06/20/2022
Judge Howard of the Berrien County Trial Court has rendered a decision after trial in favor of Bill's client in a real estate case. Judge Howard ruled that the court would enforce the real estate contract of the buyer and seller. The seller refused to close the deal claiming that the buyer's financing was not approved on time. The court found that the term "approval" in the contract was ambiguous and that the conditional approval of financing from the buyer's lender satisfied the contractual requirement and ordered the seller to close the deal.
STATE OF MICHIGAN
BERRIEN COUNTY TRIAL COURT- CIVIL DIVISIO;N
·811 Port Street, St. Joseph, Ml 49085 I Telephone 269.983.7111
THOMAS RIDGWAY,
Plaintiff
V
CASE NO. 2020-0115-CK-H HON. DONNA R HOWARD
ROBERT STRATTON,
Defendant.
William Stevens (P55380)
Attorney for Plaintiff
P.O. Box 747 Bridgman, MI 49116 (269) 496-1469
Peter W. Smith (P22999)
Attorney for Defendant
423 Sycamore Street, Ste 102; PO Box 67
Niles, MI 49120
(269) 683-3300
At a session of the Berrien County Trial Court, held On the 10th day of June 2022 in the City of
St. Joseph, Berriien County, Michigan
PRESENT: HON. DONNA B. HOWARD
OPINION AND ORDER AFTER NON-JURY TRIAL
AND REGARDING JUDGMENT
This matter culminated with a 2-day bench trial on Febrnary 15 and 16, 2022. The trial proceeded on Plaintiff Thomas Ridgway's Complaint, filed on or about July 7, 2020, requesting specific performance for a contract and incidental damages. More specifically, Plaintiff alleged incidental damages included withholding of possession, increased costs of keeping financing in place, cost of obtaining a temporary dwelling, cost of storing his possessions, and attorney's fees [see Complaint]. At trial, both parties disputed whether Plaintiff had obtained timely "loan approval," as stated under Paragraph F of the Purchase Agreement, and whether Defendant had the right to rescind or cancel the Purchase Agreement prior to closing. Plaintiff argued that the initial approval received by Compass Mortgage satisfied the term in the Purchase Agreement and it was Defendant who breached by not moving forward with the closing. In con!rnst, Defendant
argued that the approval Plaintiff received from Compass Mortgage was merely conditional, not final approval, and therefore, on its face, did not satisfy the deadlines in the Purchase Agreement. After opening arguments by the parties, the Court heard testimony from individual parties, Thomas Ridgway and Robert Stratton, as well as witnesses Jeanne Delgado, Debra Guy, Daniel Crum, Fred Strattan, Marc Churchill, and Dr. Robert Spenser. This Court admitted the following exhibits into evidence: Purchase Agreement [Exh A-1], Compass Mortgage Email, June 9, 2020 [Exh A-2], Stratton Email, June 12, 2020 [Exh A-4], Compass Mortgage Loan Decision, June 22, 2020 [Exh A-5], Churchill Report .[Exh A-6]., Campas Mortgage Email,.June..10, 2.020 [Exh B-2],
Compass Mortgage Email, July 1, 2020 [Exh B-4], and Robinson Report [Exh B-8].
At the close of proofs and upon waiver by the parties for supplemental briefing, the Court took the matter under advisement for issuance of written findings of fact and conclusions of law in conformity with MCR 2.517. The Court has considered the testimony of all the witnesses and the exhibits admitted into evidence. The Court has assessed the credibility of witnesses and has applied the standard of proof by a preponderance of the evidence to Plaintiff's request for relief in his Complaint, except where clear and convincing evidence is required as a matter of law.
I. Fl!Nl!:HNGS OF FACT
It is undisputed that on May 19, 2020; Thon1as Ridgway C"lvfr. Ridgway' or ''Plaintiff") entered into an agreement with Robert Stratton ("Mr. Stratton" or "Defendant") to purchase property owned by Mr. Stratton located at 314 N Berrien Street, New Buffalo, MI 49117 ("the Property") for $298,000.00. [Agreement, Exh A-1, p l]. Paragraph E of the Purchase Agreement states that Plaintiffs purchase of the property was contingent upon his ability to obtain a mortgage loan for 80% of the purchase price ($238,400.00), payable in not less than 30 years, with an original interest rate not to exceed 4.5% per armum and not to exceed 1 point [Exh A-1, p 2]. As the buyer, Plaintiff was to pay all costs of obtaining financing [Exh A-1, p 2].
Paragraph F of the Purchase Agreement - 'Time for Obtaining Financing" articulates how long Plaintiff had to secure financing for the deal, stating in relevant part:
2. APPROVAL: No more than 21 days after acceptance of this Agreement shall
be allowed for obtaining loan approval or rnortgage assurnption approval. !f a11
',",-.r.'.J..:..-.-.i.o...i.... ,,; a1. ,., no+ oh+.-.;nerl .,. ,,:;,.]..,1" +ho 11· ,,, pc,.,.;.C:,,,,.J l..._,...-,.,,,_ +'f- s _A,;-cL.yee -lc.i..l-v-U--'-L H_..l,Q_,, y
terminate unless an extension of time for this purpose is mutually agreed to in
wTiting.
[Exh A-1, p 2]. It is undisputed that June 9, 2020, marked the twenty-first day from the signing of the Purchase Agreement.
Paragraph G of the Purchase Agreement- "Closing" further specified that the closing date "shall be on or before June 30, 2020, or within 5 days after Lender Apprnval, whichever is later." (emphasis added) [Exh A-1, p 2]. As indicated in Paragraph T of the Purchase Agreement in pertinent part:
1'. T][ME: Time is of the essence. Time periods specified in this Agreement and any subsequent Addenda to the Purchase Agreement are calendar days and shall expire at 11:59 PM of the date stated unless the parties agree in writing to a different date and/or time.
