Miller Family Real Estate, LLC v. Hajizadeh

• Decision Date: 26 December 2008
• Docket Number: No. 20080365-CA.,20080365-CA.
• Citation: 200 P.3d 213,2008 UT App 475
• Parties: MILLER FAMILY REAL ESTATE, LLC, a Utah limited liability company, Plaintiff and Appellee, v. Saied HAJIZADEH, an individual, Defendant and Appellant.
• Court: Utah Court of Appeals

200 P.3d 213

2008 UT App 475

MILLER FAMILY REAL ESTATE, LLC, a Utah limited liability company, Plaintiff and Appellee, v. Saied HAJIZADEH, an individual, Defendant and Appellant.

No. 20080365-CA.

Court of Appeals of Utah.

December 26, 2008.

John Martinez and Nick J. Colessides, Salt Lake City, for Appellant.

Larry G. Moore, Brent D. Wride, and Gregory S. Roberts, Salt Lake City, for Appellee.

Before THORNE, Associate P.J., McHUGH and ORME, JJ.

OPINION

McHUGH, Judge:

¶ 1 Saied Hajizadeh appeals the trial court's dismissal without prejudice of the complaint filed by Miller Family Real Estate, LLC (Miller Family) for specific performance and breach of contract. We affirm.

BACKGROUND

¶ 2 Hajizadeh is the record title owner of real property located at 5712 and 5720 South State Street, in Murray, Utah (the Property). On March 1, 2007, Miller Family entered into a Real Estate Purchase Contract (REPC) with Hajizadeh to buy the Property for $1.7 million. Although Miller Family paid Hajizadeh $25,000 in earnest money and placed the balance in escrow on or before the agreed closing date, April 30, 2007,¹ Hajizadeh refused to sell the Property. On May 8, 2007, Miller Family filed a complaint against Hajizadeh, alleging breach of contract and seeking specific performance. Miller Family also recorded a notice of lis pendens against the Property at that time.

¶ 3 Hajizadeh moved to dismiss Miller Family's complaint on June 11, 2007, citing the REPC's Alternate Dispute Resolution (ADR) provision (Section 15). Upon receiving notice of Hajizadeh's motion to dismiss on June 20, 2007, Miller Family made an offer of mediation, which Hajizadeh rejected. On September 6, 2007, the trial court granted Hajizadeh's motion to dismiss without prejudice, holding that the REPC required Miller Family to submit the dispute to mediation before filing the complaint. That same afternoon, Miller Family sent a letter to Hajizadeh's counsel again requesting mediation. Hajizadeh did not respond, instead arguing that Miller Family's substantive claims were barred. Subsequently, on September 7, 2007, Miller Family filed a second complaint and recorded a new lis pendens against the Property.²

ISSUES AND STANDARDS OF REVIEW

¶ 4 Hajizadeh argues that the trial court erred when it dismissed Miller Family's initial complaint without prejudice. Hajizadeh's challenge to the trial court's order is premised on his contention that the REPC created either a statute of limitations or a condition precedent,³ which required Miller Family to conduct mediation within thirty days of notice of the dispute. We review issues of contract interpretation not requiring a resort to extrinsic evidence for correctness, affording no deference to the trial court. See Foster v. Montgomery, 2003 UT App 405, ¶ 11, 82 P.3d 191. When interpreting a contract, "`[w]e first look to the four corners of the agreement to determine the intentions of the parties.'" Central Fla. Invs., Inc. v. Parkwest Assocs., 2002 UT 3, ¶ 12, 40 P.3d 599 (quoting Ron Case Roofing & Asphalt v. Blomquist, 773 P.2d 1382, 1385 (Utah 1989)).

ANALYSIS

¶ 5 Section 15 of the REPC states:

The parties agree that any dispute or claim relating to this Contract, including but not limited to the disposition of the Earnest Money Deposit and the breach or termination of this Contract, shall first be submitted to mediation in accordance with the Utah Real Estate Buyer/Seller Mediation Rules of the American Arbitration Association. Each party agrees to bear its own costs of mediation. Mediation shall take place within 30 days after notice by either party of the existence of a dispute or claim. Any agreement signed by the parties pursuant to the mediation shall be binding. If mediation fails, the procedures applicable and remedies available under this Contract shall apply. Nothing in this Section shall prohibit the Buyer from seeking specific performance by the Seller by filing a complaint with the court, serving it on the Seller by means of summons or as otherwise permitted by law, and recording a lis pendens with regard to the action; provided that the Buyer permits the Seller to refrain from answering the complaint pending mediation. Also the parties may agree in writing to waive mediation.

