939 F.2d 794 (9th Cir. 1991), 90-55750, Texaco, Inc. v. Ponsoldt

Docket Nº:90-55750, 90-56088.
Citation:939 F.2d 794
Party Name:TEXACO, INC., Plaintiff-counter-claim-defendant-Appellant, v. William R. PONSOLDT, Defendant-counter-claimant-Appellee.
Case Date:July 25, 1991
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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939 F.2d 794 (9th Cir. 1991)

TEXACO, INC., Plaintiff-counter-claim-defendant-Appellant,


William R. PONSOLDT, Defendant-counter-claimant-Appellee.

Nos. 90-55750, 90-56088.

United States Court of Appeals, Ninth Circuit

July 25, 1991

Argued and Submitted June 4, 1991.

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Donald F. Woods, Jr., Dewey Ballantine, Los Angeles, Cal., Mark D. Litvack, White Plains, N.Y., for plaintiff-counter-claim-defendant-appellant.

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Laurence D. Strick, Richman, Lawrence, Mann & Greene, Beverly Hills, Cal., for defendant-counter-claimant-appellee.

Appeal from the United States District Court for the Central District of California.

Before D.W. NELSON, O'SCANNLAIN and TROTT, Circuit Judges.

TROTT, Circuit Judge:

Texaco appeals summary judgment in favor of William R. Ponsoldt on multiple claims arising out of an unconsummated land sale. After Ponsoldt failed to close escrow on a ranch located in Santa Barbara, California that he had contracted to purchase, Texaco sued for declaratory relief and specific performance. Failed settlement talks led to a second suit by Texaco for breach of the settlement agreement, fraud, and negligent misrepresentation. Ponsoldt filed counterclaims in both suits, which are still pending. We affirm in part and reverse in part.



Texaco and Ponsoldt entered into an agreement under which Ponsoldt agreed to pay $7 million for a large ranch (approximately 3,000 acres) on which Ponsoldt allegedly planned to raise horses. The ranch is known as El Capitan Ranch. Ponsoldt paid a $200,000 deposit to open escrow. The purchase/sale agreement contained a liquidated damages provision that provided:

It is agreed that the seller's sole and exclusive remedy in the event of buyer's default prior to the close of escrow shall be the retention of said deposit [$200,000] as liquidated damages.

The retention of said deposit shall be seller's sole remedy for damages in the event of a default on the part of the buyer, all other claims, damages, expenses, costs and attorneys' fees being expressly waived by seller.

Two lawsuits were filed below based on the purchase/sale agreement, which were consolidated on appeal.

  1. The First Action--Breach of the Purchase Agreement

    Texaco acquired El Capitan in 1981, and with the purchase assumed an obligation to homeowners in the adjoining subdivision to (1) construct a water system and (2) provide licenses for beach access. A dispute arose as to whether Texaco had performed on these obligations, and the homeowners filed claims against Texaco. Because Texaco was going through Chapter 11 reorganization, two homeowners filed proofs of claim with the bankruptcy court for a total of $3 million. Ponsoldt was informed of these claims. Ponsoldt alleges there were other claims filed against Texaco relating to the El Capitan Ranch that Texaco did not disclose to him. Texaco asserts that it disclosed all potential liability to Ponsoldt, and that Ponsoldt expressly agreed to assume Texaco's obligations relating to the production of water to serve El Capitan Ranch and adjacent properties, as well as providing licenses guaranteeing beach access to the homeowners.

    At the closing, Ponsoldt refused to perform, raising the pending homeowners' claims. He filed suit in state court, asserting claims for specific performance, breach of contract, and fraud. He also filed a lis pendens against the property. Texaco filed suit in federal district court on the following day, requesting specific performance and declaratory relief. The state court stayed its action, and Ponsoldt subsequently filed counterclaims against Texaco in the district court for breach of contract, specific performance, bad faith denial of the existence of a contract, breach of the covenant of good faith and fair dealing, fraud, and negligent misrepresentation.

  2. The Second Action--Breach of the Settlement Agreement

    After the above actions were filed, Texaco and Ponsoldt attempted to resolve the dispute. Texaco entered into a settlement agreement with the homeowners, agreeing to pay for improvements to the water system, record licenses in their favor for beach access, and change the composition of the Board of Directors of the El Capitan Mutual

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    Water Company to increase homeowner representation. Texaco asserts that Ponsoldt agreed to this settlement with the homeowners, to contribute $250,000 toward the payment to the homeowners, to dismiss his claims against Texaco, and to close escrow. Ponsoldt denies this, arguing that Texaco settled with the homeowners without his approval.

    After this supposed settlement agreement, Ponsoldt refused to close escrow by paying the balance of the purchase price, or to dismiss his claim for specific performance and expunge the lis pendens. Texaco filed a second action against Ponsoldt, raising claims for breach of the settlement agreement, fraud, and negligent misrepresentation. Ponsoldt counterclaimed for breach of contract, specific performance, fraud, and negligent misrepresentation.


    Procedural History

    On April 3, 1989, Ponsoldt moved for summary judgment on Texaco's specific performance claim in the first action, raising the liquidated damages provision as a complete defense. The district court granted the motion, finding that Texaco had specifically waived its right to seek specific performance. Texaco does not appeal this ruling. Five months later, Ponsoldt moved for summary judgment on the declaratory relief claim in the first action, claiming that it was moot because the relief requested was identical to that in the specific performance claim. Ponsoldt simultaneously moved for summary judgment on all claims in the second action, asserting that the settlement agreement was unenforceable under the statute of frauds, and the fraud claims were barred because the agreement was unenforceable.

    The district court granted Ponsoldt's motions. It dismissed the declaratory relief claim, holding it was moot because the specific performance claim had been dismissed. The court found that because the settlement agreement affected the disposition of real property, the agreement had to comply with the statute of frauds to be enforceable. Because the agreement was never...

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