Opinion
E050183
11-09-2011
DAILY TRANSIT MIX, LLC, Plaintiff and Respondent, v. DAILY TRANSIT MIX CORPORATION et al., Defendants and Appellants.
J.W. Biedebach & Associates, James W. Biedebach and Taline G. Snell for Defendants and Appellants. Law Office of Pope & Gentile and Daniel K. Gentile for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Super.Ct.No. VCVVS041126)
OPINION
APPEAL from the Superior Court of San Bernardino County. W. Robert Fawke, Judge. Affirmed.
J.W. Biedebach & Associates, James W. Biedebach and Taline G. Snell for Defendants and Appellants.
Law Office of Pope & Gentile and Daniel K. Gentile for Plaintiff and Respondent.
Plaintiff and respondent Daily Transit Mix, LLC (Daily LLC) sued defendant and appellant Daily Transit Mix Corp. (Mix Corp.), and Elizabeth Daily (Elizabeth),trustee of the Daily Family Trust (collectively, defendants) for (1) breach of contract; (2) specific performance; (3) fraud; and (4) a preliminary and permanent injunction. The lawsuit concerned an alleged agreement for the sale of real property. Following a bench trial, the trial court found in favor of Daily LLC. The trial court ordered defendants to (1) convey the real property at issue, as well as the water rights, to Daily LLC; (2) pay Daily LLC damages in the amount of $896,860; and (3) pay Daily LLC's costs of suit.
We refer to the individuals involved in this case by their first names, not out of disrespect, but for ease of reference.
Defendants contend the judgment should be reversed because (1) the agreement was not binding on the Trust; (2) the agreement is unenforceable due to the statute of frauds; (3) the agreement is unenforceable because a condition precedent was not satisfied; (4) the agreement is unenforceable due to a lack of consideration; and (5) the agreement is unenforceable because Elizabeth never ratified the agreement. Alternatively, defendants assert the agreement should be rescinded or reformed. We affirm the judgment.
FACTUAL AND PROCEDURAL HISTORY
A. MIX CORP.
Approximately 44 years ago, Elizabeth and her husband, David, created Mix Corp., in Helendale. Mix Corp. was involved in the manufacturing of ready-mix concrete, which is comprised of cement, water, sand, and rock. Elizabeth was the secretary for Mix Corp. and David was the president. David handled most aspects of Mix Corp.'s business; however, an employee handled the daily telephone calls, bookkeeping, and billing. Mix Corp. had two plants, known as the Helendale Plant and the Fort Irwin Plant.
B. THE TRUST
In June 1986, David and Elizabeth established the Daily Family Trust (the Trust). David and Elizabeth were named as trustees of the Trust. The real property associated with the Fort Irwin Plant (hereinafter the "Real Property") was deeded to the Trust by H and P Land Co., Inc. (H&P). The property added to the Trust was designated community property. At the beginning of the Trust formation document, the term "Trustee" (singular form) is defined as referring collectively to David and Elizabeth. Toward the end of the Trust formation document, the term "Trustee" (singular form) is "deemed to include any successor Trustee or Co-Trustee."
In regard to selling trust property, the Trust formation document provided: "In addition to all other powers and discretions granted or vested in a Trustee by law or by this instrument, any Trustee appointed hereunder shall have the following powers and discretions, subject always to its fiduciary obligations and subject always to the limitations expressly provided in this instrument, to carry out the purposes of each trust established hereunder:
"A. General Powers:
"To do all such acts, take all such proceedings and exercise all such rights and privileges in the management of the Trust Estate as if it were an individual and the absolute owner thereof, including, without limiting the generality of the foregoing, the following:
"(1) To grant, bargain, sell (for cash or on deferred payments), convey, grant options, exchange or convert any real or personal property."
The trust document further provided: "The Trustees may designate . . . a managing Trustee who shall have the authority to perform any act alone which all of the Trustees acting together might be permitted to perform under the provisions of this Agreement. Such powers shall include the right to execute, without the joinder of the other parties, all instruments of sale, conveyances, exchange, partition, division, lease or encumbrance."
