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Leamon v. Krajkiewcz: Seller's Duress Voids Purchase Agreement

A California appellate court has considered a buyer's challenge to a jury verdict determining that seller had signed purchase agreement under duress, thereby voiding purchase contract.

Joyce Leamon ("Owner") listed her home for sale with Joe Randy ("Randy") in 1996 or 1997. Upon expiration of the listing agreement, the Owner's neighbors, Leonard and Corrie Krajkiewcz ("Neighbors"), contacted her about their interest in purchasing her home. Rick Dennison ("Dennison"), a real estate broker and a friend of the Neighbors, helped to draw up a sale contract between the parties and the Neighbors made a deposit with the Owner. The transaction was never completed because the Neighbors were unable to fund the purchase.

In 1999, the Neighbors again expressed an interest in purchasing the Owner's home. The Owner orally agreed to Dennison's representation of all parties in the transaction, and Dennison stated that he would get the paperwork ready.

Shortly after this discussion, the Owner told her daughter she was selling her home to the Neighbors. Her daughter stated that she would like to purchase the home, and the Owner told her daughter she would sell her the home. The next day, the Owner conveyed this information to Dennison. On that same day, Randy called the Owner about her interest in again listing her home with him and the Owner told him that she was selling her home to her daughter.

The next day, Dennison and the Neighbors arrived at the Owner's house with a purchase agreement in hand. Dennison informed the Owner that a verbal agreement was the same as a written one and that he would bring a lawsuit against her if she didn't sell her home to the Neighbors. The Owner told the Neighbors and Dennison that she didn't want to sign anything until she had a chance to speak with her daughter. When she was unable to reach her daughter, Dennison insisted she sign the contract immediately and continued to threaten her with litigation if she did not sign. At first, the Owner was unable to sign the purchase agreement and dual agency disclosure form because she was so upset that she was crying, but after she composed herself, she signed both forms. Dennison and the Neighbors left immediately after the forms were signed.

The following day, the Owner telephoned her lawyer and the lawyer sent a letter to the Neighbors stating that the Owner's signature was obtained under duress and thus the contract was void. The Neighbors filed a small claims action against the Owner, claiming damages of $5,000. The Owner filed a separate lawsuit against the Neighbors, seeking to quiet title in her name as well as emotional distress damages from the Neighbors and Dennison. The two lawsuits were consolidated, and the Neighbors then filed a counterclaim, seeking breach of contract damages as well as specific performance of the purchase contract. The case went to the jury, and judgment was entered in favor of the Owner, finding there was no contract between the parties. Following entry of judgment, the Owner sought recovery of attorney's fees but the trial court denied her request. Both parties appealed.

The California Court of Appeal, Fifth District, affirmed the trial court. On appeal, the Neighbors challenged the trial court's rulings, including whether the Owner's signature was obtained under duress. In an unpublished portion of the opinion, the court rejected all of the Neighbors' challenges.

Next, the court considered whether the Owner could recover attorney fees. The Owner had claimed the attorney fees based on a provision in the purchase agreement. California law provides that a litigant is entitled to recover attorney fees whenever the other party to the litigation would have recovered these fees if they had prevailed. Since the Neighbors would have claimed attorney fees if they had established the validity of the purchase agreement, the Owner argued she was entitled to recover her attorney fees.

The court did not find any prior decisions where a party who had successfully argued that a contract was unenforceable could then claim attorney fees based on the otherwise void agreement. Under the purchase agreement, a party was only entitled to recover attorney fees if the party had first sought to mediate the dispute. The court ruled that because the Owner had never offered the Neighbors mediation prior to filing their lawsuit, she was barred from collecting attorney fees from the Neighbors. Thus, the rulings of the trial court were affirmed.

Leamon v. Krajkiewcz, 132 Cal. Rptr. 2d 361 (Cal. Ct. App. 2003).