RONALD J. GOLDSTEIN and MARY E. GOLDSTEIN, Appellants, v. FUAD HANNA, Respondent
Goldstein v. Hanna
Mowbray and Manoukian, JJ., dissented.
RONALD J. GOLDSTEIN and MARY E. GOLDSTEIN, Appellants, v. FUAD HANNA, Respondent.
RONALD J. GOLDSTEIN and MARY E. GOLDSTEIN, Appellants, v. FUAD HANNA, Respondent.
No. 11852
October 29, 1981
635 P.2d 290
Mowbray and Manoukian, JJ., dissented.
Martin Becker, and Patrick R. Doyle, Las Vegas, for Appellants.
Leonard A. Wilson, Las Vegas, for Respondent.
OPINION
By the Court,
Gunderson, C. J.:
Appellants, Ronald and Mary Goldstein, sued respondent, Fuad Hanna, to compel specific performance of an option to purchase Hanna's condominium. The district court entered judgment in favor of Hanna. We reverse and remand.
On or about December 10, 1977, the parties entered into a lease relating to Hanna's condominium in Clark County, Nevada. The lease granted the Goldsteins an option to purchase the condominium, and declared "the option may be exercised at any time after December 1, 1977 and shall expire at midnight December 9, 1978 unless exercised prior thereto." Callahan Realty conducted all negotiations on behalf of respondent Hanna, and was designated in the agreement as his authorized agent. The Goldsteins dealt exclusively with Callahan Realty, both as tenants and prospective purchasers. They had no direct dealings with Hanna until after August 1978.
In the summer of 1978, the Goldsteins chose to exercise their option to purchase. They contemplated a purchase from Hanna, with a simultaneous sale from themselves to another purchaser. To effectuate this double sale, Callahan Realty established two escrows, both with closing dates of August 29, 1978. Shortly before the escrows were to close, however, the ultimate purchaser declined to perform.
Three days before their escrow with Hanna was due to close, the Goldsteins contacted Mr. Callahan, and specifically advised him that they intended to complete the purchase. They advised Callahan they would purchase the condominium themselves, rather than find another purchaser. Callahan informed the Goldsteins that they need not consummate the purchase by August 29, because their option would continue to be valid under the terms of the lease until December 9, 1978. To insure that respondent Hanna shared this understanding of the option terms, Mr. Goldstein requested Callahan call to Hanna, in his presence and confirm the agent's representations.
Callahan called Hanna and advised him that the ultimate purchaser would not close escrow as planned. Callahan also told Hanna that the Goldsteins' option to purchase would still be in effect until expiration of the lease term. Although Hanna testified at trial that he never authorized Callahan Realty to extend the escrow, the record indicates he never asserted that the option would not remain viable following termination of the pending escrow. On this issue, it appears he remained silent, and thus permitted the Goldsteins to rely on Callahan's representations. Callahan Realty, as Hanna's agent, thereafter accepted the Goldsteins' check for payments on the lease through October. Callahan Realty deposited the money in a trust account and issued a check to Hanna for the lease payments, less commission.
On August 31, Hanna notified the escrow holder to consider the escrow cancelled. On September 15, however, Hanna called the Goldsteins on at least two occasions and attempted to purchase their option rights in the property. After the Goldsteins rejected Hanna's offer, they learned that Hanna purportedly had cancelled the escrow. Hanna then refused to participate in a second escrow initiated by the Goldsteins.
On these facts, the district court entered judgment for Hanna, which we think was erroneous. In our view, this case does not turn on whether Callahan correctly advised the Gold-steins concerning their contract with respondent Hanna. Nor need we decide whether Callahan had actual authority to alter the contract's terms. The doctrine of equitable estoppel clearly precludes Hanna from claiming that the Goldsteins' rights under the lease-option agreement expired on August 29, 1978.
According to § 8B(1) of the Restatement (Second) of Agency (1958), an equitable estoppel arises under the following circumstances:
(1) A person who is not otherwise liable as a party to a transaction purported to be done on his account, is nevertheless subject to liability to persons who have changed their positions because of their belief that the transaction was entered into by or for him, if
(a) he intentionally or carelessly caused such belief, or
(b) knowing of such belief and that others might change their positions because of it, he did not take reasonable steps to notify them of the facts.
See also, Gardner v. Pierce, 22 Nev. 146, 36 P. 782 (1894).
