Opinion
D057730 Super. Ct. No. 37-2008-00091596-CU-BC-CTL
09-20-2011
RICHARD CORDOVA et al., Plaintiffs and Appellants, v. JEFF GARCIA, as Trustee, etc., Defendant 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
APPEAL from a judgment of the Superior Court of San Diego County, Jay M. Bloom, Judge. Affirmed and remanded for determination of attorney fees on appeal.
Richard Cordova, and his wife, Alba Cordova (together, the Cordovas), appeal from a judgment entered against them on their claims against Jeff Garcia, as Trustee of the JJG Family Trust, to recover $125,000 paid to Garcia related to a series of real estate transactions. The Cordovas argue the trial court erred in finding that the $125,000 payment was a nonrefundable option consideration because the payment was actually a refundable down payment for the purchase of Garcia's house. We disagree with the Cordovas and affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
In March 2006, Garcia purchased a home in Escondido, California. Rather than moving into the home, Garcia decided to sell it. At some point, discussions ensued between Richard and Michael Holt, Garcia's investment advisor, regarding the purchase of the home. Richard informed Holt that he wanted to rent the home and eventually buy it. Accordingly, an option agreement, lease agreement and purchase agreement were prepared. The option agreement required nonrefundable option consideration in the amount of $150,000 that would be applied to the sale price of $1,099,515 if the option was exercised.
After receiving the documents, Richard negotiated a reduced purchase price of $989,563 and option consideration of $125,000. The documents were redrafted to reflect these terms and provided to the Cordovas. In mid-August, the Cordovas sent two checks to Holt, one for $125,000 and the other for August and September rent.
The Cordovas moved into the home in September 2006. Thereafter, they returned the transaction documents, but signatures were missing and only certain pages were initialed. When Holt notified Richard of the missing signatures, he responded by stating that it was an oversight and that the documents would be signed.
In November 2006, Richard requested an addendum providing that if the option was not exercised, the Cordovas would be reimbursed for money they spent on landscaping the property. Accordingly, Addendum No. 2 was prepared to address the landscaping issue.
During the next year, Holt continued to request that Richard provide signed copies of all documents. Richard assured him that they would be signed and delivered. On August 15, 2007, Richard signed Alba's name to the option agreement, lease agreement, purchase agreement and Addendum No. 2. Garcia signed the documents two days later. The documents were never signed with Richard's signature.
The signed option agreement had a one-year option period from August 15, 2006 to August 14, 2007, and stated that the option consideration would be retained by the optionor if the option was not exercised. Additionally, the purchase agreement incorporated the terms of the option agreement and under the section entitled "Additional Financing Terms," stated "Non-refundable Option consideration credited to sale price per Option Agreement between Buyer as Optionee and Seller as Optionor dated 8/15/2006."
Richard later requested an extension of time to purchase the house. Addendum No. 3 was prepared to reflect an extension of the option term, but it was never signed. Richard also indicated that he needed a lower purchase price to have the loan approved because of the bank's appraisal. Accordingly, Addendum No. 4 was prepared to show a lower purchase price for purposes of the bank. The Cordovas, however, were still going to pay the full contract purchase price through a promissory note secured by a deed of trust. During this time, the Cordovas were behind on their rent. Thus, Addendum No. 4 also stated that $26,044 of the $125,000 option consideration would be applied toward rent and "the remaining $98,956 shall be applied as a deposit and credited against the Purchase Price." Addendum No. 4 was signed in January 2008.
The Cordovas were unable to secure financing to purchase the property, and eventually agreed to move out after Garcia initiated unlawful detainer proceedings. Garcia did not market the property for sale from August 2006 to early 2009.
The Cordovas initiated this action against Garcia, alleging breach of contract, breach of the covenant of good faith and fair dealing, conversion and fraud. Through their lawsuit, the Cordovas essentially sought to recover the $125,000 they paid to Garcia on the basis that it was a down payment for the purchase of the home, rather than option consideration. After a bench trial, the trial court issued its statement of decision finding that there was a valid option agreement between the parties and that the $125,000 payment was nonrefundable consideration for the option. In making its decision, the trial court noted that the Cordovas were not credible witnesses. Judgment was entered against the Cordovas and this appeal followed.
DISCUSSION
I. Standards of Review
We apply established appellate standards of review for a judgment following a bench trial. We begin with the settled principle that the interpretation of a contract generally presents a question of law for this court to determine anew unless the interpretation turns on the credibility of conflicting extrinsic evidence. (Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 527; City of El Cajon v. El Cajon Police Officers' Assn. (1996) 49 Cal.App.4th 64, 70-71 (City of El Cajon).)When a contract is reasonably susceptible to different interpretations based upon conflicting extrinsic evidence requiring the resolution of credibility issues, its interpretation evolves into a question of fact to which the reviewing court applies the substantial evidence standard of review. (ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1266-1267.) Where the evidence is undisputed and the parties draw conflicting inferences, the reviewing court will independently draw inferences and interpret the contract. (Id. at p. 1267; City of El Cajon, at p. 71.) We endeavor to effectuate the mutual intentions of the parties as it existed at the time of contracting insofar as it is ascertainable and lawful. (Civ. Code, § 1636; City of El Cajon, at p. 71.) (Undesignated statutory references are to the Civil Code.) With these standards in mind, we consider the Cordovas' arguments.
