FILED SEP 27 2019 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
In re: BAP No. NV-18-1219-KuLB
FREDRIK ABULYAN (Deceased) and Bk. No. 2:15-bk-15667-GS KARINE GHADYAN, Adv. No. 2:15-ap-01197-GS Debtors.
COLBY IRISH,
Appellant, v. MEMORANDUM*
KARINE GHADYAN,
Appellee.
Submitted Without Argument** on September 26, 2019 at Pasadena, California
Filed – September 27, 2019
Appeal from the United States Bankruptcy Court
* This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. ** By order entered on July 8, 2019, a motions panel determined this appeal suitable for submission on the briefs and record without oral argument. for the District of Nevada
Honorable Gary A. Spraker, Bankruptcy Judge, Presiding
Appearances: Appellant Colby Irish pro se on brief; David Olshan of Nevada Legal Services on brief for appellee Karine Ghadyan.
Before: KURTZ, LAFFERTY, and BRAND, Bankruptcy Judges.
INTRODUCTION
Appellant-creditor, Colby Irish, filed a nondischargeability complaint
against chapter 71 debtors, Karine Ghadyan and her husband,
Mr. Abuylan,2 alleging claims for fraud and embezzlement, among others.
The claims were based on acts committed while Ms. Ghadyan was
operating a wedding clothing rental business owned by Mr. Irish.
The parties settled their disputes for $48,000. However, Ms. Ghadyan
had the option to pay a discounted amount of $30,000 by making monthly
payments over a three-year period. If she defaulted on a monthly payment
and failed to cure within a 15-day grace period, Mr. Irish could seek entry
of judgment for the full amount of the settlement ($48,000 less any amounts
paid), which would be nondischargeable. Ms. Ghadyan was one day late
1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. 2 Mr. Abulyan passed away in March 2017.
2 with her April 2018 payment. Although she timely cured the payment, she
did not pay the $25 late fee until after the grace period expired. Mr. Irish
sought entry of judgment based on Ms. Ghadyan’s breach. The bankruptcy
court denied his request, finding that payment of the $25 late fee outside
the grace period was not a material breach of the settlement. This appeal
followed. For the reasons set forth below, we AFFIRM.
FACTS
Although there is an extensive factual and procedural background to
this appeal, the issue on appeal is narrow: whether the $25 late fee payment
outside the grace period constitutes a material breach which entitles
Mr. Irish to entry of judgment. The few salient facts relevant to this issue
are briefly summarized below.
A. The Settlement Agreement
In December 2017, Mr. Irish, his mother, Lori Irish, Bridal Elegance
and Tuxedos, Inc., and the Lortex Trust3 entered into a settlement and
mutual release with Ms. Ghadyan and Bridal Elegance, LLC,
Ms. Ghadyan’s company. The parties settled the remaining claims4 alleged
3 Lori Irish was the trustee of the Lortex Trust which was presumably established for the benefit of her son Colby. At the time of the acts complained of in the nondischargeability complaint, Mr. Irish was a minor and the owner of Bridal Elegance and Tuxedos, Inc. The business was eventually sold to Ms. Ghadyan. It was after the sale that the alleged fraud was discovered. 4 Ms. Ghadyan filed a motion for summary judgment which the bankruptcy (continued...)
3 in Mr. Irish's nondischargeability complaint.
The settlement amount was $48,000, payable, without interest, at the
rate of $500 per month over 96 months. Ms. Ghadyan had the option to pay
the discounted amount of $30,000 (in monthly or lump sum payments)
within three years after the bankruptcy court approved the agreement. The
agreement also provided: "Payments should be made by electronic
transmission to the account of Colby Irish at: TO BE SUPPLEMENTED." In
addition, a fee of $25 was due with any payment made after the payment
due date, which was the 25th of each month.
The agreement further provided: "In the event Ghadyan fails to make
a payment when due, Irish may mail and transmit by email a Notice of
Default to Ghadyan . . . . If Ghadyan fails to cure a default (including
payment of any applicable late fee) within the 15 days after Irish mails and
emails the Notice of Default, Colby Irish may file with the Court" a notice of
default and request for entry of judgment. (Emphasis added.) Finally, the
agreement contained a confidentiality/nondisparagement provision and a
broad release.
