Serpa v. Darling

810 P.2d 778, 107 Nev. 299, 1991 Nev. LEXIS 48
CourtNevada Supreme Court
DecidedApril 30, 1991
Docket20464
StatusPublished
Cited by12 cases

This text of 810 P.2d 778 (Serpa v. Darling) is published on Counsel Stack Legal Research, covering Nevada Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Serpa v. Darling, 810 P.2d 778, 107 Nev. 299, 1991 Nev. LEXIS 48 (Neb. 1991).

Opinions

[300]*300OPINION

By the Court,

Young, J.:

Respondent Michael Darling owned several parcels of land [301]*301known 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The parties continued negotiations and, on December 16, 1985, executed several documents that superseded the Letter of Intent, including the following: a Master Agreement; purchase and sale agreements of the PUD; an option to purchase effluent lands; an option to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 [302]*302were 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 [303]*303pursue 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.

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Serpa v. Darling
810 P.2d 778 (Nevada Supreme Court, 1991)

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Bluebook (online)
810 P.2d 778, 107 Nev. 299, 1991 Nev. LEXIS 48, Counsel Stack Legal Research, https://law.counselstack.com/opinion/serpa-v-darling-nev-1991.