Note: Sell.er and Buyer have the right to witl1dl1raw any offeir/Com,teF" Offer prior to wirirten acceptance and delivery of smid1 offer/Counter Offer.
[Exh A-1, p 6].
Paragraph V of the Purchase Agreement, subtitled "Attorney's Fees," reads that:
Any party to this Agreement who is the prevailing party in a..riy legal or equitable proceeding against any other party brought under or with relation to the Agreement or transaction shall be additionally entitled to recover court costs and reasonable attorney's fees from the non-prevailing paity.
[Exh A-1, p 6]. The Purchase Agreement also contains a choice of law provision, stating in part that, "[t]his agreement shall be construed under ai1d in accordance with the laws of the State of Indiana "[Exh A-1, p 6].
Ou or around IViay 24, 2020, less than a V-/eek after executing the Purchase Agree111ent, Plaintiff applied for a 30-year loan to finance 80% of the $298,000 purchase price through Compass Mortgage. On June 9, 2020 (i.e. 21 days after the Purchase Agreement was signed by the parties), Daniel Crum, a Compass Mortgage loan officer, documented the underwriting completion for Plaintiffs ]oar,_ [Exh A-2]. Mr. Crum also .testified thatwhile this approval. was never re:voked, modified, or rescinded, he and Jearme Delgado, a loan processor, did not have the authority to gra,.rit fmal loan approval, as final approval could only be granted by the underwriter. [Crum TT, 2/15/22]. The next day, on .Tune IO, 20201 Ms. Delgado com1nunicated the loan approval status to
?laintiff[Exh B-2]. Ms, Delgacio·s email stated inpa.n:
I am pleased to inform you that your mmtgage loan has been initiaily approved by the underwriter as long as foe documentation requested below is submitted and approved.
We ask that you provide the documents below in a timely fashion. If you are experiencing difficulty collecting any of the requested items, please let us know immediately. Ifwe do not receive any response to this request within seven business days, we wiil not be able to further consider your credit request. ...
[Exh B-2]. The email· alsu listed the Teferenced·documentation Compass Mortgage was seeking. Near the conclusion of her email, Ms. Delgado stated, "Once I receive these items I can work with the underwriter to clear them, and then we can move your loan to the closing department. "
[Exh B-2].
On or about June 12, 2020, Defendant notified Plaintiff via email that he was terminating the Purchase Agreement on the grounds that loan approval had not been obtained within the required 21-day period. Defendant's email stated:
Hi Tom per our agreement you do not have approved financing on the 314 Berrien street property yet! I just got off the phone with your lender and the title company and they said as of today's date June 12, 2020 at 11:28 am Eastern time! You are not approved yet!! ·
Due to timing!! I am withdrawing from our purchase agreement per our contract of 21 days have gone and passed!! I am instructing my brother to give you your earnest money back!! Thank you for your consideration -and I wish you the very best to stay safe!!
Bob Stratton!! [Exh A-4].
Ten days later, Compass I\1ortgage inforrned Plaintiff of its final lean appro",,:al on June 22 2020. [Exh A-5; Delgado TT, 2/15/22]. Plaintiff was subsequently notified by Cheryl Swift of Compass Mortgage that they were cleared to close via email on or about July 1, 2020. [Exh B-4]. Ms. Swift then provided an estimated closing date of July 8, 2020. [Exh B-4]. Thereafter, when Plaintiff attempted to contact Defendant in order to proceed with the property sale, DefendiLrtt re emphasized his position that he had no interest in moving forward with the sale because he did not find that Plaintiff had timely obtained lOiLrt approval [Ridgway TT, 2/15/22].
DebTa Guy, ,vit.½. 1vferidian Title, expiair..ed that the title request for processing on the Property heg 1:. on or ab()ut 1vl2..y 15, 2020) at the req'..:est cf Defendant. 1\11:s. Gli.y ca,,flrrLced. that,
after May 19th and prior to .Tune 9'1\ there were no modifications to the order for the title work and
no other closing documents were issued. However, on or about June I 6, 2020, Defendant made contact with Meridian Title and had the file placed on hold. A couple days later, Defendant
requested that Meridian continue with the title side of the commitment work, but still hold on the escrow portion. Ms. Guy recalled that the file came on and off hold a couple of times. Ms. Guy was not aware of any action by Defendant to further proceed with scheduling a closing on the Property. She further explained that Meridian never issued a title policy for the Property because it was never scheduled to close [Guy TT, 2/15/22].
Fred Strattan,1 brother of Defendant, and a dual agent to both parties to broker the real estate transaction, testified at trial that Defendant attempted to "put a fork in the deal," shortly after agreeing to sell the Property to Plaintiff. Mr. Strattan also testified that Defendant's attempts to terminate the deal included: limiting when an appraisal of the property could occur, contacting Meridian Title Corporation and informing a representative that he was not going to close, and aI!egedly offering Mr. Strattan.an extra $5,000 to apply to his next commission. M..r. Strattan went on to note that Defendant has not sought to resell the Property since the Ridgway sale did not close. Mr. Strattan conceded during his testimony that he had a financial ir1terest in seeing the Ridgway sale go through, and despite being brothers, that he and Defendant have a contentious relationship [Strattan TT, 2/15/22].
Marc Churchi!I, with approximately 25 years of residential loan-experience as a mortgage loa.11 origination officer, licensed in l'vfichigful, Indiana and Illinois, testified as.to L½.e meaning of the tenn "loan approval," v,,ithin the context of the Purchase Agreement. Mr. Churchill described the process for securing a loan from a mortgage company, while also noting that ne"rr!y all initial approvals are not cleared to close immediately. Mr. Churchill opined that the primary difference between receiving "initial approval," and "final approval," from a mortgage company was that after initial approval, an applicant's info1mation goes through an underwriting system-e.g. Fan.c'l.ie May or Freddie Mac-before ai1 underwriter can deliver final approval. Mr. Churchill testified that in his professional opinion, Compass Mortgage's conditional loan approval would constitute "loan approval," under the terms of the Purchase Agreement [Churchill TT, 2/15/22].
