Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of Tulare County. Ct. No. VCU219493 Lloyd L. Hicks, Judge.
Tisdale & Nicholson, Guy C. Nicholson and Linda J. Kim, for Defendant and Appellant.
Wagner, Kirkman, Blaine, Klomparens & Youmans, Douglas E. Kirkman and Mary deLeo, for Plaintiff and Respondent.
OPINION
Ardaiz, P.J.
Appellant Contour Development, Inc. ("Contour") and respondent Reynen & Bardis Communities, Inc. ("RBC") were parties to a contract for the sale of a parcel of real property. Contour was the seller and RBC the buyer. The parcel was approximately 70 acres in area and was to be sold at a price of approximately $7.7 million. A legal action filed by an entity called Porterville Citizens for Responsible Hillside Development ("Porterville Citizens") against Contour and the City of Porterville shortly before the scheduled close of escrow excused RBC, under the terms of the contract, from going through with the purchase of the property. RBC had, however, made a deposit of $50,000 and a second deposit of $450,000 (collectively, "the $500,000 deposit") to the escrow holder. These funds had been released by the escrow holder (with RBC's authorization) to Contour before RBC became aware of the Porterville Citizens' action.
This case is a contractual dispute about the $500,000 deposit made by RBC and received by Contour. RBC sought a refund of the $500,000 deposit, but Contour claimed that the terms of the contract entitled Contour to keep the $500,000. RBC sued Contour for breach of contract. The court, in a nonjury trial, ruled in favor of RBC and awarded RBC a judgment of $500,000 plus interest. Contour now appeals.
APPELLANT'S CONTENTION
Contour contends that the terms of the contract between the parties allow Contour to keep the $500,000 deposit. As we shall explain, we agree with the trial court that the terms of the contract do not allow Contour to keep the deposit. We will affirm the judgment.
FACTS
The parties entered into their written contract (entitled "Purchase Agreement and Escrow Instructions") on or about April 13, 2005. It called for a purchase price of approximately $6.1 million ("Twenty-Seven Thousand Dollars ($27,000) per approved single-family residential lot, approximately 227 lots ...") for the "approximately sixty-nine and 90/100 (69.9) acres of land" described in the contract. The contract called for a "Review Period" of "forty-five (45) days from the execution of " the contract during which RBC could conduct a "Due Diligence Investigation." It also required RBC to deposit $50,000 into escrow (the "Deposit") within three days of execution of the contract and to deposit an additional $450,000 into escrow (the "Additional Deposit") "at the end of the Review Period" with these funds to be made available "immediately" to the seller at the end of the review period. The contract further provided that "[i]f Buyer disapproves of any of the results of its Due Diligence Investigation, Buyer may terminate this Agreement without any liability whatsoever by providing written notice thereof (the 'Disapproval Notice') to Seller prior to the termination of the Review Period." It also provided that "[t]he 'Close of Escrow' shall occur on June 20, 2005."
A written "First Amendment" to the contract extended the review period, which would have ended in late May, to July 6, 2005, and extended the closing date to August 8, 2005. On or about July 6, 2005 the parties entered into a "Second Amendment" of the contract. The Second Amendment expressly terminated the original contract. It provided: "Buyer and Seller each recognize that the original Purchase Agreement contemplated approval of the Tentative Tract Map and now that the Planning Commission of Porterville did not approve such, the Purchase Agreement is terminated. However, the Parties do not wish to cancel the escrow in anticipation of being able to reinstate the Purchase Agreement once the Tentative Tract Map, as modified, is approved." At some point the city of Porterville did approve a tentative tract map. On or about September 13, 2005 the parties executed a "Third Amendment" which reinstated the original contract but amended it so that "the Purchase Price shall be $7,735,000.00," the review period "shall expire on October 1, 2005," and the "'Close of Escrow' shall occur on or before October 14, 2005."
The Deposit and Additional Deposit were made by RBC. The total of these deposits ($500,000) was released to seller Contour sometime after October 1, 2005.
On October 7, 2005 Porterville Citizens for Responsible Hillside Development filed its verified petition for writ of mandate and complaint for declaratory and injunctive relief. The Porterville Citizens Action sought to set aside the city's approval of the tentative tract map. The Porterville Citizens action named Contour as a real party in interest.
