Glenmat Properties v. PioneerCenter

Filed 3/15/07 Glenmat Properties v. Pioneer Center CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

APPEAL from a judgment of the Superior Court of Los Angeles County. Robert A. Dukes, Judge. Affirmed.

Law Offices of Henry N. Jannol, Paul H. Levine and Andrea Breuer for Plaintiff and Appellant.

Gaw Van Male Smith Myers & Miroglio and Bruce A. Miroglio for Defendants and Respondents.

Plaintiff and appellant Glenmat Properties, LLC (Glenmat) appeals the judgment, following a court trial, in favor of defendants and respondents Pioneer Center (Pioneer Center), Pioneer Center, LLC, and Marta L. Brownfield (collectively, defendants), in Glenmats action for breach of contract for the sale of certain real property. Glenmat contends the evidence is insufficient to support the trial courts findings that negotiations concerning essential terms of the sale were never concluded, and that no valid, enforceable contract existed. Substantial evidence supports the trial courts findings and we therefore affirm the judgment.

BACKGROUND

A. The Parties

Glenmat is a limited liability company that buys and sells commercial real estate properties. Nasser Matloob is a commercial real estate broker and the managing director of Glenmat.

Pioneer Center is a California general partnership that owned a commercial shopping center located at the intersection of North Azusa Avenue and Rowland Avenue in West Covina, California (the Property). Pioneer Center, LLC is a limited liability company formed in 2002 for the purpose of effecting a transfer of the Property. Marta Brownfield is the managing general partner of Pioneer Center and a member of Pioneer Center, LLC. Joshua Kennedy is a consultant retained by Pioneer Center to manage its business affairs. Richard Paley is a commercial real estate broker retained by Pioneer Center to market the Property.

B. The March 31, 2003 Letter Agreement

After receiving an advertisement for the sale of the Property, Mr. Matloob contacted Mr. Paley in early 2003 to express Glenmats interest in purchasing the Property. In late March 2003, Mr. Matloob met with Mr. Paley and Mr. Kennedy to discuss the proposed purchase transaction. At the meeting the parties discussed a purchase price of $6,050,000 that included assumption of a $2 million existing loan, a $2,050,000 seller carry-back loan, and a $2 million cash payment. Mr. Kennedy disclosed to Mr. Matloob that tenants of the Property had a right of first refusal to purchase the Property upon 30 days notice, and that a tenant named Steak Corral, Inc. had sought to exercise that right. Mr. Kennedy also discussed issues concerning GMAC, the existing lender for the Property. The GMAC loan prohibited further encumbrances on the Property and contained an acceleration clause that became effective upon any sale or transfer of the Property. In order to avoid the prohibitions imposed by the GMAC loan, the parties discussed obtaining GMACs consent to transfer the Property to a newly formed limited liability company that would assume the existing loan. Glenmat could then obtain the Property by purchasing the membership interests of the limited liability company.

At the conclusion of the meeting, Mr. Paley provided Mr. Matloob with a form agreement setting forth terms for the purchase and sale of a single asset entity named Pioneer Center, LLC. Using the form provided by Mr. Paley as a template, Mr. Matloob prepared and submitted a letter agreement dated March 31, 2003, in which Glenmat agreed to purchase Pioneer Center, LLC for $6,050,000. The March 31, 2003 letter set forth the payment terms as a $100,000 cash deposit, to be paid upon the opening of escrow; assumption by Pioneer Center, LLC of an existing $2 million deed of trust; a seller carry-back loan of $2,050,000; and a $2 million cash deposit into escrow before the scheduled closing date of June 1, 2003.

The March 31, 2003 letter agreement listed the following items as contingencies to closing: [] a. Review of all aspects of the Property, including all books and records (2001-2002 and year to date), loan document, leases, title reports, survey, recent estoppel certificates from tenants, etc., to be completed within fifteen (15) days after receipt of all documents required from Seller. This shall be waived prior to the opening of escrow. [] b. Consent by GMAC to the transfer of all the membership interests in Seller without triggering the due on sale/transfer provisions in the loan documents, and without the payment of any transfer fee by Buyer. The letter agreement concluded: If the foregoing is acceptable, please have the Seller execute where indicated below. A Purchase Agreement draft shall be prepared in accordance with the foregoing terms. On April 12, 2003, Marta Brownfield countersigned the March 31, 2003 letter agreement on behalf of Pioneer Center.

