Republic Nat. Life Ins. Co. v. Red Lion Homes, Inc., 80-1738

• Decision Date: 21 March 1983
• Docket Number: No. 80-1738,80-1738
• Citation: 704 F.2d 484
• Parties: REPUBLIC NATIONAL LIFE INSURANCE COMPANY, a Texas corporation, Plaintiff-Appellant, v. RED LION HOMES, INC., a Colorado corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 484

704 F.2d 484

REPUBLIC NATIONAL LIFE INSURANCE COMPANY, a Texas corporation, Plaintiff-Appellant, v. RED LION HOMES, INC., a Colorado corporation, Defendant-Appellee.

No. 80-1738.

United States Court of Appeals Tenth Circuit.

March 21, 1983.

Rehearing Denied May 3, 1983.

James M. Dieterich, Denver, Colo. (Lowell White, Denver, Colo., with him on brief), of White & Steele, Denver, Colo., for plaintiff-appellant.

Alan E. Karsh, Denver, Colo., for defendant-appellee.

Before BARRETT, DOYLE and LOGAN, Circuit Judges.

LOGAN, Circuit Judge.

In this diversity case, Republic National Life Insurance Company appeals the trial court's award of $270,480 in damages to Red Lion Homes, Inc. for breach of contract. Republic owned a tract of land near Loveland, Colorado, part of which consisted of 92 undeveloped lots. In January 1972 Republic and Red Lion signed an agreement for Republic to convey the lots to Red Lion "on or before November 1, 1972." Republic was required to install all on-site and off-site improvements, including curbs, sewer and water extensions, street lighting, grading, and paving prior to the conveyance. The contract was expressly made contingent on annexation of the lots by the City of Loveland and approval of the lots by the FHA and the VA.

Republic hired an engineering company to oversee completion of the improvements. Various delays occurred, and Republic acknowledges that the improvements were not completed by November 1, 1972 and that the lots were not made available to Red Lion until February 1975. Although after November 1972 Red Lion periodically expressed continued interest in the lots, it refused to purchase them in 1975. Republic then sought a declaratory judgment that Red Lion had not acquired any rights in the real estate by virtue of the 1972 contract. Red Lion counterclaimed, alleging that Republic had breached its contract by not completing the improvements until 1975.

The claims were heard separately. Republic received the declaratory judgment it had requested, but a second trial judge, subsequently hearing Red Lion's counterclaim in a bench trial, held that Republic had breached the contract to prepare the lots and convey them. The court concluded that (1) the agreement was enforceable against Republic, (2) time was of the essence in performing the contract, (3) Republic had not made reasonable efforts to complete the improvements on time, (4) Red Lion's continued interest in purchasing the lots did not constitute a waiver of its right to demand performance in accordance with the contract terms, and (5) Red Lion was entitled to damages based on the profit it would have received from building and selling houses on the lots. These conclusions are all contested in the appeal.

I

We agree with the trial court that under Colorado law the agreement between Republic and Red Lion was an enforceable contract of sale. The mutual promises of the parties provided sufficient consideration, see DeFeyter v. Riley, 43 Colo.App. 299, 606 P.2d 453, 454 (1979), and the language of the agreement indicates that it was a contract of sale rather than merely an option to purchase, see Bursack v. Moore, 165 Colo. 414, 439 P.2d 993, 995 (1968); DeFeyter v. Riley, 606 P.2d at 454-55. That the contract was contingent upon city, FHA, and VA approval of the improvements did not limit its enforceability. Rather, this provision imposed a duty on Republic to use reasonable efforts to secure the necessary approvals. See Sala v. Hay, 160 Colo. 169, 415 P.2d 330, 332 (1966) (when contract is contingent on obtaining additional financing, purchaser must make reasonable efforts to secure it); Sorenson v. Connelly, 36 Colo.App. 168, 536 P.2d 328, 329-330 (1975) (same). Republic could not rely on the contingent nature of the approvals to avoid its duty to attempt to secure them. ¹

II

The trial court held that the circumstances surrounding the agreement necessarily implied that the parties intended time to be of the essence of the contract, although the agreement contained no express provision to this effect.