On October 13, 2005 Contour sent RBC a letter (apparently by fax) advising RBC that "[e]arlier this week, we became aware that a lawsuit challenging the City's decision to approve the Tentative Subdivision Map has been or is being filed by an entity known as the Porterville Citizens for Responsible Hillside Development ...." !(2 JA 462 at Tab 35; RT 4.)! Contour's letter to RBC further stated: "The only substantive information we have concerning this matter consists of a letter dated October 6, 2005 from Richard B. Harriman (the Association's counsel) to the Porterville City Clerk ... indicating that the Association plans to commence such a lawsuit. We became aware of the letter on October 12, 2005." !(2 JA 462 at Tab 35.)! Enclosed with Contour's letter to RBC was a copy of Mr. Harriman's October 6, 2005 letter to the Porterville City Clerk advising the city that Porterville Citizens "will be filing suit against the City of Porterville to compel the City of Porterville to vacate, set aside, void, rescind, and annul the decision, findings, and actions ... approving the Canyon Springs Estates Tentative Subdivision Map, which final action was taken on September 6, 2005." As we have already mentioned, the Porterville Citizens action was actually filed on October 7, six days before Contour's October 13 letter to RBC and one day after Mr. Harriman's October 6 letter to the Porterville City Clerk.
On October 14, 2005 the title company was notified that RBC wanted to cancel the escrow and receive its total deposit of $500,000 back. Also on October 14, RBC's counsel sent to a Mr. Rick Skandalaris a letter stating in part: "I have been apprised that you have spoken with the seller and the seller has agreed to refund the deposit within 30 days." The parties stipulated at trial that this letter "was received by seller on or about the date it bears."
Paragraph "9" of the Purchase Agreement was entitled "Representations and Warranties of Seller." It stated in part: "Seller hereby represents and warrants to Buyer that: [¶] ... [¶] (e) To the best knowledge of Seller, there are no ... (ii) pending or threatened litigation against Seller or otherwise effecting [sic] the Property ...."
Paragraph "11" of the Purchase Agreement was entitled "Conditions of Closing." !(2 JA 448 at Tab 31.)! It stated in part: "(a) Buyer's Conditions. Buyer's obligations to purchase the Property on the Close of Escrow are expressly conditioned upon each of the following: [¶] ... [¶] (ii) Map Contingency. Final Approval of the Tentative Tract Map by the City of Porterville ('Map Contingency') [¶] (iii) Representations and Warranties Remade. All of Seller's representations and warranties shall be true, correct and complete on and as of the Close of Escrow as if the same were made on such date." As we have already mentioned, the Porterville Citizens Action was filed on October 7, 2005, and the Third Amendment to the Purchase Agreement extended the closing date to October 14, 2005. The parties stipulated that the Porterville Citizens action remained pending as of October 14, 2005.
Paragraph "12" of the Purchase Agreement gave RBC the right to back out of the purchase if litigation affecting the property was pending as of the scheduled October 14, 2005 closing date. Paragraph "12"stated in part: "Failure of Conditions. ... If any of Buyer's Conditions specified in Section 11(a) of this Agreement except for the Map Contingency fails to occur prior to the date established herein for the Close of Escrow, Buyer shall ... have the right ... to waive the condition or to cancel the Escrow and terminate this Agreement." The parties agree that RBC was excused from buying the property. Their dispute is over whether Contour was required to return the $500,000 in deposits made by RBC and disbursed by the escrow holder to Contour. On this topic, paragraph "12" of the Purchase Agreement stated: "In the event Buyer elects to cancel the Escrow and terminate this Agreement in such circumstances, Seller shall return the Deposit and the Additional Deposit, if made, to the Buyer and/or instruct Escrow Holder to return the Deposit and the Additional Deposit, if made, to Buyer."