C. The April 24, 2003 Transmittal

On April 24, 2003, Mr. Matloob received a transmittal from Mr. Paley that included a copy of the March 31, 2003 letter agreement, countersigned by Pioneer Center. Mr. Paleys transmittal stated: Per our conversation, I am enclosing the signed copy of the agreement in principle to purchase the above referenced property. Obviously, a formal purchase agreement must be prepared and approved by both parties. The April 24, 2003 transmittal listed various documents Pioneer Center had provided to Glenmat, including a preliminary title report, copies of the existing leases, a current rent roll, and a copy of the GMAC note, and stated that Glenmat would have 15 calendar days from April 28 to review and approve all aspects of the Property. The transmittal further stated: Also as we discussed, I want to make you aware that this deal will be contingent on the following: [] a) Approval by GMAC Commercial Mortgage of assumption by Buyer of the existing note and deed of trust or expansion of existing note and deed of trust to provide required financing; [] b) Removal of lis pendens filed by Steak Corral, Inc; and [] c) Retention of ownership by Seller of parcel leased by Steak Corral, Inc.

Upon receipt of the transmittal, Mr. Matloob telephoned Mr. Paley and stated that he would not agree to the GMAC financing contingency. He inquired about the lis pendens filed by Steak Corral, Inc., and was assured that Pioneer Center would clear title to the Property before the close of escrow. Mr. Matloob crossed out the GMAC contingency, initialed that item, then countersigned the April 24, 2003 transmittal and returned it to Mr. Paley.

D. Subsequent Dealings Between the Parties

Glenmat proceeded with its inspection of the Property, and during the course of its inspection, identified several deferred maintenance issues. Pioneer Center agreed to a $25,000 reduction in the purchase price to account for these issues.

On June 1, 2003, the anticipated closing date for the transaction, escrow had not been opened, nor had a formal purchase agreement been drafted. In early June, Mr. Kennedy communicated with Glenmats attorney, who agreed to draft a purchase agreement based on the representation that Pioneer Center would pay for one-half the expense of doing so. In late June, Mssrs. Paley and Kennedy met with Mr. Matloob and Glenmats attorney, and Glenmats attorney again stated that he would be drafting a purchase agreement, notwithstanding the issues raised by the Steak Corral lis pendens action.

In July 2003, Pioneer Center received an offer to purchase the Property from another potential buyer for $5.9 million that included a direct assumption of the GMAC loan and payment of the balance of the purchase price in cash. In mid-July, Mr. Kennedy met with Mr. Matloob and Glenmats attorney to determine when a purchase agreement would be forthcoming. At that meeting, Mr. Kennedy informed Mr. Matloob that Pioneer Center was continuing to market the Property and was considering other offers.

In August 2003, Pioneer Center continued to negotiate with the potential buyer who had submitted the $5.9 million offer by submitting a counter offer of $6.2 million. The prospective buyer subsequently countered at $6.05 million. By letter dated August 14, 2003, Glenmat advised Pioneer Center that although the Steak Corral lis pendens has frustrated our ability to close the transaction contemplated . . . [w]e remain interested in purchasing the Property and suggest that the following schematic be adopted to move matters forward: [] 1. The Closing Date originally contemplated (June 30) . . . be postponed to thirty days after the Lis Pendens is removed of record. . . . [] 2. The Closing will occur once verification is made that the Property is held by the Limited Liability company (LLC) and that all members have consented to the transaction. [] 3. The Closing be contingent upon transfer of the existing loan to the LLC at no cost to Buyer. [] 4. The LLC interests will be purchased by the Buyer with suitable representations and warranties. Glenmats letter concluded: Kindly review the above and confirm that you agree with each of the terms set forth above.

On August 20, 2003, Pioneer Center responded to Glenmat as follows: We are currently negotiating a contract for the sale of Pioneer Center with another party that will assume the GMAC mortgage and pay the $4.0 million balance to us in cash as part of a 1031 deal. Thus, at this juncture, we are not in a position to sign the letter you have presented.

On August 21, 2003, Glenmats attorney communicated with Mr. Kennedy, threatening litigation in the event Pioneer Center negotiated with another party for the sale of the Property. On August 27, 2003, Mr. Kennedy met with Mr. Matloob and advised him that Pioneer Center would consider a formal purchase agreement from Glenmat if submitted by September 2, 2003.

