Nichols v. Pico Ranch

Filed 4/18/07 Nichols v. Pico Ranch CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FOURTH APPELLATE DISTRICT

DIVISION TWO

APPEAL from the Superior Court of Riverside County. Edward D. Webster, Judge. Affirmed.

Law Offices of Charles D. Nachand and Charles D. Nachand for Defendants, Cross-complainants and Appellants.

Hall & Bailey, John L. Bailey and Therese Bailey-Nelson for Cross-defendant and Respondent.

Carroll & Werner and Lee G. Werner for Plaintiffs, Cross-defendants and Respondents.

In April 1999, Nichols^[1]and Holgate^[2]entered into an agreement for the sale of real property. The sale was contingent upon the completion of certain preliminary development conditions. As of July 15, 2003, the conditions had not been satisfied and Nichols instructed the escrow holder to cancel the sale.

Nichols then filed an action for quiet title. First, the trial court granted summary judgment in favor of Nichols. Then, the trial court sustained the demurrers of Nichols and cross-defendant Tricia Cowan^[3]to Holgates second amended cross-complaint and granted Cowans motion to strike. The trial court entered judgment in favor of Nichols and Cowan.

Holgate appeals, contending the real estate purchase contract was ambiguous and the court improperly excluded parole evidence bearing on the meaning of the contract. Holgate urges that material issues of fact prevented granting the summary judgment motion and it was improper to sustain the demurrers to the Holgate cross-complaint and to grant the motion to strike.

We conduct an independent review and affirm the judgment. (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476; Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.)

I

FACTUAL AND PROCEDURAL BACKGROUND

A. Summary Judgment Motion

For purposes of the summary judgment motion, the following facts were undisputed or not effectively disputed by Holgate. Instead, Holgate repeatedly disputed the legal effect and interpretation of the facts.

Nichols owned undeveloped real property in San Jacinto. On April 20, 1999, Nichols and Holgate executed a real estate purchase contract for the property. The contract provided for a 24-month escrow with provisions for two six-month extensions. The contract was first amended on April 20, 1999. The amended escrow instructions provided for escrow to be opened on February 16, 2000, and to close on or before February 16, 2002. A notice of pending sale was recorded against the property on May 4, 2000. Amended escrow instructions were executed again on February 26, 2002, extending the date for close of escrow to July 15, 2003.

On July 3, 2003, Nichols wrote to the escrow department, instructing it to cancel the escrow if it did not close on July 15, 2003. Holgate did not deposit the purchase price in escrow by July 15.

Holgate refused to execute a release of the recorded notice of pending sale or to execute cancellation instructions to escrow.

In the opposing separate statement of material facts, Holgate argued July 15 was not an ultimate deadline and that the sale was not completed because Nichols refused to cooperate in the processing of plans and approvals required for development of the property.

The court granted the summary judgment motion in favor of Nichols in July 2005.

B. Demurrers

In October 2005, Holgate filed the second amended cross-complaint against Nichols, First American Title Company, the escrow holder, and Tricia Cowan, the escrow officer and an employee of First American. All cross-defendants demurred. The trial court sustained the demurrers with leave to amend. Eventually, the trial court dismissed Nichols and Cowan. The record does not reflect any final disposition of the claims against First American. Holgate appeals.

II

ANALYSIS

A. Ambiguity and Parole Evidence

In multiple ways, Holgate argues the court should have allowed parole evidence about the meaning of the contract. The trial court determined, as a question of law, that no ambiguity existed. The issue of the admission of parole evidence is subject to independent review on appeal. (WYDA Associates v. Merner (1996) 42 Cal.App.4th 1702, 1710-1711.) We conclude there was no ambiguity and affirm the trial courts ruling.

Civil Code section 1638 provides: The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity. (Appalachian Ins. Co. v. McDonnell Douglas Corp. (1989) 214 Cal.App.3d 1, 11.) Civil Code section 1639 provides: When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible; . . . Code of Civil Procedure section 1856, subdivision (a), states: Terms set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement. (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 344; Bionghi v. Metropolitan Water Dist. of So. California(1999) 70 Cal.App.4th 1358, 1364 (Bionghi).)

The purchase contract provided for a 24-month escrow period with two six-month extensions. Additionally, the contract provided the escrow would close concurrently with development approvals, an executed development agreement, and construction financing in place. The seller agreed to cooperate with the development process. The close of escrow was eventually extended. The amended escrow instructions contained the specific language: The date for close of escrow is hereby amended to show on or before: July 15, 2003. The contract also contained a clause stating Time is of the essence and a written integration clause, tracking the language of Code of Civil Procedure section 1856.

