Steiner v. Thexton, C054605.

• Decision Date: 28 May 2008
• Docket Number: No. C054605.,C054605.
• Citation: 77 Cal. Rptr. 3d 632,163 Cal.App.4th 359
• Court: California Court of Appeals Court of Appeals
• Parties: MARTIN A. STEINER, Plaintiff and Appellant, v. PAUL THEXTON, as Trustee, etc., Defendant and Respondent; SIDDIQUI FAMILY PARTNERSHIP, Intervener and Appellant.

163 Cal.App.4th 359

77 Cal. Rptr. 3d 632

MARTIN A. STEINER, Plaintiff and Appellant, v. PAUL THEXTON, as Trustee, etc., Defendant and Respondent; SIDDIQUI FAMILY PARTNERSHIP, Intervener and Appellant.

No. C054605.

Court of Appeals of California, Third District.

May 28, 2008.

Law Office of Robert Vaughan and Robert Vaughan for Plaintiff and Appellant.

Law Office of Klaus J. Kolb and Klaus J. Kolb for Intervener and Appellant.

Law Office of David L. Price and David L. Price for Defendant and Respondent.

OPINION

SIMS, Acting P. J.

In this action seeking specific performance of a real estate sales agreement, the hopeful buyer, plaintiff Martin A. Steiner, and his partial assignee, intervener Siddiqui Family Partnership, (collectively, plaintiffs) appeal from a judgment, following a bench trial, entered in favor of the property owner, defendant Paul Thexton, as trustee for the FAS Family Trust (Thexton). Plaintiffs contend the trial court erred in construing the contract as an unenforceable option to buy the property, void for lack of consideration and in awarding attorney's fees to defendant. We shall affirm the judgment and the attorney's fee award.

FACTUAL AND PROCEDURAL BACKGROUND

On October 20, 2004, Steiner filed a complaint seeking specific performance of a "REAL ESTATE PURCHASE CONTRACT."

Thexton filed an answer, asserting a variety of defenses, including a defense that the "contract" was a disguised option, void for lack of consideration.¹

On March 21, 2006, Siddiqui, with leave of court, filed a complaint in intervention, based on Steiner's partial assignment of his rights under the "contract" to Siddiqui, pursuant to an agreement for Steiner and Siddiqui to participate in the expenses of the effort to subdivide the property. Siddiqui sought specific performance. Siddiqui's complaint also sought damages—for capital gains taxes it owed on the sale of other property, which it planned to defer by using the money to buy Thexton's property in a "1031 exchange" under the Internal Revenue Code. However, Siddiqui later withdrew the claim for monetary damages, asking instead for reformation of the Steiner/Thexton agreement to allow additional time to pay Thexton.

As adduced in the bench trial, Steiner, a real estate developer, was interested in buying and developing several residences on a 10-acre portion of Thexton's 12.29-acre parcel. In order for this to happen, county approvals for a parcel split and development permits were required. Steiner approached Thexton, who had not been interested in selling the property on which he resided, but considered selling a portion of the property. Thexton had previously turned down an offer from a different party for $750,000, because that party wanted Thexton to obtain the required approval and permits. The agreement between Thexton and Steiner, which was prepared by Steiner, was for Thexton to sell the 10-acre portion to Steiner for $500,000 by September 2006, if Steiner decided to purchase the property after pursuing, expeditiously and at Steiner's own expense, the county approvals and permits. However, the "contract" also provided that Steiner was not obliged to do anything and could abandon the effort with notice to Thexton and delivery to Thexton of any work performed up to the time of such notice.

Thus, the document executed by Steiner and Thexton on September 4, 2003, was labeled, "REAL ESTATE PURCHASE CONTRACT." (A copy is attached as an appendix.) It stated in part:

"Martin A. Steiner and/or Assignee, hereinafter called `Buyer,' offers to pay to FAS Family Trust, Paul Thexton, hereinafter called `Seller', the purchase price of Five Hundred Thousand Dollars ($500,000.00) for 10 acres of a 12.29 acre property situated in the County of Sacramento . . . hereinafter called `Property' . . . .

