No. 58261 

129 Nev., Advance Opinion 33 

IN THE SUPREME COURT OF THE STATE OF NEVADA 

JACK GALARDI, AN INDIVIDUAL; 

AND BIRDIE, LLC, A NEVADA 

LIMITED LIABILITY COMPANY, 

Appellants, 

vs. 

NAPLES POLARIS, LLC, A NEVADA 

LIMITED LIABILITY COMPANY, 

Respondent. 

Appeal from a district court order granting summary 

judgment in a contract action. Second Judicial District Court, Washoe 

County; Brent T. Adams, Judge. 

Affirmed. 

Armstrong Teasdale LLP and Bruce A. Leslie and Bret F. Meich, Las 

Vegas, 

for Appellants. 

Holland & Hart, LLP, and J. Stephen Peek, Timothy A. Lukas, and 

Tamara Reid, Reno, 

for Respondent. 

BEFORE PICKERING, C.J., HARDESTY and SAITTA, JJ. 

OPINION 

By the Court, PICKERING, C.J.: 

This dispute arises out of a written option contract. Under the 

contract, respondent Naples Polaris had the right to purchase Las Vegas 

real property from appellants Jack Galardi and Birdie, LLC (together, 

- /14164, 
Galardi), for $8 million "cash." The property was subject to a deed of trust 

securing approximately $1.3 million in debt. The question is whether 

Naples or Galardi must pay off the $1.3 million debt. Specifically, does the 

option contract require Galardi to deliver clear title, meaning Galardi 

must remove the $1.3 million encumbrance for a net $6.7 million option 

price? Or does it contemplate that Naples take title subject to preexisting 

encumbrances, so that Galardi receives the full $8 million option price? 

The district court granted summary judgment to Naples. 

Galardi appeals and we affirm. 

I. 

Naples acquired its option rights by assignment from 

Galardi's lessee, French Quarter, a nonparty. The deed of trust securing 

the $1.3 million debt predated the option. French Quarter was operating 

a topless club on the property but losing money and filed for bankruptcy 

protection. We simplify the facts slightly, but what happened next is the 

bankruptcy trustee lined up a fourth party to acquire the property and 

Naples' option. The price was handsome—enough to pay off the $1.3 

million encumbrance, to give Galardi the full $8 million option price he 

demanded, and to generate surplus funds for Naples and French Quarter's 

creditors. 

Naples and Galardi welcomed the Bankruptcy court sale. But 

they could not agree on whether the $1.3 million needed to retire the 

preexisting encumbrance against the property should come out of Naples' 

or Galardi's share of the sale proceeds. They stipulated to let the sale 

close, with Galardi receiving $8 million and Naples reserving the right to 

sue Galardi in state court for the $1.3 million. This suit over the proper 

interpretation of the option contract followed, which the district court 

decided on cross-motions for summary judgment. 

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The option contract is in writing and includes an integration 

clause. The contract is silent as to preexisting encumbrances in general 

and the $1.3 million debt in particular. It says simply: 

Buyer [Naples] shall have an option to purchase 

the above described real estate for the sum of 

$8,000,000 (Eight Million Dollars) cash.. . . Buyer 

[Naples] shall pay all costs of transfer and closing 

whereby Seller [Galardi] shall receive full 

purchase price. 

In their motions for summary judgment, both sides argued 

that the option contract, as written, unambiguously favored its position. 

Each focused on the phrase, "Buyer shall pay all costs of transfer and 

closing whereby Seller shall receive full purchase price." Galardi argued 

that "costs of transfer and closing" encompasses preexisting indebtedness, 

so that he receives the $8 million "full purchase price" with no deductions. 

Naples countered that "costs of transfer and closing" refers to transaction 

costs such as recording fees and transfer taxes, not encumbrances. In 

Naples' view, if Galardi meant for Naples to take title subject to 

preexisting encumbrances, he needed to write the option contract to say so 

specifically. 

Both Naples and Galardi supported their readings of the 

contract with testimonial evidence. Galardi offered excerpts from his 

deposition, in which he testified that he understood that the deal would 

net him $8 million; that French Quarter (later Naples, as French 

Quarter's assignee) would "pick up the bank note, clean it up, send me $8 

million and I'm gone." Naples offered an expert affidavit from Diane 

Erickson, past president and current certification chair for the Nevada 

Escrow Association with considerable Nevada real estate industry 

experience. Addressing the contract provision that "Buyer shall pay all 

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costs of transfer and closing," Ms. Erickson opined that in the real estate 

industry, "[c]losing costs are separate and apart from the purchase price 

and normally consist of the title policy fee, escrow fee, real property 

transfer tax, recording fees, etc." She further opined, based on her 

"experience in the industry, that whenever real property is transferred, it 

is always given to the purchaser free and clear of any encumbrances or 

liens, unless the agreement specifically states that it is to be acquired 

'subject to' the existing encumbrance, and the buyer specifically agrees to 

take over the payments of the existing loan." 

