Billman v. Hensel

The Hensels (plaintiffs) entered into a contract to sell their home to the Billmans (defendant) for $54,000. The contract required a $1,000 earnest money deposit from the Billmans. Additionally, the contract included a “subject to financing” clause stating that the contract was conditioned upon the ability of the Billmans to secure a conventional mortgage on the property for not less than $35,000 within thirty days. The Billmans gave a check for $1,000 to the Hensels as earnest money. On September 30th, the Billmans met with Lincoln National Bank and Trust Company to discuss a mortgage. Mr. Billman was told that he could not obtain a mortgage for $35,000 unless he could come up with the difference between the purchase price ($54,000) and the mortgage. The Billmans were $6,500 short of the required balance. On October 3rd, Mr. Billman and his parents viewed the Hensels’ home. Mr. Billman later told the Hensels that the deal was off because Mr. Billman’s parents would not loan him $5,000 needed to complete the financing. The Hensels offered to reduce the price of the home by $5,000. Mr. Billman rejected this offer, saying that he was still $1,500 of the required balance. On October 4th, Mrs. Billman stopped payment on the check for earnest money given to the Hensels. The Hensels brought suit in Indiana state court seeking payment of their $1,000 earnest money deposit by the Billmans. The trial court held that the Billmans were not excused from performance of the contract, and awarded $1,000 to the Hensels. The Billmans appealed.