Does an election of remedies clause bar breach of contract claims for wrongful deed recording? Selvig v. Blockbuster Explained

In Selvig v. Blockbuster, the Utah Supreme Court addressed whether an election of remedies provision in a real estate purchase contract bars breach of contract claims arising from a buyer’s wrongful recording of a deed before payment.

Background and facts: The Selvigs contracted to sell their bed and breakfast to Blockbuster Enterprises for $759,139. The contract required simultaneous delivery of the deed and full payment at closing. When Blockbuster failed to secure financing by the original closing date, the parties entered a lease-to-purchase agreement extending the deadline to September 1, 2006. Blockbuster obtained the Selvigs’ signatures on a warranty deed, promising not to record it until closing. However, on October 3, 2006, Blockbuster recorded the deed without paying off the first mortgage, effectively obtaining title without full payment.

Key legal issues: The primary issue was whether the contract’s election of remedies provision barred the Selvigs’ breach of contract claims. This provision required sellers to either retain earnest money as liquidated damages or return it and sue for damages. The district court dismissed all claims under Rule 41(b), finding the Selvigs had elected their remedy by keeping the $1,000 earnest money deposit.

Court’s analysis and holding: The Utah Supreme Court reversed the dismissal of contractual claims but affirmed dismissal of the unjust enrichment claim. The court held that election of remedies provisions apply to traditional defaults like failure to pay, not to breaches involving wrongful recording of deeds before payment. The court reasoned that allowing a $1,000 earnest money deposit to bar claims arising from wrongful acquisition of title to property worth over $700,000 would produce an absurd result. The contract contemplated simultaneous exchange of deed and payment, not scenarios where buyers could obtain title without full payment.

Practice implications: This decision clarifies that election of remedies provisions have limits and must be interpreted in context of the entire contract. Practitioners should carefully analyze whether specific breaches fall within the scope of election provisions. The court’s emphasis on avoiding absurd results provides guidance for contract interpretation arguments. Additionally, the decision demonstrates the importance of precise contract drafting to address various breach scenarios, particularly in real estate transactions involving complex closing procedures.