Opinion
NOT TO BE PUBLISHED
Sonoma County Super. Ct. No. SCV229907
Siggins, J.
Appellant Andrea Associates and respondents Stony Point West, Stony Point Investors II, and Stony Point East (Stony Point) attempted to form a real estate joint venture. Stony Point, as optionor, agreed to share its interest in eight Santa Rosa commercial properties in exchange for interest in certain of optionee Andrea Associates’ properties and Andrea Associates’ multi-million dollar cash payment. The deal never closed, and Andrea Associates sued Stony Point for breach of contract, promissory estoppel and fraud. The trial court concluded that the failure of the contemplated transaction to close on time discharged the parties’ obligations under their option agreement. Judgment was entered in favor of Stony Point. We affirm.
BACKGROUND
The proposed joint venture entailed the ownership and management of eight commercial real estate properties in a Santa Rosa office park and retail center. The option agreement, executed on November 6, 1998, granted Andrea Associates an exclusive two-year option to acquire an interest in specified Stony Point properties in exchange for an interest in certain Andrea Associates properties, and a resulting agreement with Stony Point for joint management of the properties. Andrea Associates was required to deposit $75,000 into escrow as “Initial Option Consideration . . . at least ten (10) days prior to the Option Closing Date, as defined” in the agreement. Pursuant to the agreement, March 31, 1999, the last day of Andrea Associates’ due diligence period was the option closing date. So, Andrea Associates was required to deposit $75,000 into escrow no later than March 21, 1999.
Andrea Associates gave Stony Point written notice of its election to exercise its option on or about March 23, 2001. That notice, pursuant to the agreement, triggered calculation of the closing date for the joint venture transaction 90 days after notice of exercise, or June 25, 2001. The option agreement also provided that: “Time is of the essence of every provision contained in this Agreement.”
Events made timely close of the transaction unlikely, so the parties agreed in writing to extend the close of escrow deadline by 30 days, until July 25, 2001. They later executed a second extension, to require closing by September 28, 2001. Despite these extensions, escrow had not closed by September 28 and, in fact, neither party had done anything that was required under the option agreement to close escrow.
On April 7, 2001, Stony Point principal Jim Brecht died unexpectedly of a heart attack at age 48.
Just over a month after the last extended closing date had passed, Andrea Associates requested another extension. Stony Point appears to have considered granting this request because one of its principals signed this third written extension agreement that provided a new close of escrow on March 25, 2002. However, this “Third Addendum” by Stony Point was never transmitted to Andrea Associates.
On April 11, 2002, Andrea Associates requested a further extension, and on or about April 12, 2002, Andrea Associates deposited $75,000 to escrow. Stony Point had then recently discovered that Andrea Associates never paid the $75,000 initial option consideration that was due on March 21, 1999. So, Andrea Associates deposited the money three years after it was due.
Stony Point rejected Andrea Associates’ April 11 extension request and terminated the option agreement in a letter of April 19. It gave two reasons. First, it explained, “Due to the fact that the Initial Option Consideration was not properly and timely paid, Andrea Associates’ legal right to exercise the option under the Option Agreement (the ‘option’) never accrued. An option, such as the one at issue here, is a unilateral agreement. The Stony Point entities’ ‘obligation’ to keep the Option open for a fixed period of time never arose because Andrea Associates failed to fulfill a necessary condition precedent—namely, depositing the Initial Option Consideration with Escrow Holder by March 21, 1999.” Stony Point expressly rejected Andrea Associates’ “severely delinquent” attempt at payment.
Stony Point also stated termination was warranted because “over the past year Andrea Associates has been afforded numerous extensions of the Closing Date. The original Scheduled Closing Date for this transaction was June 25, 2001. Pursuant to your requests, however, the Stony Point entities have granted Andrea Associates no less than three Closing Date extensions, the last one of which expired back on March 25, 2002. [¶] . . . [¶] Thus, as of today’s date, no further extension of the Scheduled Closing Date has been agreed to or is in effect. [¶] Accordingly, for the above-stated reasons and pursuant to Section 19.9 of the Option Agreement, the Stony Point entities hereby provide formal notice that the Option Agreement dated November 6, 1998 has terminated pursuant to its express terms.”
