(CONSENT) JMJ Mining, LLC v. Zib
2:16-cv-02276
| E.D. Cal. | Oct 1, 2018Background
- JMJ Mining sued over the right to mine the Primrose Mine, owned by Kenneth and Susan Zib (the Zibs); Richard Siebrecht owned adjacent land. The parties settled on the record 9/5/2017 and executed a Settlement Agreement and Mutual Release (SAR) and a Purchase & Sale Agreement (PSA). The court retained jurisdiction to enforce the settlement.
- PSA required JMJ to deposit $110,000 into escrow and satisfy closing conditions by 5:00 p.m. on June 15, 2018; PSA stated "time is of the essence" and the sale was "AS-IS." SAR provided that failure by JMJ to deposit by June 15 would terminate Zib’s duty to sell and render the PSA void, and that Zib would confirm termination by court order.
- JMJ had received a preliminary title report (Sept. 20, 2017) showing a possible unrecorded easement (exception no. 9) for an adjoining landowner (Siebrecht), making such matters "Permitted Exceptions" if known pre-close.
- On June 12–15, 2018 Siebrecht’s counsel emailed claims of an unrecorded easement and an unrecorded lease; JMJ’s investor hesitated and JMJ did not deposit the $110,000 by the June 15 deadline. Zib’s counsel offered a one-week extension only if JMJ wired funds by close of business on June 15; JMJ did not wire funds.
- Zibs moved to enforce the settlement and confirm termination of the PSA; JMJ argued its failure was excused because Zibs could not deliver a valid Grant Deed and breached the covenant of good faith by refusing pre-sale assurances and by (allegedly) assisting Siebrecht.
- Court concluded time was of the essence, JMJ failed to perform, no valid excuse existed, the PSA terminated and was void, and awarded the Zibs $4,500 in attorney fees under the SAR.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether PSA terminated for JMJ’s failure to deposit $110,000 by June 15, 2018 | JMJ said its failure was excused; requested extension and opportunity to deposit after Zib responded to Siebrecht claims | Zibs said PSA made time of the essence and nonpayment by deadline voids the PSA per its express terms | Court: PSA terminated; time was of the essence and JMJ’s failure to deposit by deadline voided the agreement |
| Whether Zibs’ alleged inability to provide a valid Grant Deed excused JMJ’s nonperformance | JMJ: implied covenants in future Grant Deed (e.g., against encumbrances) required pre-sale assurances, so seller’s inability to provide deed excused deposit obligation | Zibs: implied deed covenants provide post-closing remedies; parties contractually allocated pre-closing investigation/risk to buyer (AS-IS clause) | Court: no excuse; Grant Deed covenants are post-closing and parties contracted JMJ bore pre-sale investigation risk |
| Whether Zibs breached the covenant of good faith and fair dealing or conspired with Siebrecht | JMJ: Zibs refused assurances and allegedly cooperated with Siebrecht to scuttle sale | Zibs: they allowed JMJ to investigate, expressed skepticism about Siebrecht’s claims, did not interfere, and any contact with Siebrecht did not breach contract | Court: no breach shown; Zibs acted within contract terms and did not frustrate JMJ’s rights |
| Entitlement to attorneys’ fees for enforcing settlement | N/A (JMJ did not oppose fees) | SAR provides prevailing party fees for enforcement; Zibs sought fees incurred | Court: awarded Zibs $4,500 in attorney fees under SAR |
Key Cases Cited
- Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 (1994) (federal court retains enforcement jurisdiction only if settlement order retains jurisdiction or terms are incorporated)
- Jeff D. v. Andrus, 899 F.2d 753 (9th Cir.) (1989) (settlement agreement construction governed by local contract law)
- Matter of Beverly Hills Bancorp, 649 F.2d 1329 (9th Cir.) (1979) (same: application of state contract principles to settlement enforcement)
- Skookum Oil Co. v. Thomas, 162 Cal. 539 (Cal. 1912) (when time is of the essence in real estate contract, buyer forfeits rights for failure to perform on time)
- Leiter v. Handelsman, 125 Cal. App. 2d 243 (Cal. Ct. App.) (1954) (time is not of the essence unless contract so states)
- Thrifty Payless, Inc. v. The Americana at Brand, LLC, 218 Cal. App. 4th 1230 (Cal. Ct. App.) (2013) (scope and function of the implied covenant of good faith and fair dealing)