Dr. Spenser Robinson, a Professor and Director of Real Estate Depa,_--tments of Finance/Law and Entrepreneurship at Central Michigan University with approximately six years of experience as an underwriter in Michigan, also testified as to the meani.r1g of the phrase "loan approval," in the Purchase Agreement. He opined that a partial or conditional loan approval does not equate to tl1e te1m "loai1 approval," described in the Purchase Agreement. Dr. Robinson
1 The different spellings of their last name is intentional, not in e1Tor, for.reasons stated on the record during trial.
reasoned that the email sent to Plaintiff by Ms. Delgado of Compass Mortgage did not meet the national regulatory requirements for a full approval. Dr. Robinson ·concluded that Plaintiff did not satisfy the "loan approval," language in the Purchase Agreement until June 22, 2020 [Robinson TT, 2/16/22].
H. CONCLUSIONS OF LAW
As mentioned, Plaintiff seeks specific perfonnance under the terms of the Purchase Agreement, along with incidental expenses incurred for Defendant's wrongful repudiation of the Agreement, by failing to proceed to closing and not delivering the Prope1iy to Plaintiff. On the other hand, Defendant essentially asse1is that he was entitled to rescind the Purchase Agreement for Plaintiffs failure to meet certain financing deadlines.
A. Choice of Law
Paragraph Vv'-8 of the Purchase Agreement contains a choice of!aw provision, which reads: "This agreement shall be construed under and in accordance with the laws of the State oflndiana and is binding upon the parties' respective heirs, executors, adn1inistrators, legai representatives, successors, and assigns." [Exh A-1 p 6].
Generally, "[u]nder Michigan !aw, interpretation of contract provisi0ns,is governed by the
!aw of the state in which the contract was entered." Jones v State Farm Mut Auto Ins Co, 202 Mich App 393,398; 509 NW2d 829 (1993), holding mod by Patterson v Kleiman, 447 Mich 429; 526 NW2d 879 (1994). However, "[i]t is undisputed that Michiga..TJ's public policy favors the enforcement of contractual forum-selection clauses and choice-of-law provisions." Robert A Hansen Family Tr. v FGH Indus, LLC, 279 Mich App 468, 476; 760 NW2d 526, 532 (2008). (recognizing the enforceability of forum-selection clauses and choice-of-law provisions). Thus, assunung that certain exceptions do not apply, Michigan courts will enforce an express forum selection clause as written. Turcheck v Amerifund Fin, Inc, 272 Mich App 341, 345; 725 NW2d 684 (2006), citing MCL 600.745(3). Michigan courts will also "enforce contractual choice-of-law provisions if certain conditions are met." Turcheck 272 Mich App at 346.
In analyzing a conflict between Michigan and Illinois law, the Michigan Court of Appeals noted t_½.at the concern is to balance the expectations of the contracting parties with the interests of the states involved so the application of the parties' choice oflaw is allowable if"the issue is one the parties could have resolved by an express contractual provision." Chrysler Corp v Skyline Indus Services, Inc, 448 Mich 113, 126; 528 NW2d 698 (1995), citing Second Restatement of Conflict
of Laws § 187(1). However, "the choice of law will not be followed if the chosen state has no substantial relationship to the parties or the transaction, or when there is no reasonable basis for choosing that state's law," or if it is "contrary to a fundan1ental policy of a state which has a materially greater interest than 1i'i.e chosen state in the determination of the particular issue and whjch, under the rule of§ 188, would be the state of the applicable law in the absence of an effective choice oflaw by the parties." Chrysler, 448 Mich at 126.
Here, it is evident why the parties sought to construe the Purchase Agreement under Indiana law. The real estate broker, Fred Strattan,.who was agreed upon.by bothparties for.this transaction is licensed in Indiana. Defendant Robert Stratton testified that he owns a marina in LaPorte, Indiana. The Purchase Agreement was signed and negotiated in Indiana. Plaintiff testified that he does not reside in Michigan. Finally, applying Indiana law to this matter that contains a choice of law provision does not appear to have any adverse effects to any fundamental policy in the State of Michigan. Thus, this Court determines that Indiana substantive law is controlling in this case.
lB!. Colllltmct foterprefation
As previously outlined, the crux of the parties' dispute is the operation and enforceability of certain Purchase Agreement provisions; na..rnely the firrancing and·associated dosing deadlines expressed therein [see, Exb A-1]. As such} this Court .1nust sta...rt v,.rit.½ the interpretation of the contract under Indiana law. To begin, "Indiana comis recognize that it is in the best interest of public policy not to unnecessarily restrict persons' freedom ta contract.." Barrington A1gt Co, Inc v Paul E Draper Family Ltd Pship, 695 NE2d 135, 140 (Ind Ct App, 1998).
When interpreting a written contract, the reviewing court should attempt to determine the intent of the parties at the time the contract was made as discovered by the language used to express their rights and duties in the document. Estate ofSaemann v Tucker Realty, 529 NE2d 126 (Ind Ct App, 1988); Barrington Mgt, 695 NE2d at 140; RR Donnelley & Sons v Henry-Williams, Inc, 422 NE2d 353, 356 (Ind Ct App, 1981), "The meaning of a contract is to be determined from an examination of all of its provisions, not from a consideration of individual words, phrases or even paragraphs read alone." Simon Prop Group, LP v Michigan Sporting Goods Distributors, Inc, 837 NE2d 1058, 1072 (Ind Ct App, 2005), quoting Indiana-American Water Co, Inc. v Town of Seelyville, 698 NE2d 1255, 1259 (Ind Ct App, 1998). Thus, t.he reviewing court should ma..ke all attempts to construe the language in a contract so as not to render a..ny words, phrases, or terms ineffective or meaningless, and the court must accept an interpretation of the contract which
hannonizes its provisions as opposed to one which causes the provisions to conflict. Bicknell Minerals, Inc v Tilly, 570 NE2d 1307, 1316 (Ind Ct App, 1991). Moreover, the courts "may not construe unan1biguous language to give it anything other than its clear, obvious meaning, and we may not add provisions to a contract that were not placed there by the parties.." Simon Prop, 837 NE2d at l 070 (citations omitted).
