JOHN C. SERPA, Appellant, v. MICHAEL DARLING, MURIEL H. DARLING AND DARLING PROPERTIES CORPORATION, a Nevada Corporation, Respondents
Serpa v. Darling
Mowbray, C. J., and Steffen, J., concur.
JOHN C. SERPA, Appellant, v. MICHAEL DARLING, MURIEL H. DARLING AND DARLING PROPERTIES CORPORATION, a Nevada Corporation, Respondents.
JOHN C. SERPA, Appellant, v. MICHAEL DARLING, MURIEL H. DARLING AND DARLING PROPERTIES CORPORATION, a Nevada Corporation, Respondents.
No. 20464
April 30, 1991
810 P.2d 778
Crowell, Susich, Owen & Taches, Carson City; Laura Wight-man FitzSimmons, Las Vegas, for Appellant.
Allison, MacKenzie, Hartman, Soumbeniotis & Russell, and Mark Amodei, Carson City, for Respondents.
OPINION
By the Court,
Young, J.:
Respondent Michael Darling owned several parcels of land known as the Empire Ranch, located adjacent to the Carson River in Carson City. In 1979, Darling subdivided part of the ranch into a planned unit division, or PUD. During the late summer and early fall, the appellant Serpa and Darling entered into negotiations regarding the purchase of Darling's property.
On September 24, 1985, the parties signed a Letter of Intent wherein they agreed to "bargain in good faith in connection with negotiating a final agreement" for the purchase and/or option to purchase Darling's property. The Letter of Intent stated that it would "continue in effect for a period not to exceed 30 days."
The parties continued negotiations and, on December 16, 1985, executed several documents that superseded the Letter of Intent, including the following: a Master Agreement; purchase and sale agreements of the PUD; an option to purchase effluent lands; an option to purchase water rights; and an Addendum to the agreement. The Master Agreement does not incorporate the other agreements but does refer to them.
Under the option agreements, Serpa had ninety days from the date of execution to pay Darling the total sum of $140,000 for the two options "in consideration for Darling granting to Serpa the option to purchase . . . ." Additionally, annual option payments totaling $100,000 were due one year from the date of execution. The combined purchase price for the effluent option and the water rights option was $1,240,000, with each payment to be applied against the total purchase price. The option periods were seven years; if Serpa failed to exercise the options, Darling would retain all payments.
The Addendum provided that Serpa had ten days to approve of the preliminary title reports and the status of five other listed items, and that, if Serpa objected to any of the items, Darling was to "use due diligence to resolve such objections at his own expense before close of escrow."
On December 26, 1985, ten days after the execution of the above agreements, Serpa's attorney, Bill Crowell, delivered to Darling's attorney, Scott Heaton, a letter (Letter of Exceptions) concerning the objections contained in the Addendum.
An escrow was opened on February 14, 1986, and the sale of the PUD to Serpa was closed on March 24, 1986. The parties continued to negotiate during this time as to the option agreements. On February 21, 1989, the parties executed a Memorandum of Agreement concerning the sale of the PUD. This Memorandum also provided that, if Serpa failed to pay Darling for the PUD, the option agreements would be rendered null and void.
On March 17, 1986, the initial option payments of $140,000 were due to Darling from Serpa pursuant to the option agreements allowing for ninety days. Darling made no demand on March 17, 1986, for the initial option payments.
On April 10, 1986, Serpa wrote to Darling and informed him that he would deposit
the full $140,000 on the options with releases of $50,000 as soon as we agree what is to be settled on with Scott Heaton and Bill Crowell as the final written agreement. Another $50,000 when the items in Scott Heaton's letter of 3/31/86 are meet [sic] (pages 1 & 2) and the final $40,000 when items on page 3 are settled. I also believe Sierra Land Title Co. should hold title to items in each option until they are paid for in full and can be transfered [sic] to myself.
Serpa deposited three checks totalling $140,000 with Sierra Land Title Co. shortly thereafter. In order to receive the money, Darling had to go to the title company and sign instructions (agree to conditions) for the options. An escrow was never opened for the option properties.
On April 16, 1986, Heaton wrote a letter to Crowell noting that the $140,000 in option payments was due on March 17, 1986, and requesting payment. One week later, Crowell wrote to Heaton and expressed continued frustration with Darling's progress in satisfying the exceptions and offered an outright purchase of the option properties.
The parties apparently attempted to negotiate an outright purchase of the option properties but no agreement was ever reached.
Darling continued to exercise "due diligence" to satisfy Ser-pa's objections until July 14, 1986, when Darling wrote to Serpa, through Crowell, and informed him that the option period had expired on March 17, 1986, due to non-payment. However, the letter extended the period until August 1, 1986, and stated that Serpa had until that date to exercise the options for the properties on an "as is" basis. It also indicated that the period of "due diligence" was over.
On August 1, 1986, Crowell wrote to Andrew MacKenzie, Darling's new attorney, and demanded performance by Darling to remove the objections from the option properties, stating that "[t]here is no agreement in existence that requires us to take the property where is and as is . . . ."