Andrea Associates sued Stony Point for breach of contract, promissory estoppel and fraudulent misrepresentation. Following a bench trial, the court issued its statement of decision and judgment in favor of Stony Point. Most critically, it found that “Andrea Associates’ breach of contract claim fails because neither party took any steps to close escrow by the close of escrow deadline, and the parties’ obligations under the Option Agreement were mutually discharged.” As an independent basis for its decision, the court further found Andrea Associates never acquired a legal right to an option because it failed to pay the initial option consideration. The court rejected Andrea Associates’ claims of waiver and estoppel and ruled that it had neither a right to cure nor a right to relief from forfeiture. Andrea Associates filed a timely appeal.
It also filed notices of lis pendens on the disputed properties. The trial court granted Stony Point’s motion to expunge and this court denied Andrea Associates’ petition for writ of mandate challenging that ruling.
DISCUSSION
In this appeal, Andrea Associates contests the court’s conclusions that (1) the parties’ contractual obligations were mutually discharged by the failure to timely close escrow; (2) Stony Point did not waive the deadline for close of escrow; (3) Stony Point did not prevent Andrea Associates from closing the transaction; and (4) Civil Code section 3275 does not afford Andrea Associates relief from forfeiture.
1. Mutual Discharge
Where a contract requires the performance of concurrent conditions and a timely closing, the parties may be discharged from their obligations when neither of them has tendered performance by the closing date. (Pittman v. Canham (1992) 2 Cal.App.4th 556.) The trial court applied Pittman to deny recovery to Andrea Associates. “Under Pittman, as applied to the uncontroverted testimony at trial, the parties’ mutual failure to take any steps to close escrow by September 28, 2001 and to satisfy their concurrent conditions caused the parties to fall out of contract and discharged the parties’ contractual obligations under the Option Agreement.” The court’s conclusion was supported by findings that: (1) the option agreement contained the “time is of the essence” clause; (2) there was no credible evidence that the close of escrow was extended past September 28, 2001; (3) there was no evidence showing a tender of performance of close of escrow obligations by September 28, 2001, or any later date; and (4) there was no credible evidence showing Stony Point prevented Andrea Associates from taking steps to close escrow by the deadline.
Andrea Associates argues the trial court was wrong to deny relief by relying on Pittman, and urges us to reject Pittman in favor of authority that, even where time is made of the essence, neither party can place the other in default unless he performs or tenders full performance by the closing date. As observed in Miller and Starr’s treatise on California real estate, “When either the purchase agreement or the escrow instructions expressly provide that ‘time is of the essence, ’ the right of either party to cancel the escrow and terminate the transaction without liability is unclear. Traditionally, the decisions have held that because the performance by both parties are conditions concurrent, neither party is in default, and neither party can cancel the escrow without full performance or a tender of performance. However, more recent decisions have concluded that when time is of the essence and the time has expired, either party can terminate the transaction without liability even though the party has neither performed nor tendered performance.” (Italics added.) (3 Miller & Starr, Cal. Real Estate (3d ed. 2000) § 6:20, p. 46; see 1 Miller & Starr, supra, § 1:162, pp. 684-688; Katemis v. Westerlind (1953) 120 Cal.App.2d 537, 545-547 [discussing and applying traditional rule in dictum]; Lemle v. Barry (1919) 181 Cal. 6, 9-10 [full performance or tender required for party to terminate transaction]; Kossler v. Palm Springs Developments, Ltd. (1980) 101 Cal.App.3d 88, 99 [same].)
Pittman expresses the more recent rule and holds that “[t]he failure of both parties to perform concurrent conditions during the time for performance results in a discharge of both parties’ duty to perform. Thus, where the parties have made time the essence of the contract, at the expiration of time without tender by either party, both parties are discharged. . . . Neither party can hold the other in default and no cause of action to enforce the contract arises.” (Pittman v. Canham, supra, 2 Cal.App.4that pp. 559-560.) Pittman expressly rejects the position that, where time has been made of the essence, the failure of both parties to perform concurrent conditions leaves the contract open for an indefinite period “so that either party can tender performance at his leisure.” (Ibid., citing 3A Corbin on Contracts (1960) § 663, p. 181; Pitt v. Mallalieu (1948) 85 Cal.App.2d 77, 81; see also Major-Blakeney Corp. v. Jenkins (1953) 121 Cal.App.2d 325, 331-332, criticized in Williams Plumbing Co. v. Sinsley (1975) 53 Cal.App.3d 1027, 1032.)
