Court Opinion

ID: 1032649
Source: CourtListenerOpinion
Date Created: 2013-07-09 18:54:30.388647+00
Date Added: 2024-06-11T12:40:14.875561
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF NEVADA

                BRIAN J. HORNER,                                     No. 58574
                Appellant/Cross-Respondent,
                vs.                                                              FILED
                LAWRENCE J. SEMENZA,
                Respondent/Cross-Appellant.                                      MAY 3 1 2013
                                                                                 TRACE K. LINDEMAN
                                                                            CL      • so-;         OUT
                                     ORDER AFFIRMING IN PART,              BY.
                                                                                   DEF"Jri CLERK
                                 REVERSING IN PART AND REMANDING

                           This is an appeal and cross-appeal from a district court
                summary judgment and an order granting a motion in limine in a civil
                action regarding an escrow arrangement. Eighth Judicial District Court,
                Clark County; Abbi Silver, Judge.
                           An escrow agent must perform his or her duties "with
                scrupulous honesty, skill and diligence." Broussard v. Hill, 100 Nev. 325,
                329, 682 P.2d 1376, 1378 (1984). If an escrow agent misappropriates
                escrow funds, an injured party may recover damages against the agent in
                the amount of money that the agent misused.      Hart v. Hecht, 104 Nev.
                382, 383-84, 760 P.2d 114, 115 (1988). Here, we address whether
                appellant Brian J. Horner may recover from respondent Lawrence J.
                Semenza the money that Semenza held in escrow but did not return to
                Horner, in violation of the escrow agreement's terms. We conclude that he
                may, even though the money was either liquidated damages or a penalty
                under a purchase agreement (the Agreement) between Horner and
                another party.
                           Under the Agreement, Horner purchased real property from
                Oilmen Participation, Inc., and the parties had Semenza hold in escrow
                Homer's final payment to Oilmen, totaling $355,000. The Agreement

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                required the final payment to be returned to Horner if Oilmen did not
                remove by a specific date all encumbrances from the real property that
                Horner purchased from Oilmen. Semenza received and deposited Homer's
                final payment in a trust account. Despite Oilmen failing to remove all of
                the encumbrances by the specified date, Semenza gave Oilmen the final
                payment. Horner filed a claim against Semenza to recover the final
                payment amount.
                            On summary judgment, the district court concluded that (1)
                Semenza assumed and breached his escrow agent duties; (2) the
                Agreement's requirement for the return of the final payment was a
                liquidated damages clause that was only enforceable against the parties to
                the Agreement, which did not include Semenza; (3) Horner was not
                estopped from asserting his claims against Semenza; and (4) issues of fact
                remained as to Homer's actual damages. The district court also granted a
                motion in limine that barred Horner from using the Agreement's provision
                on the return of the final payment as evidence of damages against
                Semenza because the provision pertained to liquidated damages that could
                not be enforced against Semenza. Thereafter, the parties entered a
                stipulated judgment that allowed for an appeal of the summary judgment
                and the order granting the motion in limine.
                            This appeal and cross-appeal followed. On appeal, Horner
                contests the order granting the motion in limine and the district court's
                summary judgment determination that Horner could not recover the final
                payment amount as damages against Semenza. On cross-appeal,
                Semenza challenges the district court's conclusion that he was an escrow
                agent who owed and breached his escrow agent duties to Homer.

