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Cavalier Properties, Inc. v. Renaissance Development

March 5, 2007


The opinion of the court was delivered by: Susan Webber Wright United States District Judge

Memorandum Opinion and Order

Plaintiff Cavalier Properties, Inc. ("Cavalier") brings this action for breach of contract and fraud against defendants Renaissance Development, LLC. ("Renaissance") and Stephen Ray Walker. The case is set for a jury trial the week of March 26, 2007. Now before the Court is defendants' motion for summary judgment to which plaintiff responded. Upon careful review of the motion, response, statements of undisputed facts, briefs, and exhibits, the Court finds the motion should be denied.


On February 9, 2005, Renaissance entered into and accepted a contract with Cavalier to purchase 7.1 acres of commercial real estate in Conway, Arkansas. The contract listed the purchase price of the property as one million eight hundred thousand dollars ($1,800,000.00) payable in cash at closing. The contract required Renaissance to tender earnest money in the amount of twenty-five thousand dollars ($25,000.00) within three (3) days of the acceptance of the contract. The earnest money was to be applied toward the purchase price or closing costs. Renaissance failed to tender the required $25,000.00. Cavalier seeks damages from Renaissance for breach of contract. It also seeks damages for fraud, claiming that Walker, the sole shareholder and manager of Renaissance, misrepresented Renaissance's ability to pay the earnest money.

Defendants move for summary judgment arguing Cavalier's contract claim is subject to dismissal for failure of consideration and failure of conditions precedent. They argue they are entitled to summary judgment on Cavalier's fraud claim for failure of proof and failure to plead fraud in the particularity.

Standard of Review

Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). As a prerequisite to summary judgment, a moving party must demonstrate "an absence of evidence to support the non-moving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once the moving party has properly supported its motion for summary judgment, the non-moving party must "do more than simply show there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The non-moving party may not rest on mere allegations or denials of his pleading but must "come forward with 'specific facts showing that there is a genuine issue for trial.'" Id. at 587 (quoting Fed. R. Civ. P. 56(e)).

"[A] genuine issue of material fact exists if: (1) there is a dispute of fact; (2) the disputed fact is material to the outcome of the case; and (3) the dispute is genuine, that is, a reasonable jury could return a verdict for either party." RSBI Aerospace, Inc. v. Affiliated FM Ins. Co., 49 F.3d 399, 401 (8th Cir. 1995). The inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. Matsushita, 475 U.S. at 587 (citations omitted). Further, summary judgment is particularly appropriate where an unresolved issue is primarily legal, rather than factual. Mansker v. TMG Life Ins. Co., 54 F.3d 1322, 1326 (8th Cir. 1995).


The parties agree that this case, which is based on the diversity jurisdiction of the Court, is governed by Arkansas law. Under Arkansas law, it is necessary that there be consideration in order to have a valid contract. If there is no consideration, there is no enforceable contract. McIlroy Bank & Trust v. Comstock, 678 S.W.2d 782 (Ark. 1984). Failure of consideration is a defense to actions between parties to a contract. Ozark Diamond Mines Corp. v. Townes, 174 S.W. 151 (Ark. 1915).

A determination of the existence of consideration for a contract is a question of fact for the jury to determine. Minyard v. Daking Mill, Inc., 599 S.W.2d 742 (Ark. 1980). Consideration is any benefit conferred or agreed to be conferred upon a promisor to which he is not lawfully entitled, or any prejudice suffered or agreed to be suffered by a promisor other than such that he is lawfully bound to suffer. Bass v. Service Supply Co., 757 S.W.2d 189 (Ark. 1988); McIlroy Bank & Trust, supra. Mutual promises constitute consideration, each for the other. Berry v. Cherokee Village Sewer, Inc., 155 S.W.3d 35 (Ark. 2004). Defendants argue there is no consideration because Renaissance did not tender the $25,000.00 earnest money. Cavalier asserts there was consideration for the transaction entered into by the parties. Renaissance agreed to tender the stated earnest money within three (3) days of acceptance of the contract, and in return, Cavalier refrained from selling the subject property to any other purchaser. Cavalier submits the affidavit of its agent, Phillip Hiegel, that for a period of more than a month after Renaissance's acceptance of the contract at issue, Walker and his agent, Roy Martin, made repeated assertions that Renaissance intended to and would be able to tender the earnest money. Cavalier argues it has suffered damages, in the form of a diminution in the value of the property, by refraining from selling its property to another purchaser.

Renaissance also argues that under the terms of the contract, its offer to purchase was contingent on obtaining satisfactory financing with thirty days after acceptance of the contract. Renaissance asserts that because it did not obtain satisfactory financing, the condition precedent failed and Cavalier is not entitled to enforce the contract. Cavalier maintains that it is clear from the express language of the contract that the obligation of Renaissance to tender the earnest money is separate and apart from any other language in the contract which could be construed as an obligation on the part of Renaissance.

Paragraph 6 of the contract requires a tender of the stated earnest money within three (3) days of acceptance of the contract. The contract provides:

6. EARNEST MONEY: Buyer herewith tenders a check for $25,000 within 3 days of acceptance to be deposited upon acceptance as earnest money ("the Earnest Money") which shall ...

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