Galardi did not dispute the real-estate-industry usages and 

customs detailed in the Erickson affidavit. He argued instead that the 

district court could only consider the Erickson affidavit if it deemed the 

contract ambiguous and that, if the contract were ambiguous, it would 

take a trial to resolve the ambiguity. The district court disagreed. It 

deemed the contract unambiguous when considered in light of the trade 

usages described in the Erickson affidavit; it rejected the deposition 

testimony offered by Galardi as insufficient to create a genuine issue of 

material fact. The district court thus granted summary judgment to 

Naples and denied Galardi's cross-motion for summary judgment. 

"[Tin the absence of ambiguity or other factual complexities," 

contract interpretation presents a question of law that the district court 

may decide on summary judgment, Ellison v. Cal. State Auto. Ass'n, 106 

Nev. 601, 603, 797 P.2d 975, 977 (1990), with de novo review to follow in 

this court. May v. Anderson, 121 Nev. 668, 672, 119 P.3d 1254, 1257 

(2005). Whether a contract is ambiguous likewise presents a question of 

law. Margrave v. Dermody Props., 110 Nev. 824, 827, 878 P.2d 291, 293 

(1994). A contract is ambiguous if its terms may reasonably be 

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interpreted in more than one way, Anvui, LLC v. G.L. Dragon, LLC, 123 

Nev. 212, 215, 163 P.3d 405, 407 (2007), but ambiguity does not arise 

simply because the parties disagree on how to interpret their contract. 

Parman v. Petricciani, 70 Nev. 427, 430-32, 272 P.2d 492, 493-94 (1954) 

(concluding that summary judgment was appropriate because the 

interpretation offered by one party was unreasonable and, therefore, the 

contract contained no ambiguity), abrogated on other grounds by Wood v. 

Safeway, Inc., 121 Nev. 724, 121 P.3d 1026 (2005). Rather, "an ambiguous 

contract is 'an agreement obscure in meaning, through indefiniteness of 

expression, or having a double meaning." Hampton v. Ford Motor Co., 

561 F.3d 709, 714 (7th Cir. 2009) (quoting Whiting Stoker Co. v. Chicago 

Stoker Corp., 171 F.2d 248, 251 (7th Cir. 1948)). 

Citing Dickenson v. State, Dep't of Wildlife, Galardi argues 

that the district court erred in considering Naples' expert evidence of trade 

usage and industry custom because it did not first declare the option 

contract ambiguous. 110 Nev. 934, 937, 877 P.2d 1059, 1061 (1994) ("If 

there is an ambiguity requiring extrinsic evidence to discern the parties' 

intent, summary judgment is improper. However, if no ambiguity exists, 

the words of the contract must be taken in their usual and ordinary 

signification." (internal citation omitted)). Galardi argues that the district 

court compounded its error, adding insult to injury, when it deemed the 

deposition excerpts he submitted about how he understood the deal terms 

insufficient to generate a genuine issue of material fact. But see Kaldi v. 

Farmers Ins. Exch., 117 Nev. 273, 281, 21 P.3d 16, 21 (2001) (when an 

integrated written contract is unambiguous, "parol evidence may not be 

used to contradict [its] terms"). 

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Galardi's arguments track the former common-law rule that 

trade usage and industry "custom can only supply incidents to a contract 

when the contract is ambiguous on the point to which the party seeks to 

apply the custom." 12 Richard A. Lord, Williston on Contracts § 34:7 (4th 

ed. 2012). But this rule has lost adherents over time. Id. Modernly, 

courts consult trade usage and custom not only to determine the meaning 

of an ambiguous provision, but also to determine whether a contract 

provision is ambiguous in the first place. 1 See, e.g., Restatement (Second) 

of Contracts § 220 cmt. d (1981) ("[U]sage relevant to interpretation is 

treated as part of the context of an agreement in determining whether 

there is ambiguity or contradiction. . . . There is no requirement that an 

ambiguity be shown before usage can be shown . . ."), 5 Margaret N. 

