## Facts

- Rosa Lea Slone and Michael Calhoun entered a 2005 installment land contract for a lot and mobile home in Knott County, Kentucky, requiring monthly payments plus taxes and insurance, with deed conveyance after full payment.
- The contract contained a forfeiture clause purporting to allow Calhoun, upon Slone’s default, to terminate the contract and retain prior payments and improvements.
- In January 2009, Calhoun executed a second land contract with Jerry Allen Sumner that mistakenly described the same property covered by Slone’s contract.
- In May 2009, Slone informed Calhoun she could not continue paying and vacated the property; the trial court found her departure voluntary.
- Calhoun and Sumner later recognized the erroneous property description and executed a corrected contract for adjacent property.
- Slone sued Calhoun and Sumner for breach of contract, claiming they forced her to move out.
- After a bench trial, the circuit court ruled that Slone had voluntarily terminated the 2005 contract by vacating and, under the forfeiture clause, forfeited all interest and all payments; it dismissed her damages claim.

## Issues

1. Whether Kentucky law permits enforcement of an installment land contract forfeiture clause that strips the buyer of all equitable interest and all prior payments upon default or vacating the property.
2. Whether an installment land contract must be treated as a purchase-money mortgage requiring foreclosure and sale rather than contractual forfeiture.

## Decision

- The Kentucky Court of Appeals reversed the circuit court’s judgment.
- The court held the trial court erred as a matter of law by enforcing the forfeiture clause to extinguish Slone’s interest and payments.
- The court concluded Slone’s payments gave her an equitable interest, and Calhoun’s remedy for any default was judicial foreclosure and sale rather than forfeiture.

## Legal Principles

- In Kentucky, installment land contracts are treated as the functional equivalent of purchase-money mortgages: the buyer holds equitable title and the seller holds legal title as security.
- Contractual forfeiture provisions that allow a seller to retake the property while retaining all prior payments are generally unenforceable under this mortgage-analogy doctrine.
- Upon buyer default under such a contract, the proper remedy is foreclosure and judicial sale with mortgagor-type protections, rather than unilateral termination and forfeiture.

## Conclusion

The court rejected contractual forfeiture as a means to eliminate a land-contract buyer’s equity and prior payments, requiring the seller to proceed through foreclosure and sale consistent with Kentucky’s treatment of installment land contracts as purchase-money mortgages.


Slone v. Calhoun, 386 S.W.3d 745 (Ky. Ct. App. 2012)