As such, construction of the terms of an unambiguous contract is purely a question of law for the courts to decide. Harrison v Thomas, 761 :NE2d 816, 818 (Ind, 2002); George S. May International Co v King, 629 NE2d 257,. 260 (Ind Ct App, 1994), trans denied. "If, however, a contract is ambiguous or uncertain and its meaning is to be determined by extrinsic evidence, its construction is matter for the factfinder." Biclmell Minerals, 570 NE2d at 1310. Language of a contract is considered an1biguous only if reasonable people could come to different conclusions about its meaning. Simon Prop, 837 NE2d at 1070. "Ambiguity in a contract may be one of two types: patent or latent. Patent ambiguity is apparent on the face of the instrnment and arises from an inconsistency or inherent uncertainty of language used so that it either conveys no definite meaning or a confused meaning. Latent an1biguity, on the other hand, arises only upon attempting to implement the contract."Jd. at 1070-7! (quotation marks and citations omitted).
The rules of contract constn.1ction an.cl extrinsic evidence to resolve a latent ainbiguity may be employed in giving effect to the pariies' reasonable expectations. Extrinsic or parole evidence of prior and contemporai1eous. negotiations and-statements is..adrnissib1e to- aid in the construction of a contract ai,d to arrive at the intention of the parties. Binford v Shicker, 553 N""E2d 845, 848 (Ind Ct App, 1990). However, if the ambiguity is a patent ambiguity that arises because of the language used in the contract ai,d not because of extrinsic facts, its construction is purely a question oflawto be determined by the trial court. Bicknell Minerals, 570 NE2d at 1310.
It is under these stai,dards that the Court reviews the subject Purchase Agreement.
C. The Contrnctual Deadlines
As mentioned above, there are two primary deadline dates at issue in this dispute: 1) the 21-day finac'l.cing or loan approval date under Paragraph F, and 2) the closing date as presc1ibed in Paragraph G [Exh A-1, p 2]. From analyzing those two deadlines, in conjunction with the "time is of the essence" provision of the Purchase Agreement, the key determinative questions are answered. That is, did Defendant have a right to rescind the Purchase Agreement as it relates to Plaintiff obtaining loan approval under Paragraph F, and if not, did Plaintiff prove that Defendant
improperly repudiated or anticipatorily breached the Purchase Agreement by causing a delay in Plaintiffs ability to close by the stated deadline.
1. Rescission - Timeliness of Loan Approval
The party seeking to rescind a contract (here Defendant) "bears the burden of proving his right to rescission and his ability to return any property received under the contract." Barrington Mgt, 695 NE2d at 141. As explained by the Indiana Court of Appeals in pertinent part:
Rescission of a contract is not automatically available. However, if a breach of the contract is a material one which goes to the heart of the contract, rescission may be the proper remedy. A contract may be rescinded, warranting the need for equitable remedies, only when a party avers that he has pe1rformed a substantial part of his obligations unde1r a cont.act and that the other party 1refused to perform its nbligatim:1.s. One pa..--ty will not be permitted by his or her own breach to create a condition which will tend to bring t_he other party into default then assert that such party's rights are forfeited by a default so caused.
Gabriel v Windsor, Inc, 843 NE2d 29, 45 (Ind Ct App, 2006)(emphasis added; quotation marks, citations a.rid brackets omitted).
Financing provisions in real estate purchase agreements have been regularly deemed conditions precedent. Dvorak v Christ, 692 NE 2d 920., 924 (Ind Ct-App, 1"998;, "A condition precedent is either a condition which 1n st be performed before the agreen1e11t of the parties becomes binding, or a condition which must be fulfilled before the duty to perform an existing contract arises." Barrington lvfgt, 695 NE2d at 141. On the other hand, "[a] condition subsequent is a condition which, if performed or violated (as the case may be), defeats the contract." Id A closing date for a real estate transaction, for instance, is a common condition subsequent. See, Id at 141-142. Here, there is no question that the 21-day financing provision of Paragraph F was a condition precedent. That is, Plaintiff was required to secure a conventional mortgage for 80% of the purchase price ($238,400.00) before the sale could proceed [Exh A-1 p 2].
Paragraph F of the Purchase Agreement plainly states that Piaintiffhad 21 days from the acceptance of the agreement to obtain loan approval [Exh A-1 p 2]. The Purchase Agreement also expressly states that a consequence for not securing fina..,cing by the 21-day deadline may include terinination, unless both parties agreed to an extension in WTiting [Exh A_-1 p 2]. It is undisputed that no written extension for financing was granted between the parties. In the case at bar, the parties vigorously dispute whether "loan approval" was granted to Plaintiff within the time constraints of the Purchase Agreement, i.e. within 21-days or June 9, 2020, and whether time truly
was of the essence to warrant rescission as to the financing provision of Paragraph F [Exh A-1]. Plaintiff asserted t.l:tat he obtained loan approval in time, as indicated by the June I 0, 2020 communication from Compass Mortgage [Exh B-2]. Defendant countered that Compass Mortgage only provided a conditional loan approval, not final loan approval within the 21-day deadline. The Court finds that the use of "loan approval" without a qualifier in the Purchase Agreement is ambiguous. The Court recognizes that "loan approval" can reasonably include both conditional and final loan approvals. Both types are loan approvals, yet until the parties took action on the Purchase Agreement, the differing interpretations did not become apparent... Therein lies.the latent ambiguity. Simon Prop, 837 NE2d at 1071. With that, the Court, as the factfinder, may t.hen look to the extrinsic evidence admitted at trial to discern the intent of the parties at the time they entered into the Purchase Agreement. Bicknell Minerals, 570 NE2d at 1310.