C. 1992 AGREEMENT
Jonathan Hove (Jonathan) was the sole shareholder of a business known as AgCon. AgCon was created in 1992, when Jonathan bought assets and real property related to the Helendale Plant from Mix Corp., for approximately $3.4 million. As part of the 1992 agreement, AgCon was given the option of purchasing the Real Property. The option period lasted for five years, starting in March 1992. The 1992 option agreement was signed by (1) David, as an individual and cotrustee of the Trust; (2) Elizabeth, as an individual and cotrustee of the Trust; (3) Jonathan, as president of AgCon; and (4) Robert Hove, as chairman of the board and secretary of AgCon. If AgCon chose to exercise its purchase option, the price would have been $150,000. AgCon did not exercise its option to purchase the Real Property.
The record related to this transaction is somewhat unclear. We infer from statements in the record that the transaction related to the Helendale Plant; however, Jonathan testified that the real property was in Oro Grand and Adelanto.
D. DAVID'S HEALTH
In 1997, David had a heart catheter inserted, and he suffered from total renal failure. David suffered from congestive heart failure and diabetes. David had been on a transplant list for a heart, but was removed from the list due to the failure of his kidneys. David was placed on dialysis due to his kidney failure; he was rarely able to sleep due to his poor health and multiple medications.
E. 1999 AGREEMENT
In 1999, Jonathan began discussing with David the acquisition of the Fort Irwin Plant from Mix Corp. A parcel of property, referred to as the "Lint Property," was across the street from the Fort Irwin Plant. The Lint Property was leased by Mix Corp., and used for mining sand. Mix Corp. had operations running on the Lint Property as well as the Fort Irwin Plant. Jonathan and David discussed Jonathan, under the identity of Daily LLC, leasing all of the assets on the Lint Property, such as the plant and equipment, as well as the approximately 187 acres of real property that comprised the Fort Irwin Plant, and then having an option to purchase the Lint Property assets and the Fort Irwin Plant.
Jonathan and David had a cordial relationship, and they both contributed different terms to the lease option agreement. Elizabeth was not part of the negotiations. Jonathan agreed to a purchase price of $1,060,000 for the various assets and real property. On May 20, 1999, David signed the lease option agreement as president of Mix Corp., and Jonathan signed as manager of Daily LLC. The lease portion of the lease option agreement was effective until January 19, 2000, but then was extended by one year. During the lease period, Daily LLC paid $10,000 per month in rent to Mix Corp. After entering into the lease option agreement, David continued to work at the Lint Property, helping Daily LLC with its operations and permits.
In the trial court's written findings, it concluded that Elizabeth signed the 1999 agreement. We have reviewed the 1999 agreement, and do not see Elizabeth's signature on the document.
F. 2001 AGREEMENT
On January 20, 2001, a purchase and sale agreement (the agreement) was created. The introduction of the agreement reflected that it was being entered into by (1) Daily LLC; (2) David, as an individual; (3) David and Elizabeth, as trustees of the Trust; and (4) Mix Corp. The agreement related to the Fort Irwin Plant and the assets at the Lint Property. The total purchase price for the assets and real property was lowered to $816,000 due to David wanting to retain some of the equipment for his other business operations.
Article Two of the agreement was entitled, "Transfer of Real Property by Trust." Article Two provided as follows: "The Trust presently owns the real property described in the attached Exhibit 'D' [the Real Property] and hereinafter referred to as the 'Daily Property.' The Trustees agree and represent to the Buyer that the Trust has no equity in the Daily Property since the present encumbrance against said property is equal to the present value of the property. Upon payment in full of [the] existing note for $93,000 (expected to be within two years of Agreement date) by Daily on the Daily Property to H&P, said property shall be deeded to Buyer by Daily. A Trust Deed shall then be executed by Buyer in the amount then owning on the 'Note.'[] Any water rights won by 'Daily Group' in court shall stay with Daily Property and any and all documentation and/or transfer agreements required now or in the future shall be provided by the 'Daily Group' and the foregoing shall survive this document.[]"
David and Jonathan agreed that Daily LLC would execute a trust deed to David to secure the payment of the funds remaining on the $816,000 purchase price.
At the time the agreement was executed David was involved in adjudication related to water rights in the high desert region.
Jonathan explained that he, on behalf of Daily LLC, would not have entered into the purchase agreement if the Real Property were not included, because Daily LLC must have an ownership interest or owner's agreement in order to obtain mining permits for the Real Property.
