Court Opinion

ID: 9552857
Source: CourtListenerOpinion
Date Created: 2023-08-07 19:18:27.566699+00
Date Added: 2024-06-11T15:29:14.445737
License: Public Domain

Manoukian, J.,
dissenting:
I cannot agree with the majority opinion, because the record and law support an opposite result. Accordingly, I dissent.
In this appeal, appellants contend that the trial court erred in finding that respondent’s agent did not have the authority to extend an escrow closing date, and alternatively, that absent such authority, respondent did not ratify the agent’s unauthorized acts. The majority concludes that the doctrine of equitable estoppel prevents respondent Hanna from claiming that the Goldsteins’ rights under the lease-option agreement expired on August 29, 1978. The majority’s reliance on the law of estoppel in the context of this case is misplaced. It merely appears viable, because of the majority’s omission of facts both material and relevant to the disposition of this appeal. Not only is the principle announced by the Court today without sound precedent, it is also a trap for unsuspecting prospective vendors.
On November 23, 1977, appellants-lessees and respondent-lessor entered into a “residential lease with option to purchase” for a residential unit (hereinafter referred to as Unit 21-E) in a development known as Regency Towers in Clark *565County. Appellants paid respondent $1,000 for the option to purchase the unit for $83,000, which option was exercisable anytime between December 10, 1977, and December 9, 1978. Callahan Realty, Inc., was named as respondent’s agent regarding the lease.
On or about July 17, 1978, appellants exercised the option and the parties executed escrow instructions which set forth the terms and conditions of the sale. The closing date was August 29, 1978, and the escrow included a provision that time was of the essence. Callahan Realty, Inc., was named as the broker. The instructions did not authorize Callahan Realty, Inc., to extend the closing date of the escrow.
The record shows that Callahan, apparently without the knowledge of respondent, was coordinating a “double escrow” relative to Unit 21-E. The value of the unit was nearly twice the lease-option purchase price. On approximately August 26, appellants were informed that the third party buyer had withdrawn his offer to buy.
Shortly before the closing date of the escrow, appellants met with Gerald Callahan, president of Callahan Realty, Inc., to discuss the problems with escrow financing. While appellants were waiting, Callahan telephoned the respondent, Hanna. Hanna did not agree to extend the August 29 closing date, nor did he authorize Callahan to extend it and, in fact, indicated to Callahan that if appellants did not meet the escrow terms by then, the escrow would be cancelled.1 Callahan, nevertheless, did not relate this information to appellants, and instead informed appellants that they could close at any time before the end of the option period.
Appellants did not comply with the escrow agreement by the August 29 deadline,2 and on August 31, respondent sent a *566notice of cancellation of escrow to the escrow company. Thereafter, appellants did not deposit the necessary funds until September 27, 1978. Appellants were subsequently unsuccessful in this action for specific performance and respondent successfully counterclaimed for unpaid rent. Appellants appeal from the adverse judgments.
It is the general rule that when an option is properly exercised, the option agreement is terminated and is converted into a bilateral contract for the purchase and sale of the property. Maloff v. B-Neva, Inc., 85 Nev. 471, 456 P.2d 438 (1969); 8 A. G. Thompson, Real Property § 4446 (1963). And when the option exercised is part of a lease-option agreement, the incidents of the lease agreement terminate as well, and the lessor-lessee relationship becomes that of vendor-vendee. Summa Corp. v. Richardson, 93 Nev. 228, 564 P.2d 181 (1977); Rosenthal v. Shapiro, 52 N.W.2d 859 (Mich. 1952). Accordingly, when appellants exercised the option in July, 1978, the option terminated and the lease agreement was converted into a contract for the purchase and sale of property.3 As correctly noted by the trial judge, Callahan’s assertions that the option could be exercised after the August 29 closing date were, therefore, erroneous legal conclusions.
Appellants reject application of the general rule discussed above, arguing first that Gerald Callahan, as agent for respondent, had apparent authority to renew the option or extend the escrow closing date beyond August 29, and that consequently, respondent’s cancellation of the escrow was wrongful. As we stated in Tsouras v. Southwest Plumbing & Heating, 94 Nev. 748, 751, 587 P.2d 1321, 1323 (1978), quoting 2 F. Mechem on Agency §§ 725, 726 (2d ed. 1903):
It is indispensible to keep in mind here that, as against *567the principal, there can be reliance only upon what the principal himself has said or done, or at least said or done through some authorized agent. The acts of the agent in question can not be relied upon as alone enough to support an estoppel. If his acts are relied upon there must also be evidence of the principal’s knowledge and acquiescence in them. . . .
Contrary to the majority view, appellants have failed to present any evidence of actions on the part of respondent which could be construed as clothing Callahan with the apparent authority to either extend the escrow or renew the option. See Tsouras v. Southwest Plumbing & Heating, supra; Ellis v. Nelson, 68 Nev. 410, 418-19, 233 P.2d 1072, 1076 (1951). See also Wilshire Insurance Co. v. State, 94 Nev. 546, 582 P.2d 372 (1978). Indeed, on cross-examination, Callahan testified that he had no authorization to extend the escrow, and that in the event appellants failed to timely comply, Hanna had instructed him to cancel the escrow.4 Any representations that Callahan made regarding any extension of the escrow or regarding the option “were merely hearsay, and, however much the [Gold-steins] may have been lured into relying iipon them, they did not affect the rights of the [seller].” Tsouras v. Southwest Plumbing & Heating, supra, at 751, 587 P.2d at 1323, quoting Schlitz Brewing Co. v. Grimmon, 28 Nev. 235, 249, 81 P. 43, 46 (1905). The determinations of the trial court are supported by substantial evidence, and I would not disturb them. Harris v. Shell Dev. Corp., 95 Nev. 348, 351, 594 P.2d 731, 733 (1979).
Appellants next contend that Hanna ratified Callahan’s unauthorized actions by accepting subsequent rental payments, allowing the option to be exercised in a manner that was not specified in the agreement and by offering appellants money to vacate the premises before the lease expired.
We long ago held that when a principal deliberately ratifies the unauthorized acts of an agent, he will be bound thereby as fully as if the agent had been expressly authorized to do the act. Clarke v. Lyon County, 8 Nev. 181 (1873). A principal is only held to ratify the unauthorized act of an agent when he does so expressly, or, with full knowledge of the transaction, accepts or receives some advantage from it, or when he fails to repudiate *568it within a reasonable time after acquiring such knowledge. Edwards v. Carson Water Co., 21 Nev. 469, 34 P. 381 (1893). See also Goetz v. Security Industrial Bank, 508 P.2d 410 (Colo.App. 1973); Rakestraw v. Rodriques, 500 P.2d 1401 (Cal. 1972).
Here, there is no showing that respondent ratified Callahan’s purported extension of the escrow period or that he even had knowledge of Callahan’s unauthorized act; respondent’s expressed intentions were to the contrary. The acts alleged by appellants to be a ratification of Callahan’s conduct did not relate to the closing of escrow and cannot be deemed a renewal of the option or extension of the closing date.
On the authority of Tsouras v. Southwest Plumbing & Heating, supra, quoting 2 F. Mechem on Agency §§ 725, 726 (2d ed. 1903); Restatement (Second) of Agency, § 8B(1) (1958), I would reject as unmeritorious the claim of equitable estoppel. Hanna failed to take any action, express or implied, that could be construed as clothing Callahan with the necessary authority. It necessarily follows that appellants’ reliance was inappropriate, as application of the doctrine of estoppel would require that Hanna know about and acquiesce to any assertion on which the Goldsteins purportedly relied. Tsouras v. Southwest Plumbing & Heating, supra.
I would affirm the judgments of the trial court.

