## Facts

- Charles and Elizabeth Benton owned a Maui condominium encumbered by a first mortgage to Amfac Financial in the original amount of about $31,800.
- The Amfac mortgage included a due-on-sale type clause requiring Amfac’s consent to a sale; absent consent, Amfac could accelerate the debt.
- The Bentons agreed to sell the condominium to Philip J. Harder for $44,500 under a Deposit, Receipt, Offer and Acceptance (DROA).
- Under the DROA, the buyer would pay $7,000 cash and the $37,500 balance over three years at 9% interest, with monthly payments of not less than $325 and a right to pay the balance in full at any time within the three-year period without prepayment penalty.
- Although the DROA’s language suggested the sale was “subject to” the Amfac mortgage, the parties agreed (for purposes of the dispute) that the condominium was to transfer free and clear of that mortgage.
- The parties contemplated wrap-around style financing: the Bentons would not pay off Amfac at closing, would continue making the mortgage payments, and would receive the buyers’ installment payments at 9%, gaining a return from the spread and the deferred payment structure.
- Harder assigned his DROA rights to Dean and Barbara Schrader.
- The DROA conditioned the parties’ obligations on “obtaining all necessary consents of third parties,” which included Amfac’s consent under the mortgage clause.
- Amfac would not consent to the sale structure that would leave its mortgage in place while title transferred free and clear, but Amfac would permit the buyers to assume the mortgage obligation.
- The Bentons rejected proceeding on an assumption basis and did not complete the sale on that alternative structure.
- The Schraders sued for specific performance. Both sides moved for summary judgment.
- The trial court granted summary judgment for the Schraders and entered a specific-performance decree that, among other things, gave the Schraders options such as paying the price in cash or assuming the Amfac loan, with the Bentons remaining secondarily liable for a set period.
- The Bentons appealed.

## Issues

1. Whether summary judgment granting specific performance was proper when the record did not establish, without material dispute, the existence and enforceable terms of the parties’ agreement in light of the third-party-consent condition and Amfac’s refusal to consent to the contemplated structure.
2. Whether the trial court, in ordering specific performance, exceeded equitable discretion by molding a decree that changed the economic substance of the sellers’ bargain (including the agreed three-year, 9% installment structure).
3. Whether the pendency of litigation could extend or effectively alter the agreed payoff period of a time-limited agreement of sale.

## Decision

- The Intermediate Court of Appeals of Hawaiʻi reversed the summary judgment and remanded.
- The court held that specific performance requires a contract proved on an appropriate record; the summary-judgment submissions did not adequately establish, as a matter of law, the contract’s enforceability and operative terms given the due-on-sale consent problem and the DROA’s consent condition.
- The court ruled that, even though a court of equity has broad power to shape relief, it is an abuse of discretion to award the buyer specific performance in a way that gives the seller less than the full benefit of the substance (the core economic value) of the seller’s bargain.
- The court also rejected the notion that the existence of legal proceedings, by itself, extends the payoff date of a three-year agreement of sale if the agreed payoff date arrives while the case is pending.

## Legal Principles

- A party seeking specific performance must first show a contract with definite, enforceable terms on a record suitable for judgment as a matter of law; where the proof does not remove genuine disputes about what the parties agreed to, summary judgment is improper.
- Equity looks to substance rather than form and may shape decrees to balance the parties’ equities, but that power does not permit a court to give one side the benefit of its bargain while taking from the other side the core economic benefit for which it agreed.
- When a specific-performance decree is entered for a buyer, the seller is entitled to receive the full benefit of the substance of the seller’s bargain, including agreed financing terms that materially affect the seller’s return and risk.
- The fact that a time-limited agreement of sale becomes the subject of litigation does not, by itself, extend the agreement’s payoff date or change the timing terms the parties set.

## Conclusion

The appellate court reversed and remanded because the summary-judgment record did not conclusively establish an enforceable contract in light of the lender-consent condition and related disputes, and because the trial court’s decree reworked the agreed financing in a way that failed to preserve the substance of the sellers’ bargain, while litigation alone could not justify extending the contract’s time limits.


Schrader v. Benton, 635 P.2d 562 (1981)