This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
The Purchasers entered into a real estate contract with the Sellers to buy residential property in Albuquerque, New Mexico. The contract required the Purchasers to make monthly payments to an escrow agent, who would forward payments to a mortgage company. Additionally, the Purchasers were obligated to either formally assume the mortgage or refinance the amount due within one year. The Purchasers made the required monthly payments but failed to assume or refinance the mortgage within the stipulated time (paras 1-5).
Procedural History
- District Court, February 27, 1997: The trial court granted the Sellers' motion for a directed verdict, dismissing the Purchasers' complaint for breach of contract and equitable reinstatement of the contract (para 6).
Parties' Submissions
- Appellants (Purchasers): Argued that the default provisions of the contract did not expressly allow the Sellers to terminate the contract and retain all sums paid for failure to assume or refinance the mortgage within one year (paras 7-8).
- Appellees (Sellers): Contended that the Purchasers' failure to comply with the one-year requirement constituted a default, justifying termination of the contract and retention of all payments made (para 5).
Legal Issues
- Did the Purchasers' failure to assume or refinance the mortgage within one year constitute a default under the contract, allowing the Sellers to terminate the contract and retain all payments made?
Disposition
- The Court of Appeals reversed the trial court's order dismissing the Purchasers' complaint (para 11).
Reasons
Per Armijo J. (Apodaca and Bosson JJ. concurring):
The Court found that the default provisions in the real estate contract were ambiguous and did not expressly provide for forfeiture in the event of the Purchasers' failure to assume or refinance the mortgage within one year. The default provisions in Paragraph 5 of the contract only addressed specific types of defaults, such as failure to make payments, maintain insurance, or pay taxes, and did not clearly include the obligation in Exhibit "A" regarding mortgage assumption or refinancing. The Court emphasized that forfeitures are disfavored in law and should only be upheld when explicitly stated in clear terms. Resolving the ambiguity against forfeiture, the Court determined that the Sellers were not entitled to terminate the contract and retain all payments made by the Purchasers (paras 9-10).