The bankruptcy court approved the settlement in January 2018 and
the adversary proceeding was closed.
4 (...continued) court granted in part, eliminating many of the claims.
4 B. Notice of Failure to Cure Default
In May 2018, Mr. Irish filed a notice of failure to cure default and
request for entry of judgment in the bankruptcy court. Mr. Irish
complained that the February and March payments violated the settlement
agreement because Ms. Ghadyan made them by check instead of
electronically. He also argued that Ms. Ghadyan's check dated April 24,
2018, was returned because of insufficient funds and he was charged $12
by his bank. Although Ms. Ghadyan had deposited another check into his
account by April 26, 2018, Mr. Irish contended that this payment was late
as payments were due on the 24th or 25th of each month. Accordingly,
Ms. Ghadyan owed a $25 late fee which she did not pay within the grace
period. Mr. Irish attached proof that he emailed and mailed a notice of
default to Ms. Ghadyan, notifying her of the default and giving her 15 days
to cure it.
Ms. Ghadyan opposed the request, arguing that she did not breach
the settlement agreement with regard to any payment. She contended that
electronic payments were not required under the plain language of the
settlement agreement, but were permissive. She also emphasized that
Mr. Irish did not provide bank account information until after the signing
of the agreement. Therefore, the electronic payments were permissive
based on the impossibility or impracticality of making the electronic
payments without the required bank account information.
5 Ms. Ghadyan conceded that payments were due on the 25th of each
month, but noted that her April payment was made on the 26th and
payment of the $12 fee was made on May 7, 2018. Therefore, she contended
that both payments were made within the grace period. However, she
admitted that the $25 late fee was paid on May 25, 2019, which was after
the grace period ended. Nonetheless, she argued that this violation was not
a material breach and, therefore, Mr. Irish was not entitled to entry of
judgment.
C. The Bankruptcy Court's Findings
On July 20, 2018, the bankruptcy court held a hearing on Mr. Irish's
request for entry of judgment and entered its findings of fact and
conclusions of law on the record. First, the court confirmed that payments
were due on the 25th of each month. Ms. Ghadyan did not dispute that this
was the due date. Next, in construing the settlement agreement, the court
agreed with Ms. Ghadyan that electronic payments were not a requirement
and obligatory as shown by the use of the word "should" in the agreement,
which was permissive. The court thus concluded that payment by check
was not a per se breach. Third, the court found that the April payment and
payment for the $12 insufficient funds fee were made within the grace
period and therefore could not constitute a default under the terms of the
agreement. Last, the bankruptcy court addressed the payment of the $25
late fee outside the grace period. The court found that this breach was not
6 material as it was de minimus in the grand scheme of things and cured.
The bankruptcy court entered an order denying Mr. Irish’s request for
entry of judgment and Mr. Irish timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction pursuant to 28 U.S.C. §§ 1334
and 157(b)(2) (A) and (I). We have jurisdiction under 28 U.S.C. § 158.
ISSUE
Whether the bankruptcy court erred in determining that
Ms. Ghadyan's failure to cure the $25 late fee payment within the 15-day
grace period was not a material breach of the settlement agreement.
STANDARDS OF REVIEW
Under Nevada law, a settlement agreement is a contract governed by
general principles of contract law. The Power Co. v. Henry, 321 P.3d 858, 863
(Nev. 2014) (citing May v. Anderson, 119 P.3d 1254, 1257 (Nev. 2005)). Like a
contract, the interpretation of a settlement agreement is reviewed de novo.
Id.
To succeed on a breach of contract claim in Nevada, a plaintiff must
prove, among other elements, that there was a material breach by the
defendant. Laguerre v. Nev. Sys. of Higher Educ., 837 F. Supp. 2d 1176, 1180
(D. Nev. 2011). Generally, whether a breach is material is a question of fact.
FDIC. v. Air Fla. Sys., Inc., 822 F.2d 833, 840 (9th Cir. 1987) (explaining that
ordinarily whether a party has breached a contract and whether that breach
7 is material are triable questions of fact); see also Nev. First Bancorp v.
