Atlas Noble, LLC v. Krizman Enterprises
692 F. App'x 256
| 6th Cir. | 2017Background
- Atlas Noble (buyer) and Krizman Enterprises (sellers) contracted in Sept. 2012 for purchase of oil-and-gas leases; Atlas deposited $2,411,290 into escrow as "earnest money." The PSA required seller to deliver defensible title to at least 76.85% of acreage by closing. Closing date was amended to April 3, 2013; review period expressly ended at 5:01 p.m., but the PSA did not specify a time for closing.
- Atlas completed title review before the review-period deadline and identified defects; Atlas sent final corrective requests on April 2 (six tasks), and Krizman completed most but disputed whether it could finish the remainder by closing.
- At 5:52 p.m. on April 3 (after the 5:01 p.m. review-period cutoff but well before 11:59 p.m. closing), Atlas emailed a unilateral termination asserting seller failed to clear title and asserting termination under §8.1.
- After Atlas’s email, Krizman ceased further efforts, refused to release escrow funds, and demanded rescission; Atlas sued for escrow release; Krizman counterclaimed for escrow and for full contract damages. District court awarded escrow to Krizman, construed the earnest-money as liquidated damages, and denied Croxton’s intervention.
- Sixth Circuit: affirmed that closing ran until 11:59 p.m.; held Atlas’s 5:52 p.m. email was an anticipatory repudiation but remanded because there is a genuine fact dispute whether Krizman could have performed by 11:59 p.m.; affirmed that the escrow operated as a liquidated-damages clause; affirmed denial of Croxton’s motion to intervene.
Issues
| Issue | Plaintiff's Argument (Atlas / Krizman) | Defendant's Argument (Krizman / Atlas) | Held |
|---|---|---|---|
| When did closing occur / seller’s deadline to perform? | Atlas: review-period cutoff and closing coincide (5:01 p.m.); seller’s performance due then. | Krizman: review ends 5:01 p.m. but closing (and seller’s performance) runs until 11:59 p.m. | Closing runs whole day to 11:59 p.m.; review and closing are distinct. |
| Effect of Atlas’s 5:52 p.m. email — repudiation? | Atlas: properly terminated for failure to meet acreage. | Krizman: Atlas wrongfully repudiated; termination premature. | 5:52 p.m. email was an anticipatory repudiation of the PSA. |
| Is Krizman’s post-repudiation non-performance excused? | Atlas: even if repudiation, Krizman still could not have met acreage by 11:59 p.m.; mutual breach/rescission. | Krizman: ceased because repudiation made further effort futile; entitled to escrow. | Fact issue remains whether Krizman could have performed; remanded for factfinder to decide. |
| Is the escrow/earnest-money clause a liquidated-damages limitation? | Atlas: escrow was earnest money, not an exclusive liquidated-damages cap (Atlas favored limiting recovery to escrow). | Krizman: earnest money not labeled liquidated damages; non-breaching party should be able to seek actual damages beyond escrow. | Escrow construed as enforceable liquidated-damages clause (20% reasonable); limits recovery to escrow. |
Key Cases Cited
- Broad St. Energy Co. v. Endeavor Ohio, LLC, 806 F.3d 402 (6th Cir.) (buyer’s review-period/title-defect procedures and timing issues in oil-and-gas lease deals)
- Domingo v. Kowalski, 810 F.3d 403 (6th Cir.) (summary-judgment review standard)
- Greulich v. Monnin, 50 N.E.2d 310 (Ohio 1943) (contract that expires on a day remains effective whole day absent express time)
- Samson Sales, Inc. v. Honeywell, Inc., 465 N.E.2d 392 (Ohio 1984) (test for enforceability of liquidated-damages clauses)
- Admiral Plastics Corp. v. Trueblood, Inc., 436 F.2d 1335 (6th Cir. 1971) (mutual failure to perform can justify rescission)