Arata v. Shefco

1. The Honorable Pamela T. Greenwood, Senior Judge, sat by
special assignment as authorized by law. See generally Utah Code
Jud. Admin. R. 11-201(6).
2014 UT App 148
_________________________________________________________
THE UTAH COURT OF APPEALS
ROBERT M. ARATA,
Plaintiff and Appellant,
v.
SHEFCO, LTD.; SHEFFIELD DEVELOPMENT, INC.; KEYSTONE
CONSTRUCTION AND DESIGN, INC.; AND STEPHEN N. SHEFFIELD,
Defendants and Appellees.
Opinion
No. 20121028-CA
Filed June 26, 2014
Fifth District Court, St. George Department
The Honorable James L. Shumate
No. 080501338
Eric P. Lee, Attorney for Appellant
V. Lowry Snow, J. Gregory Hardman, and
Devin Snow, Attorneys for Appellees
JUDGE J. FREDERIC VOROS JR. authored this Opinion, in which
JUDGE MICHELE M. CHRISTIANSEN and SENIOR JUDGE PAMELA T.
GREENWOOD concurred.1
VOROS, Judge:
¶1 This appeal involves a condition precedent in a real estate
purchase contract. The condition did not occur, and the buyer did
not complete the purchase. The district court ruled on summary
judgment that because the condition precedent benefitted the seller

Arata v. Shefco
20121028-CA 2 2014 UT App 148
alone, the seller alone could, and did, waive the condition,
triggering the buyer’s obligation to perform. The buyer contends
on appeal that the condition benefitted him also and thus that its
nonoccurrence excused his performance. We agree with the buyer
that the condition precedent benefitted him. We thus reverse the
summary judgment in favor of the seller and remand for further
proceedings.
BACKGROUND
¶2 Plaintiff Robert M. Arata, a retired railroad conductor from
New York, wanted to build a home in St. George, Utah. In 2005 he
met with Stephen N. Sheffield. Sheffield, an experienced St. George
developer, seemed right for the job. Sheffield conducted business
through several related entities, including Shefco, Ltd., Sheffield
Development, Inc., and Keystone Construction and Design, Inc.
Together, the entities constituted, as the district court later put it,
a “vertically-integrated development process.”
¶3 After some negotiating, Arata and Shefco signed a real
estate purchase contract (the Contract). Under the Contract, Shefco
agreed to sell and Arata agreed to buy a lot (the Lot) in a Sheffield
Development subdivision for $155,000. They conditioned the
Contract on Arata and Keystone signing another contract for the
construction of a home at a target price and by a target completion
date:
This Contract is conditional upon Buyer executing a
construction contract prior to closing for Keystone
Construction & Design, Inc. building a home on this
lot to be completed by April 2006 upon terms they
shall agree upon. Target package $550,000.
As required by the Contract, Arata paid the entire $155,000
purchase price for the Lot shortly after signing the Contract.
However, for reasons that the parties disagree about but that are

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20121028-CA 3 2014 UT App 148
not germane to the issue on appeal, Arata never executed the
contemplated construction contract with the builder, Keystone.
Consequently, Arata demanded that Shefco return his $155,000
payment for the Lot. Shefco refused.
¶4 In 2008, Arata sued Sheffield, Shefco, Sheffield
Development, and Keystone (collectively, Defendants) for return
of the $155,000. He contended that the nonoccurrence of the
condition precedent excused both parties’ performance under the
Contract. Instead of returning Arata’s payment, Sheffield caused
the title owner of the Lot, Sheffield Development, to execute and
deliver a warranty deed to Arata.
¶5 Arata and Defendants filed cross motions for summary
judgment. The district court granted summary judgment in
Defendants’ favor, ruling that the condition precedent unilaterally
benefitted Defendants, that they could therefore unilaterally waive
the condition, and that they did waive the condition when they
unconditionally conveyed the Lot to Arata.
ISSUE AND STANDARD OF REVIEW
¶6 Arata contends that the district court erred in granting
Defendants’ motion for summary judgment. We review a district
court’s legal conclusions and ultimate grant or denial of summary
judgment for correctness. Orvis v. Johnson, 2008 UT 2, ¶ 6, 177 P.3d
600.
ANALYSIS
¶7 Arata contends that because the home-construction
condition benefitted him as well as Shefco, Defendants could not
unilaterally waive it. It benefitted him, Arata argues, because it
(1) required that Keystone build the home, (2) set a target
completion date of April 2006, and (3) set a target price of $550,000.