The trial court relied on paragraph "12" to rule that RBC was entitled to a return of its $500,000 in deposits. The court's statement of decision stated in pertinent part: "Reading the plain language of paragraph 12, and excepting map approval from the conditions of paragraph 11, the only way Contour may keep the deposit is if all the other paragraph 11 conditions are met. [¶] Here, that is not the case. Condition 11(a)(iii) [the litigation warranty of paragraph 9(e)] failed. [¶] The [Porterville Citizens] action ... is 'litigation' within the meaning of the contract. Reference to that action shows that seller Contour was a party and that it affected the subject property."
THE TRIAL COURT CORRECTLY FOUND THAT BUYER WAS ENTITLED TO A REFUND OF THE DEPOSITS
"The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties. (Civ. Code, §1636.) If contractual language is clear and explicit, it governs. ([Ibid.])" (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264.) "Such intent is to be inferred, if possible, solely from the written provisions of the contract." (Civ. Code, §1639.) (AIU Ins. Co., v. Superior Court (1990) 51 Cal.3d 807, 822.) "The interpretation of a written instrument, even though it involves what might properly be called questions of fact [citation], is essentially a judicial function to be exercised according to the generally accepted canons of interpretation so that the purposes of the instrument may be given effect. [Citation.] … It is therefore solely a judicial function to interpret a written instrument unless the interpretation turns upon the credibility of extrinsic evidence." (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865,)
Under paragraph "9(e)" of the agreement, seller Contour warranted that it was aware of "no ... pending or threatened litigation against Seller or otherwise effecting [sic] the Property." Under paragraph "11(a)(iii)" a condition of closing was that this so-called "no litigation" warranty of paragraph 9(e) "shall be true … on and as of" the October 14 closing date. The no litigation warranty of paragraph 9(e) was not true as of October 14, however, because the Porterville Citizens action had been filed on October 7 and was pending on October 14. The Porterville Citizens action affected the property because it sought to reverse the City's approval of the tentative tract map for the property. Contour knew on October 14, 2005 that there was "pending or threatened litigation ... affecting the Property" because Contour advised RBC of that "pending or threatened litigation" in its October 13 letter to RBC. Under paragraph 12 of the agreement, the failure of the no litigation warranty gave buyer RBC the right to "cancel the Escrow and terminate this Agreement" and required seller Contour to "return the Deposit and the Additional Deposit ... to the Buyer ...."
At trial, the parties stipulated that "since neither party plans to call witnesses, we have agreed that the question of which party or parties may have drafted the contract is not at issue" and that "the court is not to construe either party as the drafter of the contract for any purpose." Contour thus did not offer any testamentary evidence that the words of paragraphs 9, 11 and 12 of the agreement meant anything other than what they said. As the trial court's ruling stated, "RBC is not relying on an interpretation -- it points only to the literal and plain language of the contract."
Appellant Contour relies on a subsequent sentence in paragraph 12 of the Purchase Agreement stating: "If all of Buyer's Conditions specified in Section 11(a) of this Agreement prior to the date established herein for the Close of Escrow occur except for the Map Contingency, Buyer shall, provided Buyer did not theretofore commit a material default under this Agreement which material default shall not have been waived or cured, have the right, exercisable in Buyer's sole discretion by giving written notice to Escrow Holder and to Seller, to waive the Map Contingency or to cancel the Escrow and terminate this Agreement; provided, however, that, in such circumstances, Seller shall be entitled to retain and keep the Deposit and the Additional Deposit, if made, as liquidated damages ...." As the trial court pointed out in its ruling, however, this sentence was not applicable because all of Buyer's Conditions specified in Section 11(a) of the Agreement except for the Map Contingency did not occur. Specifically, the paragraph 11(a)(iii) condition that "[a]ll of Seller's representations and warranties shall be true, correct and complete on and as of the Close of Escrow as if the same were made on such Date" did not occur. One of those representations was the paragraph 9(e) representation that "[t]o the best knowledge of Seller, there are no ... (ii) pending or threatened litigation against Seller or otherwise effecting [sic] the Property ...." It is not factually disputed that seller Contour was aware of the Porterville Citizens action as of the agreed upon October 14, 2005 closing date.
