Business Law Section

Facts:

Blockbuster agreed to buy a bed and breakfast property from the Selvigs. The parties signed a standard real estate sale and purchase agreement whereby Blockbuster promised to pay the full purchase price for the property before recording the deed to the property. The REPSA also included an election of remedies clause stating that if Blockbuster defaulted, the Selvigs could elect to either retain the earnest money deposit as liquidated damages, or return the deposit and sue Blockbuster. An earnest money deposit of $1,000 was paid by Blockbuster together with a down payment and the Selvigs delivered a deed to Blockbuster with an agreement that it would not be recorded until the balance of the purchase price (comprised of several different components) was fully paid. At some point a dispute arose, and Blockbuster recorded the deed prior to complete payment of the purchase price. The Selvigs retained the earnest money deposit and brought suit against Blockbuster for breach of contract, breach of the duty of good faith and fair dealing, and unjust enrichment. At trial, Blockbuster argued that the Selvigs were barred from bringing suit because they had failed to return the earnest money deposit. The trial court agreed and dismissed the suit.

Procedural Posture:

Trial court dismissed the Selvigs’ suit, Selvigs appeal directly to Utah Supreme Court.

Good Business Law Rules:

1. “In construing a contract, the intention of the contracting parties is controlling. In interpreting a contract, we look to the writing itself to ascertain the parties’ intentions, and we consider each contract provision . . . in relation to all of the others, with a view toward giving effect to all and ignoring none. If the language of the contract is unambiguous, the intention of the parties may be determined as a matter of law based on the language of the agreement. If, however, the language is found to be ambiguous, the court may consider extrinsic evidence of the parties’ intentions. To determine whether contractual language is ambiguous, the court may consider any relevant evidence so that it can place itself in the same position as the parties at the time the contract was entered. A finding of ambiguity is justified only if, after reviewing all of the evidence, the competing interpretations are reasonably supported by the language of the contract.” ¶ 23.

2. “The purpose of an election of remedies provision is to give the seller of property an alternative remedy in the event the buyer fails to consummate the transaction.” ¶ 28.

3. “There is implied in an agreement for the sale of real estate, unless a contrary intention is expresses, that the vender shall retain title to the property until the balance of the purchase price is paid.” ¶ 28.

4. "In order to terminate a real estate purchase contract and work forfeiture on the buyer, the seller must notify the buyer of the default and provide an opportunity to cure. Furthermore, when a seller declares the buyer to be in default, he must cease to accept performance of the obligation.” ¶ 32.

Holding:

The election of remedies provision of the REPSA did not apply to a breach occasioned by a wrongful recording of a deed because the contract did not contemplate that Blockbuster could obtain the deed and record it without paying for the property. Interpreting the election of remedies clause to apply under the circumstances would lead to the absurd result of allowing a buyer to obtain title for the amount of the earnest money deposit – such an interpretation is not reasonable. Because the Selvigs never notified Blockbuster of its default or demanded it to be cured, the contract was still enforceable, therefore the Selvigs unjust enrichment claims were inapplicable. Note that there is a dissent by Justice Nehring.