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                        Semenza also argues that the district court abused its discretion in
                        rejecting his equitable estoppel defense.
                                    We conclude as follows. The district court did not err in
                        determining that Semenza assumed and owed Horner escrow agent duties
                        because Semenza's escrow agent status and duties arose from his conduct
                        under the Agreement's plain language. The district court did not err in
                        concluding that Semenza breached his escrow agent duties to Horner
                        because Semenza, in violation of the terms that governed the final
                        payment's distribution, failed to return the final payment to Homer. But
                        the district court erred in finding that Horner may not recover the final
                        payment amount from Semenza. Horner sought recoverable damages by
                        seeking this money that Semenza misappropriated in violation of the
                        terms governing the final payment's dispersal. Hence, the district court
                        also abused its discretion in barring Horner from using the Agreement's
                        requirement for the return of the final payment as evidence of damages
                        against Semenza. Last, the district court did not abuse its discretion in
                        rejecting Semenza's estoppel defense because he was not ignorant of the
                        facts that triggered his duty to give Horner the final payment and Horner
                        did not engage in conduct that gave Semenza the right to believe that
                        Horner intended for Semenza to give Oilmen the final payment.
                        The district court's determinations on summary judgment
                                    Semenza argues that the district court erred in concluding
                        that he breached his escrow agent duty. He asserts that a question of fact
                        remained as to whether he had this duty since the Agreement was
                        ambiguous as to who was obligated to return the final payment to Horner.
                        Semenza also asserts that the district court did not err in finding that
                        Horner may not recover the final payment amount, contending that the
                        Agreement's requirement as to the final payment's distribution
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101:'
                constituted liquidated damages or a penalty that could not be enforced
                against Semenza.
                            Horner contests the district court's determination that he
                could not recover the final payment amount from Semenza. He argues
                that he pursued recoverable damages against Semenza by seeking the
                final payment amount that Semenza misappropriated in violation of the
                terms governing its distribution.
                            A district court's conclusions when granting summary
                judgment are reviewed de novo. Wood v. Safeway, Inc., 121 Nev. 724, 729,
                121 P.3d 1026, 1029 (2005). Summary judgment is appropriate where the
                pleadings and evidence, when viewed in the nonmoving party's favor,
                show that there are no genuine issues of material fact and that "the
                moving party is entitled to a judgment as a matter of law."     Id. (quoting
                NRCP 56(c)). We refer to the substantive law in determining if a factual
                issue is material.   Id. at 731, 121 P.3d at 1031. "A factual dispute is
                genuine when the evidence is such that a rational trier of fact could return
                a verdict for the nonmoving party." Id.
                            Here, evaluating the district court's conclusions requires us to
                interpret the Agreement. If no facts are disputed, "contract interpretation
                is a question of law" and de novo review applies.   Lehrer McGovern Bovis,
                Inc. v. Bullock Insulation, Inc., 124 Nev. 1102, 1115, 197 P.3d 1032, 1041
                (2008). Absent an ambiguity, we interpret contracts based upon the
                language's plain meaning. Dickenson v. State, Dep't of Wildlife,    110 Nev.
                934, 937, 877 P.2d 1059, 1061 (1994). Ambiguity exists if the terms in
                question are "reasonably susceptible to more than one interpretation."
                Shelton v. Shelton, 119 Nev. 492, 497, 78 P.3d 507, 510 (2003) (internal
                quotations omitted). If an ambiguity exists that requires "extrinsic

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evidence to discern the parties' intent, summary judgment is improper."
Dickenson, 110 Nev. at 937, 877 P.2d at 1061.
      Semenza assumed and owed escrow agent duties to Horner
              An escrow agent's duties arise from an escrow agreement.
Broussard v. Hill, 100 Nev. 325, 329, 682 P.2d 1376, 1378 (1984). The
agent owes these duties to the parties to the agreement.        Colonial Say. &
Loan Ass'n v. Redwood Empire Title           Co., 46 Cal. Rptr. 16, 18 (Ct. App.
1965). An escrow agreement exists when a buyer and seller agree to
conditions for a deposit, the escrow agent agrees to receive and distribute
the deposit under the conditions, and the agent receives the deposit.
Hoffman v. Eighth Judicial Dist. Court, 90 Nev. 267, 270, 523 P.2d 848,
850 (1974). An escrow agreement and the status as an escrow agent do
not require a written agreement; the agreement and status stem from the
parties' intent and conduct.   See id.       ("The agreement by the seller and
buyer to all the terms of the escrow instructions and the acceptance by the
escrow agent of the position of depository create the escrow."); 30A C.J.S.
Escrows § 13 (2007) ("Whether an instrument is in escrow depends on the
intention of the parties, as manifested by their . . . words and purposes,
and no. . . form of words is necessary, and the agreement need not be in
writing.").
              Semenza's conduct, when considered with a reasonable
reading of the Agreement, made him an escrow agent. The Agreement's
plain language stated that the final payment would "remain in escrow
with . . . Semenza." It also required that the final payment be returned to
Homer if Oilmen failed to remove the encumbrances by the Agreement's
deadline. Thus, Horner and Oilmen agreed to this condition placed upon
the final payment in escrow. Semenza received, deposited, and retained
Homer's final payment in a trust account under the conditions attached to

