Arata v. Shefco Ltd.

2014 UT App 148, 330 P.3d 115, 763 Utah Adv. Rep. 10, 2014 WL 2885653, 2014 Utah App. LEXIS 150
CourtCourt of Appeals of Utah
DecidedJune 26, 2014
DocketNo. 20121028-CA
StatusPublished

This text of 2014 UT App 148 (Arata v. Shefco Ltd.) is published on Counsel Stack Legal Research, covering Court of Appeals of Utah primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Arata v. Shefco Ltd., 2014 UT App 148, 330 P.3d 115, 763 Utah Adv. Rep. 10, 2014 WL 2885653, 2014 Utah App. LEXIS 150 (Utah Ct. App. 2014).

Opinion

Opinion

VOROS, Judge:

1 1 This appeal involves a condition precedent in a real estate purchase contract. The condition did not occur, and the buyer did not complete the purchase. The district court ruled on summary judgment that because the condition precedent benefitted the seller alone, the seller alone could, and did, waive the condition, triggering the buyer's obligation to perform. The buyer contends on appeal that the condition benefitted him also and thus that its nonoceurrence excused his performance. We agree with the buyer that the condition precedent benefitted him. We thus reverse the summary judgment in favor of the seller and remand for further proceedings.

BACKGROUND

T2 Plaintiff Robert M. Arata, a retived railroad conductor from New York, wanted to build a home in St. George, Utah. In 2005 he met with Stephen N. Sheffield. Sheffield, an experienced St. George developer, seemed right for the job. Sheffield conducted business through several related entities, including Shefeo, Ltd., Sheffield Development, Inc., and Keystone Construction and Design, Inc. Together, the entities constituted, as the district court later put it, a "vertically-integrated development process."

T3 After some negotiating, Arata and Shefeo signed a real estate purchase contract (the Contract). Under the Contract, Shefeo agreed to sell and Arata agreed to buy a lot (the Lot) in a Sheffield Development subdivision for $155,000. They conditioned the Contract on Arata and Keystone signing another contract for the construction of a home at a target price and by a target completion date:

This Contract is conditional upon Buyer executing a construction contract prior to closing for Keystone Construction & Design, Inc. building a home on this lot to be completed by April 2006 upon terms they shall agree upon. - Target package $550,000.

As required by the Contract, Arata paid the entire $155,000 purchase price for the Lot shortly after signing the Contract. However, for reasons that the parties disagree about but that are not germane to the issue on appeal, Arata never executed the contemplated construction contract with the builder, [117]*117Keystone. .Consequently, Arata demanded that Shefeo return his $155,000 payment for the Lot. Shefeo refused.

4 In 2008, Arata sued Sheffield, Shefeo, Sheffield Development, and Keystone (collectively, Defendants) for return of the $155,000. He contended that the nonoceur-rence of the condition precedent exeused both parties' performance under the Contract. Instead of returning Arata's payment, Sheffield caused the title owner of the Lot, Sheffield Development, to execute and deliver a warranty deed to Arata.

T5 Arata and Defendants filed cross motions for summary judgment. The district court granted summary judgment in Defendants' favor, ruling that the condition precedent unilaterally benefitted Defendants, that they could therefore unilaterally waive the condition, and that they did waive the condition when they unconditionally conveyed the Lot to Arata.

ISSUE AND STANDARD OF REVIEW

T6 Arata contends that the district court erred in granting Defendants' motion for summary judgment. We review a district court's legal conclusions and ultimate grant or denial of summary judgment for correctness. Orvis v. Johnson, 2008 UT 2, ¶ 6, 177 P.3d 600.

ANALYSIS

17 Arata contends that because the home-construction condition benefitted him as well as Shefeo, Defendants could not unilaterally waive it. It benefitted him, Arata argues, because it (1) required that Keystone build the home, (2) set a target completion date of April 2006, and (8) set a target price of $550,000. Defendants respond that Shefeo could unilaterally waive the condition because it benefitted only Shefeo.

