Hilton v. Nelsen

Brief Fact Summary.

Plaintiff sued Defendant for specific performance when Defendant decided not to sell his farm to Plaintiff. The trial court held Defendant in breach on the contract and ordered specific performance and damages for the fair rental value of the property for the time that Defendant stayed on the premises after the contract closing date. Defendant appealed.

Synopsis of Rule of Law.

A court will not order specific performance of a land sale contract if enforcement would be unconscionable or inequitable.

Facts.

Nelson (Defendant) negotiated a contract of sale with Hilton (Plaintiff) to sell his 720-acre farm for $180,000. Defendant would receive seven percent interest annually for the first five-years; $2,000 a year principal for years six through nine; and $119,800 due upon maturity. Plaintiff’s performance was conditioned on obtaining title insurance with no policy exceptions. However, the property was subject to easements for roads, telephone cables, and the state’s mineral rights. Plaintiff refused to close without a $16,000 reduction in the purchase price. Plaintiff later agreed to close anyway but Defendant decided not to sell.

Issue.

Whether a court will order specific performance of a land sale contract even if enforcement would be unconscionable or inequitable.

Held.

No. The trial court’s ruling is reversed and the case is remanded for consideration of damages.A court will not order specific performance of a land sale contract if enforcement would be unconscionable or inequitable.Considering the totality of these circumstances, specific performance is inappropriate. Hilton is still entitled to seek its legal remedies.

Discussion.

Specific performance is usually inappropriate if:1) the party seeking its enforcement seeks to gain an unfair advantage;2) there is no mutuality of remedy;3) a remedy at law will adequately compensate the complaining party; or 4) if the contract as written is the result of mistake so fundamental that there was never a meeting of the minds.No factor is determinative and courts must look at the totality of the circumstances. Defendant relied on Plaintiff’s attorney to explain the terms of the sale, about which Defendant apparently was materially misinformed.  Plaintiff reserved the right to unilaterally cancel the contract under a number of conditions, including inability to obtain title insurance without any exceptions, however, the land in question was subject to easements for roads, telephone cables, and the state’s mineral rights.Moreover, there was no mutuality of remedy becausePlaintiff could seek specific performance or damages while Defendant could only keep the deposit money in case the deal failed to close. Defendant was also prohibited from seeking a deficiency judgment if Plaintiff defaulted on his payments.Furthermore, the payment terms demonstrate overreaching by Plaintiff. According to the mortgage, Defendant would have received a total of only $60,200 of principal on a $180,000 property just one month prior to maturity of the 10-year mortgage. Meanwhile, Plaintiff would have an estimated rental value of $20,000 a year.