(Emphasis added and emphasis omitted.) Section 15 evidences an intent to submit any and all claims or disputes to mediation before availing oneself of the other remedies provided in the contract by stating, "[A]ny dispute or claim relating to this Contract ... shall first be submitted to mediation.... If mediation fails, the ... remedies available under this Contract shall apply." (Emphasis omitted.) Notwithstanding the requirement that the parties engage in mediation before litigation, however, Section 15 expressly allows a complaint and lis pendens to be filed: "Nothing in this Section shall prohibit the Buyer from ... filing a complaint with the court ... and recording a lis pendens ...; provided that the Buyer permits the Seller to refrain from answering the complaint pending mediation." (Emphasis omitted.) In reliance on this statement in Section 15, Miller Family filed its original complaint and lis pendens before taking any other action to enforce the contract.⁴ According to Hajizadeh, that decision was fatal to Miller Family's substantive claims.

¶ 6 Hajizadeh argues that the trial court should have dismissed Miller Family's complaint with prejudice because any obligations Hajizadeh had under the REPC were extinguished when Miller Family failed to request mediation before filing its complaint and because the mediation did not take place within thirty days. Miller Family had notice of the dispute on April 30, 2007. According to Hajizadeh, mediation was to take place by May 30, 2007, and compliance is now impossible. Hajizadeh also contends that Section 15 created a "30-day statute of limitations for mandatory submi[ssion] of the dispute to mediation." We do not read the dispute resolution provision of the REPC to create either a statute of limitations or a condition precedent, which required Miller Family to conduct mediation within thirty days or lose its right to pursue its substantive claims.

I. The ADR Provisions Are Promissory Rather than Conditional

¶ 7 Hajizadeh argues that Miller Family's failure to comply with the ADR provisions of the REPC renders the entire agreement unenforceable. However, such a result would be contrary to general rules of contract construction, which favor interpretations that avoid forfeiture.⁵ See Commercial Inv. Corp. v. Siggard, 936 P.2d 1105, 1109 (Utah Ct.App.1997) ("[A]lthough parties are free to contractually provide for ... an enforceable forfeiture provision, forfeitures are not favored in the law." (omission in original) (citations and internal quotation marks omitted)); see also Madsen v. Anderson, 667 P.2d 44, 47 (Utah 1983) ("The undesirability of [forfeiture] is well-stated by the maxim that the law abhors forfeiture." (internal quotation marks omitted)); accord Crescent Corp. v. Proctor & Gamble Co., 898 F.2d 581, 584-85 (7th Cir.1990) (applying the rule against forfeitures in the context of an arbitration provision with express time limits). Consequently, courts are reluctant to interpret each promissory provision of a contract as conditional. See 5 Margaret N. Kniffin, Corbin on Contracts § 24.22, at 244-45 (rev. ed. 1998) ("When two interpretations are possible and one would produce an express condition and the other a different interpretation that will not result in forfeiture or a penalty, the court will usually choose the latter.").

¶ 8 In Cheever v. Schramm, 577 P.2d 951 (Utah 1978), the Utah Supreme Court applied this general rule to the interpretation of a contract for the sale of an auto repair business. See id. at 953. The Cheever Earnest Money Receipt and Offer to Purchase contained a provision that required the contract to be made on the approved form of the Utah Securities Commission (USC). See id. After Cheever tendered performance, Schramm argued he was excused from performing because the lease was not on a USC-approved form. See id. The Utah Supreme Court rejected this argument, stating:

[Schramm] assume[s] that [the USC form requirement] is a condition precedent to the formation of a valid contract between the parties. This assumption makes little sense, however, since [the requirement to use a USC-approved form] in no way indicates it is a condition, and there is no testimony a condition was implied. A simple statement or stipulation in a contract is not necessarily a condition to a party's duty of performance. The intention to create a condition in a contract must appear expressly or by clear implication.

Id. (emphasis added); see also Norton v. Herron, 677 P.2d 877, 879, 881-82 (Alaska 1984) (citing Cheever favorably and holding that a contract provision requiring funds from a specific source did not expressly or by clear implication create a condition precedent); Peterson v. Wirum, 625 P.2d 866, 873 (Alaska 1981) (same).

¶ 9 Hajizadeh's assumption that the contract language in this case creates a condition precedent likewise "makes little sense." See Cheever, 577 P.2d at 953. The ADR provisions of the REPC merely provide a deadline for mediation, without indicating expressly or by clear implication that the parties intend that deadline to be a condition precedent.⁶

II. Breach of the ADR Provision Did Not Bar Miller Family's Substantive Claims

¶ 10 Even if we were to agree with Hajizadeh that the ADR provision in the REPC is conditional, we would not agree that the action should have been dismissed with prejudice. See Quealy v. Anderson, 714 P.2d 667, 673 (Utah 1986) (Hall, C.J., dissenting) ("A condition precedent may qualify the existence of an entire contract or only the performance of a contractual duty. Where only the performance of a duty is qualified by the condition, failure of the condition excuses that performance only and the...