A California appellate court has considered whether a prospective buyer was entitled to specific performance of purchase agreement, basing his claims in part on information contained in the multiple listing service about the property.
Ronald and Sally Aloise ("Owners") owned a parcel of land for which the City of Santa Rosa ("City") had approved in 1999 a tentative subdivision development plan ("Plan"). The Plan included single family houses, duplexes, and an apartment building. In the fall of 1999, the Owners hired James Paschal ("Salesperson") of Re/Max Central Santa Rosa to list their property for sale. The Salesperson listed the property in the multiple listing service, stating "30 days to final map and start building." The Salesperson also published a similar advertisement in a local real estate magazine. The Salesperson stated that he obtained the information contained in his advertisements from either the Owners, the Owners' civil engineer ("Engineer"), or the development project's architect.
In January 2000, the Engineer informed the Owners that the Plan would expire in February 2000. The Owners filed a requested with the City to extend the Plan's effective date. In March 2000, some owners of neighboring properties wrote a letter to the City expressing concerns about the effect the proposed subdivision might have on a seasonal wetland. The City forwarded this letter to the Engineer, who sent it on to the Owners.
Around the same time, Walid Mando ("Developer") learned about the property from his real estate representative, Lori Barber ("Barber"). The information the Developer received about the property matched the information found in the multiple listing service. In March 2001, the Developer submitted an offer to purchase the property and the Owners submitted a counteroffer, which the Developer accepted. The purchase agreements stated that “time was of the essence” and gave the Developer 30 days to investigate the property following acceptance. The Owners were required to deliver all documents regarding the property in their possession to the Developer within five days of acceptance in order to facilitate the Developer's investigation. An initial deposit of $20,000 was required, and the Developer was to deposit another $80,000 after 30 days.
Since the Owners did not physically possess any of the documents related to the property, they directed the Engineer to turn over all of the documents in his possession related to the property. The Developer also looked at the City's file on the property. Through his review, the Developer learned for the first time about the wetlands issue raised by the neighbors and also that the Plan had expired. He also learned that the City had scheduled a hearing on the Plan for May 11, 2000, which the City postponed until June. The Salesperson wrote to Barber and informed her that the 30 day investigation period would now commence when the City extended the Plan in June, as expected.
On June 8, 2000, the City extended the Plan for another year, but added a condition requiring the owner to mitigate any loss of wetlands. Shortly after the Plan extension was approved, the Salesperson wrote to Barber, informing her that the Owners would indemnify the Developer for any costs arising from mitigation of the wetlands and so the thirty day investigation period had begun. After an exchange of correspondence where the Developer tried to further extend the 30-day investigation period, the Salesperson wrote to the Developer on July 20, 2000, stating that the "time has long [passed] for you to make a decision" and so the Owners were canceling the purchase agreement and returning the Developer's deposit. While the parties continued to try to negotiate the purchase, these negotiations were unsuccessful.
The Developer filed a lawsuit against the Owners and the Salesperson, seeking specific performance of the purchase contract as well as alleging misrepresentation based on the statements made in the multiple listing service about the property. The trial court ruled in favor of the Owners and the Salesperson, and the Developer appealed.
The California Court of Appeal, First District, affirmed the trial court. The court first considered the Developer's contract claims and whether he was entitled to specific performance of the purchase agreement. Relevant case law holds that a contract's provisions requiring a buyer to deposit the purchase price within the specified time period are as binding on the buyer as the contract provisions requiring the seller to convey the property. Here, the purchase contract required the Developer to tender the entire purchase price within 90 days of acceptance, or by July 6, 2000. Since the Developer failed to tender payment on that date or any other date, the court ruled that the Developer was not entitled to rely upon the purchase agreement, as he failed to meet the obligations imposed upon him by the agreement.
The Developer next argued that the Owners had waived the "time is of the essence" clause through their behavior. The Developer based his argument on the failure of the Owners to deliver to him all of the documents within the time period specified in the purchase agreement and also by the Salesperson's letters extending the 30-day investigatory period. The court rejected both of these arguments. First, the document delivery requirement was inserted into the contract for the benefit of the Developer and his relinquishment of that right did not amount to a waiver by the Owners. Second, the purchase agreement did not terminate if a party failed to meet a contingency within the agreement but rather when the other party delivers written notice to the defaulting party requiring compliance with the purchase agreement. The court found that the Salesperson's letters clearly set forth that the 30-day investigatory period would start running after the City approved the Plan in June 2000, which established the new time frame for the performance under the purchase agreement. None of this conduct demonstrated a waiver by the Owners, and so the court rejected the Developer's waiver arguments.
The Developer also argued that he should not be found in default of the purchase agreement because there was a factual issue as to whether the Owners were able to perform the purchase agreement. The Developer argued that because the Owners were unable to deliver an approved building plan as advertised in the MLS and elsewhere, they were not able to perform the contract. The court rejected this argument, finding nowhere in the purchase contract was the delivery of an approved building plan required. Further, the court found that the Developer had never identified the MLS listing when he had been asked in discovery to identify what agreements he was seeking to have performed. Thus, the court rejected all of the Developer's contract arguments.
Next, the court considered the misrepresentation allegations against the Owners and the Salesperson. These allegations were based on the MLS listing and subsequent advertisements, which the Developer argued that he relied upon in his decision to attempt to purchase the property, as he claimed that he believed he would be able to start construction shortly after purchase.
The court found that the statements in the MLS and elsewhere were accurate at the time they were made, and so the issue became whether the parties had misrepresented the property by failing to advise the Developer that circumstances had changed since those statements had been made. In his offer, the Developer had acknowledged that he had "not relied upon any statements” of the Salesperson in making his offer, thereby eliminating any misrepresentation claims about the continued viability of the statements made in the MLS. The court also found that the Developer had learned the true status of the Plan during the investigation period, and so could have rescinded the agreement at that time. He also could have continued with the purchase and then brought a lawsuit to recover his alleged damages. Since he did neither, the court ruled he was not entitled to relief. Therefore, the court affirmed the rulings of the trial court in favor of the Owners and the Salesperson.
Mando v. Aloise, No. A101584, 2004 WL 859337 (Cal. Ct. App. Apr. 22, 2004). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].