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Horner v. Semenza

Supreme Court of Nevada

May 31, 2013

BRIAN J. HORNER, Appellant/Cross-Respondent,
v.
LAWRENCE J. SEMENZA, Respondent/Cross-Appellant.

ORDER AFFIRMING IN PART, 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 Horner's final payment to Oilmen, totaling $355, 000. The Agreement 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 Horner'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 Horner'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 Horner. 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 Horner. 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 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 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 Sav. & 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 Horner 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 Horner's final payment in a trust ...


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