Carlson v. Hamilton

W. L. and Estella Hamilton (defendants) sold their home and farm to LaMar and Betty Carlson (plaintiffs). The parties entered into an installment-purchase contract for $22,000, whereby the Carlsons would pay the Hamiltons $1,000 annually, along with real estate taxes. The Carlsons paid a total of $6,680 under the contract prior to defaulting. The Hamiltons attempted to work with the Carlsons by offering to temporarily waive payment of the principal, but the Carlsons maintained that they would not be able to fulfill their obligations under the contract. The Hamiltons declined to sue for specific performance or for arrearages, and instead they retained the amounts paid as liquidated damages, as was permitted by the contract, and regained possession of the property. Upon recovering the property, the Hamiltons discovered that the Carlsons had caused a significant amount of damage to the home. The Carlsons filed suit against the Hamiltons to recover all monies paid under the contract prior to their default. The trial court determined that, calculating a reasonable two-year rental value for the property and accounting for the damage caused by the Carlsons, the Carlsons had paid $2,120 in excess of the damages the Hamiltons actually suffered. The court then ordered that the Hamiltons repay the Carlsons the $2,120 overage. The Hamiltons appealed, asserting that they were entitled to the entirety of the funds.