Thatcher v. Lang

462 P.3d 397

Melanie Madsen THATCHER, Appellee and Cross-appellant,

v.Michael LANG, Appellant and Cross-appellee.

No. 20180009-CA

Court of Appeals of Utah.

Filed March 12, 2020

Karra J. Porter, Salt Lake City, Kristen C. Kiburtz, and, J.D. Lauritzen, Salt Lake City, Attorneys for Appellee and Cross-appellant

Bryan J. Pattison, St. George and Elijah L. Milne, Attorneys for Appellant and Cross-appellee

Judge David N. Mortensen authored this Opinion, in which Judges Gregory K. Orme and Jill M. Pohlman concurred.

Opinion

MORTENSEN, Judge:

¶1 This is a dispute about a $1.8 million real estate purchase contract (Contract) gone sour. After the purchase fell through, the trial court ruled that (1) Michael Lang (Buyer) was not entitled to specific performance, (2) Melanie Madsen Thatcher (Seller) was entitled to have title quieted in her favor, (3) Seller was not entitled to liquidated damages, and (4) Buyer could recover a portion of the principal and interest payments he made to Seller under a theory of unjust enrichment. We affirm on the issues of specific performance and liquidated damages, but reverse and remand on the issues of quiet title and unjust enrichment.

BACKGROUND¹

¶2 This dispute arises from a real estate transaction concerning approximately nineteen acres of land located in Springdale, Utah (Property). In February 2006, Buyer and Seller entered into an option agreement (Option) granting Buyer the exclusive right to purchase the Property. In May 2006, Buyer exercised the Option, and the parties entered into the Contract wherein Buyer agreed to buy, and Seller agreed to sell, the Property for $1,800,000 (Purchase Price). The Purchase Price was originally payable as follows: $50,000 non-refundable option payment to be applied as principal; $100,000² due on May 1, 2006; $400,000 due on July 5, 2006; $600,000 due on January 5, 2007; and $650,000 due at closing on or before January 5, 2008.

¶3 The Contract contained specific provisions governing default by either party. In the event of Seller’s default, Buyer’s contractual remedy was provided by section 4.3 of the Contract (Seller Default Clause):

4.3 Seller Default. Upon thirty (30) days prior notification in writing by Buyer to Seller of any material breach of the representations, warranties and covenants of Seller set forth in this Section 4 or elsewhere in this Agreement, Seller, at Seller’s own expense, shall cure or remedy any such breach of such representations, warranties and covenants. If Seller fails within thirty (30) days following Buyer’s notice thereof to cure or otherwise remedy the breach, Buyer may terminate this Agreement upon notice to Seller. With respect to any cloud on title that may be cured by payment of cash at Closing, Seller shall have until Closing to cure such cloud. In such event, any sums paid by Buyer to Seller shall be returned to Buyer except for the initial $50,000 payment referenced in Section 1.2(a). Nothing contained in this Section shall be construed to require Buyer to postpone the Closing, or to limit or preclude the recovery by Buyer against Seller of any sums for damages to which Buyer may lawfully be entitled, or the exercise by Buyer of any equitable rights or remedies, including, without limitation, the remedy of specific performance, to which Buyer may lawfully be entitled by reason of any material breach of any of the representations, warranties or covenants of Seller set forth in this Agreement.

Conversely, in the event of Buyer’s default, Seller’s contractual remedy was provided by section 4.4 of the Contract (Buyer Default Clause):

4.4 Buyer Default. Seller may terminate this Agreement by giving written notice to Buyer if Buyer materially breaches any covenant or other obligation of Buyer under this Agreement and fails to cure such breach within thirty (30) days after written notice from Seller is received by Buyer specifying such breach. If Buyer fails to make payment on or before any deadline provided for herein after the expiration of thirty (30) day grace period, all payment previously made shall be forfeited to Seller as liquidated damages.

¶4 In December 2006, the parties amended the Contract. At the time, Buyer had paid the first $550,000, less $12,500 due to a misunderstanding between the parties. The amendment required Buyer to pay the delinquent $12,500 plus $125,000—both to be applied to the Purchase Price—by January 5, 2007. A final payment of $1,125,000 would be due by the original closing date of January 7, 2008. In return for Seller excusing the third-scheduled payment of $600,000, Buyer also agreed to pay $101,250 in interest—amounting to 9% interest on the outstanding Purchase Price. Buyer paid Seller the agreed-upon installment and interest payments, leaving a principal balance of $1,125,000 due on or before January 7, 2008.

