Mayfield v. Koroghli

• Decision Date: 29 May 2008
• Docket Number: No. 47454.,No. 46972.,46972.,47454.
• Citation: 124 Nev. 34,184 P.3d 362
• Parties: Seaynoah MAYFIELD and Helen J. Mayfield, Appellants, v. Ray KOROGHLI, as the Nominee of Satsoy Thay, an Individual, Respondent. Seaynoah Mayfield and Helen J. Mayfield, Appellants, v. Ray Koroghli, as the Nominee of Satsoy Thay, an Individual, Respondent.
• Court: Nevada Supreme Court

184 P.3d 362

124 Nev. 34

Seaynoah MAYFIELD and Helen J. Mayfield, Appellants, v. Ray KOROGHLI, as the Nominee of Satsoy Thay, an Individual, Respondent.

Seaynoah Mayfield and Helen J. Mayfield, Appellants, v. Ray Koroghli, as the Nominee of Satsoy Thay, an Individual, Respondent.

No. 46972.

No. 47454.

Supreme Court of Nevada.

May 29, 2008.

Hunterton & Associates and C. Stanley Hunterton and Pamela R. Lawson, Las Vegas, for Appellants.

Brownstein Hyatt Farber Schreck, LLP, and Todd L. Bice and James J. Pisanelli, Las Vegas, for Respondent.

BEFORE HARDESTY, PARRAGUIRRE and DOUGLAS, JJ.

OPINION

By the Court, HARDESTY, J.:

This case concerns a contract for the sale of Henderson, Nevada, real property. Under the contract, the close of escrow was conditioned on the buyer obtaining commercial subdivision approval with respect to the land. After the parties worked unsuccessfully for approximately three years to obtain the commercial subdivision approval, the sellers, without any warning to the buyer, repudiated the contract and refused to consummate the sale. In the ensuing action instituted by the buyer against the sellers and his real estate agent, who ultimately settled with the buyer, the district court granted specific performance to the buyer and awarded him costs.

In this appeal, we consider whether a party's performance under a contract must be completed within a certain time when the contract's terms do not make the time for the party's performance of the essence. We conclude that when a contract does not make the time for a party's performance of the essence, either party can make it so by setting a reasonable time for performance and notifying the other party of an intention to abandon the contract if it is not performed within that time. Further, absent such a demand for performance, or a term making time of the essence, a contract must be performed within a reasonable time. What constitutes a reasonable time for a contract's performance is a question of fact to be determined based on the nature of the contract and the circumstances surrounding its making.

We also consider in this appeal the circumstances under which a party to a contract may waive a condition precedent to his performance so that he can complete his performance under the contract. We conclude that when a contract contains a condition precedent to a party's performance, that party may waive the condition and tender performance so long as the parties included the condition in the contract for the sole benefit of the party seeking to waive the condition and complete performing his contractual obligations. Whether a condition included in a contract is for the benefit of one or both parties is a question of fact.

Finally, we consider whether costs should be apportioned when one party sues multiple defendants on similar claims based on the same set of facts. We conclude that in such a situation, it is within the district court's discretion to determine whether the claims are so intertwined as to render apportionment impracticable, but before declaring apportionment impracticable, the district court must make a good faith effort to apportion costs. In light of those considerations, we affirm the district court's judgment granting specific performance to the buyer. In particular, the sellers did not provide the buyer a reasonable time to complete his performance under the contract, and although the buyer failed to obtain the commercial subdivision approval—a condition precedent to the buyer's performance—that condition was included in the contract solely for the buyer's benefit so he was free to waive it and complete performance by tendering the down payment. Nevertheless, because the record in this case does not reveal that the district court made an effort to apportion costs, we reverse its award of costs and remand for further proceedings consistent with this opinion.

