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GAUNT v. SCHADA

June 13, 2005.

RORY GAUNT and JULIE GAUNT, Plaintiffs,
v.
STEVEN SCHADA, KAREN SCHADA, and SCOTT SCHADA, Defendants.



The opinion of the court was delivered by: JAMES MORAN, Senior District Judge

MEMORANDUM OPINION AND ORDER

Plaintiffs Rory and Julie Gaunt (the Gaunts) brought this action against defendants Steven Schada, Karen Schada and Scott Schada (the Schadas) for specific performance on a real estate contract. Defendants filed a motion for summary judgment and plaintiffs filed a cross-motion for summary judgment. For the following reasons, defendants' motion is denied and plaintiffs' motion is granted.

BACKGROUND

  The following facts are taken from the parties' Rule 56 statements of uncontested facts. Unfortunately, neither plaintiffs nor defendants responded to the others' statement of facts as required under Local Rule 56(b).*fn1 Nonetheless, based on the parties' statements and exhibits, the following is uncontested. At the center of this dispute is a vacation home in New Buffalo, Michigan, near the shores of Lake Michigan. In February 2004, plaintiffs, residents of Massachusetts, entered into a contract with defendants, residents of Illinois, for the purchase of the property. Steven and Karen Schada, husband and wife, initially owned the property with Steven's brother, Scott; however, in May 2004, Steven and Karen purchased Scott's interest. The Gaunts agreed to pay the Schadas $635,000 for the property, and deposited $5,000 in escrow as earnest money.

  After entering into their sale agreement, the parties executed two subsequent addenda to the contract (Addendum 2 and Addendum 3). The second addendum, signed by the parties on March 5 and 6, 2004, recited that the home inspector found problems with the roof, electrical service and septic system, and allowed for additional time to assess the repairs needed. The third addendum, signed March 19, 2004, provided that the sale price would remain the same, but defendants would receive an $80,000 credit on the sale price at the time of closing. It also specified that the sale would be insured by Chicago Title Insurance Co. (Chicago Title). In addition, the addendum added the contract's first mention of the property's private beach rights. It stated: "Seller represents and warrants that private beach rights to Sturgeon Beach are included in sale of property." Plaintiffs testify in affidavits that these beach rights, which allow an occupant to easily walk from the property to a private association beach, influenced their decision to purchase the property.

  The real estate contract stated that the sale of the property "shall be closed on May 1, 2004, or before, if mutually agreed by the parties." The closing date was subject to two exceptions noted in the contract: buyers could have up to fifteen extra days in order to secure a new mortgage, for which they have a written commitment, and sellers could have up to thirty additional days in order to correct defects in the property's title. Believing all the documents to be in order, the Gaunts and the Schadas agreed to close on April 16, 2004, two weeks before the contract's stated closing date. However, on April 14, 2004, Charles Hilmer, plaintiffs' attorney, received a revised copy of the title commitment from Chicago Title. Hilmer had already reviewed an earlier copy of Chicago Title's commitment to insure the property and the beach access rights. Unlike the previous version, the revised title commitment did not commit to insure the property's beach access rights. On or about March 16, 2004, neighbors of the Schadas filed suit seeking to clarify which owners in the residential area had beach access rights. The action named the Schadas among the defendants. As a result of this beach rights litigation, Chicago Title would not commit to insure the property's beach access rights.

  On April 15, 2004, the day before the parties' scheduled early closing, Hilmer faxed defendants' counsel Lawrence Frankle a letter informing him that Rory Gaunt was concerned about "the unusual liabilities and expenses that he will be exposed to due to the purchase" and that he would not proceed with the closing unless he received a $150,000 reduction in the sale price. Frankle faxed a reply letter that same day stating that there were no unusual liabilities or expenses, and though they would not agree to a price reduction they would be willing to escrow a certain amount of money to allay any anxieties regarding the purchase. Nonetheless, the letter informed plaintiffs that defendants expected them to close the next day, as scheduled. However, plaintiffs did not show up at the closing the next day.