First, "loan approval" is not defined in the Purchase Agreement [Exh A-1]. Certainly, had the parties clearly and mutually intended the "loan approval" to be limited to only "final loan approval" (as argued by Defendant), they would and could have used language to that effect. They did not do so. In this particular instance, the parties chose to simply stick ·with what appears to be a pre-p1inted fom1 agreement a..nd fi!Ied in those missing dates; amounts, etc. As outlined above, when reading the Purchase Agreen1ent as a vv·hole vvith "all of its provisions" an.d not just "individual words, phrases or even paragraphs read alone," see, Simon Prop, 837 NE2d at I 072, the Court finds, after considering the testimony of the witnesses. and. admitted documents, that interpreting Plaintiffs June 9, 2020 Ioai, approval as satisfying the condition of "obtaining loan approval" in Paragraph F, best hannonizes with the rest of the Purchase Agreement, and is supported by the admissible evidence. See, Whitaker v Brunner, 8 I 4 NE2d 288, 294 (Ind Ct App, 2004)("We must accept an interpretation of the contract that harmonizes its provisions, rather than one that places the provisions in conflict."), trans denied 831 NE2d 738 (Ind 2005). For exan1ple, such an interpretation is consistent with the man.c'1er in which Paragraph G sets forth the condition subsequent for the closing in the alternative. Stated differently, if "loan approval" in Paragraph F was intended to be a "final loan approval" by June 9'11, as Defendant suggests, there would be no reasonabie basis to require ,he contingency for dosing in Paragraph G, allowing "on or before June 30, 2020, or within 5 days after Lender Appnival, whichever is later." [Exh A-1, p 2](emphasis added). The June 30th date for closing would be 21 days after June 9th. As such, there would be no need for the alternative, movable closing date, if Jw1e 9th was intended to represent
"final loan approval" where the parties were clear to close with respect to the financing. See, Bicknell Minerals, 570 NE2d at 1316 (the court may not, by its interpretation, render any words, phrases, or terms ineffective or meaningless). See also, Simon Prop, 837 NE2d at 1072-1073 (if parties intended other rights and remedies in addition to those explicitly stated, the parties knew how to include such language).
Additionally, the evidence includes an internal email dated June 9, 2020, from Mr. Crum
of Compass Mortgage, which mentions that Plaintiff's request had "completed initial underwrite." [Exh A-2]. Plaintiff also received an email from Ms. Delgado of Compass Mortgage regarding his conditional mortgage approval on June 10, 2020 [Exh B-2]. Plaintiff also testified that he notified Mr. Strattan, the dual agent, of his conditional loan approval being received by June 9, 20202 [Ridgway TT, 2/15/22]. The Court finds that there were essentially no delays or hesitations attributable to Plaintiff in his proceeding toward closing under the Purchase Agreement. Therefore, without a qualifier to "loan approval" explicitly stated in the Purchase Agreement on the type of "loan approval," the Court finds, in resolving the latent ambiguity, that Plaintiff complied with the financing provision of Paragraph F by "obtaining loan approval" from Compass Mortgage by June 9, 2020.
In addition or alternatively, even assun1ing arguendo that Plaintiff was. delayed under
Paragraph Fin not obtaining "final loan approval" from Compass Mortgage until June 22, 2020, [see, Exh A-5], Indiana law suggests that time was not of the essence upon which a party can rescind. Granted, the general "time is of the essence" law provides that "[ w]hen a written agreement states time is of the essence and a time for performance is specified, strict performance at that point of time is necessary unless waived." Barrington Mgt, 695 NE2d at 141-142 (purchase agreements containing conditions precedent or subsequent that have gone uncompleted by specified completion dates are "legally defunct"); see also Dvorak, 692 NE 2d at 92. However, in Keliher v Cure, 534 NE2d 1133 (Ind Ct App 1989), the Court of Appeals further examined an operational financing provision with a time is of the essence condition similar to the case at bar. There, the financing provision provided:
No more than 20 working days after the acceptance of the Purchase Agreement
shall be allowed for obtaining favorable commitment(s) or mortgage assumption approval. If a commitment or approval is not obtained witl1in the time specified
2 It is also notable that the COVID pandemic had just begun in March 2020, with many professional services closed, limited and/or delayed during much of 2020.
above, this Agreement shall tenninate uPJess an extension of tin1e for this purpose is mutuallr agreed to in writing.
Id. at 1135. The purchase agreement also dictated that Ll-ie closing date would be on or before March 4, 1983, or within 5 days after mortgage approval. Id. On February 14, 1983, Defendants secured financing from a mortgage lender. Id However, DefendaI1ts ultimately changed their minds about completing the sale, and sought the return of their earnest money deposit. Id
Despite the explicit deadline "no more tha.11 20 working days" for securing financing, allowing for the agreement to tenninate if financing was not obtained, and a "time is of the essence" provision in the agreement, the Co1.fft of Appeals explained in pertinent part that:
[I]t is doubtful that a general statement in the contract "that time is of the essence,".. serves to make foe duty to close on [a date specific], truly of the essence of the contract. Even if so, it is only that fmal stage of the execufory contract which could be held! to be "of the essence." The preliminary and collateral prnvision whereby pmrchaser agreed to obtain a favorable commitment is not "of the essence."
***
The purchase agreement here provided t.1-iat closing would take place on March 4,
1984, at the earliest. It appears, therefore, t.'1at the February 6 date with respect to a loan com..mitment was not intended to·be truly of the essence of foe contract so long as any delay in obtaining the commit.uent would not result in prejudice to either party or in delay of the closing date. The real estate agent representing Keliher so indicated. The negotiations which resulted in Citicorp's waiver of the "gift-letter" clearly took place after expiration of the time fixed for the Cures to obtain a favorable commitment. That condition, however, was denoted as a "pre-ciosing condition." Therefore, we hold that the conduct of the parties served, as a matter of Jaw, to exrend the period for obtaining an unconditional commitment so long as that extension did not jeopardize closing the sale on March 4. The commitment was made unconditional on February I 4, in ample time to close on March 4.
