                                  129 Nev., Advance Opinion   33
       IN THE SUPREME COURT OF THE STATE OF NEVADA


JACK GALARDI, AN INDIVIDUAL;                         No. 58261
AND BIRDIE, LLC, A NEVADA
LIMITED LIABILITY COMPANY,
Appellants,
vs.
NAPLES POLARIS, LLC, A NEVADA
LIMITED LIABILITY COMPANY,
Respondent.



           Appeal from a district court order granting summary
judgment in a contract action. Second Judicial District Court, Washoe
County; Brent T. Adams, Judge.
           Affirmed.

Armstrong Teasdale LLP and Bruce A. Leslie and Bret F. Meich, Las
Vegas,
for Appellants.

Holland & Hart, LLP, and J. Stephen Peek, Timothy A. Lukas, and
Tamara Reid, Reno,
for Respondent.



BEFORE PICKERING, C.J., HARDESTY and SAITTA, JJ.

                                 OPINION


By the Court, PICKERING, C.J.:
           This dispute arises out of a written option contract. Under the
contract, respondent Naples Polaris had the right to purchase Las Vegas
real property from appellants Jack Galardi and Birdie, LLC (together,



                                                                  -   /14164,
                Galardi), for $8 million "cash." The property was subject to a deed of trust
                securing approximately $1.3 million in debt. The question is whether
                Naples or Galardi must pay off the $1.3 million debt. Specifically, does the
                option contract require Galardi to deliver clear title, meaning Galardi
                must remove the $1.3 million encumbrance for a net $6.7 million option
                price? Or does it contemplate that Naples take title subject to preexisting
                encumbrances, so that Galardi receives the full $8 million option price?
                             The district court granted summary judgment to Naples.
                Galardi appeals and we affirm.
                                                     I.
                             Naples acquired its option rights by assignment from
                Galardi's lessee, French Quarter, a nonparty. The deed of trust securing
                the $1.3 million debt predated the option. French Quarter was operating
                a topless club on the property but losing money and filed for bankruptcy
                protection. We simplify the facts slightly, but what happened next is the
                bankruptcy trustee lined up a fourth party to acquire the property and
                Naples' option. The price was handsome—enough to pay off the $1.3
                million encumbrance, to give Galardi the full $8 million option price he
                demanded, and to generate surplus funds for Naples and French Quarter's
                creditors.
                             Naples and Galardi welcomed the Bankruptcy court sale. But
                they could not agree on whether the $1.3 million needed to retire the
                preexisting encumbrance against the property should come out of Naples'
                or Galardi's share of the sale proceeds. They stipulated to let the sale
                close, with Galardi receiving $8 million and Naples reserving the right to
                sue Galardi in state court for the $1.3 million. This suit over the proper
                interpretation of the option contract followed, which the district court
                decided on cross-motions for summary judgment.
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                                The option contract is in writing and includes an integration
                clause. The contract is silent as to preexisting encumbrances in general
                and the $1.3 million debt in particular. It says simply:
                                Buyer [Naples] shall have an option to purchase
                                the above described real estate for the sum of
                                $8,000,000 (Eight Million Dollars) cash.. . . Buyer
                                [Naples] shall pay all costs of transfer and closing
                                whereby Seller [Galardi] shall receive full
                                purchase price.
                                In their motions for summary judgment, both sides argued
                that the option contract, as written, unambiguously favored its position.
                Each focused on the phrase, "Buyer shall pay all costs of transfer and
                closing whereby Seller shall receive full purchase price." Galardi argued
                that "costs of transfer and closing" encompasses preexisting indebtedness,
                so that he receives the $8 million "full purchase price" with no deductions.
                Naples countered that "costs of transfer and closing" refers to transaction
                costs such as recording fees and transfer taxes, not encumbrances. In
                Naples' view, if Galardi meant for Naples to take title subject to
                preexisting encumbrances, he needed to write the option contract to say so
                specifically.
                                Both Naples and Galardi supported their readings of the
                contract with testimonial evidence. Galardi offered excerpts from his
                deposition, in which he testified that he understood that the deal would
                net him $8 million; that French Quarter (later Naples, as French
                Quarter's assignee) would "pick up the bank note, clean it up, send me $8
                million and I'm gone." Naples offered an expert affidavit from Diane
                Erickson, past president and current certification chair for the Nevada
                Escrow Association with considerable Nevada real estate industry
                experience. Addressing the contract provision that "Buyer shall pay all
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                costs of transfer and closing," Ms. Erickson opined that in the real estate
                industry, "[c]losing costs are separate and apart from the purchase price
                and normally consist of the title policy fee, escrow fee, real property
                transfer tax, recording fees, etc." She further opined, based on her
                "experience in the industry, that whenever real property is transferred, it
                is always given to the purchaser free and clear of any encumbrances or
                liens, unless the agreement specifically states that it is to be acquired
                'subject to' the existing encumbrance, and the buyer specifically agrees to
                take over the payments of the existing loan."
                              Galardi did not dispute the real-estate-industry usages and
                customs detailed in the Erickson affidavit. He argued instead that the
                district court could only consider the Erickson affidavit if it deemed the
                contract ambiguous and that, if the contract were ambiguous, it would
                take a trial to resolve the ambiguity. The district court disagreed. It
                deemed the contract unambiguous when considered in light of the trade
                usages described in the Erickson affidavit; it rejected the deposition
                testimony offered by Galardi as insufficient to create a genuine issue of
                material fact. The district court thus granted summary judgment to
                Naples and denied Galardi's cross-motion for summary judgment.