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                it. As a result, an escrow agreement arose to which Semenza was an
                escrow agent.
                      Semenza breached his escrow agent duties
                            An escrow agent must execute his or her duties with
                "scrupulous honesty, skill and diligence." Broussard, 100 Nev. at 329, 682
                P.2d at 1378. The agent must strictly adhere to the escrow agreement's
                terms. Id. If an escrow agent is uncertain about his or her duties as to
                disbursing the escrow money, he or she should seek guidance from the
                district court through an interpleader action.      See Wood v. Chi. Title
                Agency of Las Vegas, Inc.,    109 Nev. 70, 73, 847 P.2d 738, 740 (1993)
                (concluding that an escrow agency breached its duties in failing to seek the
                court's guidance when faced with an order that confused the agency as to
                its duty to release the escrow money); Virtanen, v. O'Connell, 44 Cal. Rptr.
                3d 702, 709 (Ct. App. 2006) (finding that an escrow agent breached his
                duties in failing to seek guidance from a court when faced with competing
                demands for the escrow money). A failure to exercise this diligence may
                be a breach of an escrow agent's duties. See Chi. Title Agency, 109 Nev. at
                73, 847 P.2d at 740; Virtanen, 44 Cal. Rptr. 3d at 709.
                            In this case, the Agreement's language as to the final payment
                in escrow does not contain ambiguities that preclude summary judgment.
                Instead, it establishes Semenza's duty to return the final payment to
                Horner. The Agreement, in relevant part, provides that the final payment
                            is to remain in escrow with. . . Semenza . . . until
                            such time as both the lis pendens placed on the
                            properties . . . are removed and the lien on the
                            property. . . has been either removed or has
                            lapsed of its own accord. Said funds shall remain
                            in escrow for a period of time not to exceed six
                            months from April 15, 2006[;] if said liens are not

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            removed during that period of time, said funds
            shall be returned to [Horner].
The language requiring the return of the final payment to Homer follows
the language that created Semenza's duty to hold the final payment in
escrow. Hence, Semenza had a duty to hold the final payment in escrow
and to return the final payment to Horner.
            Despite Oilmen's failure to remove all the encumbrances
before the specified date, Semenza did not return the final payment to
Horner, thereby breaching his duty to do so. Between Horner and Oilmen,
the final payment was either liquidated damages or a penalty under the
purchase agreement.    See Mason v. Fakhimi, 109 Nev. 1153, 1156, 865
P.2d 333, 335 (1993) (providing that liquidated damages are "the sum
which a party to a contract agrees to pay if he fails to perform" (emphasis
added)). But the extent to which the final payment was liquidated
damages or a penalty did not relieve Semenza of his duty to return it to
Horner. The final payment was to be held in escrow and distributed under
the escrow agreement's terms.
            If Semenza feared that giving Horner the final payment would
enforce an unlawful penalty, he should have sought mutual instructions
from Homer and Oilmen or guidance from the district court. Instead,
despite knowing of the competing interests for the final payment and his
duty to return it to Horner, Semenza gave the final payment to Oilmen.
In this instance, where the interests to the final payment were conflicting