Where there is a duty to speak, silence can raise an estoppel quite as effectively as can words. A duty to speak arises when another is or may come under a misapprehension regarding the authority of the principal's agent. Under such circumstances, the principal is obligated to exercise due care, and to conduct himself as a reasonably prudent business person with normal regard for the interests of others. Restatement (Second) of Agency § 8B comment d. (1958). Thus, "a person remaining silent when he ought, in the exercise of good faith, to have spoken, will not be allowed to speak when he ought, in the exercise of good faith, remain silent." Gardner v. Pierce, 22 Nev. 146, 36 P. 782 (1894); see also Universal C. I. T. Credit Corporation v. Wagner Motor Company, 72 Nev. 337, 305 P.2d 363 (1956); Zunino v. Paramore, 83 Nev. 506, 435 P.2d 196 (1967). Similarly, silence or failure to repudiate an agent's representations can give rise to an inference of affirmation. According to § 94, comment a, of the Restatement (Second) Agency (1958):
Silence under such circumstances that, according to the ordinary experience and habits of men, one would naturally be expected to speak if he did not consent, is evidence from which assent can be inferred. Such inference may be made although the purported principal had no knowledge that the other party would rely upon the supposed authority of the agent; his knowledge of such fact, however, coupled with his silence, would ordinarily justify an inference of assent by him. . . .
In the instant case, during his telephone conversation with Callahan, Hanna made no effort to assure that the Goldsteins were not misled or lulled by his agent's representations. Hanna knew the Goldsteins might not hasten to complete the August escrow while assuming they still had several months to exercise the option. Consequently, Hanna's silence and acquiescence in his agent's representations manifestly caused the Goldsteins to do what they otherwise would not have done, i.e. to permit, at least arguably, a lapse of their valuable option rights. "Persons ordinarily express dissent to acts done on their behalf which they have not authorized or of which they do not approve. . . ." Restatement (Second) of Agency § 43 comment a. (1958). The doctrine of equitable estoppel is properly invoked whenever "unconscionable injury would result from denying enforcement of the contract after one party has been induced by the other seriously to change his position in reliance on the contract." Alpark Distributing Inc. v. Poole, 95 Nev. 605, 600 P.2d 229 (1979); Monarco v. Lo Greco, 35 Cal.2d 621, 220 P.2d 737 (Cal. 1950). In the case at bar, the detriment suffered by the Goldsteins involves the loss of the benefit of their bargain: the right to purchase the property for a specified sum.
Thus, we need not decide whether or not Callahan Realty would have had actual authority, acting alone, to extend the Goldsteins' right to exercise the option or to interpret the contract's meaning. In effect, Hanna imbued his agent, Callahan, with apparent authority to make the representations upon which the Goldsteins relied. "Apparent authority (when in excess of actual authority) proceeds on the theory of equitable estoppel; it is in effect an estoppel against the owner to deny agency when by his conduct he has clothed the agent with apparent authority to act." Ellis v. Nelson, 68 Nev. 410, 233 P.2d 1072 (1951); see also, Nevada National Bank v. Gold Star Meat Company, 89 Nev. 427, 514 P.2d 651 (1973); Tsouras v. Southwest Plumbing & Heating, 94 Nev. 748, 587 P.2d 1321 (1978).
We therefore conclude that the doctrine of equitable estoppel precludes Hanna from claiming a forfeiture of the Gold-steins' option rights. The cause is reversed and remanded for further proceedings consistent with this opinion.
Batjer and Springer, JJ., concur.
The uncontroverted testimony of Ronald Goldstein reflects that he was prepared to fund the escrow himself when the ultimate purchaser declined to perform.
Appellants' uncontradicted testimony is as follows:
Mr. Hanna offered to buy our interest out. Maybe I am not using the right phrase. He offered us money to leave the property. He said that he wanted the place for himself.
The uncontroverted testimony of Mr. Goldstein indicates:
A. I was concerned having, on Callahan's advice, used the last month's rent, in restoring this so as not to be in default of the agreement, and he called Mr. Hanna at that time, at my insistence, in my presence he phoned him, and advised him of the problem, that there would be a delay in the closing of the escrow and that — and he informed Mr. Hanna on the phone that — evidently he asked if this invalidated it, and he told him it did not, it was good until the end of November.
Q. What did Mr. Callahan indicate to you after the telephone conversation?
A. No problem. This is the basic phrase he used, no problem, we will go ahead and obtain a new buyer.
Q. Didn't Mr. Callahan also indicate to you he had full authority to make those representations?
A. Certainly. Yes.
The record indicates that but for Hanna's silence the Goldsteins would have completed the escrow as scheduled. When Hanna informed the Gold-steins in mid-September 1978 that he did not intend to go through with an escrow with them, the Goldsteins promptly deposited with Western Title Company the necessary $82,000.00 to fulfill their part of the option agreement.
In accord with the parties' joint stipulation, rental payments of $4,966.87 paid by the Goldsteins to Hanna, pursuant to the district court's judgment, should be credited toward purchase of the condominium.