                              "[Tin the absence of ambiguity or other factual complexities,"
                contract interpretation presents a question of law that the district court
                may decide on summary judgment, Ellison v. Cal. State Auto. Ass'n, 106
                Nev. 601, 603, 797 P.2d 975, 977 (1990), with de novo review to follow in
                this court.   May v. Anderson, 121 Nev. 668, 672, 119 P.3d 1254, 1257
                (2005). Whether a contract is ambiguous likewise presents a question of
                law. Margrave v. Dermody Props., 110 Nev. 824, 827, 878 P.2d 291, 293
                (1994). A contract is ambiguous if its terms may reasonably be
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                interpreted in more than one way, Anvui, LLC v. G.L. Dragon, LLC,          123
                Nev. 212, 215, 163 P.3d 405, 407 (2007), but ambiguity does not arise
                simply because the parties disagree on how to interpret their contract.
                Parman v. Petricciani, 70 Nev. 427, 430-32, 272 P.2d 492, 493-94 (1954)
                (concluding that summary judgment was appropriate because the
                interpretation offered by one party was unreasonable and, therefore, the
                contract contained no ambiguity), abrogated on other grounds by Wood v.
                Safeway, Inc., 121 Nev. 724, 121 P.3d 1026 (2005). Rather, "an ambiguous
                contract is 'an agreement obscure in meaning, through indefiniteness of
                expression, or having a double meaning."       Hampton v. Ford Motor Co.,
                561 F.3d 709, 714 (7th Cir. 2009) (quoting Whiting Stoker Co. v. Chicago
                Stoker Corp., 171 F.2d 248, 251 (7th Cir. 1948)).
                             Citing Dickenson v. State, Dep't of Wildlife,    Galardi argues
                that the district court erred in considering Naples' expert evidence of trade
                usage and industry custom because it did not first declare the option
                contract ambiguous. 110 Nev. 934, 937, 877 P.2d 1059, 1061 (1994) ("If
                there is an ambiguity requiring extrinsic evidence to discern the parties'
                intent, summary judgment is improper. However, if no ambiguity exists,
                the words of the contract must be taken in their usual and ordinary
                signification." (internal citation omitted)). Galardi argues that the district
                court compounded its error, adding insult to injury, when it deemed the
                deposition excerpts he submitted about how he understood the deal terms
                insufficient to generate a genuine issue of material fact.   But see Kaldi v.
                Farmers Ins. Exch., 117 Nev. 273, 281, 21 P.3d 16, 21 (2001) (when an
                integrated written contract is unambiguous, "parol evidence may not be
                used to contradict [its] terms").