  Following the aborted early closing, the parties remained in communication. In a letter to Frankle dated April 27, 2004, Hilmer discussed attempts to settle the beach rights issue. He explained that defendants' attempt to attain insurance for the beach rights from Metropolitan Title would not satisfy his clients because the realty contract states that Chicago Title will provide the title insurance. The letter informed defendants that plaintiffs would purchase the property on the closing date without title insurance for the beach access rights, if the price was reduced by $150,000. Without this price reduction, the letter warned that plaintiffs would terminate the contract and request a return of their earnest money. The parties did not close on May 1, 2004.

  In his declaration, Hilmer states that following their exchange of letters, Frankle told him that he thought he could get the beach rights litigation dismissed, allowing plaintiffs to get title insurance for the beach rights. On June 22, 2004, Frankle faxed Hilmer a copy of a proposed summary judgment order in the beach rights litigation. Two weeks later, Frankle faxed Hilmer a copy of the order dismissing the case, signed by the state court judge adjudicating the matter. Once the judge had dismissed the beach rights litigation, Frankle notified Chicago Title. In a letter dated July 20, 2004, Frankle inquired whether the title company would reinstate its earlier title commitment covering the property's beach rights. The letter stated: "Our buyers in the Schada sale, Rory and Julie Gaunt, are still willing to go forward with the purchase of the Schadas' property if Chicago Title will reinstate the commitment issued prior to this lawsuit being filed." At no point prior to this had either party issued written notification terminating the contract, nor had either party moved to recover the earnest money plaintiffs had deposited for the purchase the property.

  On July 30, 2004, Frankle faxed a letter to Hilmer, which he did not receive until August 6, 2004. The letter read: "The Schadas will sell to your client and provide a warranty deed with beach rights, as well as title insurance showing beach rights, but the purchase price will be $600,000.00 and closing will be within two weeks." Hilmer replied on August 12, 2004, that plaintiffs were ready to close on a mutually convenient date, but that they would need to arrange the date with their lender. Defendants demand for $45,000 more than the price agreed to in their prior contract and addendum, and their refusal to accommodate a later closing date led plaintiffs to file this action for specific performance on September 21, 2004. In late August, or early September, prior to plaintiffs filing suit, defendants entered into a sales agreement with a third party to sell the property for $625,000.

  DISCUSSION

  Our function in ruling on a motion for summary judgment is to determine if there is a genuine issue of material fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). If the evidence on file shows that no such issue exists and the moving party is entitled to judgment as a matter of law we will grant the motion. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Bennett v. Roberts, 295 F.3d 687, 694 (7th Cir. 2002). A "metaphysical doubt as to the material facts" is not enough to create a genuine issue of fact for trial, Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585 (1986); the evidence must allow for a reasonable trier of fact to find for the non-movant. Buscaglia v. United States, 25 F.3d 530, 534 (7th Cir. 1994). When reviewing a motion for summary judgment, we draw all inferences in the light most favorable to the non-movant. DeValk Lincoln Mercury, Inc. v. Ford Motor Co., 811 F.2d 326, 329 (7th Cir. 1987). The court considers the plaintiffs' and the defendants' cross-motions independently — the failure of one party's motion for summary judgment does not mandate the success of the motion of the other party.

  The Michigan Supreme Court has repeatedly stated that "specific performance is not a remedy or right but rests in the sound discretion of the court." Friedman v. Winshall, 343 Mich. 647, 653, 73 N.W.2d 248, 252 (Mich. 1955). Though equitable principles should be applied in each case, and specific performance may not be arbitrarily refused, a decision on specific performance depends on the particular circumstances of the case. Id.; First Baptist Church of Dearborn v. Solner, 341 Mich. 209, 216, 67 N.W.2d 252, 255 (Mich. 1954).

  In their motion for summary judgment, defendants argue that plaintiffs are not entitled to specific performance because they never tendered performance and they breached the contract. Defendants contend that plaintiffs failed to tender the agreed upon purchase price by the date required in the sale contract, May 1, 2004. They further maintain that plaintiffs' refusal to close the real estate contract on ...


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