- 18 -
described property, and said parties of the second part
shall not be liable for any deficiency arising from the
sale of said property in any way, capacity or manner
whatsoever, nor shall said parties of the first part
have the right to, nor seek, a deficiency or other
money judgment against said parties of the second part.
The court, however, noted such factors as the buyers’ absolute
right to title on full payment; the sellers’ lack of any right to
cancel except upon the purchasers’ default; and the buyers’
possession of, and responsibility for taxes and insurance on, the
property. See id. at 498. Given these elements, the court
declared: “we do not feel that the single fact of a ‘no
recourse’ clause served to delay the finality of this sale until
final payment of the total purchase price had been made.” Id.
An identical result was reached on similar facts in Clodfelter v.
Commissioner, 426 F.2d 1391, 1395 (9th Cir. 1970).
While we acknowledge that our opinion in Baertschi reached a
contrary conclusion on this issue, we have now reconsidered our
holding in light of reversal by the Court of Appeals for the
Sixth Circuit. We are persuaded that the position of the Court
of Appeals on the effect of a non-recourse provision rests on
sound legal principles. Accordingly, Baertschi v. Commissioner,
49 T.C. 289 (1967), will no longer be followed. We further note
that this approach better harmonizes with our earlier ruling that
contracts with provisions closely analogous to those here and
which by their terms became “utterly null and void” on the
buyer’s default, with the seller retaining all moneys paid,
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011