Vanbuskirk v. Nakamura ( 2016 )

IN THE SUPREME COURT OF THE STATE OF NEVADA
JEFF VANBUSKIRK, AN INDIVIDUAL; No. 67816
AND DENISE VANBUSKIRK, AN
INDIVIDUAL,
Appellants,
vs.
STANLEY NAKAMURA, AN
FILED
INDIVIDUAL; AND STEPHANIE MAY 2.0 2016
NAKAMURA, AN INDIVIDUAL, TRAM K. LINDEMAN
Respondents. CLERK OF SUPREME COURT
BY 5 .)1
DEPle ic5;;LC2AE-14
ORDER OF REVERSAL AND REMAND
This is an appeal from a district court order granting
summary judgment in a real property contract action. Eighth Judicial
District Court, Clark County; Rob Bare, Judge.
We review de novo a district court's order granting summary
judgment, Wood v. Safeway, Inc., 121 Nev. 724, 729, 121 P.3d 1026, 1029
(2005), and must determine whether the district court erred in
interpreting and applying a contract's negotiation and time-is-of-the-
essence provisions. We reverse.
On August 5, 2014, respondent-buyers Stanley and Stephanie
Nakamura entered into a purchase agreement ("Agreement") for
appellant-sellers Jeff and Denise Vanbuskirk's real property. Close of
Escrow was to be September 10, 2014. Section 2(C) of the Agreement
stated:
[1]f the appraisal is less than the Purchase Price,
the transaction will go forward if (1) Buyer, at
Buyer's option, elects to pay the difference and
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purchase the property for the purchase price, or
(2) Seller, at Seller's option, elects to adjust the
purchase price accordingly, such that the
Purchase Price is equal to the appraisal. If
neither option (1) or (2) is elected, then parties
may renegotiate; if renegotiation is unsuccessful,
then either party may cancel this agreement upon
written notice in which event the EMD shall be
returned to buyer.
Section 25 stated that "time is of the essence" and that "[n]o change,
modification, or amendment of this Agreement shall be valid or binding
unless such change, modification or amendment shall be in writing and
signed by each party."
On August 21st, after the appraisal came back $3,000 less
than the purchase price, the Nakamuras sent the Vanbuskirks a proposed
addendum lowering the purchase price, which evidenced their intent to
forego the first option under Section 2(C); this document had no facial
expiration date. On August 23rd, as the Vanbuskirks had not replied, the
Nakamuras sent another proposed contract addendum with a 2-hour
acceptance window. The Vanbuskirks did not reply within the specified
deadline. On August 25th, the Vanbuskirks exercised option 2, accepting
the August 21st addendum, which lowered the purchase price to match
the appraisal value. The Nakamuras, however, insisted the addendum
had expired and canceled the purchase agreement, demanding a return of
their earnest money deposit. The Vanbuskirks refused to return the
earnest money deposit, arguing that the Nakamuras failed to attempt
renegotiations as required by Section 2(C).
The Nakamuras filed a complaint alleging breach of contract,
seeking return of their $25,000 earnest money deposit. The Nakamuras
moved for summary judgment, and the Vanbuskirks opposed, counter-
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moving for a forfeit of the earnest money deposit. The district court
granted the Nakamura's motion for summary judgment, holding that
renegotiation efforts were unsuccessful because the Vanbuskirks
"rejected" the Nakamuras' offer by not accepting it within the 2-hour
timeframe. Further, the district court concluded that, because time was of
the essence, the deadline for the Vanbuskirks to respond did not need to
be reasonable. Thus, the district court held that the Nakamuras were
entitled to a return of their earnest money deposit.
"[A] fundamental principle of contract law is that the time for
performance under a contract is not considered of the essence unless the
contract expressly so provides or the circumstances of the contract so
imply." Mayfield v. Koroghli, 124 Nev. 343, 349, 184 P.3d 362, 366 (2008).
If time is of the essence, performance must occur at the "stated and
unquestionable time" and parties are not entitled to a reasonable time to
perform thereafter. Holmby, Inc. v. Dino, 98 Nev. 358, 361, 647 P.2d 392,
394 (1982). "If time is not of the essence, the parties generally must
perform under the contract within a reasonable time, which depends upon
the nature of the contract and the particular circumstances involved."
