:
- Cynthia Warner, Mark Sheehan, and Ben Bollag (Plaintiffs) sued Frank and Vetra Denis (Defendants) in the circuit court (trial court) for specific performance and damages for breach of contract.
- After Plaintiffs discovered the property had been sold, they filed an amended complaint.
- The circuit court granted the Defendants' motion to dismiss the specific performance claim.
- Following a non-jury trial on the breach of contract claim, the circuit court entered judgment in favor of the Defendants.
- The circuit court also awarded Defendants over $40,000 in attorney's fees and costs.
- Plaintiffs (as appellants) appealed the judgment on the breach of contract claim and the award of attorney's fees to the Intermediate Court of Appeals of Hawai'i.
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Issue:
Is a seller, who contracted to sell land he jointly owns with his wife, liable for breach of contract damages when he cancels the sale because his wife refuses to sign and he is unable to deliver marketable title due to unresolved encroachments by the closing date?
Opinions:
Majority - Burns, Chief Judge
Yes, a seller who contracts to sell jointly-owned land is liable for damages for breach of contract, even if the co-owner spouse refuses to join the conveyance. The seller's inability to deliver marketable title due to his own encroachments does not excuse his performance or give him the right to unilaterally cancel the contract. The court reasoned that a person who promises to sell something he does not fully own assumes the risk of being unable to acquire complete title and is liable for breach if he fails. Frank Denis's inability to get his wife's signature did not excuse his performance. Furthermore, the contract required Frank to provide marketable title, which he could not do because of the encroachments from his adjacent property. This failure was his own default and did not grant him the right to rescind; instead, it gave the Plaintiffs the option to terminate or seek performance. Since both parties were in default at the closing date (Frank couldn't provide clear title, Plaintiffs hadn't tendered payment), neither could terminate the contract without first tendering performance themselves. Frank's cancellation of the escrow and sale to another party constituted an unequivocal repudiation and breach of his contract with the Plaintiffs.
Analysis:
This decision reinforces the principle that a seller in a real estate transaction cannot use their own default as a basis for rescinding a contract. It clarifies that a seller's inability to secure a co-owner's consent is a foreseeable risk that does not excuse performance and subjects the contracting seller to damages for breach. The ruling also solidifies the doctrine that when contract obligations are concurrent, a party who is not ready, willing, and able to perform cannot declare the other party in default for their non-performance. This precedent protects buyers from sellers who might experience 'seller's remorse' and attempt to use their own failure to provide marketable title as a pretext for canceling a deal to accept a better offer.
