Kitchin v. Mori

• Decision Date: 04 March 1968
• Docket Number: No. 5373,5373
• Citation: 437 P.2d 865,84 Nev. 181
• Parties: Donald M. KITCHIN, Appellant, v. Tulio MORI, Respondent.
• Court: Nevada Supreme Court

Page 865

437 P.2d 865

84 Nev. 181

Donald M. KITCHIN, Appellant, v. Tulio MORI, Respondent.

No. 5373.

Supreme Court of Nevada.

March 4, 1968.

[84 Nev. 182] Gordon W. Rice, Reno, for appellant.

Diehl, Recanzone & Evan, Fallon, for respondent.

OPINION

ZENOFF, Justice:

This was a suit by a buyer, Kitchin, for return of moneys paid as deposit and down payment for the purchase of a business. The trial court dismissed the complaint after presentation of the buyer's evidence on the ground that he had failed to prove a sufficient case for the court upon the facts and the law, and also that no basis for restitution had been proved.

In May 1965, Kitchin and Mori entered into negotiations for the purchase of Mori's bar, restaurant and casino business known as the 'Club Horseshoe,' in Fallon. In June they entered into a written contract for the purchase and sale of the club. Kitchin paid $500 to Mori as earnest money for the purchase. The essentials of their agreement were not in dispute save for the buyer's contention that the transaction was conditioned upon his obtaining a casino license from the appropriate Nevada authorities. The condition was not expressed in the written memorandum of the transaction, but the trial court allowed testimony concerning it without objection from the seller. The full purchase price was $30,000, payable $5,000 upon execution of the agreement (which was paid) and the balance of $25,000, at $400 per month, including interest at 4% per annum. The unpaid purchase price was to be secured by a chattel mortgage of the personal property. In addition, Kitchin was to purchase the stock in trade for cash at cost price. Although the effective date of the sale was July 1, 1965, the buyer was to come upon the premises and assist in the operation until he took over. He did go upon the premises, familiarized himself with the operation and made application for a liquor license from the city of Fallon, applied for transfer of the utilities in his name and made application for a gaming license. He further provided $1,350 for minor repairs and operating money in contemplation of the purchase of the business.

In early July, Kitchin, not having heard from the gaming commission, spoke informally with one of its members who indicated that he might not be able to get a license. Thereupon, Kitchin withdrew his application and called the deal off. Upon Mori's refusal to refund the moneys paid in, Kitchin commenced this action for the amounts already paid and the $1,350 invested in the operation of the business, in all $6,850. His claim for restitution is predicated upon his failure to obtain a gaming license, apparently acknowledged as a condition precedent of the sale, or in the alternative, upon a theory of unjust enrichment in light of all the circumstances.

The trial court granted Mori's motion for judgment of dismissal under Rule 41(b) NRCP from which Kitchin appeals. We affirm the ruling of the trial court.

1. On occasion, failure to exert reasonable efforts under all the circumstances to perform a condition incumbent upon the buyer to perform will, without more, justify retention by the seller of the earnest money deposited. Glassie v. King, 123 U.S.App.D.C. 369, 360 F.2d 503 (1965); Margolis v. Joh, 243 Md. 216, 220 A.2d 542 (1966). But the great weight of authority which we choose to follow allows recovery to a defaulting buyer upon his showing that the payments made by him exceed the amount of the seller's damages. Freedman v. Rector, 37 Cal.2d 16, 230 P.2d 629, 31 A.L.R.2d 1 (1951); Harriman v. Tetik, 56 Cal.2d 805, 17 Cal.Rptr. 134, 366 P.2d 486 (1961); Honey v. Henry's Franchise Leasing Corp. of America, 64 Cal.2d 801, 52 Cal.Rptr. 18, 415 P.2d 833 (1966); Anaheim Company v. Holcombe, 426 P.2d 743 (Or.1967); Malmberg v. Baugh, 62 Utah 331, 218 P. 975 (1923); Schwartz v. Syver, 264 Wis. 526, 59 N.W.2d 489 (1953); Corbin on Contracts, Vol. 5A, §§ 1122--1124, 1129--1135 (1964); 40 Yale L.J. 1013 (1931); Restatement, Contracts, § 357 (1932). Even a wilfully defaulting vendee may recover the excess of his part payments over the damages caused by his breach. Harriman v. Tetik, supra; Honey v. Henry's Franchise Leasing Corp. of America, supra.

2. If the payments made by the buyer exceed the seller's damages, the burden is on the party who charges that unjust enrichment to prove it. Absence of such showing or failure of proof will preclude recovery. Adkins v. Morgan, 232 Ark. 520, 338 S.W.2d 921, 923 (1960); Nourse v. Azvedo, 185 Cal. 47, 195 P. 669 (1921); Quillen v. Kelley, 216 Md. 396, 140 A.2d 517, 522 (1958); Oliver v. Lawson, 92 N.J.Super. 331, 223 A.2d 355, 358 (1966).

The casual observation by one member of the Gaming Control Board is not sufficient to justify Kitchin's withdrawal of the gaming application so it cannot be said that Kitchin exercised reasonable diligence to comply with the condition. (Cf. Saltzman v. McCombs, 71 Nev. 93, 281 P.2d 394 (1955)). He testified that at the time he withdrew the application for a gaming license he did not know whether or not it would be granted. This is further borne out by the fact that he later made application for a gaming license for a casino in another location. Thus, Kitchin's only recourse was to show affirmatively that Mori suffered no damage from the failure of the sale to be consummated, or that the amount of Mori's damage was less than the sum retained. No proof whatsoever was given bearing on the amount of damages. We therefore hold with the trial court that this case was properly dismissed under Rule 41(b) NRCP.

Our perception of the damage issue differs from that of the dissenting opinion only in respect to our refusal to give the plaintiff, Kitchin, a second bite of the apple. In the Honey v. Henry's Franchise Leasing Corp. of America, supra, and Malmberg v. Baugh, supra, cases, both trial courts entertained the damage question but applied the wrong measure and were reversed on that ground. In our case, Kitchin offered no proof of Mori's damages, or lack of them, whatsoever. He failed to carry his burden of proof. The principle announced today is not so new as to require us to give him relief for his omission since the law reflected by the majority has been clearly and universally established for many years.

Affirmed.

THOMPSON, C.J., and BATJER, J., concur.

COLLINS, Justice (concurring in part; dissenting in part):

I agree with the rule of law announced by the court in its opinion.

I do not agree with the manner in which it is applied in this case. In other words, I do not believe we should sustain the NRCP 41(b) ruling granted in favor of Mori. Instead, we should reverse that ruling and remand the cause for either a full trial or at least a limited hearing on the question of damages under the rule of law announced in this decision.

There is evidence in the record to indicate that Kitchin breached his contract with Mori in falling to process his application for a gaming license to a formal determination. It appears to me that we could sustain the 41(b) ruling to that extent and remand for a limited hearing on damages only.

While the rule of law which allows recovery to a defaulting buyer upon his showing that payments made by him exceed the amount of the seller's damages is not new (see Malmberg v. Baugh, 62 Utah 331, 218 P. 975 (1923)), still in Nevada it becomes binding precedent for the first time by this decision. A reading of the record in this case clearly indicates that neither counsel nor the court considered the issues here...