Russell v. Richards - 1985-NMSC-063, 103 N.M. 48, 702 P.2d 993

Rule:

The parties to a real estate contract and their assignees agree to be bound by its terms and provisions, and to accept the burdens of the contract together with its benefits. A subpurchaser takes the land subject to the terms of the contract of which he has knowledge. The courts will enforce a real estate contract except where enforcement, under the equitable circumstances of the case, would result in an unconscionable forfeiture.

Facts:

The sellers sold land under a real estate contract. The original purchasers later sold their interest in the contract to the buyer, and the buyer assumed the balance of the contract price. Several years later, the buyer defaulted. The buyer claimed that the forfeiture was unconscionable because of the amount that she had paid to the sellers prior to her default. The buyer filed an action against the sellers seeking to recover damages resulting from the forfeiture of her interest in the contract. The district court awarded damages to the buyer, and the sellers appealed, arguing that the award of damages for losses resulting from the forfeiture was improper.

Issue:

Was the award of damages for losses resulting from the forfeiture proper? 

Answer:

No.

Conclusion:

The court reversed the award of damages for the forfeiture of the buyer's interest in the real estate contract and remanded the case for modification of the judgment. The court noted that in order to recover damages, there must be a right of action for a wrong inflicted on the party claiming damages. In this case, the buyer's loss of her interest in the real estate contract did not result from a wrong committed by the sellers but from her default under the contract. The buyer was aware that under the contract, the consequence of default was forfeiture of all interest, and there were no unusual circumstances that would make enforcement of the forfeiture provision unconscionable.