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                and the terms governing its distribution were clear, Semenza's actions
                constituted a breach of his escrow agent duties.'
                      The final payment amount was subject to recovery as damages
                            In Hart v. Hecht, this court concluded that a party to an
                escrow agreement could recover the amount of money that an escrow
                agent misused. 104 Nev. 382, 383-84, 760 P.2d 114, 115 (1988). In that
                case, Hart gave her attorney, Hecht, money to be held in escrow.      Id. at
                383, 760 P.2d at 114. Hecht released some of that money without
                complying with the terms that governed its use.     Id. at 383, 760 P.2d at
                115. Hart filed a third-party complaint against Hecht for his
                mismanagement of the escrow funds. Id. at 383, 760 P.2d at 114-15. On
                appeal, this court concluded that Hecht violated the escrow agreement and
                owed Hart the money released in "contravention of the agreement."      Id. at
                383-84, 760 P.2d at 115.
                            Like Hart, Horner sought the final payment that Semenza
                released to Oilmen in violation of the terms that governed its distribution.
                See id. While the final payment may have been liquidated damages or a
                penalty between Horner and Oilmen, Semenza had the duty to handle the
                final payment under the escrow agreement's terms. The final payment
                amount is subject to recovery as damages against Semenza.     See id. Thus,
                the district court erred in determining that Horner could not recover the
                final payment from Semenza.

                       'We do not resolve whether the final payment provision was an
                unenforceable penalty. This issue is a concern that rests with the parties
                to the Agreement—Horner and Oilmen—and not Semenza.

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                The district court's order granting Semenza's motion in limine
                            Horner argues that the district court abused its discretion in
                barring him from using the Agreement's requirement for the return of the
                final payment as evidence of damages. He contends that this evidence
                was relevant to the final payment amount that he sought from Semenza,
                that the payment constituted recoverable damages, and that the district
                court therefore improperly excluded it.
                            We review a district court's evidentiary decisions for an abuse
                of discretion. Woods v. Label Inv. Corp., 107 Nev. 419, 425, 812 P.2d 1293,
                1297-98 (1991), disapproved on other grounds by Hanneman v. Downer,
                110 Nev. 167, 180 n.8, 871 P.2d 279, 287 n.8 (1994). An abuse of discretion
                is a "clear disregard of the guiding legal principles."   Allianz Ins. Co. v.
                Gagnon, 109 Nev. 990, 993, 860 P.2d 720, 722-23 (1993). Relevant
                evidence is generally admissible. NRS 48.025. Evidence is relevant if it
                has "any tendency" to make the existence of a fact more or less probable.
                NRS 48.015.
                            Here, because the district court erred in finding that Horner
                could not recover the final payment amount from Semenza, it also abused
                its discretion in excluding evidence of the Agreement's requirement for the
                return of the final payment to Horner. This evidence had relevance to the
                damages against Semenza that were subject to recovery. 2

                      2 Horner also argues that the district court abused its discretion in
                limiting him to evidencing actual damages. We disagree. In his
                complaint, Horner alleged that Semenza breached his escrow agent duties
                by giving the final payment to Oilmen, and Horner sought damages that
                arose from breach of the escrow agent duties—damages that had a causal
                connection to Semenza's acts—thereby asserting only actual damages. See
                NRCP 9(g) (providing that special damages, damages beyond actual
                                                                 continued on next page. . .

