Thomas v. Montelucia Villas, LLC – 3/27/2012

March 29, 2012

Arizona Court of Appeals Division One Holds That a Non-Breaching Party Does Not Have to Prove That It Was Able and Willing to Perform a Contract Anticipatorily Repudiated by the Other Party, Unless It Seeks Damages for the Anticipatory Repudiation.

Plaintiffs entered into an agreement with Defendant Montelucia Villas, L.L.C. (“Montelucia”) to purchase a home.  The agreement required Plaintiffs to pay an earnest money deposit, with the balance to be paid on or before closing.  If Montelucia failed to comply substantially with the terms of the agreement, Plaintiffs were required to deliver written notice to Montelucia of its default and afford it an opportunity to cure.  If Montelucia could not timely remedy its default, Plaintiffs had the right to cancel the agreement and receive a refund of their deposit. 

In April 2008, Montelucia informed Plaintiffs that the closing date was May 16, 2008.  On May 6, 2008, however, Plaintiffs notified Montelucia that they would not go through with the sale because no certificate of occupancy had been issued by Paradise Valley, and demanded a refund of their deposit.  When Montelucia refused to refund their deposit, Plaintiffs filed suit.  Plaintiffs filed a motion for summary judgment and Montelucia filed a cross-motion for summary judgment.  The trial court granted Plaintiffs’ motion and denied Montelucia’s cross-motion after finding that Montelucia breached the agreement.  Montelucia timely appealed.       

The Arizona Appeals Court reversed and remanded for entry of judgment in favor of Montelucia, holding that Plaintiffs’ anticipatory repudiation of the purchase agreement excused Montelucia from tendering performance.  The Court explained that Plaintiffs’ May 6, 2008 notice clearly stated that they were terminating the agreement and therefore constituted a “positive and unequivocal manifestation on the part of the repudiating party that he will not render performance.”  Rancho Pescado, Inc. v. Nw. Mut. Life Ins. Co.140 Ariz. 174, 186, 680 P.2d 1235, 1247 (App. 1984).  Furthermore, the May 6, 2008 letter did not comply with the notice and cure requirements in the purchase agreement.  At the time of the repudiation, Montelucia was not in breach because it had until May 16, 2008, to perform.  Accordingly, Montelucia was not required to tender performance and was entitled to summary judgment.

The Court rejected Plaintiffs’ argument that Montelucia had failed to prove that it was able and willing to perform, explaining that once Plaintiffs repudiated the contract, Montelucia was no longer obligated to do anything more in furtherance of the contract.  Montelucia would only have to prove that it was willing and able to perform if it was seeking damages for Plaintiffs’ anticipatory breach, which was not the case in this appeal.   

Presiding Judge Thompson authored the opinion; Judges Portley and Gemmill concurred.