A paragraph of the agreement entitled "Authority and Consents" provides: "The Trustees and the Corporation have the right, power, legal capacity, and authority to enter into, and to perform its obligations under this Agreement and no approval or consent of any other person or entity is required except as otherwise provided herein." In another paragraph of the agreement, entitled "Execution of Agreement," the agreement provides: "The Trustees and the Corporation shall have executed this agreement."
The agreement was signed by (1) David, as President of Mix Corp.; (2) Jonathan, as a member of Daily LLC; and (3) Robert Hove, as the other member of Daily LLC. The agreement did not include a signature line for the Trust; Elizabeth did not sign the agreement. Jonathan explained that the agreement was assembled by himself, David, and Lori Clifton, who was Jonathan's executive assistant. The written agreement was pieced together from the 1992 AgCon agreement, and Lori assisted in editing the agreement. Lori did not recall an attorney being involved in the assembly of the agreement. Jonathan believed that a signature line for the Trust was omitted by mistake. Jonathan believed that David signed on behalf of all the relevant entities, including the Trust; David never represented to Jonathan that the Trust would not perform its obligations. As part of the agreement, Daily LLC executed a promissory note, promising to pay Mix Corp. $10,000 every month until the $816,000 plus interest was paid in full.
G. DISPUTE OVER THE REAL PROPERTY
David died in November 2003. As a result of David's death, Elizabeth became the sole successor and trustee of the Trust. As Elizabeth received the $10,000 payments from Daily LLC, she took them to the bank and deposited them. Elizabeth assumed that the checks were for the sale of concrete. In March 2004, Elizabeth searched her house for documents to assist her probate attorney, and she found a copy of the agreement in David's bathroom cabinet. Elizabeth had known that David was selling Mix Corp., but she believed the sale was limited to the assets on the Lint Property.
Following David's death, in February 2004, Jonathan contacted Elizabeth about paying off the H&P deed of trust, and transferring the Real Property. Jonathan wanted the Real Property transferred so that he could proceed with obtaining mining permits. On May 28, 2004, over the telephone, Elizabeth informed Jonathan that the payoff amount was $26,447.14 with $7.20 per day accruing in interest. Jonathan did not believe that Elizabeth was surprised by his request for a payoff amount, and she never mentioned withholding the deed to the Real Property. On May 28, 2004, Daily LLC sent Mix Corp. $27,000 so the H&P deed of trust could be paid in full. In a letter accompanying the $27,000 check, Jonathan wrote that Daily LLC would need the deed to the Real Property, with Elizabeth retaining a deed of trust until the entire $816,000 promissory note was paid.
Lori, Jonathan's executive assistant, spoke to Elizabeth approximately 10 times about the status of the deed preparation. Elizabeth never told Lori there was not an agreement to transfer title, or that she was surprised Lori was asking for a deed. On April 7, 2005, Elizabeth's attorney sent a letter to Daily LLC asking for a copy of the agreement with Elizabeth's signature on it, because she was cotrustee of the Trust. Before and after April 2005, Elizabeth continued to cash the monthly $10,000 checks that Daily LLC sent to Mix Corp.
In the summer of 2005, Elizabeth and her attorney met with Lori. At the meeting, Elizabeth and her attorney provided an appraisal of the Real Property and stated Real Property was undervalued in the agreement, and that the Trust would not convey the Real Property to Daily LLC. Daily LLC continued making the $10,000 payments following the summer meeting, and Elizabeth continued to cash the checks.
On October 25, 2005, Elizabeth's attorney wrote a letter to Daily LLC. The letter reflected that both trustees, David and Elizabeth, needed to agree on decisions affecting the Trust. The letter provided that the agreement was incorrect in reflecting the Trust had no equity in the Real Property, because the Real Property was valuable. The attorney wrote that David did not disclose the agreement to Elizabeth, and the agreement was further complicated by David's medical problems. The letter further provided that Elizabeth did not have an obligation to transfer the Real Property to Daily LLC, and that as a trustee she was obligated to preserve the Trust's assets. After receiving the October 25th letter, Daily LLC contacted an attorney.