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                The district court's rejection of Semenza's estoppel defense
                             Semenza contends that equitable estoppel precluded Homer's
                claim against him. He argues that Homer's failure to demand the final
                payment and Homer's deposition testimony, wherein he explained why he
                did not demand the money, gave Semenza the right to believe that Horner
                intended for him to give Oilmen the final payment.
                             We review the decision to deny the equitable estoppel defense
                for abuse of discretion.   Teriano v. Nev. State Bank (In re Harrison Living
                Trust), 121 Nev. 217, 222, 112 P.3d 1058, 1061 (2005). Equitable estoppel
                prevents one "from asserting legal rights that, in equity and good
                conscience, they should not be allowed to assert because of their conduct."
                Nev. State Bank v. Jamison Family P'ship, 106 Nev. 792, 799, 801 P.2d
                1377, 1382 (1990). In relevant part, estoppel requires that the estopped
                party "intend[ed] that his conduct shall be acted upon, or must so act that
                the party asserting estoppel has the right to believe it was so
                intended. . . [and that] the party asserting the estoppel must be ignorant
                of the true state of facts."    Cheqer, Inc. v. Painters & Decorators Joint
                Comm., Inc., 98 Nev. 609, 614, 655 P.2d 996, 998-99 (1982). A party's

                . . . continued

                damages, must be pleaded specifically); Broussard v. Hill, 100 Nev. 325,
                330, 682 P.2d 1376, 1379 (1984) (stating that the liability arising from the
                wrongful release of escrow funds is based upon the "causal connection"
                between the wrongful release and "any resulting damage" (emphases
                added)); Black's Law Dictionary 416 (8th ed. 2004) (defining actual
                damages as the "amount awarded to a complainant to compensate for a
                proven injury or loss").

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                silence may give rise to estoppel.    Id. at 614, 655 P.2d at 999. Here,
                Homer's silence does not support the estoppel defense.
                            Semenza bases his estoppel defense on Homer's failure to
                demand the final payment, but the Agreement did not require Horner to
                make this demand. Its plain language required Semenza to return the
                final payment to Horner if Oilmen failed to remove the encumbrances by a
                specified date. Semenza knew that Oilmen failed to remove the
                encumbrances by the specified date. Thus, Semenza was not ignorant of
                the facts that triggered his duty to return the final payment to Horner.
                            Homer's deposition did not give Semenza the right to believe
                that Horner intended for Semenza to give Oilmen the final payment. In
                that deposition, Horner stated that he did not demand the final payment
                because he was allowing Oilmen and Semenza to finish removing the last
                encumbrance. Horner explained that if Oilmen failed to remove the
                encumbrances, Horner would demand and use the final payment to
                remove the encumbrances. This was a conditional statement, and
                Semenza overextends its meaning in inferring that its converse was true
                and that he could rely on it. The conditional statement did not provide
                that if Oilmen removed the last encumbrance after the specified date,
                Horner would waive his right to the final payment. Further, Horner made
                this statement in the context of litigation and not in the context of giving
                instructions to Semenza. Homer had a right to the final payment and
                exercised that right in an action against Semenza.
                            Though Horner was silent about the final payment for over
                two years, Semenza, as the escrow agent, needed to break the silence by
                seeking either the district court's guidance or Horner and Oilmen's mutual
                instructions before deviating from the escrow agreement's terms. Hence,

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                the district court did not abuse its discretion in rejecting Semenza's
                estoppel defense because Semenza was not ignorant of the true state of
                facts and Homer's silence and testimony did not give Semenza the right to
                believe that Horner intended for Semenza to give the final payment to
                Oilmen. In light of the above, we
                             ORDER the summary judgment of the district court
                AFFIRMED IN PART AND REVERSED IN PART and the order granting
                the motion in limine REVERSED AND REMAND this matter to the
                district court for proceedings consistent with this order. 3

                                                     Gibbons

                                                     Saitta

                cc:   Hon. Abbi Silver, District Judge
                      Eva Garcia-Mendoza, Settlement Judge
                      Law Offices of Michael F. Bohn, Ltd.
                      Wilson, Elser, Moskowitz, Edelman & Dicker, LLP/Las Vegas
                      Eighth District Court Clerk

                      3 Wehave considered the remaining arguments on appeal and cross-
                appeal and conclude that they lack merit.

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