II. Interpretation of the Agreements
The Cordovas argue for numerous reasons that their $125,000 payment to Garcia was a refundable down payment on the purchase of Garcia's home, rather than nonrefundable consideration for an option agreement. Although their arguments are largely duplicative and somewhat difficult to ascertain, the Cordovas appear to assert that there was no option agreement because: (1) it is barred by the statute of frauds; (2) it was never finalized and was merely part of ongoing negotiations between the parties; (3) any ambiguities in the documents should be construed against Garcia as the drafter; and (4) as a practical matter, the transactions between the parties amounted to a purchase and sale agreement. We address each of these arguments in turn. A. Statute of Frauds
The Cordovas contend the option agreement violated the statute of frauds because it was not signed by Garcia during the option period. We disagree.
Under the statute of frauds, "[a]n agreement for the . . . sale of real property, or of an interest therein" is invalid unless it is "in writing, subscribed by the party sought to be charged." (§ 1624, subd. (a)(3).) The statute of frauds serves an evidentiary purpose, requiring reliable evidence of the existence and terms of a contract to prevent the enforcement of contracts through fraud or perjury that were never in fact made. (Sterling v. Taylor (2007) 40 Cal.4th 757, 766.) Thus, " 'the requirement of a memorandum is read in the light of the dispute which arises and the admissions of the party to be charged; there is no need for evidence on points not in dispute.' [Citations.]" (Id. at p. 767, italics deleted.)
" 'An oral agreement, within the statute of frauds, may be satisfactorily evidenced, by a subsequent writing, notwithstanding the fact that the agreement has already been executed by one party. . . . The subsequent written contract relates back to the making of the oral agreement which it embodies, so as to validate the latter under the statute of frauds. This is true, whether the written contract be viewed as merely furnishing the requisite evidence of an oral agreement otherwise valid, or as a confirmation and ratification of a previously invalid agreement.'" (Ayoob v. Ayoob (1946) 74 Cal.App.2d 236, 243.)
Here, the Cordovas do not argue that the option agreement is invalid because it was never signed with Richard's signature. Instead, they assert that the option agreement violates the statute of frauds because it was not signed by Garcia during the option period. This argument is unavailing because it is abundantly clear that the parties reached an agreement and had a meeting of the minds regarding the terms of the option. After receiving the original transaction documents from Holt, Richard negotiated reduced option consideration in the amount of $125,000. Accordingly, the option agreement was redrafted to reflect the reduced consideration and the Cordovas sent a check to Holt for $125,000. Thereafter, Richard assured Holt that the transaction documents, including the option agreement, would be signed. The parties did not sign the option agreement until shortly after the expiration of the option period. However, at that time, Garcia had already performed by not marketing the property for sale during the option period. We conclude that the option agreement memorialized the terms negotiated and agreed to by the parties and was ratified by the parties' signatures. Accordingly, the option agreement is not voidable under the statute of frauds.
Even if the option agreement was not sufficient to satisfy the statute of frauds, the Cordovas, under the circumstances of this case, are estopped to raise the bar of the statute. The statute of frauds exists to prevent the commission of fraud, not to facilitate fraud.(Rader Co. v. Stone (1986) 178 Cal.App.3d 10, 30.) Accordingly, "[w]here a contract, which is required by law to be in writing, is prevented from being put into writing by the fraud of a party thereto, any other party who is by such fraud led to believe that it is in writing, and acts upon such belief to his prejudice, may enforce it against the fraudulent party." (§ 1623; also Evid. Code, §§ 623 ["Whenever a party has, by his own statement or conduct, intentionally and deliberately led another to believe a particular thing true and to act upon such belief, he is not, in any litigation arising out of such statement or conduct, permitted to contradict it"], 125 ["'Conduct' includes all active and passive behavior, both verbal and nonverbal"].)
To permit the Cordovas to assert the statute of frauds defense in this case would lead to an unjust result. There is no evidence that the Cordovas ever rejected the option agreement or complained that it did not reflect the terms of their agreement with Garcia. To the contrary, Richard assured Holt that the missing signatures were merely an oversight and that the documents would be signed. Moreover, the parties performed as if the option agreement was valid. The Cordovas paid the option consideration and never argued that the option was invalid until this action. Garcia relied on the Cordovas' representations to his detriment by not marketing the property for sale during the option period. Under these circumstances, the Cordovas are estopped from asserting the statute of frauds as a defense. B. Negotiations
The Cordovas rely on general principles of contract formation to argue that the option agreement was not a binding contract because it was merely a part of ongoing negotiations between the parties. Again, we disagree.
