Petersen v. Hubschman Construction Co., Inc

Facts

In April 1972, the Plaintiffs entered into a contract for $71,000 with the Defendant for the purchase of a piece of land and to have a home constructed thereupon. The Plaintiffs paid $10,000 in earnest money and there was an offset of $9,000 for work done by Mr. Petersen. The Plaintiffs became dissatisfied with the Defendant’s performance and Defendant agreed to repair numerous problems on a “punch list,” but failed to satisfactorily carry out the agreement. The trial court found that the defects consisted of a basement floor pitched away from the drain, improperly installed siding, a defective and ill-fitting bay window, a seriously defective front door, deterioration and “nail popping” of the drywall. The testimony showed that repair of those items would include a large amount of work. The Plaintiffs proposed to place $1,000 in escrow to ensure that the repairs were done, but the Defendant refused. The Plaintiffs refused to close the deal and the Defendant informed the Plain tiffs that the Defendant was invoking the forfeiture provision and retaining the $10,000 earnest money payment and the $9,000 offset of work done by Mr. Peterson. The Plaintiffs sued the Defendant. The trial court ruled there were defects in substance in the construction and that the Defendant had not substantially performed and could not declare a forfeiture. The trial court held that the Plaintiffs could recover the earnest money and the amount of the offset. The Defendant appealed.