Elizabeth did not cash the check that would have constituted Daily LLC's final payment, although there was evidence that Daily LLC had already overpaid by $4,000 without the final check being cashed. Elizabeth stated she did not cash the final check because "'last payment'" was written on the check, and she did not know if the check constituted the last payment. Elizabeth further explained she continued cashing the checks because she believed that $816,000 was the value of the business assets, excluding the real property. Elizabeth stated she and David paid $110,000 for the Real Property in 1987, and she did not believe the Real Property could seriously be valued at $93,000. Defendants' valuation expert testified the Real Property would be worth approximately $800,000 to $1,400,000 in 2005. Daily LLC's appraiser estimated that in January 2001 the Real Property would have been worth $88,800. Daily LLC did not receive the deed for the Real Property.
Jonathan stated that Daily LLC suffered a variety of incidental damages as a result of not receiving the deed to the Real Property, such as (1) continuing to rent the Lint Property, which Daily LLC would not need if it could mine the Real Property— Jonathan noted the permitting process for the Real Property could take up to two years, during which time Daily LLC would need to continue renting the Lint Property; (2) the cost of rock, which was not available on the Lint Property, but was available on the Real Property; (3) the cost of freight for transporting the rock; (4) the environmental costs for the Lint Property, such as moving tortoise fencing; (5) the generators and electrical expenses for the Lint Property; and (6) the cost of road improvements that were required for retaining the Lint Property permits. The total amount of requested damages was $900,360.
Jonathan explained there was not another property as well situated as the Real Property, because it was located on an alluvial fan, which is comprised of rock and sand, and it was across the street from the current operation, so it would be easy to move the mining equipment. Jonathan believed the Lint Property was not an appropriate substitute because the rocks from the alluvial fan did not extend to the Lint Property.
H. TRIAL COURT'S FINDINGS
The trial court found a contract existed between Daily LLC and the Trust. The trial court concluded the evidence reflected it was David's intention to sell the Real Property to Daily LLC on behalf of the Trust. In regard to the lack of signature for the Trust, the trial court found the flaw was "not fatal since it [was] obviously [David's] intent as trustee[] to transfer that property." The court concluded the Trust document authorized either David or Elizabeth to sell the trust property; and therefore, Elizabeth's signature was not required for the sale of the Real Property. The trial court based this "single signature" conclusion on article IV, section (a)(1) of the Trust document, which provides "a Trustee" has the power to grant, sell, or convey real property.
Additionally, the trial court found Elizabeth knew the Real Property was included in the 2001 sale agreement. The trial court concluded "it is not credible" that Elizabeth was ignorant of what would happen with the Real Property when so many of the business assets were being sold; the trial court found it "incredible to believe" that Elizabeth would not have asked David about the future of the Real Property.
In regard to specific performance, the trial court concluded there was a contract, the contract was breached, there was adequate consideration, and the contract was reasonable. Therefore, the trial court held that equity required the contract to be enforced. The trial court entered a judgment in favor of Daily LLC. The court ordered the Trust and Mix Corp. to convey the Real Property and all associated water rights to Daily LLC. The trial court also ordered the Trust and Mix Corp. to pay Daily LLC monetary damages in the amount of $896,860, as well as Daily LLC's costs of suit.
DISCUSSION
A. DAVID'S UNILATERAL AUTHORITY
Defendants contend the agreement was not binding on the Trust because David did not have the authority to unilaterally convey the Real Property. We have reviewed the Trust agreement, and it reflects a somewhat confusing definition of the term "Trustee." The Trust agreement defines "the 'Trustee,'" as referring collectively to David and Elizabeth. As a result, when the Trust agreement grants "a Trustee" the authority to sell any real property, it is unclear if David and Elizabeth jointly must sell the Real Property, because together they constitute a single trustee; or whether David alone had the authority to sell the real property, because David and Elizabeth were each trustees with the power to unilaterally act as trustee. For the sake of judicial efficiency, we will assume that Elizabeth is correct, and David did not have the authority to unilaterally sell the Real Property. In other words, Elizabeth needed to agree to the sale of the Real Property in order for the sale to be proper.
In addition to asserting that the Trust formation document requires Elizabeth and David to participate together in the sale of Trust property, defendants argue Elizabeth's signature was needed to sell the Real Property because the property in the Trust was community property. It appears that this community property theory is being raised for the first time on appeal.
B. RATIFICATION
Defendants assert substantial evidence does not support the finding that Elizabeth ratified the agreement. We disagree.