Id. at I136-38 (citations omitted; emphasis added). Thus, the Court of Appeals held that the additional time needed to obtain an unconditional loan com..mitment did not, as a matter of law, materially violate the time is of the essence provision of the contract where foe final loan commitment was obtained well before the actual closing date. Id. FurH1er, in Harrison v Thomas, 761 NE2d 816 (lnd, 2002), the Indiana Supreme Court reviewed certain contingency provisions a.'ld the closing deadline in a purchase agreement where there was also a "time is of the essence" condition. The Harrison Court held that the phrase "whichever is later" as used in purchase agreements is found in innumerable agreements and unambiguously "refers to the event occurring
last in time, not first." Id. at 818. The use of the phrase "whichever is later" clearly contemplates the possibility of closing after the stated date. id. at 820.
This Court finds the reasoning in Keliher, supra, and Harrison, supra, instructive in this case. Here, under a similar financing provision (Paragraph F) to that in Keliher, supra, after obtaining the "conditional loan approval" by June 9, 2020, Plaintiff managed to acquire actual "final loan approval" by June 22, 2020, well before the anticipated closing date in Paragraph G. More specifically, the actual "final loan approval" date of June 22, 2020, though approximately 13 days after the prescribed loan approval date.in the Purchase Agreement, was still at least 8 days before the parties' agreed upon closing date of June 30, 2020 (or five days after loan approval whichever is later) [Exh A-1 p 2]. Therefore, this Court finds that, even if Plaintiff failed to obtain loan approval from Compass Mortgage until June 22, 2020, as a matter of law under Keliher, supra, enough time remained between the date of final loan approval and the closing date to not prejudice or delay Defendant in honoring th.e Purchase Agreement's June 30, 2020 closing date, as well as the Agreement's "time is of the essence" provision.
2. Anticipatory Repm:liatfon - Prior to Closing
The Court's a..rialysis does not end with the determination th.at Plaintiff's Ioa..rt approval was ' d p h di ' . ,. 0 . • rl 'h. . . .
t1111e1y WJ. er.,_ aragrap., ._ !"' aw 1 or ootarnea 1n surnc1ent tune to procee..,_ wit_( the ClDs1ng cons1stent
with Paragraph G (i.e. by June 30, 2020) of the Purchase Agreement. [Exh A-1, p 2]. The pa..rties do not dispute that it was not until July 1, 2020, when Compass Mortgage cm1tacted Mr. Strattan, the dual agent, to info1m him that Plaintiffs financing was cleared to close, and provided an estimated hearing date of July 8, 2020. [Exh B-4]. July 8, 2020 extends approximately 8 days beyond the June 30, 2020 closing date deadline expressed in the Purchase Agreement, presumably ending Defendant's obligations to proceed with the sale. However, the evidence at trial gave rise to the questions of whether Defendant ever intended to proceed with the closing or anticipatorily breached the Purchase Agreement, once Defendant learned Plaintiff had obtained a conditional lofu, approval by June 9, 2020, and final loan approval by June 22, 2020.
To repudiate an agreement is to reject it without legal justification. Cheng Song v Iatarola, i20 NE3d 1110, 11 JS (Ind Ct App 2019). "Repudiation," is defined by Black's Law Dictionary as: "A contracting pmty's words or actions t..1-iat indicate an intention not to perform the contract in the future; a t.hreatened breach of contract." Black's Law Dictionary 1496 (I 0th ed. 2014); see also Cheng Song, 120 NE3d at 1115-16. Indiana Courts have asserted that the repudiation of
a contract must be positive, absolute, and unconditional in order that it may be treated as an im.ticipatory breach. Angelone v Chang, 761 NE3d 426, 429 (Ind Ct App, 2001). A finding of anticipatory repudiation represents a harsh remedy, so there is a strict requirement that the repudiating statement(s) be clear and absolute. Id "A mere request to be released from a contract cannot act as an anticipatory breach." Id; see also, Eden United, Inc v Short, 573 NE2d 920, 929 (Ind Ct App, 1991). Rather, an anticipatory breach occurs when there is clear manifestation of intent not to perfonn in accordance with a._riy other interpretation other than the differing parties' own interpretation and that interpretation is not correct..Id. The Court of Appeals explained the application of anticipatory breach in pertinent part as follows:
The demanding of the other party a performance to which the party has no right under the contract constitutes such an anticipatory breach.
If one party to a crnrntraelt, eifher wi!lfolly or by mistake dlemands of the other a performance to which he has 110 right u11dler the conltract and states defiltlliltely that, 1.mless his demand is complied with, he will not render his promised performance, an anticipatory breach has been committed. Such a repudiation is conditional in character, hut the condition is a performance to which the repmliiafor has no right....
Where two contracting parties differ as.to.the.interpretation of a G.on,trast or as to its legal effects, an offer to perfom1 in accorda._rice with his own interpretation n1ade by 0ne of the parties is no-t in itself an ar1tic-ipatory breach. In on!er to colltstitute such a breach, the offer must be accompanied !Jy a dear manifestation of intention not to pe,fo:-m in acco,dlance with any other h1terp,etation. So, also the making of a demand upon the other party to a contract that he sha!I perform in acccrd.ar.1.ce v,1ifr.1. a11 interpretation tlI.at is not justified by la-v\l is not itself a repudiation; such a demand, however, does not require much by way of accompanying expressions in order to justify the other party in understanding that no performance other tha._ri that demanded will be accepted.
