## Facts

- Elizabeth Stipp Eads agreed to sell residential property in Paris, Kentucky, to Joe S. Watkins under an installment land sale contract.
- The contract required Watkins to make periodic payments toward the purchase price over time and placed responsibility for expenses such as property taxes on Watkins.
- The contract included a default provision allowing the seller, upon default, to declare the entire remaining balance immediately due.
- The contract also included a forfeiture clause stating that if Watkins did not pay the declared balance within ten days after notice, the contract would terminate.
- Under the forfeiture clause, upon termination the seller could keep all payments already made and would receive the benefit of repairs and improvements made by Watkins.
- The forfeiture clause further stated that Watkins “specifically waive[d]” any right to a judicial foreclosure sale of the property.
- Watkins later defaulted under the contract.
- Eads provided Watkins notice and a ten-day period to pay the accelerated balance, consistent with the contract’s terms, but Watkins did not pay the full amount within that period.
- Eads (and, by the time of litigation, successors in interest Richard Stipp Eads and Deanna Eads) filed suit in Bourbon Circuit Court seeking an order declaring that Watkins had forfeited any right to a judicial foreclosure sale based on the contract’s waiver language and requesting relief consistent with termination and forfeiture.
- The circuit court granted summary judgment for the Eads, concluding that Watkins had waived his right to a judicial foreclosure sale under the contract.
- Watkins appealed the summary judgment and the resulting judgment quieting title and related relief.

## Issues

1. Whether an installment land sale contract may be enforced, as a matter of law on summary judgment, to terminate the buyer’s interest through forfeiture and a contractual waiver of the right to a judicial foreclosure sale after default.
2. Whether the trial court erred by treating the forfeiture/foreclosure-waiver clause as dispositive without further inquiry into the equitable remedy appropriate to the transaction and the parties’ performance.

## Decision

- The Kentucky Court of Appeals reversed the circuit court’s summary judgment and the judgment entered in favor of the Eads.
- The court held that the trial court erred in enforcing, at the summary-judgment stage, a forfeiture provision that purported to terminate the contract, allow retention of prior payments and improvements, and bar a judicial foreclosure sale.
- The court remanded for further proceedings to determine the proper remedy consistent with Kentucky law and equitable principles applicable to installment land contracts that function like secured financing.

## Legal Principles

- Kentucky courts disfavor forfeitures and will closely examine contractual provisions that permit a seller to retake property while retaining a purchaser’s accumulated payments and the value of improvements.
- An installment land contract, though styled as a contract for deed, may be treated in equity as a mortgage-like security arrangement when its structure and performance resemble a financed purchase.
- A contractual statement that the purchaser waives a judicial foreclosure sale is not automatically controlling where equity would otherwise require foreclosure-type protections.
- Whether termination and forfeiture are appropriate can depend on fact-sensitive considerations, including the length of the payment relationship, amounts paid, and the nature of the parties’ interests at the time of default.
- Summary judgment is improper when resolving the dispute requires an equitable determination of the parties’ rights and remedies beyond simply reading the forfeiture clause as conclusive.

## Conclusion

The Court of Appeals reversed the trial court’s enforcement of a land-contract forfeiture clause that purported to terminate the agreement, allow the seller to retain all prior payments and improvements, and eliminate the buyer’s right to a judicial foreclosure sale, holding that the waiver/forfeiture remedy could not be treated as dispositive on summary judgment and remanding for further proceedings to determine the proper equitable remedy.


Watkins v. Eads, 2014 WL 2154901 (2014)