Holgate ignores the effect of the integration clause, which is dispositive in favor of Nichols on the issue of excluding parole evidence. (Bionghi, supra, 70 Cal.App.4th at p. 1364.) Instead, Holgate maintains the contract terms are internally inconsistent. We disagree any inherent inconsistency is presented by the two conditions of having escrow close concurrently with the completion of specific development activities and the date for close of escrow being July 15, 2003. There was no reason to interpret the conditions, either expressly or by implication, as extending the date for close of escrow beyond July 15. Obviously, escrow could not have closed before the development conditions were fulfilled but certainly the closing could have occurred before July 15. The fact the parties had agreed to extend the escrow before did not vitiate the agreement for a closing date of July 15. The two sets of conditions did not combine to create a patent or latent ambiguity. (Walter E. Heller Western, Inc. v. Tecrim Corp. (1987) 196 Cal.App.3d 149, 158; Morey v. Vannucci (1998) 64 Cal.App.4th 904, 912.) Even without an integration clause prohibiting parole evidence, the trial court correctly refused to consider or admit parole evidence.

The case of Solis v. Kirkwood Resort Co. (2001) 94 Cal.App.4th 354, involving a release of liability for skiing, has little or no bearing on the present case. In Solis, plaintiff bought a season pass for Monday through Friday that included a release for negligence. Plaintiff, however, was injured on Sunday, using a one-day pass that was not subject to a release. The appellate court declined to find the season passs release covered the alleged negligence for the Sunday accident. Although Holgate copies a lot of the language from Solis, it is not factually or legally pertinent in the present case.

Nor do we agree that, by enforcing the July 15 date for close of escrow, the trial court improperly added a term or condition, regarding which the contract was silent. (Southern California Gas Co. v. Ventura Pipe Line Const. (1957) 150 Cal.App.2d 253, 257.) Rather, it was Holgate who sought to add a term to the contract permitting an extended escrow. The amended escrow instructions, signed by both parties, provided for the July 15 closing date. The terms of the purchase contract were clear and explicit and did not involve an absurdity. (Civ. Code, 1638.)

Holgate also maintains Nichols could not rely on the provision in the contract that Time is of the essence to enforce the escrow closing date. He compares the present case, in which Holgate did not complete the development activities, to a case in which the buyers of a house refused to complete the purchase when the house was not finished. (Kossler v. Palm Springs Developments, Ltd. (1980) 101 Cal.App.3d 88.) Kossler actually supports Nichols more than Holgate because Nichols is like the Kossler buyers, who were not forced to complete the purchase when the builder had not fully performed. Because Holgate did not succeed in fulfilling the development conditions, Nichols was not compelled to sell the subject property. (Fogarty v. Saathoff (1982) 128 Cal.App.3d 780 [buyers default excuses sellers failure to perform]; Pittman v. Canham (1992) 2 Cal.App.4th 556, 559-560 [mutual failure of performance justifies termination of contract]; Pitt v. Mallalieu (1948) 85 Cal.App.2d 77, 81, 84, 86.)

B. Nicholss Demurrer

The appellate court conducts an independent review of the trial courts ruling sustaining a demurrer. (Zelig v. County of Los Angeles, supra, 27 Cal.4th at p. 1126.)

In the second amended cross-complaint, Holgate asserted four causes of action, all of which were based on the written real estate purchase contract: breach of implied contract for quantum meruit; breach of implied contract for restitution; imposition of constructive trust; and breach of contract. Holgate sought to recover the value of services rendered and expenditures incurred in developing the subject property and to receive an equitable lien on the property.

The difficulty with all of Holgates claims is the contract itself precludes them. The terms of agreement included the following: Seller grants to buyer and agents, access to the property after acceptance of this offer to perform testing and engineering as requiredall at buyers expense. Buyer agrees to hold seller harmless against any expense due to these activities and Seller to cooperate with buyer in the processing of the plan for the project through the city, county, state as necessary at no cost to the seller. Additionally, the buyer agreed to make two nonrefundable deposits of $10,000 as consideration for the extensions in the escrow closing dates.