On November 19, 1986, MacKenzie wrote to Crowell informing him that, because Serpa failed to timely close the escrow (exercise the options), the agreement to purchase the option properties was terminated. Serpa then responded with a threat to pursue legal action and, on January 8, 1987, filed a notice of lis pendens.
After a bench trial, the district court concluded that no contract existed between Serpa and Darling because the Addendum provided that Serpa was not bound until he approved of the conditions in the Addendum. The court also found that, because Serpa failed to exercise the options by tendering payment to Darling, Serpa was precluded from seeking enforcement of Darling's performance under the option agreements.
Appellant first contends that the district court erred in concluding that the Addendum attached to the December 16, 1985, agreements made them unenforceable because it made appellant's obligation to perform contingent upon his approval of the six items listed in the Addendum. The district court reasoned that the items in the Addendum acted as conditions precedent to the existence of a contract. We conclude that, because the instant agreements were supported by neither mutuality of obligation nor consideration, the district court was correct in its determination that the agreements are unenforceable.
We have previously stated that "[m]utuality of obligation requires that unless both parties to a contract are bound, neither is bound." Sala & Ruthe Realty, Inc. v. Campbell, 89 Nev. 483, 487, 515 P.2d 394, 396 (1973). While a lack of mutuality of obligation in an option contract may be cured by the presence of consideration, in this case neither mutuality of obligation nor consideration was present. The language of the agreements themselves is clear and unambiguous as to the requirement of consideration. We therefore reject appellant's assertion that the execution of the PUD contract acted as consideration for the option agreements. See Club v. Investment Co., 64 Nev. 312, 323, 182 P.2d 1011, 1016 (1947).
Furthermore, we note that appellant- requests specific performance of the option agreements. Not only do the conditions and failure to tender consideration prohibit formation of a valid contract, we note that the conditions outlined in appellant's December 26, 1985, Letter of Exceptions exceed the scope of the conditions as detailed in the parties' December 16, 1985, Addendum to the agreements. This persuades us that the option agreements cannot be enforced since the parties themselves failed to agree upon the terms.
Appellant next contends that the agreements were not severable because the purchase and sale agreement of the PUD was contingent upon the conditions relevant to the options as laid out in the Addendum. While the Master Agreement does refer to both the option properties and the PUD, it does not incorporate the option documents. Furthermore, the PUD purchase was completed. Escrow on the PUD was opened and closed, while the exercise of the option properties could have been delayed for seven years. This segregated performance of the PUD from the non-exercised option agreements constitutes evidence of severable contracts. See Dredge Corp. v. Wells Cargo, Inc., 82 Nev. 69, 73, 410 P.2d 751, 754 (1966) ("A contract is divisible where, by its terms, performance of each party is divided into two or more parts . . . .")
Additionally, the language of the agreements creates severable agreements: the option agreements make no reference to the Master Agreement or to the purchase and sale agreement of the PUD. As for the subject matter of the agreements, the purchase and sale agreement involved the PUD, whereas the option agreements involved effluent lands and water rights. "Whether a contract is entire, or separable into distinct and independent contracts, is a question of the intention of the parties, to be ascertained from the language employed and the subject-matter of the contract." Sprouse v. Wentz, 105 Nev. 597, 605, 781 P.2d 1136, 1140 (1989) (quoting Linebarger v. Devine, 47 Nev. 67, 72, 214 P. 532, 534 (1923)).
Finally, appellant contends that specific performance of the option agreements should be awarded. Not only is enforcement of a nonenforceable contract impossible, we have previously stated that "the decision to either grant or refuse specific performance is addressed to the sound discretion of the trial court and will not be disturbed on appeal unless an abuse of discretion is shown." McCann v. Paul, 90 Nev. 102, 103-104, 520 P.2d 610, 611 (1974). See also Carcione v. Clark, 96 Nev. 808, 618 P.2d 346 (1980).
To be awarded specific performance, a purchaser who has not tendered the purchase price must demonstrate that she is ready, willing, and able to perform. Cohen v. Rasner, 97 Nev. 118, 624 P.2d 1006 (1981). Appellant was not ready and willing to perform because tender of the option monies was never effectuated. We find appellant's argument that a valid tender was made by placing checks at the title company unpersuasive since respond ent had to satisfy conditions in order to secure release of the money and these checks were not placed in escrow.
Specific performance is available only when: (1) the terms of the contract are definite and certain; (2) the remedy at law is inadequate; (3) the appellant has tendered performance; and (4) the court is willing to order it. Carcione, 96 Nev. at 811, 618 P.2d at 348. Even if we were to conclude that the agreements between the parties were enforceable and that appellant tendered performance, we do not find the terms of the parties' agreement to be sufficiently definite and certain to allow specific performance.
We conclude that the district court did not err in finding that the agreements were unenforceable and in quieting title in Darling. We therefore affirm the judgment of the district court.
Mowbray, C. J., and Steffen, J., concur.