When purchasing property, the buyer also received a right of first refusal on additional property. Five years later, the seller sold the additional property to another party. The original buyer filed suit, seeking specific performance of the right of first refusal and damages caused by the breach of contract.
The case is Polk Productions Inc. v. Hazel Dowe, Ansh Property LLC, Steven Price Nixon and Milner & Nixon PLLC (Court of Appeals of Mississippi, No. 2020-CA-00267-COA).
Hazel Dowe conveyed 13 acres of property to Polk Productions Inc. in May 2012 via warranty deed. The deed contained a restricted covenant that limited Polk’s ability to sell gasoline on the property. Dowe also executed a right of first refusal in favor of Polk regarding property in Raymond, Miss.
Five years later, on Jan. 31, 2017, Dowe conveyed the property to Ansh Property LLC via a warranty deed for $400,000. The deed was prepared by Milner & Nixon PLLC. Dowe was required to provide an abstract of title and to cure any title defects discovered. Instead, Dowe provided Ansh with a copy of a commitment for title insurance, which failed to identify a right of first refusal.
Polk filed suit against Dowe and Ansh on Aug. 16, 2017, seeking specific performance of the right of first refusal and damages for irreparable harm caused by the breach of contract. On Oct. 5, 2017, Ansh filed an answer and defenses, third-party claim and crossclaim. It argued that Polk lacked actual or constructive knowledge of the right of first refusal and that Ansh was a good faith and bona fide purchaser.
The trial court dismissed Polk’s original complaint and ordered Polk to amend its complaint within 14 days. Polk filed its amended complaint on Oct. 19, 2018. It asserted several claims against Dowe and Ansh, including a breach of contract and unjust enrichment claim against Dowe and an interference of contract and unjust enrichment claim against Ansh. The amended complaint also alleged Ansh was bound by the right of first refusal and that Polk should be allowed to purchase the property. It argued the warranty deed between Dowe and Ansh was void or voidable.
The court issued a ruling on Feb. 7, 2020, holding that four of the seven claims brought by Polk were invalid causes of actions. It held the other three counts were valid, finding that the right of first refusal was valid and binding. Because Dowe failed to uphold her end of the agreement, she breached the contract. The court had already ruled on the remedy of specific performance and eliminated it.
Polk appealed, arguing that the court erred by not granting specific performance, by not accepting evidence of Polk’s anticipated business profits, and not enforcing the contract against a subsequent purchase.
The appellate court affirmed the trial court’s ruling, addressing first Polk’s claim for specific performance.
“Traditionally, specific performance has been regarded as a remedy for breach of contract that is not a matter of right but of sound judicial discretion,” the court stated. “However, even with the judicial discretion, ‘where a contracting party can feasibly be given what he bargained for, specific performance is the preferred remedy.’ ‘In applying this discretion, courts will look at the adequacy of damages to protect the expectation interest of the injured party. As well as the level of transaction costs between the parties, and unless those costs are so high that no voluntary exchange can take place, the court should order specific performance.’
“Nevertheless, before a court can order specific performance, the court must be able to look at the instrument and determine what performance is required,” the court continued. “Here, the chancellor reasoned that the specific performance requested was impossible because it was not the performance of the right of first refusal. The chancellor found that specific performance of the right of first refusal would only consist of Dowe’s delivery to Polk the offer that Ansh made on the property. The court also found that the right-of-first refusal language did not support Polk’s requested specific performance. The court explained that ordering specific performance would require the court to take secondary action against other parties and divest their interests in the land just to make performance even possible. Therefore, the court found specific performance impossible. We agree.
“As mentioned above, specific performance is an appropriate remedy if a party is ready, willing, and able to perform its part of the contract,” the court stated. “Polk was not ready, willing, or able to pay the $400,000 Ansh offered Dowe for the property. In May 2017, Ansh informed Polk that Ansh was open to considering any offer Polk wanted to provide to purchase the property. Polk made no offer. In October 2017, Ansh filed its answer stating that it had purchased the property from Dowe for $400,000. Polk then filed its amended complaint asserting that Polk was willing and able to purchase the property for the sum of $400,000 per the terms of the right of first refusal. Despite the assertion, Polk did not tender the $400,000. In October 2019, during his deposition, Buell testified that he could not say if he would pay the $400,000 for the property and that he would not purchase the property at all without a survey.”
The court then addressed Polk’s claim for damages.
“In this case, Polk asked the court to award him monetary damages for lost business opportunities, lost profits, consequential damages, and punitive damages. On appeal, Polk claims that the court erred by rejecting evidence of its anticipated business profits. However, applying the above standards, we agree with the chancellor that Polk failed to present any credible evidence of its lost business opportunities, lost profits, anticipated business profits, and consequential or punitive damages,” the court stated. “Buell testified that he personally valued the property at one million dollars and lost profits at $600,000. At trial, the chancellor explained that at that stage of proof presented he could not even venture an educated guess as to any damages that Polk would be entitled to, given the facts and circumstances. We agree. Polk’s proof consisted only of Buell’s oral statements. While his testimony is certainly relevant to his losses, his testimony by itself is simply too speculative to support an award of damages. Polk failed to produce any documentary evidence, receipts, or bank records in support of its claim.”