Highland A.V.A., LLC, 367 P.3d 803 (Table), 2010 WL 3291754 at *1 (Nev.
2010) ("[W]hether the actions of a party constitute a material breach is a
question of fact, not a question of law); Thornton v. Agassiz Constr., Inc., 799
P.2d 1106, 1108 (Nev. 1990) (same).
However, "where there is no dispute about the facts and the parties
only dispute 'the meaning and effect of the [provisions in a settlement
agreement] [,the question] is a matter of law for the court to decide.'"Nev.
First Bancorp, 2010 WL 3291754 at *1; Gilbert v. Dep’t of Justice, 334 F.3d 1065,
1072 (Fed. Cir. 2003) ("[W]here . . . facts are undisputed, the determination
of whether there has been a material non-compliance with the terms of a
contract, and hence breach, necessarily reduces to a question of law.")
(citation omitted).
A factual finding is clearly erroneous if illogical, implausible, or
without support in the record. TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d
820, 832 (9th Cir. 2011). "If two views of the evidence are possible, the trial
judge's choice between them cannot be clearly erroneous." Anderson v.
Bessemer City, 470 U.S. 564, 573–575(1985); Hansen v. Moore (In re Hansen),
368 B.R. 868, 874–875 (9th Cir. BAP 2007).
We may affirm "on any ground supported by the record.” ASARCO,
LLC v. Union Pac. R. R. Co., 765 F.3d 999, 1004 (9th Cir. 2014).
8 DISCUSSION
A. Legal Standards: Materiality
This is a breach of contract matter and Nevada law controls.
Commercial Paper Holders v. Hine (In re Beverly Hills Bancorp), 649 F.2d 1329,
1333 (9th Cir. 1981) (instructing that bankruptcy settlement agreements are
contracts to be construed under state law); In re Worldcom, Inc., 343 B.R. 486,
495 (S.D.N.Y. 2006) (citations omitted) (Materiality is a question resolved
through application of state law.).
The elements of a cause of action for breach of contract under Nevada
law are: "(1) formation of a valid contract; (2) performance or excuse of
performance by plaintiff; (3) material breach by the defendant; and (4)
damages." Laguerre, 837 F. Supp. 2d at 1180. A breach of contract is the
material failure to perform "a duty arising under or imposed by agreement."
State Dep’t of Transp. v. Eighth Jud. Dist. Court in and for Cty. of Clark, 402
P.3d 677, 682 (Nev. 2017) (citation omitted).
Nevada recognizes that a material breach by one party to a contract
discharges the non-breaching party’s duty to perform. Cain v. Price, 415
P.3d 25, 29 (Nev. 2018); Young Elec. Sign Co. v. Fohrman, 466 P.2d 846, 847
(Nev. 1970). Conversely, a non-material breach may give rise to a claim for
damages, but will not relieve the non-breaching party from performing its
obligations under the contract. See, e.g., Sheehan & Sheehan v. Nelson Malley
and Co., 117 P.3d 219, 224 (Nev. 2005) (even if a party's failure to provide
9 monthly reports was a breach of the agreement, the breach was not
material); Gibby's Inc. v. Aylett, 615 P.2d 949, 950-51 (Nev. 1980) (no
material breach of the covenants and conditions in a lease such as to work a
forfeiture of the lease); Robert J. Gordon Constr. Co., Inc., v. Meredith Steel
Constr., Inc., 537 P.2d 1199, 1201 (Nev. 1975) (finding that while a
construction company may have breached an agreement by supplying
some girders made of composite steel rather than one-piece steel beams,
the trial judge did not err in finding such breach non-material). These
authorities demonstrate that in a variety of contexts a material default or
breach does not result simply because a party to a contract violates one of
the agreement’s provisions.
