Case:
Fazzio v. Mason, Case No. 36068
Court:
Supreme Court of Idaho
Date Issued:
March 21, 2011
Judges:
Opinion Author: Burdick, Justice
Concurring in Opinion: Eismann, Chief Justice; J. Jones, Justice; W. Jones, Justice; Horton, Justice
Issue:
Whether it is an abuse of discretion for a court to award specific performance to the vendor in a land sale contract if the buyer has been unable to obtain financing at the time of decision.
Summary of Ruling:
Mason entered into two agreements to purchase farmland from the Fazzios. Before the closing date, Mason annexed the properties to the City of Kuna and joined the properties into the Kuna sewer local improvement district. When Mason failed to close on the properties, the parties entered into settlement agreements allowing Mason to extend the closing date. Both settlements included a clause providing for specific performance. Neither the original contracts nor the settlement agreements were contingent upon financing. Again, Mason failed to close on time. The Fazzios filed suit for breach of contract, requesting specific performance. The district court granted the Fazzios’ motion for summary judgment and ordered specific performance. The court entered judgment against Mason in favor of the Fazzios for the purchase prices of the properties, plus interest, and granted the Fazzios vendor’s liens to the properties. Mason appealed, asserting that the award of specific performance was an abuse of discretion because: (1) it was not feasible for him to comply with the award, (2) contract damages would be an adequate remedy (the Court’s analysis of this argument is summarized here), and (3) specific performance would result in an unconscionable windfall to the Fazzios (the Court’s analysis of this argument is summarized here). This summary addresses Mason’s argument that specific performance was inappropriate because it was not feasible for him to comply with the award.
The Court began by clarifying the applicable standard. First, the Court noted that impossibility of performance is a complete defense to breach of contract, which is distinct from the question of whether the equitable doctrine of specific performance is appropriate.
Next, the Court rejected Mason’s argument that specific performance is inappropriate if it is “not practicable or feasible” to perform. Mason relied on Anderson v. Whipple, 227 P.2d 351, 359 (1951), which stated the following rule: “Equity will not enter a decree for specific performance, the enforcement of which is not practical or feasible.” The Court explained that the Anderson rule concerns a court’s ability to enforce the order, not a party’s ability to comply with the order. Therefore, the Anderson rule was inapposite.
The Court noted, however, that a court cannot order specific performance of the impossible. This was illustrated by Paloukos v. Intermountain Chevrolet Co., 588 P.2d 939 (1978), in which a car dealer with no control over product shortages could not be ordered to specifically perform on a contract to deliver a particular truck it did not have in stock.
Next, the Court analyzed whether this equitable doctrine of impossibility (as opposed to the defense of impossibility) applies in instances of both subjective and objective impossibility, as opposed to merely objective impossibility. On the one hand, the Restatement (First) of Contracts § 368 cmt A (1932) provides that specific performance is improper if it is either subjectively or objectively impossible. On the other hand, the district court relied on Christy v. Pilkinton, 273 S.W.2d 533 (Ark. 1954), which noted the distinction between “the thing cannot be done” and “I cannot do it” and found that “financial inability to pay [] does not discharge the contractual duty and is therefore not a bar to a decree for specific performance.”
The Supreme Court reconciled these two arguably inconsistent authorities. The Court agreed with the Restatement that “the defendant’s subjective ability to comply with the award of specific performance is a relevant equitable factor to be considered.” But, the Court also agreed with Christy that “a buyer’s financial inability to pay is not a complete bar to specific performance in a case involving the breach of an agreement to purchase land.”
Applying these rules to the facts of this case, the Court stated that, although Mason had shown that he had been unable to obtain financing and that it might be imprudent for Mason to liquidate his other assets in the current real estate market, “imprudence is not impossibility.” The Court explained: “[H]is inability to obtain financing up to the time of the decision does not show impossibility, because he may still be able to obtain financing.” Therefore, ordering specific performance was within the district court’s discretion.
Link to Opinion:
Fazzio
Link to Court:
http://www.isc.idaho.gov/
Summary Author:
Renee Karel