To support their argument, the Cordovas point to the various addendums that were prepared after the option agreement. The Cordovas assert that the addendums demonstrate that the parties were engaged in continuing negotiations. A review of the addendums, however, reveals that there was an existing option agreement between the parties. For example, Addendum No. 2 specifically references the option agreement and states, "[i]n the event Tenant fails to exercise his option to purchase the Premises pursuant to that certain Option Agreement dated August 15, 2006, then Landlord agrees to reimburse Tenant for any sums Tenant expended to install the landscaping at the Premises . . . ." This addendum was signed after the expiration of the option term, which demonstrates that there was an option agreement and that the Cordovas intended to keep it open. If there was no option agreement, as the Cordovas suggest, there would have been no need for the language regarding the option in Addendum No. 2. The same is true for Addendum No. 4, pertaining to application of a portion of the option consideration to back rent. Again, Addendum No. 4 references the option agreement, which would have been unnecessary if such agreement did not exist.
The Cordovas rely on the fact that Addendum No. 3, regarding an extension of the option term, was never signed to argue that there was no option agreement. The lack of a signature on Addendum No. 3 does not invalidate the option agreement. This appears to be a case where the Cordovas are picking and choosing the terms and agreements they find favorable. They ignore the fact that Addendum Nos. 2 and 4, specifically referencing the option agreement, were signed, the option agreement itself was signed, and the parties' conduct was consistent with the option agreement. We again reject the Cordovas' assertion that the option agreement was invalid because it was not signed during the option term. The Cordovas simply cannot get around the abundance of evidence demonstrating that the parties intended to and did enter into an option agreement. C. Ambiguities
The Cordovas assert that the option agreement must fail because it is ambiguous and any ambiguities should be construed against Garcia as the drafter. Although it is true that, in general, ambiguities in contract language should be resolved against the drafter (§ 1654; Victoria v. Superior Court (1985) 40 Cal.3d 734, 738), the Cordovas fail to specify how or why the option agreement is ambiguous. By failing to discuss how the option agreement is ambiguous, the Cordovas have waived this argument on appeal. (See In re Marriage of Falcone & Fyke (2008) 164 Cal.App.4th 814, 830 ["We are not bound to develop appellants' arguments for them. [Citation.] The absence of cogent legal argument or citation to authority allows this court to treat the contentions as waived."].) D. Practical Effect of Agreements
Relying on our decision in Allen v. Smith (2002) 94 Cal.App.4th 1270 (Allen), the Cordovas argue that the practical effect of the agreements was a purchase and sale, rather than an option. Their reliance on Allen is misplaced.
In Allen, we considered whether the parties' contract constituted an option or purchase agreement. (Allen, supra, 94 Cal.App.4th at pp. 1277-1281.) In that case, the contract consisted of a California Association of Realtors standard form deposit receipt and counteroffer. (Id. at p. 1279-1280.) On the counteroffer, the seller's real estate agent handwrote on the form that the deposit was "to be released to seller as a nonrefundable purchase option monies." (Id. at p 1275.) There was no separate option agreement or any other indication of the option. (Id. at pp. 1280-1281.) Rather, the evidence was clear that the parties intended to enter into a purchase and sale agreement, rather than an option agreement. (Id. at p. 1279.)
Here, in contrast, the evidence reveals that the parties intended to enter into an option agreement. The option agreement is a separate agreement from the purchase agreement and contains the hallmarks of an option, including giving the optionee the discretion to exercise the option, a specified option period, and option consideration. Further, the purchase agreement incorporated the terms of the option agreement. Reading the two agreements together, it is clear that the parties intended that the $125,000 payment was option consideration that would be applied toward the purchase price if the option was exercised. If not, the option consideration was considered nonrefundable pursuant to the terms of the option agreement.
The parties' intent to enter into an option is also clear from their actions. After reviewing the option agreement, Richard negotiated a lower amount for the option consideration and assured Holt that the document would be signed. Further, multiple signed addendums reference the option agreement. There is no evidence suggesting that the Cordovas rejected the option agreement. Accordingly, we conclude that the parties intended to and did enter into an option agreement.
II. Refund Request
The Cordovas next assert that even if there was an option agreement, they are entitled to a refund of their $125,000 payment because: (1) Addendum No. 4 superseded the option terms; and (2) pursuant to a financing contingency, they were able to cancel the agreement. We are not persuaded. A. Effect of Addendum No. 4
Relying on section 1642, the Cordovas argue that Addendum No. 4 superseded the option agreement and recharacterized their $125,000 payment as a deposit on the purchase of the property. We disagree.