Nevada also recognizes that equity requires something more than a
trivial breach to justify forfeiture.5 See Mosso v. Lee, 295 P. 776 (Nev. 1931)
(discussing the maxim that "Equity abhors a forfeiture," including equity’s
preference for compensation, rather than forfeiture); Davenport v. Republic
Ins. Co., 625 P.2d 574, 575 (Nev. 1981) (delay by insured did not preclude
recovery under the contract). "Even where time is made material, by
express stipulation, the failure of one of the parties to perform a condition
5 Forfeiture is defined as "The loss of a right . . . because of a . . . breach of obligation. . . . A destruction or deprivation of some . . . right because of the failure to perform some contractual obligation or condition." BLACK’S LAW DICTIONARY (11th ed. 2019). Here, if Ms. Ghadyan’s payment of the late fee outside the grace period is deemed a material breach, she would lose not only the right to pay the discounted settlement amount but also her discharge.
10 within the particular time limit will not in every case defeat his right to
specific performance, if the condition be subsequently performed, without
unreasonable delay, and no circumstances have intervened that would
render it unjust or inequitable to give such relief." Mosso, 295 P. at 777. The
Mosso court went on to say, "[t]he granting of relief against forfeitures is
one of legal discretion." Id. at 780. Nevada courts often apply the equitable
principal against forfeiture in cases involving sales or leases of real
property.
Against this background, there is no precise definition of what
constitutes a material breach under Nevada law, nor is there a categorical
rule stating when and to what extent a court may refuse to enforce a
forfeiture on equitable grounds since the decision is a discretionary one.
While we look at the language of the contract in the first instance, the
proper analysis of materiality may also be informed by commentaries and
decisions outside Nevada state law. See Strother v. S. Cal. Permanente Med.
Group, 79 F.3d 859, 865 (9th Cir. 1996) ("If the state has not addressed the
particular issue, a federal court must use its best judgment to predict how
the highest state court would resolve it using intermediate appellate court
decisions, decisions from other jurisdictions, statutes, treatises, and
restatements as guidance."). Accordingly, the bankruptcy court properly
considered case law outside of Nevada state law when determining
whether Ms. Ghadyan had materially breached the settlement agreement.
11 This case law is informative, setting forth various usable definitions
of what constitutes a material breach under a variety of circumstances. The
Ninth Circuit has stated: "A material breach is a breach which is so
substantial as to defeat the purpose of the entire transaction relieving the
non-breaching party of its duty to perform under the contract." Watermill
Ventures, Ltd. v. Cappello Capital Corp., 671 F.App'x 492, 493 (9th Cir. 2016)
(quoting Lipsky v. Commonwealth United Corp., 551 F.2d 887, 895 (2d Cir.
1976)); see also FDIC, 822 F.2d at 840 (breach is material if it goes to the
essence of the agreement).
Two unpublished Nevada district court decisions offer further
guidance. "A material breach of a contract occurs when there is a breach of
an essential and inducing feature of the contract."6 Gamage v. Nev. Board of
Regents of Nev. System of Higher Educ., Case No. 2:12-cv-00290-GMN-VCF,
2014 WL 250245 at *12 (D. Nev. Jan. 21, 2014) (citing Restatement (Second)
of Contracts section 237).
Whether a party has committed a material breach of contract turns upon the seriousness of the breach and the likelihood that the injured party received substantial performance of the contract promise. Generally, a material breach occurs when there is a breach of an essential element of the contract which induced the party to enter into it. Further, the breach must go to
6 Although not binding precedent, unpublished decisions have persuasive value and may be relied upon. See Employers Ins. of Wausau v. Granite State Ins. Co., 330 F.3d 1214, 1220 n.8 (9th Cir. 2003) ("[W]e may consider unpublished . . . decisions, even though such opinions have no precedential value").
12 the substance of the contract, or defeat an essential purpose of the contract.
BZ Clarity Tent Sub LLC v. Ross Mollison Int'l Pty, Ltd., No. 2:15-CV-1065
JCM, 2015 WL 3657249, at *4 (D. Nev. June 12, 2015) (citing AMJUR
Contracts section 706). Other courts apply variations of these tests. See e.g.,
Mitchell v. Straith, 698 P.2d 609, 612 (Wash. Ct. App. 1985) (stating that a
material breach of contract is often defined "as one that substantially
defeats the purpose of the contract"); Specialized Commercial Servs., Inc. v.
