Thomas v. Montelucia Villas L.L. C. (CA1 3/27/12)

THIS OPINION HAS BEEN VACATED IN PART

An interesting aspect of the law of anticipatory repudiation.

The Thomases contracted to buy a house Montelucia would build at its luxury resort in Scottsdale. The contract provided, as usual, that if the seller had not complied with a term then the buyer could give it a certain amount of time to remedy the problem and then cancel the contract. Just before closing the Thomases refused to go through with the sale, and demanded the return of their earnest money, because some of the resort’s amenities weren’t done and because a certificate of occupancy for the house hadn’t been issued. Montelucia refused to return the earnest money; the Thomases sued; Montelucia countersued, for specific performance. They both moved for summary judgment on the Thomases’ claim; the trial court granted the Thomases’ motion. Montelucia appealed.

The Court of Appeals reverses. It concludes that what the Thomases did was an anticipatory repudiation. They didn’t have a contractual right to cancel without giving Montelucia notice and time to remedy.

That raises the next question: whether Montelucia was ready and able to perform. There was a dispute about this. But “the law does not require the non-breaching party to prove it was able to perform . . . unless it is seeking damages” or equitable relief. “This appeal concerns only Montelucia’s defense to the Thomases’ claim for damages, not a claim by Montelucia for any affirmative relief.” “Once the Thomases repudiated . . . Montelucia was no longer obligated to do anything more . . . ” In other words, proof of ability to perform was an element of Montelucia’s claim against the Thomases, not of its defense to their claim.

The court remands for the entry of judgment against the Thomases on their claim. It sets aside the trial court’s award of fees and costs to them and allows the trial court to determine where fees/costs should lie after final judgment. The immediate result is that Montelucia keeps the Thomases’ $659,000 in earnest money.

We know nothing else of this case. You can perhaps read between the lines and judge for yourself whether the Thomases made a bad legal mistake, were desperately trying to avoid closing on a home they could no longer pay for, or both.

(link to opinion)