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                            Galardi's arguments track the former common-law rule that
                trade usage and industry "custom can only supply incidents to a contract
                when the contract is ambiguous on the point to which the party seeks to
                apply the custom." 12 Richard A. Lord, Williston on Contracts § 34:7 (4th
                ed. 2012). But this rule has lost adherents over time.       Id.   Modernly,
                courts consult trade usage and custom not only to determine the meaning
                of an ambiguous provision, but also to determine whether a contract
                provision is ambiguous in the first place. 1 See, e.g., Restatement (Second)
                of Contracts § 220 cmt. d (1981) ("[U]sage relevant to interpretation is
                treated as part of the context of an agreement in determining whether
                there is ambiguity or contradiction. . . . There is no requirement that an
                ambiguity be shown before usage can be shown . . ."), 5 Margaret N.
                Kniffin, Corbin on Contracts § 24.13, at 121 (rev. ed. 1998) ("Seldom
                should the court hold that the written words of a contract exclude evidence
                of the custom, since even what are often called 'plain' meanings are shown
                to be incorrect when all the circumstances of the transaction are known;
                and usages and customs are a part of those circumstances by which the
                meaning of words is to be judged.").
                            Contract interpretation strives to discern and give effect to the
                parties' intended meaning.    Id. at 118-19. Words derive meaning from
                usage and context. "It would be passing odd to forbid people to look up
                words in dictionaries, or to consult explanatory commentaries that, like

                       lAlthough the Uniform Commercial Code (U.C.C.) does not control
                this real-property-based dispute, we note that the U.C.C. expressly allows
                evidence of 'usage of trade" to explain an agreement's terms. United
                Servs. Auto Ass'n v. Schlang, 111 Nev. 486, 493, 894 P.2d 967, 971 (1995)
                (quoting NRS 104.2202(1)); see Las Vegas Sands, LLC v. Nehme, 632 F.3d
                526, 536-38 (9th Cir. 2011) (applying Nevada U.C.C. and citing Schlang).

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trade usage, are in the nature of specialized dictionaries" in interpreting a
written contract. Matter of Envirodyne Indus., 29 F.3d 301, 305 (7th Cir.
1994). We thus conclude, as other modern courts have, that "[a]mbiguity
is not required before evidence of trade usage . . . can be used to ascertain"
or illuminate contract terms. Puget Sound Fin., LLC v. Uni search, Inc., 47
P.3d 940, 943 (Wash. 2002); accord Metric Constructors, Inc. v. Nat'l
Aeronautics & Space Admin., 169 F.3d 747, 752 (Fed. Cir. 1999) ("Trade
practice and custom illuminate the context for the parties'
contract. . . . Before an interpreting court can conclusively declare a
contract ambiguous or unambiguous, it must consult the context in which
the parties exchanged promises."); Hickman v. Groves, 71 P.3d 256, 260
(Wyo. 2003) ("[E]vidence of usage may be admissible to give meaning to
apparently unambiguous terms of a contract" even "where other parol
evidence," such as "the parties' statements of what they intended the
contract to mean[,] are not admissible." (internal quotations omitted));
In,tersport, Inc. v. NCAA, 885 N.E.2d 532, 539 (Ill. App. 2008) ("contract
terms need not be found to be ambiguous before evidence of the custom
and usage of the terms in the parties' trade or practice can be considered");
cf. Warrington v. Empey, 95 Nev. 136, 139, 590 P.2d 1162, 1164 (1979)
("custom and usage may be used to establish the terms of a contract"
(dictum)).
             We recognize that, ordinarily, "Mlle existence and scope of a
usage of trade are to be determined as questions of fact." Restatement
(Second) of Contracts § 222(2) (1981). To illustrate: If Galardi had
presented admissible evidence to contradict Ms. Erickson's statements
about the Nevada real estate industry's conventions and usages, a genuine
issue of material fact may have arisen that would defeat summary



                                       7
judgment. Compare Den Norske Bank AS v. First Nat'l Bank of Boston, 75
F.3d 49, 58-59 (1st Cir. 1996) (describing usage evidence held sufficient to
create a genuine issue of material fact and defeat summary judgment in a
contract interpretation case), with Simon Wrecking Co. v. MU Ins. Co.,
530 F. Supp. 2d 706, 716 (E.D. Pa. 2008) (holding that party adequately
defeated opposing party's trade usage argument with proof the usage
claimed either did not exist or differed from that argued). But NRCP 56(e)
provides that, when a properly supported "motion for summary judgment
is made," the adverse party "must set forth specific facts showing that
there is a genuine issue for trial" or "summary judgment, if appropriate,
shall be entered." Thus, summary judgment may be granted in a case
requiring interpretation of an integrated written contract, if supported by
admissible evidence of trade usage that is both "persuasive" and
"unrebutted." Puget Sound Fin., LLC, 47 P.3d at 943; see Restatement
(Second) of Contracts § 212(2) (1981) ("A question of interpretation of an
integrated agreement is to be determined by the trier of fact if it depends
on the credibility of extrinsic evidence or on a choice among reasonable
inferences to be drawn from extrinsic evidence. Otherwise a question of
interpretation of an integrated agreement is to be determined as a
question of law."); see Intersport, 885 N.E.2d at 538-40 (consulting
industry usages in interpreting an integrated written contract and
affirming judgment on the pleadings); 5 Corbin on Contracts, supra, §
24.30, at 327.
            The district court properly deemed the Erickson opinion
admissible and the option contract unambiguous in light of the trade
usage Ms. Erickson's affidavit established. "A usage of trade is a usage
having such regularity of observance in a place, vocation, or trade as to