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20121028-CA 4 2014 UT App 148
Defendants respond that Shefco could unilaterally waive the
condition because it benefitted only Shefco.
¶8 “A condition is ‘an event, not certain to occur, which must
occur . . . before performance under a contract becomes due.’”
McArthur v. State Farm Mut. Auto. Ins. Co., 2012 UT 22, ¶ 29, 274
P.3d 981 (quoting Restatement (Second) of Contracts § 224 (1981)).
Because “no duties arise between the contracting parties until the
condition has been fulfilled,” id., failure of “‘a material condition
precedent relieves the obligor of any duty to perform,’” id. (quoting
Harper v. Great Salt Lake Council, Inc., 1999 UT 34, ¶ 14, 976 P.2d
1213 (citing 3A Arthur Linton Corbin, Corbin on Contracts § 630,
at 20–21 (1960))). Whether a condition precedent was fulfilled
generally presents a question of fact. ASC Utah, Inc. v. Wolf
Mountain Resorts, LC, 2013 UT 24, ¶ 13, 309 P.3d 201. “‘Conditions
precedent may be waived by the party in whose favor they are
made.’” Foster v. Montgomery, 2003 UT App 405, ¶ 23, 82 P.3d 191
(quoting 17A Am. Jur. 2d Contracts § 658 (2003)).
¶9 Here, the Contract contained a condition precedent—that
before closing Arata would execute a contract with Keystone, a
third party but related to the seller, to construct a home on the Lot.
Arata contends that this condition precedent benefitted him as well
as Shefco.
¶10 First, Arata argues that the condition benefitted him by
ensuring that his new home would be built by Keystone.
Undisputed evidence establishes that Arata had seen and liked the
other Keystone homes in the area. Arata lived out of state and was
glad to avoid the time and expense of finding a reputable builder.
Moreover, Sheffield assured Arata that Keystone could build the
home that Arata wanted at the price that Arata wanted. In
Sheffield’s own words, the Contract “was meant to be a transition
document leading [the parties] to a construction contract for the
entire package, breaking down the purchase of the [Lot] as step one
and building the house as step two.”

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20121028-CA 5 2014 UT App 148
¶11 Second, Arata argues that the condition benefitted him by
specifying a target completion date. As an out-of-state buyer, Arata
wanted a completion date so he could move forward with
relocation plans.
¶12 Finally, Arata argues that the condition benefitted him by
specifying a target price. When Arata began discussing his plans
with Sheffield, he did not want to exceed a total purchase price of
$500,000. Sheffield explained that the house Arata wanted would
cost close to $550,000. Arata agreed to proceed when Sheffield
assured him that Keystone could build his custom home for
$550,000 ($150,000 for the Lot and $400,000 for the home). In fact,
Sheffield even testified that the target price “was something that
[Arata] wanted to have put in the contract.”
¶13 These claimed benefits are based in the text of the Contract
and in undisputed evidence presented in connection with the cross
motions for summary judgment. We therefore agree with Arata
that the evidence demonstrates as a matter of law that the
condition precedent benefitted him.
¶14 Defendants argue that even without the condition precedent
Arata could contract with Keystone—or any other builder—to
build his home on whatever terms he could negotiate.
Furthermore, they note, as a nonparty to the Contract, Keystone
could not be held to the target completion date or target purchase
price. However, these objections miss the mark. The benefit to
Arata was that the Contract was conditioned on the execution of
the Keystone construction contract. Without the condition
precedent, Arata could have purchased the Lot and contracted with
Keystone or another builder to build a home on it. But the
condition precedent ensured that unless he and Keystone could
mutually agree on the terms of a construction contract, he had no
obligation to purchase the Lot. Simply finding another builder to
build the home would not have provided Arata this benefit. Only
with the protection of the condition precedent could Arata ensure
that he would realize what Sheffield described as an “entire