Kniffin, Corbin on Contracts § 24.13, at 121 (rev. ed. 1998) ("Seldom 

should the court hold that the written words of a contract exclude evidence 

of the custom, since even what are often called 'plain' meanings are shown 

to be incorrect when all the circumstances of the transaction are known; 

and usages and customs are a part of those circumstances by which the 

meaning of words is to be judged."). 

Contract interpretation strives to discern and give effect to the 

parties' intended meaning. Id. at 118-19. Words derive meaning from 

usage and context. "It would be passing odd to forbid people to look up 

words in dictionaries, or to consult explanatory commentaries that, like 

lAlthough the Uniform Commercial Code (U.C.C.) does not control 

this real-property-based dispute, we note that the U.C.C. expressly allows 

evidence of 'usage of trade" to explain an agreement's terms. United 

Servs. Auto Ass'n v. Schlang, 111 Nev. 486, 493, 894 P.2d 967, 971 (1995) 

(quoting NRS 104.2202(1)); see Las Vegas Sands, LLC v. Nehme, 632 F.3d 

526, 536-38 (9th Cir. 2011) (applying Nevada U.C.C. and citing Schlang). 

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trade usage, are in the nature of specialized dictionaries" in interpreting a 

written contract. Matter of Envirodyne Indus., 29 F.3d 301, 305 (7th Cir. 

1994). We thus conclude, as other modern courts have, that "[a]mbiguity 

is not required before evidence of trade usage . . . can be used to ascertain" 

or illuminate contract terms. Puget Sound Fin., LLC v. Uni search, Inc., 47 

P.3d 940, 943 (Wash. 2002); accord Metric Constructors, Inc. v. Nat'l 

Aeronautics & Space Admin., 169 F.3d 747, 752 (Fed. Cir. 1999) ("Trade 

practice and custom illuminate the context for the parties' 

contract. . . . Before an interpreting court can conclusively declare a 

contract ambiguous or unambiguous, it must consult the context in which 

the parties exchanged promises."); Hickman v. Groves, 71 P.3d 256, 260 

(Wyo. 2003) ("[E]vidence of usage may be admissible to give meaning to 

apparently unambiguous terms of a contract" even "where other parol 

evidence," such as "the parties' statements of what they intended the 

contract to mean[,] are not admissible." (internal quotations omitted)); 

In,tersport, Inc. v. NCAA, 885 N.E.2d 532, 539 (Ill. App. 2008) ("contract 

terms need not be found to be ambiguous before evidence of the custom 

and usage of the terms in the parties' trade or practice can be considered"); 

cf. Warrington v. Empey, 95 Nev. 136, 139, 590 P.2d 1162, 1164 (1979) 

("custom and usage may be used to establish the terms of a contract" 

(dictum)). 

We recognize that, ordinarily, "Mlle existence and scope of a 

usage of trade are to be determined as questions of fact." Restatement 

(Second) of Contracts § 222(2) (1981). To illustrate: If Galardi had 

presented admissible evidence to contradict Ms. Erickson's statements 

about the Nevada real estate industry's conventions and usages, a genuine 

issue of material fact may have arisen that would defeat summary 

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judgment. Compare Den Norske Bank AS v. First Nat'l Bank of Boston, 75 

F.3d 49, 58-59 (1st Cir. 1996) (describing usage evidence held sufficient to 

create a genuine issue of material fact and defeat summary judgment in a 

contract interpretation case), with Simon Wrecking Co. v. MU Ins. Co., 

530 F. Supp. 2d 706, 716 (E.D. Pa. 2008) (holding that party adequately 

defeated opposing party's trade usage argument with proof the usage 

claimed either did not exist or differed from that argued). But NRCP 56(e) 

provides that, when a properly supported "motion for summary judgment 

is made," the adverse party "must set forth specific facts showing that 

there is a genuine issue for trial" or "summary judgment, if appropriate, 

shall be entered." Thus, summary judgment may be granted in a case 

requiring interpretation of an integrated written contract, if supported by 

admissible evidence of trade usage that is both "persuasive" and 

"unrebutted." Puget Sound Fin., LLC, 47 P.3d at 943; see Restatement 

(Second) of Contracts § 212(2) (1981) ("A question of interpretation of an 

integrated agreement is to be determined by the trier of fact if it depends 

on the credibility of extrinsic evidence or on a choice among reasonable 

inferences to be drawn from extrinsic evidence. Otherwise a question of 

interpretation of an integrated agreement is to be determined as a 

question of law."); see Intersport, 885 N.E.2d at 538-40 (consulting 

industry usages in interpreting an integrated written contract and 

affirming judgment on the pleadings); 5 Corbin on Contracts, supra, § 

24.30, at 327. 