We review this issue under the substantial evidence standard of review. (White v. Moriarty (1993) 15 Cal.App.4th 1290, 1296.) "Substantial evidence is evidence that a rational trier of fact could find to be reasonable, credible, and of solid value. Under the substantial evidence standard of review, we view the evidence in the light most favorable to the judgment and accept as true all evidence tending to support the judgment, including all facts that reasonably can be deduced from the evidence . . . . [Citations.]" (Mealy v. B-Mobile, Inc. (2011) 195 Cal.App.4th 1218, 1223.)
Ratification is the voluntary election by a person to adopt, as her own, an act that was done by another person; the effect is to treat the act as if it were originally authorized by the person doing the ratification. (Estate of Stephens (2002) 28 Cal.4th 665, 673.) "A purported agent's act may be adopted expressly or it may be adopted by implication based on conduct of the purported principal from which an intention to consent to or adopt the act may be fairly inferred, including conduct which is 'inconsistent with any reasonable intention on [her] part, other than that [s]he intended approving and adopting it.' [Citations.]" (Rakestraw v. Rodrigues (1972) 8 Cal.3d 67, 73; Fretland v. County of Humboldt (1999) 69 Cal.App.4th 1478, 1490-1491.) A person who ratifies an agreement cannot split the transaction by accepting the benefits of the agreement without the burdens. (Reusche v. California Pacific Title Ins. Co. (1965) 231 Cal.App.2d 731, 737.)
The record includes evidence of the following: David died in November 2003. In February 2004, Jonathan contacted Elizabeth about paying off the H&P deed of trust, and transferring the Real Property. In March 2004, Elizabeth found a copy of the agreement in David's bathroom cabinet. On May 28, 2004, over the telephone, Elizabeth informed Jonathan that the payoff amount for the H&P deed of trust was $26,447.14 with $7.20 per day accruing in interest. That same day, Jonathan sent Elizabeth a check for $27,000 with a letter requesting the deed to the Real Property. Elizabeth did not tell Jonathan over the telephone or in response to the letter that she had no obligation to transfer the Real Property. Elizabeth accepted the $27,000 and used it to pay off the mortgage on the Real Property. During the foregoing time period, Daily LLC sent checks for $10,000, every month, to Mix Corp. Elizabeth testified that she accepted the checks and personally deposited them in the bank.
Approximately one year later, in April 2005, Elizabeth's attorney asked Daily LLC for a copy of the agreement with Elizabeth's signature on it; however, after April 2005, Elizabeth continued to cash the $10,000 monthly checks sent by Daily LLC. In the summer of 2005, Elizabeth and her attorney informed Daily LLC that the Trust would not transfer the Real Property because it was undervalued in the agreement. Nevertheless, following the summer of 2005 meeting, Elizabeth continued to cash the checks sent by Daily LLC.
Elizabeth's testimony that she personally continued to cash Daily LLC's checks after finding the agreement, speaking to Jonathan about the land transfer, and receiving Jonathan's letter about the land transfer, is substantial evidence that she impliedly ratified the agreement. Elizabeth's conduct was consistent with conforming to the terms of the agreement, because she accepted all the benefits of the agreement, i.e., she personally took Daily LLC's money. If Elizabeth did not want to ratify the agreement, then she could have (1) not cashed the checks; (2) told Jonathan during the telephone conversation that she would not transfer the land; or (3) replied to Jonathan's letter, letting him know that she would not transfer the land. Elizabeth's testimony that she cashed the checks every month, with the knowledge that Daily LLC expected to receive the Real Property as part of the deal, supports a finding of ratification.
Defendants assert there is not substantial evidence Elizabeth ratified the agreement as she "was not capable of ratifying the [a]greement before ascertaining a copy of it because she lacked an understanding of the terms and implications of those terms, and ultimately her rights." The flaw in this argument is that there is evidence Elizabeth discovered a copy of the agreement in April 2004, and communicated with Jonathan about the transfer of the Real Property in May 2004. For a year after gaining knowledge of the impending land transfer, Elizabeth continued to personally deposit Daily LLC's checks, acting in conformance with the agreement, and accepting the benefit of the agreement. Given the evidence that Elizabeth did have knowledge of the agreement, we find Elizabeth's argument unpersuasive.