Although the majority opinion states that “the record indicates he [Hanna] never asserted that the option would not remain viable following termination of the pending escrow,” the record, in fact, indicates that Hanna did exactly that. The majority states that “to insure that respondent Hanna shared this (Callahan’s) understanding of the option terms, Mr. Goldstein requested Callahan call Hanna, in his presence, and confirm the agent’s representations.” Callahan’s own testimony shows that Hanna objected to an extension of the escrow beyond the August 29, 1978, date. The majority’s statement that Hanna apparently remained silent concerning the question of the viability of the option is clearly contradicted by the record.

Irrespective of the majority opinion’s reference to “[t]he uncontradicted testimony of Ronald Goldstein” concerning his claimed ability to fund the escrow, the record raises substantial doubt as to appellants’ ability to fund the escrow by the August 29 closing date without participation of the third party buyer. While Ronald Goldstein claimed he had sufficient monies to fund the escrow when he first approached Callahan in June or July, he also testified: “I was so firmly convinced nothing would *566go amiss [with the third party escrow] that we depleted some of these funds in business investments in Alaska, and then given two or three days’ notice. . . .” Furthermore, when the Goldsteins funded the second escrow in late September, the money was deposited by Reames Food, Inc., a third party to the escrow, the title company was instructed not to inform the seller (Hanna) of the deposit, the funds deposited in the account could not be paid to the seller without written authorization from Reames Foods, Inc. and Reames could withdraw the funds from the escrow account at any time.

The lease-option agreement itself unambiguously calls for the same result as the case authority cited above. The lease states:
This option may be exercised at any time after December 10, 1977, and shall expire at midnight December 9, 1978, unless exercised prior thereto. Upon expiration Owner shall be released from all obligations hereunder and all of Tenants rights hereunder, legal or equitable, shall cease. (Emphasis added.)

Callahan also testified that customarily brokers are without the authority to extend an escrow. The legislative scheme supports this representation, providing that any “power over or concerning lands, or in any manner relating thereto [shall be in writing or subscribed to by the transferor] or by his lawful agent thereunto authorized in writing.” NRS 111.205. Here, Callahan was unable to even produce a listing agreement.