The rule expressed in Pittman is neither contrary to the weight of authority, nor does it “change[] existing law in any remarkable fashion.” (Galdjie v. Darwish (2003) 113 Cal.App.4th 1331, 1340.) “California courts generally do strictly enforce time deadlines in real estate sales contracts, permitting the seller to cancel after the time specified where time is specifically made of the essence unless there has been a waiver or potential forfeiture.” (Id. at p. 1341; see also Ninety Nine Investments, Ltd. v. Overseas Courier Service (Singapore) Private, Ltd. (2003) 113 Cal.App.4th 1118, 1133-1134 [distinguishing Pittman but rejecting contention that it represents an “aberration in the law”].) The Pittman holding conforms to the fundamental aim of contract interpretation—that of effectuating the parties’ expressed contractual intent. (Civ. Code, §§ 1636, 1639.) Here, the evidence established without dispute that the closing date, as extended, had passed and Andrea Associates remained unready to close. It would thus thwart, rather than effectuate, the parties intent to preclude Stony Point from enforcing the mutually agreed deadline unless it also undertook the considerable cost and effort of tendering performance. Certainly in the context of this complex transaction, Pittman provides the better rule.
To close escrow Stony Point was required to provide certified copies of resolutions of all partners approving the execution and delivery of the option agreement and related documents ([¶] 15.2(c)); provide rent rolls and tenancy statements for each of its property leases ([¶] 15.2(d)); provide a deed of conveyance of half its interest in the properties ([¶] 15.2(g), (h)); notify tenants of the change in ownership ([¶] 15.2(n)); and deliver various tax-related certificates. There is no evidence that a demand was ever made by the escrow holder that Stony Point tender these documents, and it seems it would have been futile for it to do so.
2. Waiver
If the holding of Pittman applies, and Stony Point was discharged without tendering performance, Andrea Associates argues that by continuing to negotiate after the deadline passed, Stony Point waived its right to require a timely close of escrow. The argument is unpersuasive. “The burden is on the party claiming a waiver of right to prove it by clear and convincing evidence that does not leave the matter to speculation. As a general rule, doubtful cases will be decided against the existence of a waiver.” (Ringler Associates, Inc. v. Maryland Casualty Co. (2000) 80 Cal.App.4th 1165, 1188.) “[T]he question of waiver is one of fact, and an appellate court’s function is to review a trial court’s findings regarding waiver to determine whether these are supported by substantial evidence.” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 983; Conservatorship of Kevin M. (1996) 49 Cal.App.4th 79, 92.)
The court found in favor of Stony Point on the waiver issue, and its finding is supported by substantial evidence. Andrea Associates tries to demonstrate a waiver due to the fact that the parties continued to meet and negotiate after September 28, 2001. But the question is not whether the parties continued to discuss the possibility of a deal after the deadline for close of escrow came and went; the question is whether Stony Point waived its right to enforce the deadline. There was evidence that it did not. Joan Woodard from Stony Point testified she told Maria Mackey of Andrea Associates in October 2001 that the parties were “out of contract” and that she had turned the matter over to Stony Point’s legal counsel. Mackey admitted that after September 28, 2001, there were no further written extensions and that the parties never agreed to any new date for close of escrow. Evidence on whether the parties discussed a possible closing date in 2002 was in conflict. Woodard flatly contradicted Mackey’s testimony that the two had such regular discussions.
Andrea Associates itself acknowledges that in November 2001 the principals met to “continue talking about whether they wanted to close the Agreement or do something else.” (Italics added.)
The trial court plainly credited Woodard’s testimony over Mackey’s. “When a trial court’s factual determination is attacked on the ground that there is no substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether, on the entire record, there is substantial evidence, contradicted or uncontradicted, which will support the determination, and when two or more inferences can reasonably be deduced from the facts, a reviewing court is without power to substitute its deductions for those of the trial court.” (Bowers v. Bernards (1984) 150 Cal.App.3d 870, 873-874.) There was evidence that Stony Point informed Andrea Associates the parties were “out of contract.” The deadline for close of escrow was not extended past September 28, 2001, and Stony Point never waived the requirement for a timely closing.