Defendants support their assertion by pointing to the evidence that Elizabeth was not a party to the negotiations, and evidence she believed Daily LLC's checks were solely for the Mix Corp. assets—not for the Real Property. We find Elizabeth's reliance on this evidence to be problematic, because we must look at the record in the light most favorable to the trial court's findings. While Elizabeth testified she did not believe the Real Property was included in the agreement; she also testified that she discovered a copy of the agreement in April 2004, and communicated with Jonathan about the transfer of the Real Property in May 2004. The fact Elizabeth contradicted herself does not equate with a lack of substantial evidence; a record will still be found to have substantial evidence, even if there is contradictory evidence in the record. (Jones & Matson v. Hall (2007) 155 Cal.App.4th 1596, 1607.)
Next, defendants assert there is not substantial evidence that Elizabeth ratified the agreement because "neither her words nor conduct rise to the level required for ratification." We disagree with defendants' position, because Elizabeth testified she personally cashed the checks sent by Daily LLC. Given the evidence that Elizabeth knew the Real Property was included in the agreement, Elizabeth's acts of cashing the checks rise to the level of ratifying the agreement, because Elizabeth was accepting the benefit of the agreement. As set forth ante, a person who ratifies an agreement cannot split the transaction by accepting the benefits of the agreement without the burdens. (Reusche v. California Pacific Title Ins. Co., supra, 231 Cal.App.2d at p. 737.) Thus, when Elizabeth accepted Daily LLC's checks, she also accepted the burden of transferring the Real Property. (See ibid. [Principal ratified the agreement by accepting funds for the sale of real property while making "no offer to return [the] sum" while retaining full knowledge of the payment's "source and character."].)
C. STATUTE OF FRAUDS
Defendants contend the agreement is unenforceable due to the statute of frauds. We disagree.
"The statute of frauds requires contracts and options for the sale of real property to be in writing. (Civ. Code, § 1624.)" (Alameda Belt Line v. City of Alameda (2003) 113 Cal.App.4th 15, 20.) However, a defendant will be estopped from asserting the statute of frauds affirmative defense whenever she has represented by words or conduct that she intends to stand by an agreement, and the plaintiff has seriously changed its position in reliance on the contract, or the defendant would be unjustly enriched by the benefits received from the plaintiff's performance under the agreement. (Monarco v. Lo Greco (1950) 35 Cal.2d 621, 623-624; Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031, 1041, fn. 10.)
"'[W]hether a contracting party should be estopped to assert the statute of frauds is usually a question of fact the termination of which, if supported by substantial evidence, will not be disturbed on appeal unless the contrary conclusion is the only one to be reasonably drawn from the facts.' [Citation.]" (Reynolds v. Special Projects, Inc. (1968) 260 Cal.App.2d 496, 501-502.)
Defendants assert we should review the statute of frauds issue de novo, because the issue involves undisputed facts. We elect to follow the standard of review set forth in Reynolds v. Special Projects, Inc., supra, 260 Cal.App.2d at pages 501 through 502, which is the substantial evidence standard.
As set forth ante, for a year after discovering the agreement and speaking to Jonathan about the property sale, Elizabeth continued to cash the checks sent by Daily LLC. During that time period, Daily LLC spoke to Elizabeth approximately 10 times regarding preparation of the deed. Elizabeth never said she planned to back out of the contract. Elizabeth's partial performance of the contract, i.e., accepting the benefit of the bargain every month for approximately one year, is substantial evidence that she intended to stand by the agreement.
Further, Daily LLC stayed at the Lint Property, and made improvements to the Lint Property, while waiting to complete the transaction for the Real Property. Daily LLC incurred more business expenses at the Lint Property due to the Lint Property not having the rocks that were located at the Real Property. There is also evidence that no other property would be an adequate substitute for the Real Property, with respect to Daily LLC's business needs and moving expenses. Based upon the foregoing, there is substantial evidence that Daily LLC seriously changed its position in reliance on the contract, because Daily LLC paid for the Real Property, incurred a variety of expenses while waiting for the Real Property to be transferred, and suffered delays in starting the mining permit process because it did not have title to the Real Property.
In sum, there is substantial evidence Elizabeth's conduct represented that she intended to stand by the agreement, and Daily LLC changed its position in reliance on the contract. Therefore, the evidence supports a finding defendants are estopped from asserting the statute of frauds affirmative defense.
