Northwood Estate, LLC v. Lennar Nw., Inc.
| Decision Date | 28 June 2022 |
| Docket Number | 38546-9-III |
| Parties | NORTHWOOD ESTATE, LLC, a Washington State Limited Liability Company, Respondent, v. LENNAR NORTHWEST, INC., a Delaware corporation, Appellant. |
| Court | Washington Court of Appeals |
UNPUBLISHED OPINION
Lennar Northwest, Inc. (Lennar), and Northwood Estate, LLC (Northwood) entered into a purchase and sale agreement (PSA) for several residential lots. According to the original PSA Lennar would pay Northwood an additional $765,000 if Northwood completed a plat modification that changed 8 lots into 13 lots by the closing date. When Northwood failed to meet this deadline, the sale closed and the parties signed an amendment giving Northwood one additional year to finalize the plat modification with no further extensions. When Northwood failed to meet this second deadline, Lennar assumed the plat revision and refused to pay the additional $765,000. Shortly thereafter, the City of Edgewood (City) granted Lennar the revised plat.
Northwood sued Lennar, alleging breach of contract. Division Two of this court granted discretionary review and held that Northwood's obligation to finalize the plat modification was a condition precedent to Lennar's obligation to pay the additional sales price. Northwood Estate, LLC v Lennar NW., Inc., No. 52000-1-II, slip op. at 1 (Wash.Ct.App. Mar. 3, 2020) (unpublished), https://www.courts.wa.gov/opinions/pdf /D2%52000-1-II%20Unpublished%20Opinion.pdf. Nevertheless, the court held that equitable relief would be available to avoid extreme forfeiture if the condition precedent did not form an essential part of the bargain. Id. at 8. The court remanded for the trial court to determine if equitable relief was available and, if so, in what form it should take. Id. at 15, 17.
On remand, Lennar moved for summary judgment, arguing that the deadline for completing the plat modification was an essential part of the bargain because the contract includes a time-is-of-the-essence clause and Lennar relied on the deadline to schedule the development of the property. The trial court denied Lennar's motion, indicating that Lennar had waived strict application of the deadline by providing two prior extensions.
Northwood then filed for summary judgment, arguing that it was entitled to equitable relief. The court granted Northwood's motion, imposed an equitable grace period, found that Northwood had complied with the condition and was entitled to the increased purchase price, prejudgment interest, and attorney fees.
Lennar appeals raising five issues: whether the trial court erred in (1) denying its motion for summary judgment, (2) concluding that the parties had waived the "time-is-of-the essence" provision, (3) finding waiver when that issue was not raised by either party, (4) failing to grant Lennar's motion for a continuance to conduct discovery, and (5) granting Northwood's motion for summary judgment.
While Lennar is generally precluded from appealing a denial of summary judgment under RAP 2.2, to the extent that the trial court found waiver of an essential term on summary judgment, such a finding was premature and based on contested evidence. Otherwise, we conclude that the trial court abused its discretion by denying Lennar's motion to continue Northwood's motion for summary judgment so that Lennar could conduct discovery. We reverse the judgment in favor of Northwood and remand for further proceedings.
The basic facts of this case were set out in a previous appeal to Division Two. Northwood Estate, LLC, No. 52000-1-II. Lennar is engaged in the business of the construction and sale of single-family residences. In December 2015, Lennar agreed to purchase from Northwood finished lots in a residential subdivision. The PSA provided that Lennar would pay an additional $765,000 if Northwood obtained a plat modification that turned 8 lots into 13 lots by the closing date in the PSA-about a year out from mutual acceptance of the PSA. When the sale closed on December 8, 2016, Northwood had not started the plat modification. The parties agreed to a second amendment to the PSA, giving Northwood until December 1, 2017, to complete the plat modifications. The amendment provided that no additional extensions would be granted.
From December 2016 to December 2017, Northwood began the process of obtaining a plat modification. Northwood maintains that it spent approximately $260,000 to prepare the plat modification, including engineering costs, surveying, and curb modifications. On November 13, 2017, 18 days before the contract deadline, Northwood submitted the plat modification. The City advised developers that plat modifications may take up to 120 days to finalize. The City responded to Northwood's submission by stating it would start review on January 9, 2018, due to the holiday season. Lennar then advised Northwood that it would not be paying the additional sales price and notified the City that it was assuming the plat modification.
Lennar completed the plat modification on January 10, 2018. Northwood sued for payment for the additional lots contending that the PSA "time-is-of-the-essence" provision was a covenant, not a condition precedent. Lennar argued that the provision was a condition precedent and Northwood's failure to perform the condition extinguished Lennar's payment obligation. Division Two granted discretionary review, and held that the provision was a condition precedent. Id. at 17.
Despite finding a condition precedent, the court recognized that Northwood might be entitled to equitable relief. The court suggested that a "[c]ondition[ ] precedent 'will be excused if enforcement would involve extreme forfeiture or penalty and if the condition does not form an essential part of the bargain.'" Id. at12 (quoting Ashburn v. Safeco Ins. Co. of Am., 42 Wn.App. 692, 698, 713 P.2d 742 (1986)). Without deciding that the plat modification and deadline were essential to the contract, the court noted:
Here, the plat modification deadline arguably may have been essential to the contract because the plat modification was the only remaining task under the contract and the parties' time-is-of-the-essence provision suggests that a condition involving the modification deadline was important.
Id. at 14. The court provided further guidance by recognizing several factors a court should consider in determining whether equitable relief is appropriate: "the amount that would be forfeited without the equitable relief sought, whether the failure to meet the deadline was inadvertent, and whether the other party was prejudiced by the delay." Id. at 13. In the end, the court remanded the case to address two issues: "whether equitable relief is appropriate to prevent forfeiture and, if so, what form that relief should take." Id. at 17.
On remand, Lennar moved for summary judgment arguing that because the contract included a time-is-of-the-essence provision, the deadline was material as a matter of law under a line of cases involving deadlines and time-is-of-the-essence provisions. The motion was accompanied by the declaration of Lennar's president, William Salvesen, explaining generally why Lennar includes a time-is-of-the-essence provision in its plat purchase agreements, and how the failure to meet a deadline affects Lennar's business. Specifically, he stated:
Northwood responded to Lennar's motion by arguing that since it had expended considerable time and resources to modify the plat, and the final plat was approved one month after the deadline with little additional work by Lennar, strict enforcement of the condition precedent failure would constitute an extreme forfeiture.
Northwood's manager is Satwant Singh, a subdivision developer, who testified to the costs and investment Northwood put into readying the lots in question for sale to Lennar in accord with the PSA and its modifications. Northwood also submitted a declaration of Singh that submitted facts supported by aerial photography that Lennar had other lots that sat dormant during the delay period. Singh testified that the lots averaged about $60,000 more in sale price.
The trial court denied Lennar's motion for summary judgment. Beyond denying the motion, the court suggested that it was affirmatively finding waiver of the time-is-of-the-essence contract provision:
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