Nebaco, Inc. v. Riverview Realty Co., 6283

• Citation: 482 P.2d 305,87 Nev. 55
• Decision Date: 12 February 1971
• Docket Number: No. 6283,6283
• Parties: NEBACO, INC., and Nevada National Bank, Appellants, v. RIVERVIEW REALTY CO., Inc., Respondent.
• Court: Supreme Court of Nevada

Page 305

482 P.2d 305

87 Nev. 55

NEBACO, INC., and Nevada National Bank, Appellants, v. RIVERVIEW REALTY CO., Inc., Respondent.

No. 6283.

Supreme Court of Nevada.

Feb. 12, 1971.

Guild, Hagen & Clark, Reno, for appellants.

Sidney W. Robinson, Sinai & Sinai, Reno, for respondent.

OPINION

ZENOFF, Chief Justice.

Nebaco, together with its parent organization, Nevada National Bank, seeks to set aside its obligations under a lease executed with Riverview Realty on the ground that performance on its part became impossible.

On March 1, 1969 Nebaco and Riverview Realty executed a long-term lease. Nebaco's performance under this lease was guaranteed by Nevada National Bank. The pertinent portions of the lease state that 'Lessee shall have up to and including August 1, 1969, within which to attempt to obtain interim and/or long-term financing for construction of improvements upon the land. * * *' Further, that 'If on or before August 1, 1969, Lessee has not been able after exercise of reasonable diligence * * * to procure such financing above described, Lessee may thereupon at its option, terminate this lease by giving written notice to Lessor on or before August 1, 1969.' If the lessee failed to cancel the lease before August 1, 1969 or if it obtained financing, the effective date of the lease was March 1, 1969.

Under the provisions of 12 U.S.C. § 371d, National Bank investments in premises are limited to the amount of the capital stock of the bank, which in this case was $1,183,600. Investments of more than that sum in premises require the permission of the Regional Administrator of National Banks. Although the lease contained no specific provisions regarding the extent of the structure to be constructed and made no mention of the condition of obtaining the Regional Administrator's permission Nebaco decided to construct a four to five million dollar building. Permission to invest that sum for this purpose was denied by the Regional Administrator on March 3, 1969. Nebaco notified Riverview on July 23, 1969 that the lease was being terminated but Riverview rejected the termination.

Riverview brought this action to declare the lease in full force and effect. Nebaco asserted the affirmative defense that 'it was impossible for defendants, or either of them, to obtain or guarantee the financing. * * *' A motion for summary judgment was made by Riverview, arguing that the defense of impossibility was unavailable because Nebaco knew of the need to obtain the Regional Administrator's permission and should have provided for the contingency of its denial, and because Nebaco could build a less expensive building without that permission. Nebaco now appeals the granting of the motion for summary judgment, asserting there were factual questions of whether reasonable diligence was exercised in seeking financing. If such reasonable diligence was exercised, they assert, the defense of impossibility may be available and there must be further proceedings.

Generally, the defense of impossibility is available to a promissor where his performance is made impossible or highly impracticel by the occurrence of unforeseen contingencies (Restatement of Contracts, § 454 (1932)), but if the unforeseen contingency is one which...