3. Prevention of Performance
The Pittman rule recognizes an exception to discharge where the seller’s performance is “necessarily precedent to performance by the buyer” such that its failure to perform prevents the buyer from performing. (Pittman v. Canham, supra, 2 Cal.App.4th at p. 561, citing Rubin v. Fuchs (1969) 1 Cal.3d 50, 54.) Andrea Associates argues that this case falls within that exception. We disagree. As Andrea Associates observes, the parties were jointly obligated under the option agreement to participate in determining the amount of Andrea Associates’ cash payment and causing the formation of an LLC, tenancy in common agreement, and master lease, and it is true that neither party took steps to create these documents. The option agreement states that on the closing date, “Optionee shall have the right to require and cause” the parties to form each of these entities and agreements. But Andrea Associates never sought to require and cause formation of each of these agreements, and there is no evidence that Stony Point precluded it from doing so. It is true that both parties were required to fulfill a number of steps in order to timely close escrow, but Andrea Associates cites no evidence that Stony Point did or did not do anything that prevented escrow from closing.
4. Forfeiture
Finally, Andrea Associates asserts the court should have granted it relief from forfeiture of its ability to close escrow pursuant to Civil Code section 3275. The court did not relieve Andrea Associates from forfeiture because: (1) Andrea Associates made no payments to Stony Point that would be unjustly lost by forfeiture; (2) Stony Point was not unjustly enriched by any installment payments or otherwise; and (3) the contract was discharged by, inter alia, Andrea Associates’ failure to take steps to close escrow by the September 28, 2001 deadline. Just so. Andrea Associates’ only payment to Stony Point was the late tender of $75,000 initial option consideration, and it got precisely what it (belatedly) paid for: a two-year period during which it had the exclusive right to enter into a venture with Stony Point. “ ‘ “When that time [the time in which the option is to be exercised] expires, the option holder has received the full agreed equivalent of the price he paid for his option. . . .” ’ ” (Simons v. Young (1979) 93 Cal.App.3d 170, 184.) Accordingly, there was neither unfair forfeiture nor unjust enrichment of amounts paid.
Civil Code section 3275 provides: “Whenever, by the terms of an obligation, a party thereto incurs a forfeiture, or a loss in the nature of a forfeiture, by reason of his failure to comply with its provisions, he may be relieved therefrom, upon making full compensation to the other party, except in [the] case of a grossly negligent, willful, or fraudulent breach of duty.”
Andrea Associates argues, however, that it should not have to forfeit the “benefit of the buyer’s bargain” because it did not close escrow on time. But parties lose the benefit of their bargain by failing to satisfy their contractual obligations. As noted in a similar context in Simons, “ ‘Courts, even in equity, must respect lawful contracts made by competent persons . . . .’ ” (Simons v. Young, supra, 93 Cal.App.3d at p. 185, fn. 5.) The defaulting party in Simons argued, unsuccessfully, that he would suffer an unjust forfeiture unless the court granted him equitable relief because he expended substantial effort and money refurbishing and improving the property that was the subject of the dispute. But the Simons court observed that such relief is not warranted where the party seeking equity has not diligently enforced its contractual rights. Here, Andrea Associates argues it stands to lose substantial time, effort and money it expended over the years it pursued a deal with Stony Point. Equally apt to Andrea Associates’ situation is the Simons court’s observation that “ ‘both parties executed a contract with their eyes open. Both lived by the contract and both should abide by it.’ ” (Ibid.) Stony Point and Andrea Associates set a contractual deadline by which they either would or would not form their joint venture. Andrea Associates lost the potential benefit of its bargain because it failed to perform on the contract, and its failure to perform precludes relief from the consequences of its default.
In light of our resolution of these issues, we do not consider the import or consequences of Andrea Associates’ failure to timely pay the initial option consideration.
DISPOSITION
The judgment is affirmed.
We concur: McGuiness, P.J., Horner, J.
Judge of the Alameda County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
Andrea Associates voluntarily dismissed its cause of action for fraudulent misrepresentation before trial.