On September 3, 2003, Glenmat sent Pioneer Center a draft purchase agreement. The draft agreement did not include any of the corollary documents necessary to complete the contemplated purchase transaction, such as the note and pledge agreement required in connection with a seller carry-back loan. Further negotiations took place between the parties thereafter; however, the purchase agreement was never finalized, and the transaction was never completed. Pioneer Center sold the Property to another buyer in late December 2003.

E. The Instant Lawsuit

On February 6, 2004, Glenmat filed a first amended complaint for breach of contract, seeking damages for defendants alleged breach of the March 31, 2003 letter agreement countersigned by Pioneer in April 2003. The matter proceeded to a court trial. At the close of Glenmats case, defendants made a motion for judgment, which the trial court granted.

In its statement of decision, the trial court concluded: Plaintiff has not established that the March 31, 2003 writing constituted a valid and binding contractual agreement. At best, the document could be said to be an agreement to agree as various essential terms needed to be confirmed and negotiated. Without an agreement, no breach can be found. The fact that these negotiations were never finally concluded could not be attributed to any fault or act solely attributed to the defendants. Without a breach, no damages can be assessed against defendants. Glenmat filed this appeal.

DISCUSSION

I. Applicable Law and Standard of Review

Glenmat challenges the trial courts finding that there was no enforceable contract, based on the parties lack of mutual assent with respect to certain essential terms of the transaction. Mutual assent is necessary to the formation of a contract. (Civ. Code,  1550, 1565.)

The manifestation of mutual assent is generally achieved through the process of offer and acceptance. (1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, 117, p. 156.) Both must be reasonably certain, which means the terms provide a basis for determining the existence of a breach and for giving an appropriate remedy. (Rest.2d Contracts, 33, subd. (2).) Mutual assent necessary to the formation of a contract is determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed intentions or understandings. [Citation.] (Alexander v. Codemasters Group Limited (2002) 104 Cal.App.4th 129, 141.)

[W]hether a certain or undisputed state of facts establishes a contract is [a question] of law for the court . . . On the other hand, where the existence and not the validity or construction of a contract or the terms thereof is the point in issue, and the evidence is conflicting or admits of more than one inference, it is for the jury or other trier of the facts to determine whether the contract did in fact exist , . . . [Citation.] (Robinson & Wilson, Inc. v. Stone (1973) 35 Cal.App.3d 396, 407.) Here, the parties presented conflicting evidence as to whether a valid and enforceable contract existed. We review the trial courts factual finding on this issue under the substantial evidence standard.

Under the substantial evidence standard of review, [w]here findings of fact are challenged on a civil appeal, we are bound by the elementary, but often overlooked principle of law, that . . . the power of an appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, to support the findings below. [Citation.] We must therefore view the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference and resolving all conflicts in its favor in accordance with the standard of review so long adhered to by this court. [Citations.] (Jessup Farms v. Baldwin (1983) 33 Cal.3d 639, 660.)

II. Existence of Contract

The essential elements of a contract for a real property transaction are the seller, the buyer, the price to be paid, the time and manner of payment, and the property to be transferred, describing it so it may be identified. [Citations.] [Citation.] (Doryon v. Salant (1977) 75 Cal.App.3d 706, 711.) Glenmat argues that each of those elements is present in the March 31, 2003 letter agreement countersigned by Pioneer Center, and that the parties intended the agreement to be a valid and binding contract.

Whether a writing constitutes a final agreement or merely an agreement to make an agreement depends primarily upon the intention of the parties. In the absence of ambiguity this must be determined by a construction of the instrument taken as a whole. [Citation.] Preliminary negotiations or an agreement for future negotiations are not the functional equivalent of a valid, subsisting agreement. A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent. [Citation.] [Citation.] Thus, where it is part of the understanding between the parties that the terms of their contract are to be reduced to writing and signed by the parties, the assent to its terms must be evidenced in the manner agreed upon or it does not become a binding and completed contract. [Citations.] (Beck v. American Health Group Internat., Inc. (1989) 211 Cal.App.3d 1555, 1562.)

