41 Cal.App.5th 357
Cal. Ct. App.2019Background
- Rugger agreed to sell a pre-owned aircraft to Jennings (later assigned to Magic Carpet Ride, LLC (MCR)) under an Agreement with a "time is of the essence" clause; purchase price $610,000 with $50,000 down.
- An Amendment gave Rugger 90 days after closing (closing: Feb. 23, 2016) to deliver a Cutter Aviation lien release in an FAA-recognized original form and required a $90,000 holdback in escrow.
- Title and possession passed to MCR on Feb. 23, 2016; Rugger failed to deliver the lien release within 90 days but deposited an FAA-form release into escrow 8 days late (May 31, 2016); that release was not filed with the FAA.
- Rugger sought $38,000 from escrow (amount Rugger’s manager paid Cutter); MCR refused and kept the $90,000 holdback, claiming Rugger breached by missing the 90-day deadline.
- Trial court granted summary adjudication for MCR/Jennings on breach and rescission claims and entered judgment for $90,000; Rugger appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rugger’s 8‑day late deposit of the lien release was a material breach or substantial performance | Late deposit violated the Amendment/strict deadline; breach entitles plaintiffs to holdback | Eight‑day delay was immaterial; Rugger substantially performed and cured; any defect is compensable | Triable issue of fact exists; substantial performance may apply so summary adjudication improper |
| Effect of the Agreement’s “time is of the essence” clause on the Amendment obligations | Clause makes compliance strict; untimely performance is a material breach | Clause does not automatically render slight delay a breach; scope and applicability to the Amendment are uncertain | Time‑is‑of‑the‑essence provision does not automatically bar relief; scope and applicability present triable issues |
| Whether enforcing strict deadline would cause forfeiture or windfall | Enforcement enforces the parties’ bargain; buyer entitled to holdback if deadline missed | Strict enforcement would unjustly forfeit Rugger’s $90,000 and reward buyer with both aircraft and price reduction | Triable issue whether strict enforcement would produce unjust forfeiture and windfall; equity may limit enforcement |
| Whether Rugger was required to file the release with the FAA | Plaintiffs implied ongoing recording obligation or continued lien until filing | Amendment required an FAA‑recognized form delivered to escrow, not FAA filing; Cutter had filing obligation | The Amendment required an FAA‑recognized form delivered to escrow; filing with FAA was Cutter’s obligation, not Rugger’s |
Key Cases Cited
- Posner v. Grunwald‑Marx, Inc., 56 Cal.2d 169 (Cal. 1961) (doctrine of substantial performance permits recovery despite imperfect performance)
- Walsh v. Walsh, 42 Cal.App.2d 287 (Cal. Ct. App. 1940) (where time is not of the essence, payment within a reasonable time suffices)
- Gold Min. & Water Co. v. Swinerton, 23 Cal.2d 19 (Cal. 1943) (traditional rule: time‑is‑of‑the‑essence makes delay a material breach)
- Nash v. Superior Court, 86 Cal.App.3d 690 (Cal. Ct. App. 1978) ("time is of the essence" language not always strictly enforced)
- MacFadden v. Walker, 5 Cal.3d 809 (Cal. 1971) (equitable anti‑forfeiture limits strict enforcement of time provisions)
- Williams Plumbing Co. v. Sinsley, 53 Cal.App.3d 1027 (Cal. Ct. App. 1975) (delay did not permit termination despite time‑is‑of‑the‑essence clause)
- Galdjie v. Darwish, 113 Cal.App.4th 1331 (Cal. Ct. App. 2003) (courts may refuse to enforce time clauses to prevent forfeiture)