Section 1642 provides: "Several contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction are to be taken together." The Cordovas argue that the language in Addendum No. 4 stating that "the remaining [option consideration, after application of a portion to back rent,] shall be applied as a deposit and credited against the purchase price" demonstrates that the option consideration was converted to a refundable deposit. Construing the option agreement and Addendum No. 4 together, as the Cordovas suggest, we are not persuaded that Addendum No. 4 superseded the option agreement. To the contrary, Addendum No. 4 references the option agreement that was in effect and incorporates its terms. Further, Addendum No. 4 is consistent with the parties' original agreement to credit the option consideration to the purchase price if the option was exercised. Addendum No. 4 merely reduced the amount to be applied to the purchase price because the Cordovas were behind on their rent payments. The plain language of the agreements shows that Addendum No. 4 was meant to amend the option agreement, not terminate it. B. Financing Contingency
The Cordovas also assert that they are entitled to a refund of their $125,000 payment because the purchase agreement contained a financing contingency and they were unable to qualify for financing to purchase the property. Again, we disagree with the Cordovas.
It is not clear whether this issue was raised in the trial court; however, even if it was, the financing contingency in the purchase and sale agreement does not entitle the Cordovas to a refund of the option consideration. Although there is a financing contingency in the purchase and sale agreement, the agreement also specifically incorporates the terms of the option agreement. The option agreement provides that the option consideration is nonrefundable, even if the purchase agreement was cancelled due to a financing contingency. Specifically, the option agreement states, "[i]f this Option is exercised and Optionee cancels pursuant to any contingency in the attached purchase agreement, including but not limited to any . . . financing provision, all option consideration paid . . . by Optionee, shall be retained by Optionor in consideration of the granting of the Option." Accordingly, based on the plain language of the option agreement, the option consideration was nonrefundable, regardless of the financing contingency.
III. Conversion
The Cordovas argue that the trial court abused its discretion by finding that there was no conversion of the Cordovas' funds. The essence of this argument is that the evidence was insufficient to support the trial court's finding that Garcia was not liable for conversion of the Cordovas' $125,000 payment. The standard of appellate review for such a challenge is well established. We must review the entire record in the light most favorable to the prevailing party to determine whether there is substantial evidence to support the trial court's findings. (Jessup Farms v. Baldwin (1983) 33 Cal.3d 639, 660.) In doing so, we cannot reweigh the evidence, but instead must accept all evidence and reasonable inferences therefrom that tend to establish the correctness of the trial court's findings and decision and resolve every evidentiary conflict in favor of the judgment. Our authority begins and ends with a determination of whether, on the entire record, there is any "substantial evidence," contradicted or uncontradicted, that will support the judgment. (Grappo v. Coventry Financial Corp. (1991) 235 Cal.App.3d 496, 506-507.)
Conversion is "the wrongful exercise of dominion over" property that belongs to someone else. (Burlesci v. Petersen (1998) 68 Cal.App.4th 1062, 1066 (Burlesci);see also Black's Law Dict. (5th ed. 1979) p. 300 [Conversion is an "unauthorized assumption and exercise of the right of ownership over goods or personal chattels belonging to another, to the alteration of their condition or the exclusion of the owner's rights."].) "The elements of a conversion claim are: (1) the plaintiff's ownership or right to possession of the property; (2) the defendant's conversion by a wrongful act or disposition of property rights; and (3) damages." (Burlesci, at p. 1066.)
The trial court concluded that the Cordovas' conversion claim failed because there was no evidence that Garcia did anything wrong. The trial court's conclusion is supported by substantial evidence. As we have explained in detail, Garcia was entitled to retain the Cordovas' $125,000 payment because it was nonrefundable pursuant to the terms of the option agreement. Further, the evidence shows that Garcia satisfied his obligations under that agreement by not marketing the property for sale during the option term. Accordingly, he cannot be liable for conversion as he rightfully retained the option consideration.
IV. Attorney Fees
Garcia seeks attorney fees on appeal. It is established that when a party is entitled to attorney fees, they are available for services at trial and on appeal. (Morcos v. Board of Retirement (1990) 51 Cal.3d 924, 927.) Garcia is the prevailing party on appeal, and thus it is entitled to contractual attorney fees. "Although this court has the power to fix attorney fees on appeal, the better practice is to have the trial court determine such fees." (Security Pacific National Bank v. Adamo (1983) 142 Cal.App.3d 492, 498.)
DISPOSITION
The judgment is affirmed and the matter is remanded to the trial court for its determination of an award to Garcia of attorney fees on appeal. Garcia is also entitled to his costs on appeal.
MCINTYRE, J. WE CONCUR:
HALLER, Acting P. J.
MCDONALD, J.