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HKQ Attorneys Win Carbon County Real Estate Case

NOTE: The Plaintiffs in this case were represented by Attorney Brian P. Stahl with assistance from Attorneys Richard S. Bishop and Chris Kang. Paralegal Tiffany Buckman provided key support in the case.

Dowd v. Scenic View Farms Inc., PICS Case No. 14-2091 (C.P. Carbon Dec. 15, 2014) Nanovic, J. (19 pages).
The Legal Intelligencer

January 6, 2015

In this action for specific performance of a real estate contract that stated that time was of the essence, buyer was entitled to a reasonable time within which to settle despite not having tendered payment by the specified closing date since seller's conduct led buyers reasonably to believe that the settlement date would not be enforced.

On Feb. 2, 2014, John and Tina Dowd signed an agreement with Peter Martin for the purchase of a farm owned by Scenic View Farms, Inc. Peter signed the agreement as the corporation's sole shareholder and officer. The agreement called for a general warranty deed and settlement within 30 days, i.e., by March 4. It did not contain a waiver of formal tender of the deed or of the purchase price and stated that time was of the essence.

On Feb. 13, the buyers received an email from Peter's son Paul, advising that it would take a few weeks to organize seller's paperwork. On Feb. 26, Paul sent an email asking that the contract be cancelled. On March 2, he sent an email asking whether buyers had decided to cancel.

On March 3, the buyers responded, expressing their desire for a closing in March. On March 12, their settlement agent sent seller documents requiring his signature and tentatively scheduled the closing for March 20.

On March 15, seller advised that because closing had not occurred within the 30-day-period and time was of the essence, buyers were in breach and that he therefore terminated the contract. Counsel for buyers responded, requesting that settlement proceed. When that did not occur, buyers sought specific performance.

The court said that implied in every contract in Pennsylvania was an obligation on each party to act in good faith and to deal fairly with the other party. In this case, delivery of the deed and payment of the purchase price were mutual, concurrent and dependent covenants. However, neither party did what was necessary to consummate settlement within the stipulated period. After advising buyers that additional time was necessary for paperwork, seller deliberately refused to communicate that it would not meet the closing date, believing that if buyers did not demand settlement on or before March 4, it retained the right to terminate the agreement, which was its intention for reasons independent of when the settlement was held.

The court said that seller's conduct reasonably led buyers to believe the stipulated date for settlement was not critical and would not be enforced and that seller then used this belief to declare the agreement void. It said that conduct would not be countenanced. Moreover, it found that seller, by its conduct, implicitly waived and/or was estopped from insisting on strict compliance with that date.

The court noted that a grant of specific performance was discretionary and that case law had held that where the seller waived strict compliance with contract terms regarding payment, he could not thereafter rescind the contract without notifying the buyer of his intent to do so unless payment was made and allowing the buyer a reasonable time for performance. In this case, seller did not do so.

Further, the court said that buyers' tender of the purchase price was not a precondition to specific performance because seller never tendered a deed and in fact, it was not in a position to convey good title by March 4.

The court concluded that the settlement date was waived where neither party had tendered performance by that date and neither tender of the deed nor tender of the purchase money had been waived in the agreement. The court was persuaded that, in light of seller's allowing the settlement date to pass with the intent to void the agreement while having led buyers to reasonably believe that the date was no longer material, buyers should be permitted a reasonable period within which to complete settlement.

Brian Stahl Business Lawyer Richard Bishop Business Lawyer Chris Kang Business Lawyer