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Mining Inv. Group, LLC v. Roberts - 3/11/2008

Arizona Court of Appeals Division One Holds that Buyer’s Failure to Fund Escrow on Date Called for In Purchase Contract Was Material Breach.


Mining Investment Group (the “Buyer”) entered into a purchase contract for vacant land with Roberts (the “Seller”).  The contract contained language stating that “time was of the essence” and requiring the Buyer to deposit a total of $40,000 in escrow on or beforeOctober 12, 2005.  The parties agreed once to extend the deadline toOctober 14, 2005.   By close of business onFriday October 14, 2005, the Buyer had deposited only $10,000 (the initial earnest money).  The Seller then faxed a cancellation notice removing the property from escrow.  OnMonday October 17, 2005, the Buyer then wired the missing $30,000 to the escrow account.

OnOctober 24, 2005, the Buyer sued for specific performance and recorded a Lis Pendens.  Both parties subsequently moved for summary judgment, with the Seller contending that the Buyer had recorded a groundless lis pendens, and that its failure to timely fund the escrow constituted a material breach pursuant to the contract’s “time of the essence” clause.  The Buyer maintained that the short delay was an immaterial breach.  The Superior Court granted the Seller’s motion for summary judgment as to the materiality of the contract breach, and ordered the earnest money paid to Roberts, along with liquidated damages and attorneys’ fees.  However, the Superior Court, found the lis pendens was not groundless when recorded.

On appeal, the Buyer argued that summary judgment was inappropriate because there was a question of fact as to the “materiality” of its breach.  Rejecting that claim, theArizonaAppeals Court relied heavily on the plain language of the purchase contract to hold the breach material.  The Court similarly relied on the contract’s language in awarding the earnest money to Roberts as liquidated damages and in awarding attorneys’ fees.  The Court further emphasized the difference between a purchase contract and a lease contract, and distinguished Foundation Development Corp. v. Loehmann’s, Inc., 163 Ariz. 438, 788 P.2d 1189 (1990), which held in the landlord-tenant context that a late payment did not constitute a material breach notwithstanding a “time of the essence” clause.

Judge Orozco authored the decision in which judges Barker and Timmer joined.

 

 

Posted On: 3/18/2008