"TERMS OF SALE:

"1. Upon Seller's acceptance escrow shall be opened and $1,000.00 . . . shall be deposited by Buyer, applicable toward purchase price.²

"2. During the escrow term, Seller shall allow Buyer an investigation period to determine the financial feasibility of obtaining a parcel split for development of the Property. Buyer shall have no direct financial obligation to Seller during this investigation period as Buyer will be expending sums on various professional services needed to reach the financial feasibility determination. Buyer hereby warranties that all fees shall be paid for said professional services by Buyer and neither the Seller nor the Property will in any way be obligated or indebted for said services. [¶] . . . [¶]

"5. Buyer will pay for the required civil engineering and surveying for the entire parcel map. Any agency requirements of Seller's remaining 2.29 acre parcel will be paid by Seller. Any agency requirements for planning, development or entitlement of the 10 acre parcel will be paid by Buyer. [¶] . . . [¶]

"10. If any condition herein stated has not been eliminated or satisfied within the time limits and pursuant to the provisions herein, or if, prior to close of escrow, Seller is unable or unwilling to remove any exceptions to title objected to, and Buyer is unwilling to take title subject thereto, then this Contract shall at the end of the applicable time period, become null and void. [¶] . . . [¶]

"17. Buyer hereby agrees to purchase the above-described Property for the price and upon the terms and conditions herein expressed. . . . [¶] . . . [¶]

"CONTINGENCIES:

"The Buyer shall have from date of acceptance until the closing of escrow to satisfy or waive the items listed herein below:

"1. Seller is aware that Buyer plans to subdivide, apply for planning entitlements and develop 10 acres from the existing parcel and agrees to cooperate, as needed, with Buyer as Buyer attempts to obtain the necessary permits and authorizations from the various local jurisdictions.

"2. Buyer, at his sole option and expense, will conduct all necessary investigations, engineering, architectural and economic feasibility studies as outlined earlier in this Contract.

"3. Both Buyer and Seller understand that Buyer could have substantial investment during this development period.

"4. Buyer shall hereby indemnify and hold Seller harmless for any acts, errors or omissions of Buyer or Buyer's agents; and Buyer and Buyer's agent hereby agree that, upon the performance of any test, they will leave the Property in the condition it was in prior to those tests.

"5. By acceptance of this offer, the Seller has granted Buyer and/or Buyer's agents, the right to enter upon subject Property for the purpose of conducting said tests and investigations.

"6. Buyer shall indemnify and hold Seller harmless for any costs associated with Buyer's investigations. In the event that this contract is terminated prior to the close of escrow, Buyer shall deliver to Seller the originals or copies of all information, reports, tests, [etc.]

"7. It is the intent of Buyer that the time period from execution of this contract until the closing of escrow is the time that will be needed in order to be successful in developing this project. It is expressly understood that the Buyer may, at its absolute and sole discretion during this period, elect not to continue in this transaction and this purchase contract will become null and void.

"CLOSE OF ESCROW:

"Upon successful completion of subdividing the 10 acres from the existing parcel, Buyer will pay Seller the balance of the purchase price to escrow and close immediately.

"Buyer will move expeditiously with the parcel split. It is anticipated it will take one to three years, due to existing governmental requirements.

"Buyer will give quarterly reports to Seller as to progress of the parcel split.

"If parcel split is not completed by September 1, 2006, this real estate purchase contract will be cancelled." (Italics added.)

Steiner began pursuing the necessary county approvals and (with his partial assignee, Siddiqui) ultimately expended thousands of dollars in this endeavor.³

Steiner and Thexton signed an addendum to the "contract" in January 2004. The addendum allowed Steiner to purchase up to 10.17 acres (as opposed to the 10 acres in the original agreement), with a concomitant increase in price. The addendum also deleted original requirements that Steiner grant an easement to Thexton and not build within 100 feet of Thexton's home, and called for Steiner to demolish some old buildings and provide a standard water hookup at no cost to Thexton.⁴

In May and August 2004, Thexton cooperated with Steiner's efforts by signing, as property owner, (1) Siddiqui's application to the county planning department for a tentative parcel map, and (2) a letter stating an existing structure on the property had no historical significance and would be razed.

In October 2004, Thexton asked the title company to cancel escrow.⁵ When Steiner inquired, Thexton said he no longer wanted to sell the property. Steiner nevertheless proceeded with the final hearing of the parcel review committee and apparently obtained approval for a tentative map (evidence which the trial court admitted as going to Steiner's state of mind). Steiner opposed the cancellation of escrow and filed this lawsuit seeking specific performance. The escrow agent continued to hold the money pending trial of this lawsuit.

Following the bench trial, the trial court issued a statement of decision, stating in part:

"Th[e] contract is unenforceable against Defendant Paul Thexton because it is, in effect, an option that is not supported by any consideration. [¶] . . . [¶] "[T]he contract must be construed as an option contract because defendant bound himself to sell the subject property to plaintiff at a stated price for an undefined period of up to three years (described in the contract as the `investigation period'), while plaintiff retained the `absolute and sole discretion' to elect not to continue in the transaction at any time during that period, in which case the purchase...