Aspired Custom Homes, LLC v. Melton


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Docket Number: 2010-CA-00429-COA

Court of Appeals: Opinion Link
Opinion Date: 10-11-2011
Opinion Author: Carlton, J.
Holding: Affirmed

Additional Case Information: Topic: Contract - Breach of implied covenant of good faith and fair dealing - Clean hands - Appraisal of property - Market value approach - Fraud - Specific performance
Judge(s) Concurring: Lee, C.J., Irving and Griffis, P.JJ., Myers, Ishee, Roberts, Maxwell and Russell, JJ.
Concur in Part, Concur in Result 1: Barnes, J.
Procedural History: Bench Trial
Nature of the Case: CIVIL - CONTRACT

Trial Court: Date of Trial Judgment: 03-05-2010
Appealed from: Lee County Chancery Court
Judge: John A. Hatcher
Disposition: DECLARED REAL ESTATE/HOME SALES CONTRACT VOID, DISMISSED BUILDER/SELLER’S SUIT FOR SPECIFIC PERFORMANCE AND DAMAGES, REFUNDED EARNEST MONEY TO DEFENDANTS-BUYERS, AND AWARDED ATTORNEY’S FEES TO BUYERS
Case Number: 08-1307-41-H

  Party Name: Attorney Name:   Brief(s) Available:
Appellant: Aspired Custom Homes, LLC




THOMAS MELVIN MCELROY



 
  • Appellant #1 Brief
  • Appellant #1 Reply Brief

  • Appellee: Todd Melton and Tina Melton MICHAEL BLAKELY GRATZ JR.  

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    Topic: Contract - Breach of implied covenant of good faith and fair dealing - Clean hands - Appraisal of property - Market value approach - Fraud - Specific performance

    Summary of the Facts: Tom and Tina Melton entered into a contract to purchase a home from Randall Godwin, the owner of Aspired Custom Homes, LLC. The contract, executed on June 25, 2008, listed the sale price of the home at $340,000, and the contract required the Meltons to provide earnest money in the amount of $8,000. The contract listed the closing date as July 9, 2008. The contract also stated that “the property must appraise at or above sales price or Buyers shall not be obligated to complete the purchase of the property described herein and all earnest money shall be refunded to the Buyers.” The contract required Aspired to make a substantial number of changes and additions to the home, and the contract also required the Meltons to apply in proper form for a loan sufficient to close within seven days after the effective date of the contract. The Meltons contracted with E.C. Neelly IV to perform an appraisal and home inspection of the property. Neelly performed the appraisal six days after the execution of the contract, and Neelly subsequently generated the full report on July 1, 2008, listing the market value of the property at only $330,000. Neelly also performed the home inspection on July 1, 2008, and the home-inspection report set forth his concerns regarding the property. On July 7 and 8, 2008, the Meltons sent two letters to Aspired to place Aspired on notice that the home inspection revealed standing water and flooding in the front yard. The Meltons also informed Aspired that the property appraised at a value below the purchase price. The Meltons informed Aspired of their desire to cancel the contract, and they demanded the return of all of their earnest money. On July 7, 2008, Aspired sent the Meltons a letter apologizing for the yard flooding, and the letter from Aspired claimed a lack of awareness of the flooding issues. In the letter, Aspired stated that it would attempt to rectify the situation as soon as possible. Aspired refused to return the earnest money to the Meltons. On August 13, 2008, Aspired’s real estate agent, Crye-Leike Realty, filed a complaint in interpleader for the earnest money, and Crye-Leike Realty requested that the chancery court continue the action on its merits between Aspired and the Meltons. Crye-Leike also requested discharge by the chancery court from any further liability. Aspired filed a cross-claim against the Meltons in the chancery court, seeking specific performance of the real-estate contract and damages caused by the Meltons’ failure to perform. The Meltons filed a cross-claim against Aspired, seeking the return of their earnest money and attorney’s fees. The chancellor dismissed Crye-Leike as a party through an agreed order. Following trial, the chancellor denied Aspired’s claim for specific performance and damages. The chancellor also declared the real-estate contract between Aspired and the Meltons to be null and void, and the chancellor ordered the earnest money to be returned to the Meltons. The chancellor ultimately ordered Aspired to pay the Meltons’ attorney’s fees and costs in the amount of $6,554.56. Aspired appeals.

    Summary of Opinion Analysis: Aspired argues that the Meltons failed to come into court with “clean hands” by breaching the implied covenant of good faith and fair dealing and also by failing to fulfill a number of their contractual obligations. Aspired argues that the Meltons breached the implied covenant of good faith and fair dealing by failing to obtain a realistic value of the property through a proper appraisal. The record shows that in performing the appraisal, Neelly, a state-certified real-estate appraiser, utilized a market-value approach for appraising the property. As Neelly explained through his testimony, the market-value approach includes no measure of the garage area or porch area. Neelly also testified that he eventually re-measured the property at the request of Aspired’s realtor, and as a result, he found a thirty-foot discrepancy from his original measurements. However, Neelly testified that this discrepancy warranted no adjustment to the appraisal amount. Aspired also claims that the Meltons breached the implied covenant of good faith with regard to the home inspection. According to Aspired, the home-inspection addendum to the real-estate contract at issue required the Meltons to both arrange for a home inspection to be conducted and also arrange for “a written request for repairs delivered” to Aspired within ten calendar days of the execution of the contract. The home-inspection addendum provides the Buyer with the discretion to choose to notify the Seller of deficiencies. The addendum to the contract provided an option for the Meltons to cancel the contract upon the revelation by the home-inspection report of previously unknown or undisclosed deficiencies. The record shows that the Meltons chose to exercise this option to cancel the contract. Thus, the evidence in the record supports the chancellor’s finding that the contract is void. Aspired also argues that the Meltons did not “make application in proper form” for a loan sufficient to close on the house within seven days of the contract, and also the Meltons failed to apply for a loan as late as July 4, 2008. However, there is no evidence of fraud or willful misconduct on the part of the Meltons. The record instead reflects substantial evidence showing that the Meltons exercised their rights under the contract to cancel the agreement prior to the closing date. Aspired also argues that the chancellor erred when he refused to order the Meltons to specifically perform the real-estate contract. The remedy of specific performance falls within sound judicial discretion, but judicial discretion notwithstanding, where a contracting party can feasibly be given what he bargained for, specific performance is the preferred remedy. However, in this case, the addendum to the contract provided the Meltons with the option to cancel the contract due to deficiencies revealed by the home inspection report. Therefore, no breach of contract occurred, and no basis exists to consider specific performance as a remedy in the present case. Aspired also claims that numerous factual findings by the chancellor were manifestly wrong or clearly erroneous. However, the record supports the chancellor’s findings. Aspired argues that the chancellor’s award of attorney’s fees cannot stand on appeal. Since there is no merit to Aspired’s claims that the chancellor committed error in his findings, and since the contract between the parties authorizes the award of attorney’s fees to the prevailing party in the event of litigation, the chancellor’s award of attorney’s fees and costs in the amount of $6,554.56 will stand.


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