Welsh, Case No. 1 CA-CV 08-0181, 2009 WL 532603 at *3 (Ariz. Ct. App.
Mar. 3, 2009) ("A generally accepted definition of material breach is a
breach that goes to the essence of the contract, defeating the parties'
purpose in entering the contract.") (emphasis omitted); Marion Family
YMCA v. Hensel, 897 N.E.2d 181, 186 (Ohio Ct. App. 2008) (defining a
material breach as "a failure to do something that is so fundamental to a
contract that the failure to perform defeats the essential purpose of the
contract”); Stansbury v. Fed. Home Loan Mortg. Corp., No. 7:16-cv-00516, 2017
WL 3821669 at *3 (W.D. Va. Aug. 31, 2017) ("The Supreme Court of Virginia
has defined a 'material breach of contract' as 'a failure to do something that
is so fundamental to the contract that the failure to perform the obligation
defeats an essential purpose of the contract.'") (citation omitted).
The Restatement (Second) of Contracts is also a helpful resource
because Nevada courts have frequently turned to the Restatement for
13 guidance. Cain, 415 P.3d at 29 (material breach of promise discharges the
non-breaching party’s duty to perform) (citing Restatement (Second) of
Contracts section 237 (Am. Law Inst. 1981)); Dynalectric Co. of Nev., Inc. v.
Clark & Sullivan Constructors, Inc., 255 P.3d 286, 288 (Nev. 2011) (following
the Restatement (Second) of Contracts in holding that a court may award
expectation, reliance, or restitutionary damages for promissory estoppel
claims). The Restatement (Second) of Contracts section 241 sets forth
several circumstances for courts to consider when determining whether a
breach is material.
In the end, the standard for deciding materiality always starts with
the language of the contract under a de novo standard of review. If there is
no definite language, the court then determines as a factual matter whether
the breach is material by applying the circumstances set forth in the
Restatement and applicable case law. In any event, the duty must be an
essential and inducing feature of the contract and its breach must be so
substantial as to defeat the entire transaction.
B. Analysis
1. The plain language of the settlement agreement
It is undisputed that Ms. Ghadyan breached the settlement
agreement by paying the late fee outside the grace period. To determine
whether this breach was material, we look to the express terms of the
agreement to determine the intent of the parties.
14 Nevada courts construe contracts from the written language and
enforce them as written. The Power Co., 321 P.3d at 863; Kaldi v. Farmers Ins.
Exch., 21 P.3d 16, 20 (Nev. 2001). "[N]either a court of law nor a court of
equity can interpolate in a contract what the contract does not contain."
Traffic Control Servs., Inc. v. United Rentals Nw., Inc., 87 P.3d 1054, 1059 (Nev.
2004); see also 23 Richard A. Lord, Williston on Contracts section 63:3 (4th
ed. July 2019) ("Where the contract itself is clear in making a certain event a
material breach of that contract, a court must ordinarily respect that
contractual provision.") (citations omitted).
On appeal, Mr. Irish argues that the clear language of the settlement
agreement states when payments were to be made, the procedure to
follow, and the consequence of late payments. According to Mr. Irish, these
provisions went to the essence of the contract and, without them, neither he
nor his mother would have signed the agreement. In contrast,
Ms. Ghadyan contends that the settlement does not reflect the timing of
payment as a "central aspect" because there was no "time is of the essence"
language. She maintains that the timely payments were "accessory and not
material."
We start from the premise that, under Nevada law, "a fundamental
principle of contract law is that the time for performance under a contract
is not considered of the essence unless the contract expressly so provides or the
circumstances of the contract so imply." Mayfield v. Koroghli, 184 P.3d 362, 366
15 (Nev. 2008) (emphasis added). The Nevada Supreme Court explained: "[I]n
the absence of a clause making time of the essence, a party's failure to
perform within a reasonable time generally does not constitute a material
breach of the agreement." Id. Although Mayfield is factually distinguishable
from this case, there is no indication that this "fundamental principle of
contract law" has limited applicability in Nevada.