Defendants assert the statute of frauds should apply because Elizabeth never signed the agreement. We agree Elizabeth never signed the agreement; however, she partially performed in compliance with the agreement by accepting Daily LLC's monthly payments, and application of the statute of frauds would injure Daily LLC, as set forth ante. Therefore, despite the lack of requisite writing, the statute of frauds will not act as a defense. (See In re Marriage of Benson (2005) 36 Cal.4th 1096, 1108 ["[W]here assertion of the statute of frauds would cause unconscionable injury, part performance allows specific enforcement of a contract that lacks the requisite writing."].)
As a secondary argument, defendants assert Elizabeth would have needed to at least ratify the agreement in writing, and since she did not, then the statute of frauds prevents enforcement of the agreement. "[T]he equal dignities rule of Civil Code section 2310 . . . provides that a ratification of an agent's act 'can be made only in the manner that would have been necessary to confer an original authority for the act ratified.' In other words, just as an agent's authority to execute a deed must be in writing, so also must a principal's ratification of an invalid execution be in writing." (Estate of Stephens, supra, 28 Cal.4th at p. 673.) The equal dignities rule only requires the application of the statute of frauds for a ratification when the statute applies to the original document. In this case, defendants are estopped from asserting the statute of frauds affirmative defense as to the formation of the agreement, and therefore are also estopped from asserting the defense as to the ratification of the agreement.
D. CONDITION PRECEDENT
Defendants assert the agreement is unenforceable because a condition precedent was not satisfied. Defendants ask this court to "suppos[e]" that when the agreement for the sale of Mix Corp. uses the term "Trustees" it is contemplating the acquisition of Elizabeth's signature on the agreement as a condition precedent. In other words, this court should speculate that the term "Trustees" implies Elizabeth's signature is needed as a condition precedent for the agreement. We disagree with defendants' argument.
It is the person "resisting enforcement of the contract who 'cannot escape liability unless he affirmatively establishes that the signatures of all parties were contemplated as being a condition precedent to the validity of the contract [citation].' [Citation.]" (Fagelbaum & Heller LLP v. Smylie (2009) 174 Cal.App.4th 1351, 1365.) Defendants do not offer evidence to firmly establish that the acquisition of Elizabeth's signature was a condition precedent. Rather, they write, "Supposing that [Daily LLC] and [Mix Corp.] contemplated acquiring Elizabeth's consent and signature at a later date, the failure of this condition precedent renders the contract unenforceable." Since defendants offer primarily speculation regarding this assertion, we conclude they have not established the existence of the condition precedent. (See Fry v. Pro-Line Boats, Inc. (2008) 163 Cal.App.4th 970, 973 [speculation will not support reversal of a judgment.].) As a result, we find the contention to be unpersuasive.
E. LACK OF CONSIDERATION
Defendants contend the agreement fails due to a lack of consideration. We disagree.
One of the essential elements of a contract is "sufficient cause or consideration." (Civ. Code, § 1550.) However, the "'[a]dequacy of consideration need not be proved where the defendant has already accepted the consideration.' (Beab, Inc. v. First Western Bank & Trust Co. (1962) 204 Cal.App.2d 680, 685.)" (Abers v. Rounsavell (2010) 189 Cal.App.4th 348, 362.) Elizabeth testified she personally deposited the checks sent by Daily LLC. Since Elizabeth already accepted the consideration, she cannot now complain the consideration was inadequate. Therefore, we find no error.
Defendants point out the total sale price under the agreement was $816,000, and that all the equipment listed in schedule "A" of the agreement is valued at $816,000; therefore, defendants assert, the Real Property was included in the agreement for no consideration. We find defendants' argument unpersuasive because "'where there is consideration for any of the agreements specified in a contract the contract as a whole cannot be said to lack mutuality or consideration nor can any particular promise or agreement contained therein be singled out and deemed inoperative because no special or particular consideration appears to have been given or promised for it.'" (Brawley v. Crosby Research Foundation (1946) 73 Cal.App.2d 103, 118.) In other words, "'[w]hile consideration is a necessary element of every contract, it is not necessary that each separate promise or covenant should have a distinct consideration.'" (Ibid.) We find defendants' argument to be unpersuasive, because defendants are isolating the Fort Irwin transfer from the rest of the agreement, which is improper.