Contour reads the paragraph 12 sentence just quoted in the previous paragraph of this opinion as if its first clause read: "If all of Buyer's Conditions specified in Section 11(a) of this Agreement prior to the date established herein for the Close of Escrow occur except for the Map Contingency and any litigation over the City's approval of the tentative tract map ...." But that is not what the first clause states. The clause requires that "all of Buyer's Conditions specified in Section 11(a) of this Agreement ... occur except for the Map Contingency." One of those "Section 11(a)" conditions is the so-called "no litigation" condition of paragraph 11(a)(iii) and paragraph 9(e). The so-called "no litigation" representation of paragraph 9(e) does not say "[t]o the best knowledge of Seller, there are no ... (ii) pending or threatened litigation against Seller or otherwise effecting the Property except for litigation over the City's approval of the tentative tract map." As RBC pointed out in its trial brief to the trial court: "RBC was buying real property; it was not buying litigation."
Appellant Contour calls our attention to the Purchase Agreement's definition of "Final Approval" of the tentative tract map. Contour then argues that because the term "Map Contingency" is defined in the Purchase Agreement as "Final Approval of the Tentative Tract Map by the City of Porterville," !(2 JA 439)! and because the Purchase Agreement's definition of the term "Final Approval" includes the phrase "any judicial or other challenge thereto," we should read the so-called "no litigation" representation to exclude any litigation over the City's approval of the tentative tract map. Contour calls our attention to Code of Civil Procedure section 1859, which states: "In the construction of the instrument the intention of the parties, is to be pursued, if possible; and when a general and particular provision are inconsistent, the latter is paramount to the former. So a particular intent will control a general one that is inconsistent with it." The flaw we see in this argument is that the definition of "Final Approval" in paragraph 1(a) of the Purchase Agreement is not inconsistent with the so-called "no litigation" representation of paragraphs 11(a) and 9(e). Whether there is "pending ... litigation ... effecting the property" is a different question than whether there has or has not been "Final Approval" of the tentative tract map. The first clause of the paragraph 12 sentence on which Contour relies was not satisfied because Contour was aware on October 14 of pending litigation affecting the property.
Paragraph "1(a)" of the Purchase Agreement states in pertinent part:"'Final Approval' shall mean that the City of Porterville has approved a Tentative Tract Map for the Property and all periods for filing any judicial or other challenge thereto have expired with no appeal having been filed, or, if any such appeal has been filed, said appeal shall have been resolved in a manner upholding the Tentative Tract Map in the form approved by Seller and Buyer with no material change therein."
Finally, appellant contends that the trial court "failed to give due consideration to" trial exhibit No. 6. The argument is meritless. Exhibit No. 6 was the October 14, 2005 letter from RBC's counsel to Rick Skandalaris, apparently a representative of Contour. Nothing in the letter even mentions paragraph 11 or paragraph 12 of the Purchase Agreement, much less offer anyone's explanation of any understanding of the meaning of those paragraphs. Furthermore, the letter states in part that Contour "has agreed to refund the deposit within 30 days." This is hardly compelling evidence that Contour was entitled to keep the deposit.
Exhibit No. 6 states in its entirety: "Dear Rick: As you know we represent Reynen and Bardis in connection with the acquisition of the Porterville property from Contour Development. [¶] There has been a CEQA challenge filed. From the timing of the litigation and the fact that prior protests were made, it appears that insufficient facts were disclosed by the seller for RB to make an informed decision to waive the feasibility condition. [¶] This problem is compounded by the fact that Reynen and Bardis was advised, prior to the release of the deposit, that the appeals period had expired. This was clearly erroneous information. [¶] I have been apprised that you have spoken with the seller and the seller has agreed to refund the deposit within 30 days. Reynen and Bardis is perplexed why it would take 30 days, but might be willing to accept this proposal if it is confirmed in writing by the seller pursuant to a binding amendment to the contract secured by a deed of trust on the property. Please obtain this writing and deliver for signature to Reynen and Bardis by next Monday. [¶] Thanks for your time and attention. [¶] Very truly yours, WAGNER KIRKMAN BLAINE KLOMPARENS & YOUMANS"
DISPOSITION
The judgment is affirmed. Costs to respondent.
WE CONCUR: Vartabedian, J., Cornell, J.