Sterling v. Taylor 11/26/03 CA2/5

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State: California

Court: 1st District Court of Appeal 1st District Court of Appeal

Docket No: B162961

Case Date: 11/26/2003

Preview:Filed 11/26/03

CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FIVE

ROCHELLE STERLING et al., Plaintiffs and Appellants, v. LAWRENCE N. TAYLOR et al., Defendants and Respondents.

B162961 (Los Angeles County Super. Ct. No. SC065807)

APPEAL from a judgment of the Los Angeles County Superior Court, Lisa Hart Cole, Judge. Reversed with instructions. Manatt, Phelps & Phillips, Carl L. Grumer, Jeffrey A. Backhus; Barak Lurie and Dennis Tulsiak for Plaintiffs and Appellants. Buchalter, Nemer, Fields & Younger, Geoffrey F. Bogeaus and Raquel Vallejo for Defendants and Respondents.

INTRODUCTION Plaintiffs and appellants Rochelle Sterling et al., trustees of the Sterling Family Trust (plaintiffs), made claims, including for the ownership of three apartment buildings, based on written memoranda with defendants and respondents Lawrence N. Taylor (Taylor), Christina Development Corporation, Santa Monica Collection (SMC), Santa Monica Collection II and 1066 Corporation (collectively defendants). The trial court granted defendants' motion for summary judgment on the grounds that the writings violated the statute of frauds and were too uncertain for enforcement, and that plaintiffs' fraud claim failed as a matter of law. We hold that there are triable issues of fact as to the enforceability of the alleged agreement reflected by the writings. Even though parol evidence is necessary to clarify ambiguities in material terms in the writings, the writings, as presented by plaintiffs, comply with the statute of frauds and are not, as a matter of law, too indefinite to enforce. Therefore the summary judgment is reversed. We also hold that the fraud cause of action should be summarily adjudicated against the plaintiffs because they have not alleged sufficient facts or submitted sufficient evidence to raise a triable issue of fact with respect to the element of damages. FACTUAL AND PROCEDURAL BACKGROUND1 In January 2000, Taylor, a general partner of SMC, a limited partnership, contacted Donald T. Sterling (Sterling), a trustee of the Sterling Family Trust and one of the plaintiffs, and proposed that Sterling purchase various real estate properties, including the properties involved in this action that are known as Santa Monica Collection (SMC Properties). 2

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The facts stated are uncontradicted, except where noted otherwise.

Sterling had assigned any of his rights in the alleged agreement in issue to the Sterling Family Trust. 2

During a March 13, 2000 meeting between Taylor and Sterling, Sterling prepared in handwriting a document dated March 13, 2000 entitled "Contract for Sale of Real Property" that reads as follows: "Seller Larry Taylor, & Christina Development, and Buyer Donald T. Sterling, Trustee of Sterling Family Trust, agree to the following terms and conditions: D.P. 3,000,000 3,000,000 (cash to loan) Price $31,000,000 2,000,000 DP Price $12,700,000 6,000,000 DP approx. 10.468 x gross income estimated income 1,600,000 Price $16,750.00 escrow 30 days. Brentwood scrow [sic]

"1. "2.

Fox Plaza Barrington Bldg.

"3. 808 4th St. ) "4. 843 4th St. } "5. 1251 14th St.) "Cash to loan. "Contract to be completed within 30 days. "Date 3/13/2000 Seller ____________ " Buyer DTS

The document was not signed by a "Seller." According to Sterling, the omission of Taylor's signature was inadvertent. Taylor said he refused to sign the document. Taylor claimed he told Sterling that he, Taylor, needed the approval of the limited partners of SMC.3 On March 14 or 15, 2000, Sterling gave an accountant for SMC three checks from "Beverly Hills Properties," each check in the amount of $500,000 and purporting to be a "deposit" on each of the three SMC Properties: 808 4th Street, 843 4th Street, and 1251 14th Street. Following a meeting between Sterling and Taylor on March 15, 2000, Sterling delivered a typewritten letter to Taylor that reads as follows: "This letter will confirm our contract of sale of the above buildings.

There is no explanation for the inclusion of Christina Development as a seller, except it appears to be a corporation in which Taylor was involved. 3