Id (emphasis added), quoting A. Corbin, Corbin on Contracts§ 973 at 961-62 (One Vol Ed 1952). After considering the admitted evidence from trial, including Defendant's own testimony,
the Court finds that Plaintiff sustained his burden of proof in showing that Defendant's actions after June 9, 2020, a._nd leading up to the anticipated closing date of June 30, 2020, amounted to an anticipatory b.:each. It is clear th2.t Defend 11t on y intended to proceed to clcsi:ig ender the Purchase Agreement if Plaintiff obtained "final loan approval" by J111,e 9, 2020. First, on or about June 12, 2020, Defendant emailed Plaintiff, stating in part: "Due to timing!! I am withdrawing from our purchase agreement per our contract of 21 days have gone and passed!!" [Exhibit A-4].
Additionally, Mr. Strattan, who is both Defendim.t's brother and the dual real estate agent, offered his account, at trial, of how he believed Defendant caused or contributed to the deal falling th.rough. Mr. Strattan stated under oath that Defendant took steps to either "slow up," or "put a fork in," the sale of Property [Strattan TT, 02/15122]. These steps to obstruct the completion of the deal included slowing the appraisal process by limiting when it could occur, as well as calling representatives from Compass Mortgage and Meridian in an effort to "kill," the deal after the June 9, 2020 deadline had passed. Mr. Strattan also testified that Defendant attempted to "bribe" him in an effort to help him terminate the deal, with an offer to give Mr. Strattan an extra. $5,000 towards his next commission in the event that the sale of this Property fell through. The Court notes that Mr. Strattan acknowledged that he and Defendant have since had a contentious relationship, and that as the agent, he was eager to close on the deal due to his own financial interests [Strattan TT, 02/15/22]. Moreover, Defendant testified under oath that he "didn't want to go through with the sale,"
and acknowledged that he would have gone through with the sale had Plaintiff obtained an "unconditional loan approval" within the 21 days of the signing of the Purchase Agreement, June 9, 2020 [Stratton TT, 02/15/22]. To Defendant the "unconditional loan approval" meant that there were "no contingencies;-" "no credit contingencies. ' Defendant also admi·tted·thathe·"·"sentan email to the title company [Meridian Title] and said I don't believe Ton.1 Ridgvvay got app:-coved ·within a 21 day period. Ifhe did, I will proceed. Ifhe didn't, I am not paying for anything. Tell them not to do the title." [Stratton TT, 2/15/22]. Furthermore, Deborah Guy, of MeridianTitle, testified that after this cormnunication from Defendant, Meridian Title as directed, placed the file on hold. Subsequently, Defendant requested Meridian Title to continue the title side of the commitment, but to continue the hold on the escrow and closing [Guy TT, 2/15/22].
Based on the evidence provided to the Court, including the testimony of Defendant and the other witnesses, the Court is persuaded that Defendant had no intention of proceeding with the closing unless Plaintiff obtained final or unconditional loan approval by June 9, 2020. As already discussed above, as a matter of contract interpretation under Indiana law, Defendant had no legal right to require the loan approval prescribed in Paragraph F, obtained by Plaintiff within the stated 21-days (i.e. by June 9th), be "final'" or "unconditional.': As such under the precedence of Eden Untied. supra, Defendant anticipatorily breached by clearly expressing his intent not to proceed with the closing due to the conditional loan approval.
Consequently, Defendant's repudiation of the Purchase Agreement affected Plaintiff's ability to schedule a closing date by the Jlu1e 30, 2020 deadline. Most notably, on or about June 16, 2020, Defendant himself testified that he instructed Meridian Title to hold off doing title work and he was "not paying for anything" because he didn't believe Plaintiff had timely obtained the necessary loan approval. Ms. Guy from Meridian Title testified that although closing was not scheduled until July 8, 2020, Meridian would have been ready to close "within 24 hours," had an earlier date been requested. Therefore, the preponderance of the evidence supports the finding that Defendant's anticipatory repudiation prevented the closing from proceeding by June 30, 2020, and Plaintiff is entitled to relief for Defendant's repudiation.
When a party repudiates a contract (here Defendant), Indiana case law is well settled that the injured party has the option of pursuing one of three remedies:
I) he may treat the contract as rescinded and recover upon quantum meruit; 2) he may keep the contract alive for the benefit of both parties, being at all time ready and able to peiform, and at the end of the time specified in the contract for performance, sue to recover under the contract; or 3) he may treat the repudiation as putting an end to the contract and sue to recover the damages caused by refusing to carry out the contract.
Cheng Song, 120 NE3d at 1 I 17-18 (emphasis in original), quoting Scott-Reitz Ltd v Rein Warsaw Assoc, 658 NE2d 98, 103-104 (Ind Ct App, 1995). As discussed below, Plaintiff has chosen remedy number 2 - to keep the contract alive and seek specific performance with associated incidental dan:1ages claimed.
Plaintiff requests that this Court grant him specific performance of the Purchase Agreement, meaning enforcing the sale of the New Buffalo property at the agreed upon purchase price. "The decision whether to grant specific performance is a matter within the sound discretion of the trial court." Humphries v Ables, 789 NE2d 1025, 1034 (Ind Ct App.2003) (citing.Ruder v. Ohio Valley rVholesale, Inc., 736 NE2d 776, 779 (Ind Ct App 2000)). Indiana trial courts are given deference in their judgn1ents because an action to compel specific peiformance sounds in equity. Id It is a 1natter for the Trial Court to grant the specific performance of a valid contract for t..!Je
seeking specific performance of a real estate agreement must prove that he or she has substantially performed his contract obligations or offered to do so. Ruder, 736 NE2d at 779. A Trial Court may
award equitable compensation to adjust the equities of the parties as part ofa specific performance decree. Humphries, 789 NE2d at 1034.
The present case involves a real estate matter in which one party has effectively repudiated the obligations under the signed Purchase Agreement. Meanwhile, by securing loan approval by no later than June 22, 2020 and seeking to close by June 30, 2020 in spite of Defendant's efforts to obstruct the sale, Plaintiff has demonstrated that they have substantially performed his contract obligations. Therefore, the Court grants Plaintiffs request for specific performance as it pertains to the enforcement of the sale of the Property.