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20121028-CA 6 2014 UT App 148
package,” with “the purchase of the [Lot] as step one and building
the house as step two.”
¶15 Defendants also argue that Eliason v. Watts supports the
district court’s ruling. 615 P.2d 427 (Utah 1980). There, a contract
for the sale of real property was conditioned on the buyers’
obtaining a septic-tank permit for the property. Id. at 429. When the
buyers failed to obtain the permit, the seller refused to convey title
and the buyers sued. Id. The seller argued that the buyers’ failure
to obtain the land-use permit invalidated the contract. Id. at 430. He
argued that the condition benefitted him as well as the buyers
because the installation of a septic tank might benefit him as the
owner of nearby property. Id.
¶16 The Utah Supreme Court held that the condition benefitted
only the buyers: “The failure to obtain a permit does not deprive
[the seller] of any valuable right. The provision was added to the
contract by [the buyers], and the condition was clearly for their
benefit in putting the property to its desired use.” Id. Accordingly,
the court concluded that because the buyers alone were entitled to
demand the benefit of that condition, “if they chose to waive the
condition, it was within their power to do so.” Id. (citing Ahrendt v.
Bobbitt, 229 P.2d 296, 468 (Utah 1951)).
¶17 While the legal framework of Eliason governs here, its facts
support Arata’s position. In Eliason, the buyers’ inability to obtain
a permit frustrated or at least delayed their ability to construct a
home on the property. Id. at 429. But the seller’s contractual interest
was merely to receive the sales price; he did not (as here) lose the
benefit of an ancillary construction contract or any other benefit
contemplated in the contract. Id. While he claimed that he would
benefit from the buyers’ building a home on the property, that
incidental benefit inured to him only because he happened to own
property nearby. Id. at 430. It did not benefit him as the seller of the
subject property. Id. Nor was that incidental benefit tied to the text
of the real estate purchase contract. Id.

Arata v. Shefco
2. Because we agree with Arata that the condition precedent
benefitted him, we do not reach his alternative argument that
Keystone, a nonparty to the Contract, could not and did not waive
the condition.
20121028-CA 7 2014 UT App 148
¶18 In contrast, the anticipated benefits Arata has identified are
spelled out in the purchase agreement: if Keystone was unwilling
to build the house he wanted at the target price and by the target
completion date, Arata was released from any obligation to
purchase the Lot. Indeed, the condition precedent more directly
benefitted Arata than it did Shefco. The provision describing the
condition never mentions Shefco, whose claim to a benefit rests on
parol evidence connecting it—through Sheffield (a nonparty to the
Contract)—to Keystone (also a nonparty to the Contract).
¶19 Shefco further argues that this court should not consider
Arata’s parol evidence because it varies and contradicts the terms
of the Contract. The parol evidence rule “operates . . . to exclude
evidence of prior or contemporaneous conversations,
representations, or statements offered for the purpose of varying
or adding to the terms of an integrated contract.” Ward v.
Intermountain Farmers Ass’n, 907 P.2d 264, 268 (Utah 1995). Both
parties here rely on extrinsic evidence, but neither does so to vary
or expand the terms of the Contract. Accordingly, like the district
court, we look to the undisputed extrinsic evidence to determine
whether the condition precedent benefitted Arata.2
¶20 Finally, Defendants contend that Arata “cannot use his
nonperformance as a basis for rescission.” This argument rests on
a factual predicate: that “Arata refused to contract with Keystone
for his home construction,” “opting instead to speculate” in a rising
real estate market. Arata replies that this argument lacks record
support or at the very least “was the subject of factual disputes
before the district court.”

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20121028-CA 8 2014 UT App 148
¶21 Because the district court ruled that Shefco and Keystone
could and did unilaterally waive the condition precedent, the court
had no reason to reach these factual issues. Accordingly, it would
be premature for us to do so. We thus leave the matter for the
district court to determine on remand.
CONCLUSION
¶22 We reverse the summary judgment entered in favor of
Defendants and remand for further proceedings consistent with
this opinion.