Western Commerce Bank v. Gillespie
| Citation | 1989 NMSC 46,108 N.M. 535,775 P.2d 737 |
| Decision Date | 28 June 1989 |
| Docket Number | No. 18089,18089 |
| Parties | WESTERN COMMERCE BANK, formerly known as Commerce Bank and Trust, a New Mexico banking corporation, Plaintiff-Appellant, v. Sylvian E. GILLESPIE, Senior Vice-President and Trust Officer of United New Mexico Bank at Roswell, et al., Defendants-Appellees. and WASHINGTON RANCH, LTD., a limited partnership, et al., Plaintiffs-Appellees, v. WESTERN COMMERCE BANK, Defendant-Appellant, v. Sylvian E. GILLESPIE, Senior Vice-President and Trust Officer of United New Mexico Bank at Roswell, et al., Third-Party-Defendants-Appellees. |
| Court | Supreme Court of New Mexico |
Western Commerce Bank appeals from an order enforcing an agreement in settlement of the claim of Western as a creditor of the Miller estates. Because Western had failed to file its claim within the time limitations under the probate code, the personal representatives had refused to pay the claim. Relying upon defects in the published notice to creditors, Western sued the personal representatives and heirs on unpaid promissory notes in the principal sum of $315,962.86. On February 10, 1988, the heirs tendered an offer of settlement that provided for the payment of $275,000, subject to the heirs obtaining the financing necessary for the settlement payment. Western accepted. Approximately two months later, Western revoked or repudiated the settlement agreement on the grounds that the heirs had not obtained the financing within a reasonable period of time.
In its letter decision granting the motion to enforce settlement, the trial court stated that:
The Court will first address Motion to Enforce Settlement. The facts are undisputed that the parties entered into a Settlement Agreement on or about February 10, 1988. The offer was subject to Plaintiff's attaining financing to enable them to consummate the settlement offer. The offer was accepted by Defendant Western Commerce Bank. Plaintiff worked on getting the necessary financing and had entered into an agreement with United New Mexico Bank Financial Corporation. The process did take some time to complete but not an unreasonable amount of time under the circumstances and considering the amount of the financing. Defendant Western Commerce Bank's president, Mr. Don Kidd, directed counsel for Defendant to withdraw the acceptance of the settlement offer because he did not feel Plaintiff was proceeding with due diligence. However, the Exhibits of correspondence circulated between the parties and the testimony of the witnesses proved otherwise. The Court finds that the Plaintiff was acting with due diligence to complete the financing and was keeping Defendant Bank informed of the progress. United Bank's officer testified it was prepared to continue with its agreement with Plaintiff to fund the settlement. Therefore, the Court grants Plaintiff's motion and the Court directs the parties hereto to complete the Settlement Agreement within sixty (60) days from the entry of the Order in the case.
(Emphasis added.)
Western argues that, because the court found the offer was subject to the heirs attaining financing to enable them to consummate the settlement offer, the financing contingency was a condition precedent to the formation of a contract. In Elephant Butte Resort Marina, Inc. v. Woolridge, 102 N.M. 286, 289, 694 P.2d 1351, 1354 (1985), this Court stated that a condition precedent must be satisfied before the contract is formed, citing Wyrsch v. Milke, 92 N.M. 217, 585 P.2d 1098 (Ct.App.1978). A close reading of Elephant Butte, however, reveals that the Court was confirming the contention that performance (not formation ) was conditional. Despite language such as "before the contract is formed," Elephant Butte, 102 N.M. at 289, 694 P.2d at 1354, or "fulfill the condition precedent which would have given rise to a binding contract," Wyrsch, 92 N.M. at 221, 585 P.2d at 1102, we do not read Elephant Butte or Wyrsch to apply the principles of contract law urged by Western. In Wyrsch, it was held that the party bound to perform the condition precedent "did not perform in time and therefore breached the contract." 92 N.M. at 221, 585 P.2d at 1102.
The existence of a contract does not hinge on a condition that qualifies a party's duty to perform. M.K. Metals, Inc. v. Container Recovery Corp., 645 F.2d 583, 588 (8th Cir.1981) (citing Cohen v. Crumpacker, 586 S.W.2d 370, 375 (Mo.Ct.App.1979)). Generally, a condition precedent is an event occurring subsequently to the formation of a valid contract, an event that must occur before there is a right to an immediate performance, before there is breach of a contractual duty, and before the usual judicial remedies are available. 3A A. Corbin, Corbin on Contracts Sec. 628, at 16 (1960). See, e.g., Evans v. Prufrock Restaurants, Inc., 757 S.W.2d 804 (Tex.Ct.App.1988); Walter Implement, Inc. v. Focht, 107 Wash.2d 553, 730 P.2d 1340 (1987). Whether conditions precedent are considered prerequisites to formation of a contract or prerequisites to an obligation to perform under an existing agreement is controlled by the intent of the parties. See Hohenberg Bros. Co. v. George E. Gibbons & Co., 537 S.W.2d 1 (Tex.1976); GRD Dev. Co. v. Foreca, S.A., 747 S.W.2d 9 (Tex.Ct.App.1988).
Here, the heirs implicitly promised to use due diligence to obtain financing and pay $275,000 within a reasonable period of time. In their briefs, the parties agreed that, where no time for performance of a condition precedent is specified, the law implies a reasonable time within which to perform. See Smith v. Galio, 95 N.M. 4, 7, 617 P.2d 1325, 1328 (Ct.App.1980). Western accepted the offer, promising to forebear further claims. The contract was thereby formed and became binding. There is no ambiguity. We consequently reject Western's contention at oral argument that, until the heirs met the condition precedent, there was no contract and Western could repudiate.
The heirs acknowledge a right of repudiation if a condition precedent is not satisfied, see Enerdyne Corp. v. William Lyon Dev. Co., 488 F.2d 1237 (10th Cir.1973), accord Elephant Butte Resort Marina, Inc., 102 N.M. at 289, 694 P.2d at 1354, but maintain that here the condition precedent was satisfied within a reasonable period of time. Western complains that the heirs unreasonably delayed satisfaction of the condition precedent because, in addition to seeking...
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