410 S.W.3d 619
Ky. Ct. App.2013Background
- Crimson Ridge contracted to buy 46 acres in Warren County, KY; payment schedule: $50,000 upfront, $150,000 at closing, $875,000 over five years.
- Contract Contingencies require a seller-obtained survey satisfactory to Buyer for use in the deed description.
- Attached to the contract are Smiths’ property description and several out-conveyances sold by the Smiths over time.
- A survey revealed a discrepancy: the described property did not align with the current road layout (Elrod Road) and utility access; Crimson Ridge deemed the survey unsatisfactory and terminated.
- Crimson Ridge sought rescission and return of the initial $50,000; the trial court granted summary judgment in its favor; on appeal, the decision was affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of 'survey ... satisfactory to Buyer' | Crimson Ridge contends satisfaction is subjective; its good-faith judgment on survey defects justified rescission. | Smiths contend satisfaction is objective or dependent on further cure; no valid basis for rescission. | Crimson Ridge entitled to rescind; subjective satisfaction with good faith suffices. |
| Impact of the attached description on the contingency | Satisfaction limited to updating a description; not controlling over overall satisfaction. | Contingency governs; attached description does not constrain the 'satisfactory' standard. | Rescission proper regardless of attached description; description does not narrow the clause. |
| Proper interpretation standard for contract terms | Terms should be read in light of ordinary meaning; the sale was contingent on buyer satisfaction. | Unambiguous terms interpreted de novo; no extrinsic evidence needed. | Contract interpreted by its four corners; ordinary meaning governs; de novo review confirms result. |
| Bad-faith assertion of survey defects | Smiths alleged implied duty of good faith; contract interpretation should consider potential bad faith by Crimson Ridge. | No bad faith shown; Crimson Ridge's actions were in good faith and based on the survey results. | No genuine issue of bad faith; summary judgment proper in favor of Crimson Ridge. |
Key Cases Cited
- Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381 (Ky.App.2002) (contract interpretation is a question of law reviewed de novo)
- Baker v. Coombs, 219 S.W.3d 204 (Ky.App.2007) (unambiguous terms interpreted according to ordinary meaning)
- Frear v. P.T.A. Indus., Inc., 103 S.W.3d 99 (Ky.2003) (interpretation of contracts with emphasis on ordinary meaning)
- Crest Coal Co. v. Bailey, 602 S.W.2d 425 (Ky.1980) (satisfaction contingencies require good faith and genuine satisfaction)
- Humble & McLendon v. Wyatt, 182 S.W. 610 (Ky.1916) (satisfaction in contracts requires good faith; arbiter of satisfaction)
- Steelvest, Inc. v. Scansteel Serv. Ctr., 807 S.W.2d 476 (Ky.1991) (summary judgment standard: no genuine issues of material fact)
- O.P. Link Handle Co. v. Wright, 429 S.W.2d 842 (Ky.1968) (courts will not remake a contract for the parties)