While it is true that the March 31, 2003 letter agreement identifies the parties, the Property, the purchase price and time and manner of payment, the agreement on its face also contemplates further negotiation by the parties to reach a definitive written contract. It states: A Purchase Agreement draft shall be prepared in accordance with the foregoing terms. Use of the term draft indicates the parties intent to leave open for further negotiation other terms of the transaction, such as suitable representations, warranties, and covenants to be included in a definitive agreement. There is no meeting of the minds of the parties while they are merely negotiating as to the terms of the agreement to be entered into. To be final, the agreement must extend to all terms which the parties intend to introduce, and material terms cannot be left for future settlement. . . . [citation]. (Stephan v. Maloof (1969) 274 Cal.App.2d 843, 847-848.)

The parties subsequent conduct was consistent with the written expression of their intent to negotiate further toward a definitive contract. In an April 24, 2003 transmittal to Mr. Matloob, Mr. Paley stated: I am enclosing the signed copy of the agreement in principle to purchase the above referenced property. Obviously a formal purchase agreement must be prepared and approved by both parties. The April 24, 2003 transmittal further stated: Please acknowledge this letter by signing below and faxing a copy to me. The entering into an agreement to purchase the property will be contingent on the approval and acceptance of this letter. By countersigning the April 24, 2003 transmittal, Mr. Matloob, on behalf of Glenmat, assented to its terms, including the requirement that a formal purchase agreement must be prepared and approved by both parties.

In the ensuing months, several communications took place between Pioneer Center and Glenmat concerning the drafting of a definitive purchase agreement. Glenmats attorney agreed to draft the document based on the representation that Pioneer Center would pay for one-half the expense of doing so. By June 1, 2003 (the anticipated closing date for the purchase transaction), however, no purchase agreement had been prepared.

In the interim, the parties continued to negotiate certain essential terms of the transaction, including the purchase price and manner of payment. Before countersigning the April 24, 2003 transmittal from Mr. Paley, Mr. Matloob crossed out a contingency listed in the transmittal requiring GMACs approval of the buyers assumption of the existing loan, notwithstanding the parties previous agreement to such a contingency in the March 31, 2003 letter agreement. Glenmat also continued to negotiate the purchase price to be paid for the Property. When an inspection revealed several items of deferred maintenance, Glenmat obtained a $25,000 reduction in the purchase price. Glenmat again sought to reduce the purchase price in August 2003, when it learned that a major tenant had cancelled its lease and vacated the premises.

By letter dated August 14, 2003, Glenmat acknowledged that the June 1, 2003 closing date contemplated in the parties March 31, 2003 agreement had expired, and requested that the closing date be changed to 30 days after the Steak Corral lis pendens was expunged. In its letter, Glenmat referred to suitable representations and warranties to be included in the still to be drafted purchase agreement. Glenmat also sought Pioneer Centers agreement to continue the negotiations: Kindly review the above and confirm that you agree with each of the terms set forth above.

In response, Pioneer Center informed Glenmat that it would not agree to the terms set forth in the August 24, 2003 letter and that it was negotiating with another potential buyer. Pioneer Center subsequently advised Glenmat that it would consider a formal purchase agreement from Glenmat if submitted by September 2, 2003. Glenmat submitted a draft purchase agreement on September 3, 2003, but the draft was incomplete in that it did not include several documents necessary to effect the contemplated purchase transaction, such as the note and pledge agreement required in connection with the proposed seller carry-back loan. Although the parties continued to negotiate thereafter, a definitive purchase agreement was never achieved.

The terms of the March 31, 2003 letter agreement itself, as well as the conduct of the parties after signing that document, show that the parties did not intend to be contractually bound by its terms, but that they were negotiating toward a definitive purchase agreement. Those negotiations ultimately failed, and no contract was made. Substantial evidence supports the trial courts findings that there was no mutual assent between the parties concerning certain essential terms of the purchase transaction, and that the March 31, 2003 letter agreement was not a valid, enforceable contract.

III. Sanctions

Defendants request that sanctions in the amount of $8,946.69 be imposed against Glenmat pursuant to Code of Civil Procedure section 907 and California Rule of Court, rule 8.276(e)(1)(A) for filing a frivolous appeal. We cannot conclude that Glenmats appeal, although without merit, was frivolous or taken solely for delay, within the meaning of those statutes, and therefore deny defendants motion for sanctions.

DISPOSITION

The judgment is affirmed. Defendants are awarded their costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

____________________, J.

CHAVEZ

We concur:

_______________________, P. J.

BOREN

_______________________, J.

ASHMANN-GERST

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