Contrary to Mr. Irish’s belief, the plain language of the agreement
does not make Ms. Ghadyan’s payment of the late fee within the grace
period an essential element of the parties’ agreement. We reach this
conclusion for several reasons. First, the settlement agreement does not
contain an explicit "time is of the essence" clause nor does it plainly say that
Ms. Ghadyan’s failure to pay amounts past due, including the late fee,
within the grace period will be considered a material default. If the time of
payment is essential, the agreement should clearly and expressly say so.
Mayfield, 184 P.3d at 366.
Next, the agreement does not make timely payments so essential that
any delay gives Mr. Irish the immediate right to entry of judgment. There
are further acts required. Under the plain terms of the agreement, if
Ms. Ghadyan was late with her monthly payment, Mr. Irish had the
unilateral discretion to provide notice of the default thereby triggering the
15-day grace period ("Irish may mail and transmit by email a Notice of
Default . . . ."). He also had the unilateral discretion to file the notice of
16 default and request for entry of judgment after the 15-day period expired
without a cure ("Irish may file with the Court . . . .").
In other words, explicit in the agreement is that Mr. Irish had the
discretion to extend the 15-day grace period if he wished. See Jama v.
Immigration & Customs Enf’t, 543 U.S. 335, 346 (2005) ("The word 'may'
customarily connotes discretion.” (citation omitted)); Conant v. Wells Fargo
Bank, N.A., 60 F. Supp. 3d 99, 117-18 (D.D.C. 2014) (concluding that contract
stating that "Lender may send [Plaintiff] a written notice" does not impose
mandatory obligation); State v. Am. Bankers Ins. Co., 802 P.2d 1276, 1278
(Nev. 1990) (in statutory construction endeavor, construing "may" as
permissive and "shall" as mandatory, absent contrary legislative intent).
The possibility of Mr. Irish exercising his discretion is contrary to a "time is
of the essence" intent. See Katemis v. Westerline, 120 Cal. App. 2d 537, 544
(Cal. Ct. App. 1953) (buyer's agent's power to extend the performance of
any act to a time beyond the date involved was "inconsistent" with the
supposition that the precise time specified for buyers’ performance was "of
the essence of the contract.").
In sum, although Mr. Irish argues otherwise, the plain language of
the settlement agreement did not make the timeliness of Ms. Ghadyan’s
payments an essential part of the bargain. Nor do the circumstances of the
agreement require us to so imply. The parties were in litigation. Mr. Irish
agreed to the settlement of the adversary proceeding in exchange for the
17 payment of money. The essential purpose of the settlement agreement was
for Mr. Irish to avoid the risks and costs of litigation and get paid either the
discounted amount of the settlement or the full amount. Here,
Ms. Ghadyan’s breach was not so fundamental or substantial as to defeat
the essential purpose of the agreement. She paid the $25 within a
reasonable time after expiration of the grace period. In sum, we cannot find
that the agreement itself made Ms. Ghadyan’s breach a material one under
these circumstances.
2. The Restatement Factors
The bankruptcy court’s application of the factors in the Restatement
(Second) of Contracts section 241 gives us a better understanding as to why
this was not a material breach. The Restatement lists five factors that may
be considered in determining whether a breach is material: (a) the extent to
which the injured party will be deprived of the benefit which he reasonably
expected; (b) the extent to which the injured party can be adequately
compensated for the part of that benefit of which he will be deprived; (c)
the extent to which the party failing to perform or to offer to perform will
suffer forfeiture; (d) the likelihood that the party failing to perform or to
offer to perform will cure his failure, taking account of all the
circumstances including any reasonable assurances; and (e) the extent to
which the behavior of the party failing to perform or to offer to perform
comports with standards of good faith and fair dealing. The comments to
18 the Restatement underscore that these "circumstances" are not rules and are
to be applied "in such a way as to further the purpose of securing for each
party [its] expectation of an exchange of performances."
Here, the bankruptcy court properly applied these factors when
deciding, as a matter of fact, whether Ms. Ghadyan’s breach was material.