Time is of the essence when "the nature of the property or the exigencies of the transaction make timely performance essential." MaceRich Real Estate Co. v. Holland Properties Co., 454 F.Supp. 891, 896 (D.Colo.1978). Regardless of the provisions of a contract, the circumstances surrounding the transaction must show that timely performance was in fact essential. Houy v. Davis Oil Co., 175 Colo. 180, 486 P.2d 18, 21 (Colo.1971). The trial court determined that discussions between Republic and Red Lion indicated they intended the lots to be ready for conveyance as early as July 1972, and that November 1, 1972 was an outside, final date that included a cushion for unforeseen delays. The court relied on Republic's orders to its engineering firm to complete the lots on a priority basis as further evidence of the parties' intent that time be of the essence of the contract. The record supports the trial court's conclusion that time was of the essence and that Republic failed to perform in a timely manner. The parties contemplated speedy completion of the improvements and approvals in part so that Red Lion could commence building the homes before the 1972 winter season hampered construction. Completion of the lots by 1975 was not timely in these circumstances. Since Republic failed to perform by the specified time, it breached the contract.

Colorado law did not require Red Lion to tender money or otherwise offer to perform on November 1, 1972. Rather, in order to establish Republic's breach, Red Lion had only to be able to perform, see DeFeyter v. Riley, 43 Colo.App. 299, 606 P.2d 453, 455 (1979), and the trial court specifically found that it was.

III

The trial court held that Republic failed to make reasonable efforts to develop the property and secure the approvals by the contract date. Republic, which is not a developer but an insurance company, hired the engineering firm Hogan & Olhausen to make the improvements and secure the approvals. Hogan & Olhausen was already in charge of developing adjacent subdivision lands for Republic. The trial court specifically found that Hogan & Olhausen worked "for and on behalf of Republic in all development matters for which Republic was responsible," R. II, 230, and that "Republic retained a right of final approval or disapproval over Hogan and Olhausen's decisions, and Hogan and Olhausen understood and consented to that right of control." Id. Testimony in the record supports these findings. From these factual findings the court reasonably concluded that Hogan & Olhausen acted as Republic's agent for developing the lots and obtaining the approvals. See Ocrant v. Dean Witter & Co., 502 F.2d 854, 858 (10th Cir.1974) ("[Agency] relationship exists if the conduct of the parties manifests the willingness of one person to have another act for him subject to his control, and the consent of the other so to act."); accord Pouppirt v. Greenwood, 48 Colo. 405, 110 P. 195, 196 (1910); Butler v. Colorado International Pancakes, Inc., 510 P.2d 443, 445 (Colo.App.1973).

In finding that Republic and its agent failed to make reasonable efforts to complete the development and secure the approvals by the contract date, the court cited several examples of what it considered unreasonable delay, including failure to begin preliminary earthwork until July 25, 1972, and failure to perform competently and quickly a necessary noise abatement study. These and other examples contained in the record support the court's finding that Republic and its engineers did not make the effort necessary to meet the short deadline set in the agreement. Republic's failure to make reasonable efforts to complete the improvements and secure the approvals on time gives rise to a cause of action for breach of its obligation under the contract. See Sala v. Hay, 160 Colo. 169, 415 P.2d 330 (1966); Sorenson v. Connelly, 36 Colo.App. 168, 536 P.2d 328 (1975).

IV

Republic argues that even if it did breach the contract, Red Lion either waived its right to assert the breach or should be estopped from asserting the breach by having continued to express interest in purchasing the property after November 1, 1972. The trial court rejected both of these contentions, and we affirm.

"[W]aiver is the intentional relinquishment of a known right ...." Ewing v. Colorado Farm Mutual Casualty Co., 133 Colo. 447, 296 P.2d 1040, 1043 (1956). There is no evidence that Red Lion ever formally waived its rights. Furthermore, the trial court held that Red Lion did not by implication intend to abandon its right to sue for the breach. Rather, the court specifically found that Red Lion's continuing interest was in "whether the improvements were completed, whether the lots were still available, and if so, on what terms." R. II, 231 (emphasis in original). Because there is evidence in the record supporting the trial court's interpretation of the facts, and because we do not think that a buyer's continued interest in purchasing property after breach of a contract for sale constitutes a waiver of the breach as a matter of law, we uphold the conclusion that Red Lion did not waive its right to assert the breach.

Republic also claims that Red Lion should be estopped from asserting the breach because in 1973 it asked Republic to make a change in some of the curb improvements, which Republic made at some additional expense. Republic also argues that Red Lion's continued expressions of interest in purchasing the property estop it from asserting the breach. Estoppel will lie against a party "who by his language or conduct leads another to do what he would not otherwise have done [and] ... subject- [s] such person to loss or injury by disappointing the expectations on which he acted." Mabray v. Williams, 132 Colo. 523, 291 P.2d 677, 679 (1955). "[T]he doctrine of estoppel is not favored" in Colorado, University of Colorado v. Silverman, 192 Colo....