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"As we discussed I am leaving for a week. In order to expedite our sale pursuant to our contract, I agreed to give you the following deposits: "1. 3025 Barrington Ave. $ 2,000,000.00 "2. 808 4th Street 500,000.00 "3. 843 4th Street 500,000.00 "4. 1251 14th Street 500,000.00 "5. 10000 Santa Monica Blvd. 1,200,000.00. "These deposits were given to you to enable you to have three million dollars to deposit 1/2 of the down payment of the Fox property. I agreed to pay the other 1/2 so we would have a total of 6 million, the difference between the $25,000,000 loan and the price of $31,000,000. "I am also enclosing the 1.2 million deposit and down payment for the purchase of 10000 Santa Monica Boulevard which represents the same amount you invested in this property. "This letter will also confirm our agreement that the depreciation allocation and tax benefits will be given to me no later than April 1, 2000, since I now have equitable tittle [sic]. Of course I will be fully responsible for all recapture liabilities. "Darren is prepared to wire the balance of the funds needed if you will call my office. If you have any questions or your understanding is different from mine, please contact me immediately. "Warm Personal Regards, "Don" Taylor wrote on the letter, "agreed, accepted and approved" and signed his name. Sterling contradicts Taylor's assertion that this notation simply reflected a receipt of the checks. Sterling states that the March 13 letter (which has "Exhibit A" written on it) was attached to the March 15 letter when Taylor signed the latter, but Taylor disagrees with this statement. On April 4, 2001, Taylor sent to Sterling ("pursuant to our agreement") for signature proposed escrow instructions concerning the SMC Properties. Those instructions reflect that the seller was "Santa Monica Collections, a California Limited Partnership," with Taylor signing as the general partner. The documents provided for a $16,750,000 total purchase price for the SMC Properties, with a credit for the $500,000 deposit for each of the properties. Sterling said he had examined the rent rolls that reported rent as of March, 2000 and determined that the rental income was $1,375,404, instead of the $1.6 million that was on the March 13 writing. Sterling took the position that the March 13

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writing contained a price formula of 10.468 multiplied by the actual rental income, and calculated the price to be $14,404,841, instead of the $16,750,000 shown in the March 13 writing. Accordingly, Sterling did not sign the proposed escrow instructions sent by Taylor. The parties continued to negotiate, but ultimately did not complete the transaction. On May 23, 2000, Taylor returned Sterling's "deposits"--the actual checks referred to in the March 15 letter, which checks had not been cashed. Taylor sent Sterling more rent rolls, but the parties did not communicate further until near the end of the year. On December 8, 2000, Sterling wrote in a letter to Taylor, "I desparately need your help in closing the escrow of the three properties that constitute the Santa Monica collection [sic] before the end of the year. . . . As you know, we agreed on 10.46 times the gross annual income on each of the three buildings as of April 2000. . . . If you now believe there has to be a slight modification of the price or some other term, please tell me what you need. . . . Please call me immediately with the amount that you need to close this transaction . . . ." Taylor responded in writing to Sterling on January 8, 2001, "I am focused now and will be responding to you this week on all open items." In a January 19, 2001 letter to Sterling, Taylor referred to a conversation with Sterling about the properties and sent him updated rent rolls and a copy of a written offer from another potential purchaser. Taylor apparently was willing to proceed at a price that exceeded the amount reflected in the March 13 writing. Sterling insisted on a sales price based on his computation of 10.46 times the actual gross annual income reflected in earlier rent rolls. On March 22, 2001, plaintiffs filed an action asserting that the March 15 writing with the attached March 13 writing constituted an enforceable agreement for the sale of the SMC Properties by SMC for $14,404,841 and that defendants breached the agreement by

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refusing to sell those properties to plaintiffs. 4 Plaintiffs asserted that they have been ready, willing and able to perform their obligations under what they claim is the contract. Based on the purported agreement, plaintiffs alleged causes of action for breach of the implied covenant of good faith and fair dealing, specific performance, declaratory relief, an accounting, and imposition of a constructive trust. Plaintiffs also alleged that defendants had committed fraud in that they had not intended to perform the promise to convey the properties at the agreed-upon price. Plaintiffs recorded a lis pendens that the trial court later expunged. Defendants filed a motion for summary judgment and summary adjudication as to each cause of action, contending that the writings were too uncertain to be enforced as a contract and constituted an insufficient memorialization of any alleged agreement to comply with the statute of frauds, and that as a matter of law there was no fraud. The trial court granted the motion for summary judgment on the grounds that the contract for the sale of the SMC Properties was unenforceable under the statute of frauds and that it was too uncertain as to the price and description of the properties. The trial court held that plaintiffs could not prevail on any of the causes of action--the fraud cause of action because plaintiffs could not establish the requisite elements and the remaining causes of action because there was no enforceable contract. This appeal followed.

The other properties referred to in the writings are not involved in this action. Sterling does point to the closings on the sale of those properties as evidence of contractual intent with respect to the properties in issue in this case. 6

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DISCUSSION A. Standard of Review

Code of Civil Procedure section 437c, subdivision (c) states that a "motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (See Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) If the evidence shows a triable issue of a material fact, the trial court must deny the motion for summary judgment. (Inter Mountain Mortgage, Inc. v. Sulimen (2000) 78 Cal.App.4th 1434, 1442.) On appeal from a summary judgment, we make "an independent assessment of the correctness of the trial court's ruling, applying the same legal standard as the trial court in determining whether there are any genuine issues of material fact or whether the moving party is entitled to judgment as a matter of law." (Iverson v. Muroc Unified School Dist. (1995) 32 Cal.App.4th 218, 222.) "In performing our de novo review, we must view the evidence in a light favorable to plaintiff[s] as the losing part[ies] [citation], liberally construing [plaintiffs'] evidentiary submission while strictly scrutinizing defendants' own showing, and resolving any evidentiary doubts or ambiguities in [plaintiffs'] favor. [Citations.]" (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768-769.) B. Statute of Frauds

The statute of frauds provides that certain contracts "are invalid, unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or by the party's agent." (Civ. Code,

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