E. focidental Damages
This Court has been asked to award incidental damages in addition to specific perfonnance. Indiana courts have explained, "(t)he compensation awarded as incident to a decree for specific perfonnance is not for breach of contract and is therefore not legal damages." Kesler v Marshall, 792 NE2d 893, 897 (Ind Ct App 2003). Rather, such sums.are awarded to adjust the rig_hts of the parties and help equalize any losses occasioned by the delay of the performance. Id.
To obtain payment of equitable compensation, a paiiy entitled to specific performance must establish facts to meet certain criteria. Estate of Collins v McKinney, 936 NE2d 252,261 (Ind Ct App 2010). In other words, the expenses or other losses for which money is to be paid must "be fairly and reasonably considered as naturally arising from a breach of contract, according to the usual course of things." Id. Expenses from special circumstances ai·e generally not recoverable unless the breaching party k.r.-:evl er had such circurnstances ccrn1riunicated to it. Id.
In the present case, Plaintiff asserts that he is entitled to incidental damages. The incidental damages listed in Plaintiffs Complaint included I) for with_Jiolding of possession, 2) increased costs of keeping his financing in place, 3) cost of obtaining temporary dwelling, 4) cost of storing his possessions and 5) attorney's fees [see, Complaint]. As discussed below, attorney's fees are considered pac"t of recoverable litigation costs, when allowed, unlike the other claimed incidental
damages arising from the breach. With that said, as to the balance of the incidental dainages (not
atto111ey' s 1.cees c1, ,mn1ed'J, at tn.a.L1 1t 1·1s Lourt \Vas not presented w1. t1n sur,..n.,...c1• ent ev•1aT ence or,... spec1·~nc
costs incUired frorn Defe._ndant s vvitl".u\o1ciing. of possession, Plaintiff keeping fi_.is fi.na.-icing in place, or him obtaining a temporary dwelling, or storage. Furthermore, Plaintiff did not specify in any of his pleadings how much his award of incidental damages should be. Thus, without being presented with evidence regarding the type or amount of incidental damages incurred, Plaintiff has
not sustained his burden of proof as to the claimed incidental damages (Cou_rit II). As such, this Court cannot award Plaintiff incidental damages, reserving only Plaintiffs claim for attorney's fees as part of h:is allowable taxable costs.
F. Attomev's Fees
Indiana follows the "American Rule" which generally requires each party to litigation to pay its own attorney's fees. Willie's Const Co, Inc, v Baker, 596 :N"E2d 958, 963 (Ind Ct App, l 992), trans denied. "Attorney's fees are not allowable in the absence of a statute, or in the absence of an agreement or stipulation between the parties." Id, citing, Kikkert v Krumm, 474 NE2d 503, 504-05 (Ind, 1985). "[A] contract that allows for the recovery of attorney's fees will be enforced according to its terms unless the contract is contrary to law or public policy." Harrison, 761 NE2d at 821. Here, page 6, Paragraph V of the Purchase Agreement plainly reads as follows:
V. ATTORNEY'S FEES: Any party to this Agreement who is the prevailing party in any legal or equitable proceeding against any other party brought under or with relation to the Agreement or transaction shall be additionally entitled to recover court costs and reasonable attorney's fees from the non-prevailing party.
[Exh A-1, p 6]. Such an arrangement by way of the contractual provision is not barred by Indiana (or Michigan) statutes, nor is it contrary to public policy. However, as the above contract provision does not define the term "prevailing party," the Comi ·will tum to dictionary definitions as a source that reflects the ordinary meaning of the term at the time the contract was executed. The term "prevailing party" is defined in Black's Law Dictionary as:
The party to a suit who successfuily prosecntes foe action or snccessful!y defends against it, prevailing on the main issue, even foough not necessarily to the extent of his original contention. The one in whose favor the decision or verdict is rendered and judgment entered.
"Prevailing party," Black's Law Dictionary, p 1188 (6t.1i. ed. 1990). Anofaer exan1ple suggests, "[t]he term 'prevailing party' shali include, but not be limited to, a party who obtains legal counsel or brings an action against the other by reason of the other's breach or default and obtains substantially the relief sought whether by compromise, settlement, or judgment." Clark A. Nichois,
}./ichols Cyclopedia of Legal Forms .,in.notated§ 3:220 (rev ¥,;cl 2005).
In this case, it is clear to the Court that Plaintiff, having prevailed on foe primary claim for specific perfonnance, is the prevailing party in this action and as expressed in this Jndgment. Therefore, by operation of the clear language of Paragraph V of the Purchase Agreement, Plaintiff
is entitled to recovery of his reasonable attorney's fees as the prevailing party. The Court further finds it appropriate to determine same as part of the recoverable costs Plaintiff may be entitled to as the prevailing party. See, MCR 2.625.
Ill.CONCLUSION
In light of the foregoing reasons, and the Court being otherwise advised in the premises, the Court cone!udes as fo11o ws:
KT IS H:EREBY ORDERED that on Plaintiff Thomas Ridgway's claim for specific
performance (in Count !) a verdict is entered for Plaintiff and against Defendant Robert Stratton.
IT IS HEREBY FURTHER ORDERED that on Plaintiffs claims for incidental damages, with the exception of attorney's fees (as pa1i of Count II), a verdict is entered for Defendant Robert Stratton and against Thomas Ridgway.
IT IS HEREBY FINALLY ORDERED that except upon stipulation of the parties, any claims for taxable costs and/or attorney's fees to be added to this Judgment shall be submitted to this Court through the procedures set forth in MCR 2.625, or will be deemed waived.
SO ORDERED.
This resolves the last pending claim, but the case remains open for final determination of taxable costs and fees, if any, to be set in a final Judgment.
DATE: June 10. 2022
HON. DONNAB. HOWARD (P57635)
Berrien County Trial Court - Civil Division