With regards to factors (a) and (b), the court considered the degree of harm
caused by Ms. Ghadyan’s breach as compared to the reasonable
expectations of Mr. Irish. The court found that the $25 in the grand scheme
of things was a de minimus amount and was paid. Therefore, the harm to
Mr. Irish was slight and he received all the performance that was due. In
applying factor (c), the bankruptcy court implicitly considered the harm to
Ms. Ghadyan if it granted Mr. Irish’s request for entry of judgment.
Ms. Ghadyan would be required to pay a substantial amount over and
above the discounted amount of the settlement and that amount would be
nondischargeable. As to factor (d), Ms. Ghadyan had cured. All these
findings are plausible, logical, and supported by inferences drawn from the
record.
Regarding factor (e), Mr. Irish contends that Ms. Ghadyan violated
the standards of good faith and fair dealing. He raises this issue for the first
time on appeal. Generally, we do not consider issues raised for the first
time on appeal. See Kieslich v. United States (In re Kieslich), 258 F.3d 968, 971
(9th Cir. 2001); Price v. Lehtinen (In re Lehtinen), 332 B.R. 404, 411 (9th Cir.
19 BAP 2005). We have discretion to consider arguments raised for the first
time on appeal, but do so only if there are "exceptional circumstances.” El
Paso City of Tex. v. Am. W. Airlines, Inc. (In re Am. W. Airlines), 217 F.3d 1161,
1165 (9th Cir. 2000). There are no exceptional circumstances here, especially
when Ms. Ghadyan’s good faith is a factual question.
3. Slight delay of payment is not always a material breach.
Finally, we observe that numerous courts outside Nevada have
found in different contexts that a slight delay of payment is not a material
breach. Although not binding and factually distinguishable, these cases
support the outcome here. See, e.g., Korb v. Cutler Trucking, Inc., Case No.
A099775, 2003 WL 21766238, at *1 (Cal. App. July 30, 2003) (affirming the
trial court's conclusion that "neither Cutler's delay in paying the relatively
small sum overdue for June 1998 nor its relatively short delay in paying
Korb's earnings for July 1998 constituted a material breach of the oral
agreement"); Associated Builders, Inc. v. Coggins, 722 A.2d 1278, 1280–81 (Me.
1999) (finding that a short delay in payment, absent any aggravating
circumstances, was not a material breach); Jenkins v. U.S.A. Foods, Inc., 912
F. Supp. 969, 974 (E.D. Mich. 1996) (contract payment made two days after
expiration of grace period not a material breach where payee suffers little
or no prejudice); Edward Waters College, Inc. v. Johnson, 707 So. 2d 801, 802
(Fla. Dist. Ct. App. 1998) (one day delay in paying settlement agreement
not a material breach where agreement did not state that time is of the
20 essence and payee incurred no hardship because of delay); A.E. Giroux, Inc.
v. Contract Servs. Assocs., 299 N.W.2d 20, 21 (Mich. Ct. App. 1980) (accord
satisfied by one-day delay of payment where no material damage to
obligee and payment amounted to substantial performance); compare
Servicios Aereos del Centro S.A. de C.V. v. Honeywell Intern., Inc., 252 Fed.
Appx. 849 (9th Cir. Oct. 31, 2007) (late payments constituted a material
breach); Placo Inv., LLC v. Ibarra, Case No. B196846, 2008 WL 2347730 at *5
(Cal. App. June 10, 2008) (noting that "it is reasonable to infer any delay in
the payment of money amounts to a substantial breach when the party
now denying breach earlier acknowledged (in writing) that the delay
would constitute an 'incurable' and 'material' breach as the appellants so
recognized in the negotiated settlement agreement").
In sum, as a matter of law we find the complained of breach to be
non-material under the plain language of the settlement agreement. We
further conclude that the bankruptcy court applied the proper standards
for determining whether Ms. Ghadyan’s breach was material and its
findings of fact were not clearly erroneous. Accordingly, the bankruptcy
court did not err by denying Mr. Irish’s request for entry of judgment
under these circumstances.7
7 We emphasize that our decision is limited to the facts before us. Continual payments outside the grace period may dictate a different result. The bankruptcy court wisely urged Ms. Ghadyan to make electronic and timely payments for the duration.
21 CONCLUSION
For the reasons explained above, we AFFIRM.