¶5 On September 13, 2007, the parties amended the Contract again. This amendment provided that (1) the closing date could be delayed up to five years, until January 10, 2013 (Effective Closing Date); (2) Buyer was required to make principal payments of $50,000—due within ten days of signing the amendment—and $75,000—due by December 23, 2007; and (3) beginning January 10, 2008, Buyer would make $10,000 monthly interest payments until he closed on the Property. The parties executed the amendment, and Buyer paid the $50,000 and $75,000 principal payments—leaving a principal balance of $1,000,000 due on or before closing.

¶6 Buyer struggled to stay current on the monthly interest payments. In September 2010, Buyer’s interest payment was a week late. He was late again the following month, at which time he secured a loan. From the loan, he used $40,000 to pay the delinquent October 2010 interest payment and prepay the next three months. But by October 2011, Buyer was behind on interest payments again.

¶7 On December 5, 2011, Seller sent Buyer a written notice of default (First Notice). Seller’s First Notice explained that Buyer was behind on interest payments, property taxes, and other assessments which were his responsibility under the Contract. Specifically, the First Notice stated,

This is a notice of breach and request to cure all breaches ... including payment in full of all Washington County taxes and other assessments past due and owing on [the Property]. Public information on the taxes due ... is attached herewith.

You are currently, once again, late on your monthly payment. ... This includes city and county assessments. ...

In addition, Seller requests reimbursement for water, sewer and other city assessments she paid during 2006–2008 which were Buyer’s responsibility to pay. An invoice of payments and dates will follow.

Please note that you are currently in default pursuant to Clause 11 of the Option now merged with [the Contract] and Clause 4.4 of [the Contract] on scheduled payment and nearing the thirtieth (30th) day of delinquency.

Buyer attempted to negotiate an extension on the overdue payments, but Seller refused. Strapped for cash, Buyer obtained a second loan. With those funds in hand, Buyer timely cured the defaults identified in the First Notice.

¶8 As of February 2, 2012, Buyer was current on all payments due under the Contract, and he was planning to secure financing that would enable him to close on the Property. On February 9, 2012, Buyer’s attorney wrote Seller asking that she be prepared to close on the Property by March 10, 2012. On February 21, 2012, Buyer again contacted Seller, stating that he had the required amount of "money together"³ and wanted to close by March 15, 2012. Seller responded that she disagreed with Buyer about the total amount due at closing but nonetheless indicated that she would be willing to close anytime before March 8, 2012, because she planned to leave the country on that date. Buyer was unable to secure financing by March 8, 2012; Seller left the country, and the parties agreed to close at some point after her return.

¶9 Over the ensuing months, the parties quibbled about the total amount due at closing. Then, on April 23, 2012, Buyer informed his attorney, who in turn informed Seller, that if Buyer did not receive certain accounting information from Seller by the following day, he would "start[ ] every legal procedure possible" and that Seller "would not believe the damages if she did not comply with his demands." The following day, Seller initiated a lawsuit against Buyer, incorrectly alleging that Buyer had "not been current since October 10, 2011," and requested that the court quiet title to the Property in her favor (Lawsuit-1). Seller never served Buyer with Lawsuit-1.⁴

¶10 Despite their respective posturing, the parties continued to work toward a closing.

However, a closing tentatively scheduled for April 26, 2012, fell through because Buyer "never tendered payment of the amount he claimed was due, ... was behind on his monthly payments, ... had not yet completed due diligence items, ... and ... was involved in litigation" concerning the zoning designation of the Property. Another tentative closing, scheduled for May 4, 2012, fell through because Buyer did not tender the amount due by that date.

¶11 On July 1, 2012, Seller mailed a second notice of default (Second Notice) to Buyer stating,

As you are aware, you are now, and have been for many months, in default and breach of the [C]ontract for purchase of [the Property].

This is not your first notice, and you have previously received written notice pursuant to the [C]ontract.

Although you have defaulted, I expected to hear from you concerning my willingness to allow you to cure the default, but I have not.

Buyer did not make any payments or respond to the Second Notice.

¶12 On August 13, 2012, Seller mailed a notice of forfeiture to Buyer. Therein, Seller indicated that she believed that Buyer had failed to cure within thirty days of receiving the Second Notice, and therefore the Contract was terminated and he needed to remove his notice of interest and any liens or lis pendens...