                                      8
                justify an expectation that it will be observed with respect to a particular
                agreement." Restatement (Second) of Contracts § 222(1) (1981). 2 In this
                case, Galardi did not challenge Ms. Erickson's qualifications or the
                legitimacy and relevance of her opinions. Ms. Erickson opined that unless
                otherwise expressly stated, real property is "always given to the purchaser
                free and clear of any encumbrances or liens."         See NRS 111.170(1)(b)
                (Nevada grant, bargain and sale deeds, "unless restrained by [contrary]
                express terms," include a covenant that the property conveyed is "free
                from encumbrances"). She further opined that, in the escrow setting, the
                phrase "costs of transfer and closing" signifies costs "separate and apart
                from the purchase price and normally consist[ing] of the title policy fee,
                escrow fee, real property transfer tax, recording fees, etc."
                            Ms. Erickson's expert opinions comport with the language of
                the option contract and make sense in light of both common law and
                Nevada statutes. To credit Galardi's contrary reading that "costs of
                transfer and closing" encompasses preexisting encumbrances would mean
                that Galardi could have increased the option price at will just by
                borrowing against the property and passing the debt along to the optionee,
                which is unreasonable. The phrase "costs of transfer and closing" thus
                does not carry a double meaning that renders the option contract


                      2Galardi, French Quarter, and Naples had counsel or commercial
                real estate experience or both. Thus, Galardi makes no argument that he
                did not know or have reason to know of the Nevada real estate industry
                usages that the Erickson affidavit addressed. See Restatement (Second) of
                Contracts § 222(3) (1981) ("[A] usage of trade in the vocation or trade in
                which the parties are engaged or a usage of trade of which they know or
                have reason to know gives meaning to or supplements or qualifies their
                agreement.").

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                ambiguous. See Parman, 70 Nev. at 430-31, 272 P.2d at 493-94. Nor does
                the reference to "full purchase price" render the contract ambiguous,
                particularly when read in light of the industry usages detailed in the
                Erickson affidavit.
                            The deposition testimony Galardi offered that he (and perhaps
                French Quarter) understood the deal terms to require the optionee to take
                subject to existing encumbrances would, if admitted, contradict the option
                contract's express terms. It thus was inadmissible under the parol
                evidence rule. Daly v. Del E. Webb Corp., 96 Nev. 359, 361, 609 P.2d 319,
                320 (1980) ("The parol evidence rule forbids the reception of evidence
                which would vary or contradict the contract, since all prior negotiations
                and agreements are deemed to have been merged therein."). Allowing
                extrinsic evidence of objective facts such as industry usage and custom
                does not open the door to a party's subjective understanding of a contract's
                terms, when that understanding contradicts the contract's express terms.
                Cf. AM Inel, Inc. v. Graphic Mgmt. Assocs., Inc., 44 F.3d 572, 575 (7th Cir.
                1995) (discussing the admissibility of objective evidence as distinguished
                from the subjective testimony by the parties as to what they believe the
                contract means in the related context of construing ambiguous contracts);
                Campanelli v. Conservas Altamira, S.A., 86 Nev. 838, 841, 477 P.2d 870,
                872 (1970) (parties to a written contract are bound by its terms regardless
                of their subjective beliefs at the time the agreement was signed). The
                extrinsic evidence with which Galardi opposed Naples' properly supported
                summary judgment motion was either inadmissible or irrelevant or both,
                and thus insufficient to generate a genuine issue of material fact or to
                establish his entitlement to judgment as a matter of law.



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                             The district court properly considered trade usage and
                industry custom in interpreting the option contract, even though it also
                found that the contract was unambiguous. For the option contract to
                require the optionee to take the property subject to existing indebtedness,
                it needed to so state. We therefore agree with the district court that the
                contract placed responsibility for the $1.3 million debt on Galardi's side of
                the ledger and affirm.



                                                                                 , C.J.
                                                    Pickering


                We concur:




                Harde




                Saitta




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