159 So. 3d 555
Miss. Ct. App.2013Background
- In Sept. 2011 Collins granted Prestenbach a USDA form option to buy 150 acres for $500,000 to enable Prestenbach to apply for a USDA loan; Collins agreed to self-finance $250,000 and Prestenbach sought a $225,000 USDA loan.
- The option was irrevocable for three months and thereafter terminable on ten days’ notice; no closing date was set in the option.
- Collins found another cash buyer and sent termination notice; Prestenbach recorded the option and then sent written notice (Dec. 16, 2011) purporting to exercise the option, claiming USDA loan approval.
- At the time of notice Prestenbach had only conditional/subject-to-funding USDA approval: funds were not immediately available and approval was contingent on funds and updated financials if delayed.
- Collins sued to quiet title; Prestenbach counterclaimed for specific performance. The chancery court granted summary judgment for Collins, finding Prestenbach lacked financing and thus could not show he was ready, willing, and able to perform. The appellate court affirmed.
Issues
| Issue | Plaintiff's Argument (Prestenbach) | Defendant's Argument (Collins) | Held |
|---|---|---|---|
| Was Prestenbach’s Dec. 16 notice a valid exercise of the option? | Written notice of acceptance satisfied the option’s exercise requirement; tender at closing, not at exercise, was required. | Prestenbach’s acceptance was conditional on future loan funding and thus not a valid unconditional exercise. | Held: Not a valid exercise because acceptance was contingent on loan funding. |
| Must the option holder be ready, willing, and able to perform to obtain specific performance? | The option holder need only be willing to pay the option price upon exercise; tender can occur within a reasonable time. | Specific performance requires readiness, willingness, and ability to perform—financial ability is essential. | Held: Specific performance requires readiness, willingness, and ability; Prestenbach failed to prove ability. |
| Is conditional/subject-to-funding approval sufficient to show ability to close within a reasonable time? | Conditional USDA approval demonstrated forthcoming funding and thus sufficed to show ability. | Conditional approval ("funds not immediately available") does not show present ability or assured ability within a reasonable time. | Held: Conditional/subject-to-funding approval insufficient; Prestenbach did not show he could close within a reasonable time. |
| Should the cloud on title created by recording the option be removed? | (Implicit) The recorded option created an equitable interest entitling relief. | The option was unenforceable; cloud should be removed. | Held: Cloud removed; summary judgment for Collins affirmed. |
Key Cases Cited
- Creely v. Hosemann, 910 So.2d 512 (Miss. 2005) (option holder entitled to specific performance when option exercise and tender occur within reasonable time)
- Busching v. Griffin, 542 So.2d 860 (Miss. 1989) (specific performance lies where option holder is ready, willing, and able to pay)
- Gunn v. Heggins, 964 So.2d 586 (Miss. Ct. App. 2007) (no specific performance where purchaser never had funds during closing period)
- Houston v. Willis, 24 So.3d 412 (Miss. Ct. App. 2009) (specific performance appropriate when party is ready, willing, and able to perform)
- Lamanna v. Wing Yuen Realty, Inc., 283 A.D.2d 165 (N.Y. App. Div. 2001) (option holder failed summary judgment when never had financial ability to complete purchase)
- Duke v. Whatley, 580 So.2d 1267 (Miss. 1991) (option is unilateral until exercised; exercise creates bilateral contract)
- Karpinsky v. American National Insurance, 109 So.3d 84 (Miss. 2011) (summary-judgment burden on moving party to produce evidence supporting claim)