T8 "A condition is 'an event, not certain to occur, which must oceur ... before performance under a contract becomes due.'" McArthur v. State Farm Mut. Auto. Ins. Co., 2012 UT 22, ¶ 29, 274 P.3d 981 (quoting Restatement (Second) of Contracts § 224 (1981)). Because "no duties arise between the contracting parties until the condition has been fulfilled," id., failure of "'a material condition precedent relieves the ob-ligor of any duty to perform," id. (quoting Harper v. Great Salt Lake Council, Inc., 1999 UT 34, ¶ 14, 976 P.2d 1213 (citing 3A Arthur Linton Corbin, Corbin on Contracts § 630, at 20-21 (1960))). Whether a condition precedent was fulfilled generally presents a question of fact. ASC Utah, Inc. v. Wolf Mountain Resorts, LC, 2013 UT 24, ¶ 13, 309 P.3d 201. "'Conditions precedent may be waived by the party in whose favor they are made"" Foster v. Montgomery, 2003 UT App 405, ¶ 23, 82 P.3d 191 (quoting 17A Am.Jur.2d Contracts § 658 (2003)).

{9 Here, the Contract contained a condition precedent-that before closing Arata would execute a contract with Keystone, a third party but related to the seller, to construct a home on the Lot. Arata contends that this condition precedent benefitted him as well as Shefeo.

10 First, Arata argues that the condition benefitted him by ensuring that his new home would be built by Keystone. Undisputed evidence establishes that Arata had seen and liked the other Keystone homes in the area. Arata lived out of state and was glad to avoid the time and expense of finding a reputable builder. Moreover, Sheffield assured Arata that Keystone could build the home that Arata wanted at the price that Arata wanted. In Sheffield's own words, the Contract "was meant to be a transition document leading [the parties] to a construction contract for the entire package, breaking down the purchase of the [Lot] as step one and building the house as step two."

11 Second, Arata argues that the condition benefitted him by specifying a target completion date. As an out-of-state buyer, Arata wanted a completion date so he could move forward with relocation plans.

12 Finally, Arata argues that the condition benefitted him by specifying a target price. When Arata began discussing his plans with Sheffield, he did not want to exceed a total purchase price of $500,000. Sheffield explained that the house Arata wanted would cost close to $550,000. Arata agreed to proceed when Sheffield assured [118]*118him that Keystone could build his custom home for $550,000 ($150,000 for the Lot and $400,000 for the home). In fact, Sheffield even testified that the target price "was something that [Arata] wanted to have put in the contract."

{13 These claimed benefits are based in the text of the Contract and in undisputed evidence presented in connection with the cross motions for summary judgment. We therefore agree with Arata that the evidence demonstrates as a matter of law that the condition precedent benefitted him.

{14 Defendants argue that even without the condition precedent Arata could contract with Keystone-or any other builder-to build his home on whatever terms he could negotiate. Furthermore, they note, as a non-party to the Contract, Keystone could not be held to the target completion date or target purchase price. However, these objections miss the mark. The benefit to Arata was that the Contract was conditioned on the execution of the Keystone construction contract. Without the condition precedent, Ara-ta could have purchased the Lot and contracted with Keystone or another builder to build a home on it. But the condition precedent ensured that unless he and Keystone could mutually agree on the terms of a construction contract, he had no obligation to purchase the Lot.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

ASC Utah, Inc. v. Wolf Mountain Resorts, L.C.
2013 UT 24 (Utah Supreme Court, 2013)
Ward v. Intermountain Farmers Ass'n
907 P.2d 264 (Utah Supreme Court, 1995)
Ahrendt v. BOBBITT
229 P.2d 296 (Utah Supreme Court, 1951)
Eliason v. Watts
615 P.2d 427 (Utah Supreme Court, 1980)
Harper v. Great Salt Lake Council, Inc.
1999 UT 34 (Utah Supreme Court, 1999)
McArthur v. State Farm Mutual Automobile Insurance Co.
2012 UT 22 (Utah Supreme Court, 2012)
Foster v. Montgomery
2003 UT App 405 (Court of Appeals of Utah, 2003)
Orvis v. Johnson
2008 UT 2 (Utah Supreme Court, 2008)

Cite This Page — Counsel Stack

Bluebook (online)
2014 UT App 148, 330 P.3d 115, 763 Utah Adv. Rep. 10, 2014 WL 2885653, 2014 Utah App. LEXIS 150, Counsel Stack Legal Research, https://law.counselstack.com/opinion/arata-v-shefco-ltd-utahctapp-2014.