Mayfield, 124 Nev. at 349, 184 P.3d at 366. Whether the time in question
is reasonable is a question of fact. Id. at 346, 184 P.3d at 364.
A contract that includes a clause providing in general terms
that time is of the essence does not necessarily apply to pre-closing
conditions that do not affect the specified closing date. See Fletcher v.
Jones, 333 S.E.2d 731, 734 n.1 (N.C. 1985) ("If the condition precedent
were of crucial import to either or both parties and needed to be fulfilled
by a certain date, other than that set for closing, a separate date should
have been explicitly included to govern the condition precedent, along with
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a separate time-is-of-the-essence provision if necessary. It would then
have been clear that this particular condition, separate from the act of
closing, must be strictly performed by a different date."); Harris v.
Stewart, 666 S.E.2d 804, 807 (N.C. Ct. App. 2008) (holding that "the
reasonable time to perform rule applies to pre-closing conditions, even
where an express deadline for the pre-closing condition is provided" unless
a time is of the essence provision expressly applies to that condition); see
also Jackson v. Holmes, 307 So. 2d 470, 472 (Fla. Dist. Ct. App. 1975)
(concluding that the time-is-of-the-essence provision applied to the closing
of the purchase and not a pre-closing condition requiring a bank loan
certification, holding: "[A] 'time is of the essence' provision will be given
effect in an equitable proceeding provided it is shown to be clearly
applicable to the contract requirement which it is sought to be applied").
Thus, courts must determine the scope of a time-is-of-the-
essence provision. See 17A Am. Jur. 2d Contracts § 471 (2004) ("[A]
question of construction arises where the language of the contract taken in
connection with the subject matter indicates some uncertainty as to the
intended scope of the provisions that time is of the essence."); 8 Catherine
M.A. McCauliff, Corbin on Contracts § 37.3 (Joseph M. Perillo ed., rev. ed.
1999) ("Merely putting into the contract the words 'time is of the essence
of this contract' may be effective for the purpose, because the context may
make clear what the intention is and what the expression means. What
the court must know, however, in order to give effect to such a cryptic
provision, is: What performance at what time is a condition of what party's
duty to do what?").
Here, the purchase agreement included a general time-is-of-
the-essence provision under Section 25, titled "Other Essential Terms,"
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which simply stated: "Time is of the essence." Section 2(C), which
governed the options for appraisal, did not include a specific date or time-
is-of-the-essence provision. After receiving the appraisal for $3,000 less
than the purchase price, it took the Vanbuskirks 4 days to invoke option 2
under Section 2(C)—providing the seller will lower the purchase price to
match the appraised value. Had the Vanbuskirks expressly declined to
lower the purchase price, then the parties should have attempted to
renegotiate under option 3 of Section 2(C). For example, the parties could
have renegotiated to split the cost of the difference between the purchase
price and the appraised value. If those renegotiations were unsuccessful,
either party had the right to cancel the agreement as per Section 2(C).
In this case, however, the Vanbuskirks did not expressly
decline to exercise option 2; rather, they invoked it. The district court, on
the other hand, concluded that the Vanbuskirks "rejected" the addendum
by not responding within the 2-hour deadline. Yet, the district court failed
to analyze whether the time-is-of-the-essence provision applies to Section
2(C), and, if not, whether the 4-day delay in accepting the addendum was
reasonable. With 16 days remaining before the close of escrow after the
Vanbuskirks accepted the addendum lowering the purchase price, it is not
clear, based on the record before us, how this 4-day delay was
unreasonable such that it would affect the closing date.
Thus, we disagree that there are no genuine issues of material
fact regarding the scope of the time-is-of-the-essence provision and the
reasonableness of the delay in lowering the purchase price. Therefore,
summary judgment should not have been granted in favor of the
Nakamuras. Accordingly, we
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ORDER the judgment of the district court REVERSED AND
REMAND this matter to the district court for proceedings consistent with
this order.
J.
Saitta
cc: Hon. Rob Bare, District Judge
Nathaniel J. Reed, Settlement Judge
Black & LoBello
Pintar Albiston LLP
Eighth District Court Clerk
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