FACTS AND PROCEDURAL HISTORY

In 1999, appellants Seaynoah and Helen Mayfield entered into a contract with Satsoy Thay for the sale to Thay of a parcel of land in Henderson, Nevada. Thay subsequently assigned the contract to respondent Ray Koroghli. Koroghli hired real estate agent Ellen Ross to make an offer on the property on his behalf and to represent him in the transaction with the Mayfields. The 1999 contract expired by its own terms after four extensions. Soon after that contract expired, the parties entered into a second contract, on January 5, 2000. The second contract provided for a purchase price of $10 per square foot of "net usable acreage," with the final price to be calculated after realignment of roadways. The purchase was to be seller financed, with a $1.3 million down payment, secured by a deed of trust for the balance, payable in quarterly installments over 20 years. The second contract also provided for the close of escrow 60 days from the date that Koroghli obtained commercial rezoning and approval for commercial subdivision of the property. The parties included the commercial subdivision condition in the second contract on Koroghli's insistence, to ensure that he could use the property in the manner he expected. Other than noting that escrow would close 60 days after Koroghli obtained commercial rezoning and subdivision of the property, the second contract did not specify a date by which performance was to occur, nor did it contain a clause declaring time of the essence.

Koroghli retained an engineer, and the parties worked together to obtain rezoning and approval for commercial subdivision of the property. On September 5, 2000, the Henderson City Council rezoned the property. However, by early 2001, the property had still not been approved for commercial subdivision. Koroghli offered to waive the commercial subdivision condition and close on the property. Mr. Mayfield declined to close at that time, insisting that he would assist in obtaining all of the property that the parties anticipated would be added through expected road vacations, road realignments, and a land trade with the City of Henderson. Over the next two years, the parties worked on these issues and Koroghli retained engineering, architectural, and public relations entities to assist in developing the property.

On February 26, 2003, three years after the Mayfields and Koroghli entered into the second contract, Mr. Mayfield, without providing Koroghli notice or a reason, repudiated the contract and refused to sell the property to Koroghli. In response, Koroghli sent Mr. Mayfield a letter indicating that he was "ready, willing and able" to perform, and demanding close of escrow. Mr. Mayfield refused to perform.

Koroghli filed suit against the Mayfields seeking specific performance and against Ross alleging breach of contract and breach of fiduciary duty. The Mayfields asserted cross-claims against Ross. Both Koroghli and the Mayfields reached out-of-court settlements with Ross, and she was dismissed from the case. Following a bench trial, the district court concluded that the Mayfields had breached their contract with Koroghli and that Koroghli was entitled to specific performance. The court found that because the contract did not contain a date by which Koroghli was to obtain commercial subdivision or a clause making time of the essence, the Mayfields were obligated to fix a reasonable time for performance of this condition and communicate that time to Koroghli before they could declare him to be in default. The district court concluded that because the Mayfields did not so notify Koroghli, their repudiation constituted a breach of the contract. The court therefore awarded specific performance to Koroghli. The court also awarded Koroghli costs totaling $52,690.91. This appeal followed.

DISCUSSION

On appeal, the Mayfields assert that the district court's grant of specific performance was improper because (1) the Mayfields were not required to make a demand on Koroghli to perform by a certain date, and the passage of three years exceeded a reasonable time for performance; and (2) Koroghli did not and cannot tender performance according to the terms of the contract. The Mayfields argue further that the district court erred by awarding costs to Koroghli because the costs should have been apportioned between those incurred in pursuit of claims against the Mayfields versus those incurred in pursuit of claims against Ross.

We review the district's court's decisions to grant specific performance and to award costs for an abuse of discretion.¹

Because time was not of the essence in the parties' contract, the Mayfields were required to allow Koroghli a reasonable time in which to perform his obligations under the contract

The Mayfields argue that a demand for performance is not necessary unless it is required by the terms or the nature of a contract and that, even if a demand is required, an exception exists when it is apparent that a demand would be unavailing or constitute a useless formality. The Mayfields argue that they were not required to demand performance from Koroghli because doing so would have been futile, since, if Koroghli intended to perform, he would have done so by February 2003.

Although not previously recognized by this court, 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.² If time is not of the essence, the parties generally must perform under the contract within a reasonable time,³ which "depends upon the nature of the contract and the particular circumstances involved."⁴ Nevertheless, in the absence of a clause making time of the essence, a party's failure to perform within a reasonable time generally does not constitute a material breach of the agreement.⁵ But when a contract does not make time of the essence, one party to the contract may make it so by demanding performance by a certain date or...