FACT SUMMARY In 2006, Ralph and Carolee Thomas (Thomas) signed a contract with Montelucia Villas, LLC (Montelucia), for the construction of a custom villa for $3,295,000. As part of the purchase agreement, Thomas made three installment deposits totaling $659,000, representing 20% of the villa's purchase price. The remainder of the purchase price was due when Thomas took title to the completed villa. The contract characterized the payments as "earnest money deposits." The contract also provided that Montelucia could retain the payments as damages if Thomas breached the construction agreement.

On April 25, 2008, Montelucia notified Thomas by letter that it had set the closing date of May 16 to transfer title to the villa in exchange for payment of the remainder of the purchase price from Thomas. When the letter was sent, Montelucia did not have a certificate of occupancy for the property, which the contract required as a condition for closing. Thomas responded on May 6 with a letter stating that they would not close on May 16 and they were terminating the purchase contract alleging that Montelucia had not performed its obligations and had violated Arizona statutes governing the sale of subdivided land. The Thomas letter asked Montelucia to return the $659,000 in deposits. Montelucia did not respond to the letter or refund the deposits. Instead, it unsuccessfully attempted to obtain a certificate of occupancy for the property on May 8 and May 14. Montelucia ultimately obtained the certificate on August 27.

In February 2009, Thomas sued to recover the deposits. Montelucia counterclaimed for breach of contract. Although the trial court ruled in favor of Thomas, the court of appeals reversed and ruled that Thomas had anticipatorily repudiated the contract by sending the May 6 letter. Thomas appealed.

SYNOPSIS OF DECISION AND OPINION The Arizona Supreme Court reversed the decision of the court of appeals and remanded the case to a lower court. The court ruled that although the doctrine of anticipatory breach could be applied in this case, damages for the nonbreaching party turned on whether Montelucia was ready, willing, and able to perform its obligations. Because there was a factual dispute as to whether Montelucia would have been able to perform, the court ordered the trial court to determine whether Montelucia was able to close in accordance with the contract. If it was ultimately determined that Montelucia was ready, willing, and able to perform as required by the contract, the court could then determine the appropriate remedy available to Montelucia under the contract.

WORDS OF THE COURT: Ready and willing to perform "An anticipatory repudiation is a breach of contract giving rise to a claim for damages and also excusing the necessity for the non-breaching page 228party to tender performance. Yet, an anticipatory breach, by itself, does not entitle the injured party to damages. To recover damages, '[i]n addition to proving repudiation, the non-breaching party need only show that he would have been ready and willing to have performed the contract, if the repudiation had not occurred.' Thus, '[a] party's duty to pay damages for total breach by repudiation is discharged if it appears after the breach that there would have been a total failure by the injured party to perform his return promise.'"

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