Midulla v. Howard A. Cain Co., Inc.

133 N.C. App. 306, 515 S.E.2d 244 (1999)

Parties: Howard A. Cain (Appellant, general contractor, and seller)

Midullas (Appellees and buyers)

Relief Requested: Cain appeals the summary judgment order to return Midullas $20,000 earnest money deposit.

Facts: The parties entered into a valid contract on November 1, 1996 for the purchase of a large single-family residence. Specific provisions were agreed on and added to the standard North Carolina Real Estate Commission Form. In the standard contract, a provision provided for an option to cancel if "any of the conditions hereto are not satisfied." Plaintiffs canceled and wanted their earnest money deposit of $20,000 returned to them. They claimed two conditions were not satisfied: (1) the covenants and restrictions were not "satisfactory to the Buyer" and (2) the warranty "that there is no excessive water or unusual drainage under or around [the] house. The trial court granted summary judgment for the plaintiffs because there were no issues of material fact regarding plaintiff's' dissatisfaction with the covenants and restrictions. Any evidence to withstand summary judgment did not support defendant's claim that plaintiffs were acting in bad faith.

Issue: Did the trial court error in entering summary judgment for the Midullas or did the Midullas have a right to exercise their option to cancel the contract?

Holding: Judgment affirmed. Summary judgment is proper because Midullas had a right to exercise the option to cancel the contract.

Reasoning: Contract certainty. The terms of the contract expressly stated that "in the event that any of the conditions hereto are not satisfied … the earnest money shall be returned to the buyer." The court determined there were no issues in question regarding plaintiffs' right to cancel if they were not satisfied with the covenants and restrictions. The plaintiffs believed the "covenants and restrictions exposed them to the risk of becoming obligated for payments in which they had an inadequate voice in approving." They were not satisfied and had the right to cancel.

Note: There is a difference between a contract rescission and cancellation. A rescission is an unmaking of a contract for a legally sufficient reason, such as a material breach. A cancellation obliterates a formed writing and terminates all future executory obligations.