Moreover, we note that when looking at the agreement as a whole, the first article of the agreement includes a clause that reflects, "The Corporation recognizes and agrees that Buyer's need for the Equipment listed on Exhibit "A" will be substantially reduced if Buyer is unable to do all the following:" (1) obtain a lease on the Lint Property, with the help of Mix Corp; (2) obtain mining permits for the Lint Property; and (3) obtain permits to operate a batch plant on the Lint Property. Given that Daily LLC's need for the equipment would have been reduced if various land and permitting issues were not resolved, we find it likely the Real Property was included in the agreement as a means of selling the equipment quickly to a single buyer. It is likely that if the Real Property were not included in the agreement then Daily LLC's need for the equipment would have been reduced and Mix Corp. would have needed to extend its search for a buyer. In other words, it does not appear the Real Property was "given away"; rather, it was likely used as part of the bargaining process to reach a deal with a single buyer.
Next, defendants argue the trial court made irreconcilable findings in regard to consideration. Defendants point out that on one hand the trial court awarded Daily LLC damages for the Real Property not being transferred, while on the other hand the trial court found the agreement to be enforceable when the agreement assigned no value to the Real Property. Defendants argue that the land cannot be worthless, while at the same time being worth an award of damages. We do not find defendants' argument to be persuasive because, as set forth ante, the agreement must be viewed as a whole— isolating the Real Property from the remainder of the transaction, as defendants do in their argument, is problematic.
F. RESCISSION: MUTUAL MISTAKE
Defendants assert the agreement should be rescinded, because David and Jonathan were mistaken as to (1) the value of the Real Property, and (2) the need for Elizabeth to sign the agreement on behalf of the Trust. We disagree.
To affect a rescission, a party to the contract must promptly give notice to the party to whom she intends to rescind the contract, and restore everything of value that she has received under the contract, or offer to restore the items of value. (Civ. Code, § 1691.) "When notice of rescission has not otherwise been given or an offer to restore the benefits received under the contract has not otherwise been made, the service of a pleading in an action or proceeding that seeks relief based on rescission shall be deemed to be such notice or offer or both." (Civ. Code, § 1691.) A party may seek relief based on "rescission by way of defense or cross-complaint." (Civ. Code, § 1692.) The purpose of the foregoing notice requirements is to inform the opposing party of the grounds for rescission. (The Swahn Group, Inc. v. Segal (2010) 183 Cal.App.4th 831, 845, fn. 5.)
Defendants did not file a cross-complaint. In defendants' answer, they requested: (1) Daily LLC be denied the relief requested in its complaint; (2) an award of attorney's fees and costs; and (3) "other and further relief as the Court deems just [and] proper." There is nothing in the answer indicating a desire for rescission, or indicating that defendants had previously offered to restore the payments received under the contract. Since it appears the issue of rescission was not raised in defendants' pleading papers, we conclude the trial court did not err by not granting rescission.
G. REFORMATION
Alternatively, defendants assert that if this court concludes the agreement is enforceable and that rescission is not applicable, then the agreement should be reformed to provide adequate consideration for the Real Property. We disagree.
"'If the written instrument accurately reflects the agreement of the parties, albeit an agreement based upon a mistaken assumption of fact, an action for reformation does not lie. [Citations.]' [Citation.] [Further, 'a]lthough a court of equity may revise a written instrument to make it conform to the real agreement, it has no power to make a new contract for the parties, whether the mistake be mutual or unilateral [citation].' [Citations.]" (Appalachian Ins. Co. v. McDonnell Douglas Corp. (1989) 214 Cal.App.3d 1, 20.)
Defendants argue that David and Jonathan were mistaken about the value of the Real Property, and therefore the agreement must be reformed to reflect the true value of the Real Property. Defendants are asserting a mistake of fact and appear to be asking this court to create a new agreement for the parties. As set forth ante, a court has no power to create a new contract for the parties. Therefore, we find defendants' argument to be unpersuasive.
DISPOSITION
The judgment is affirmed. Respondent is awarded its costs on appeal. NOT TO BE PUBLISHED IN OFFICIAL REPORTS
MILLER
J.
We concur:
HOLLENHORST
Acting P. J.
CODRINGTON
J.