The district court properly deemed the Erickson opinion 

admissible and the option contract unambiguous in light of the trade 

usage Ms. Erickson's affidavit established. "A usage of trade is a usage 

having such regularity of observance in a place, vocation, or trade as to 

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justify an expectation that it will be observed with respect to a particular 

agreement." Restatement (Second) of Contracts § 222(1) (1981). 2In this 

case, Galardi did not challenge Ms. Erickson's qualifications or the 

legitimacy and relevance of her opinions. Ms. Erickson opined that unless 

otherwise expressly stated, real property is "always given to the purchaser 

free and clear of any encumbrances or liens." See NRS 111.170(1)(b) 

(Nevada grant, bargain and sale deeds, "unless restrained by [contrary] 

express terms," include a covenant that the property conveyed is "free 

from encumbrances"). She further opined that, in the escrow setting, the 

phrase "costs of transfer and closing" signifies costs "separate and apart 

from the purchase price and normally consist[ing] of the title policy fee, 

escrow fee, real property transfer tax, recording fees, etc." 

Ms. Erickson's expert opinions comport with the language of 

the option contract and make sense in light of both common law and 

Nevada statutes. To credit Galardi's contrary reading that "costs of 

transfer and closing" encompasses preexisting encumbrances would mean 

that Galardi could have increased the option price at will just by 

borrowing against the property and passing the debt along to the optionee, 

which is unreasonable. The phrase "costs of transfer and closing" thus 

does not carry a double meaning that renders the option contract 

2Galardi, French Quarter, and Naples had counsel or commercial 

real estate experience or both. Thus, Galardi makes no argument that he 

did not know or have reason to know of the Nevada real estate industry 

usages that the Erickson affidavit addressed. See Restatement (Second) of 

Contracts § 222(3) (1981) ("[A] usage of trade in the vocation or trade in 

which the parties are engaged or a usage of trade of which they know or 

have reason to know gives meaning to or supplements or qualifies their 

agreement."). 

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ambiguous. See Parman, 70 Nev. at 430-31, 272 P.2d at 493-94. Nor does 

the reference to "full purchase price" render the contract ambiguous, 

particularly when read in light of the industry usages detailed in the 

Erickson affidavit. 

The deposition testimony Galardi offered that he (and perhaps 

French Quarter) understood the deal terms to require the optionee to take 

subject to existing encumbrances would, if admitted, contradict the option 

contract's express terms. It thus was inadmissible under the parol 

evidence rule. Daly v. Del E. Webb Corp., 96 Nev. 359, 361, 609 P.2d 319, 

320 (1980) ("The parol evidence rule forbids the reception of evidence 

which would vary or contradict the contract, since all prior negotiations 

and agreements are deemed to have been merged therein."). Allowing 

extrinsic evidence of objective facts such as industry usage and custom 

does not open the door to a party's subjective understanding of a contract's 

terms, when that understanding contradicts the contract's express terms. 

Cf. AM Inel, Inc. v. Graphic Mgmt. Assocs., Inc., 44 F.3d 572, 575 (7th Cir. 

1995) (discussing the admissibility of objective evidence as distinguished 

from the subjective testimony by the parties as to what they believe the 

contract means in the related context of construing ambiguous contracts); 

Campanelli v. Conservas Altamira, S.A., 86 Nev. 838, 841, 477 P.2d 870, 

872 (1970) (parties to a written contract are bound by its terms regardless 

of their subjective beliefs at the time the agreement was signed). The 

extrinsic evidence with which Galardi opposed Naples' properly supported 

summary judgment motion was either inadmissible or irrelevant or both, 

and thus insufficient to generate a genuine issue of material fact or to 

establish his entitlement to judgment as a matter of law. 

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The district court properly considered trade usage and 

industry custom in interpreting the option contract, even though it also 

found that the contract was unambiguous. For the option contract to 

require the optionee to take the property subject to existing indebtedness, 

it needed to so state. We therefore agree with the district court that the 

contract placed responsibility for the $1.3 million debt on Galardi's side of 

the ledger and affirm. 

Pickering 

, C.J. 

We concur: 

Harde 

Saitta 

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