Because the contract makes the buyer responsible for all the development costs, Holgate cannot sue Nichols to recover those costs. This case is not like those relied upon by Holgate. For example, Holgate cites the concurring and dissenting opinion in Earhart v. William Low Co. (1979) 25 Cal.3d 503, 518, in which Justice Clark commented: Where one person renders services at the request of another and the latter obtains benefits from the services, the law ordinarily implies a promise to pay for the services. [Citations.] Nichols did not request services from Holgate. Instead, Holgate asked to begin the development process before purchasing the property and expressly agreed to pay for the costs incurred.

Nor is this case like Lesny Development Co. v. Kendall (1985) 164 Cal.App.3d 1010, 1021-1022. In that case, the sellers and buyers of property together had incurred development costs (id. at p. 1016) but there was no agreement that the buyers would be responsible for the costs. Ultimately, the court found the sellers were the prevailing party when the buyers defaulted although the buyers were accorded a small recovery for their outlay. (Id. at p. 1025.) In the present case, Holgate expressly agreed to incur and bear all development costs. Holgate cannot seek reimbursement of the costs in direct contradiction to the written contract. Additionally, the resolution of the quiet title action in favor of Nichols precluded Holgate from asserting a lien or constructive trust against the subject property.

We affirm the trial courts ruling on Nichols demurrer to the second amended cross-complaint.

C. Cowans Demurrer

The second amended cross-complaint asserted causes of action for breach of contract, negligence, breach of fiduciary duty, and intentional and negligent interference with contract against the escrow company, First American, and its employee, the escrow officer, Cowan. First American demurred to the eighth and ninth causes of action for intentional and negligent interference with contract. Cowan joined with First American and simultaneously filed a general and special demurrer to all five causes of action. Cowan also filed a motion to strike directed at Holgates allegations in support of attorneys fees. The court sustained the demurrers and granted the motion to strike.

On appeal, Holgate discusses only the motion to strike and the sixth through ninth causes of action, omitting the fifth cause of action for breach of contract. Any issue concerning the fifth cause of action is waived. The balance of the appeal is timely. (Hill v. City of Long Beach (1995) 33 Cal.App.4th 1684, 1695.)

The duties and functions of an escrow holder have been well-delineated: [A]n escrow holder is an agent for all parties who are exchanging instruments and payments through an escrow [citation] until the agency is ended by performance of the required acts. [Citation.] An escrow holder must comply strictly with the instructions of the parties. [Citations.] Upon the escrow holders breach of an instruction that it has contracted to perform or of an implied promise arising out of the agreement with the buyer or seller, the injured party acquires a cause of action for breach of contract. [Citations.] Similarly, if the escrow holder acts negligently, it would ordinarily be liable for any loss occasioned by its breach of duty. [Citation.] [Citation.] The escrow holder is a fiduciary of the parties to the escrow. [Citation.] An escrow holder has no general duty to police the affairs of its depositors, however. An escrow holders agency is limited to faithful compliance with instructions. [Citation.] (Claussen v. First America Title Guaranty Co. (1986) 186 Cal.App.3d 429, 435-436 (Claussen).) A distinction exists between an escrow holder, First American, and its employee, Cowan.

Holgate alleges in the second amended cross-complaint that First American and Cowan mishandled the escrow. In particular, when Nichols gave instructions on July 3 to cancel the escrow on July 15, First American and Cowan did not provide Holgate with notice. But the letter from Nichols, attached as exhibit B to the pleading, indicates Nichols sent a copy to Holgate. The second amended cross-complaint shows on its face that Holgate may have been given notice by Nichols of the proposed cancellation. That circumstance alone could be enough for this court to uphold the trial courts ruling because an escrow holder has no general duty to police the affairs of its depositors. (Claussen, supra, 186 Cal.App.3d at p. 435.) Notwithstanding, the issue of whether Holgate received the July 3 letter is not dispositive because escrow had already been instructed the closing date was July 15. The July 3 letter was superfluous.

Nevertheless, we also address the issues of Cowans potential liability as the employee of First American. The issue of an escrowholders employees liability was not discussed in Zang v. Northwestern Title Co. (1982) 135 Cal.App.3d 159. Holgates reliance on that case is scarcely persuasive. Instead, the pertinent law is Civil Code section 2343,^[4]concerning an agents responsibility to third persons: One who assumes to act as an agent is responsible to third persons as a principal for his acts in the course of his agency, in any of the following cases, and in no others:

1. When, with his consent, credit is given to him personally in a transaction;

2. When he enters into a written contract in the name of his principal, without believing, in good faith, that he has authority to do so; or,

3. When his acts are wrongful in their nature.

As an employee, Cowan was the agent of First American and Holgate is the third party seeking to hold her liable. But, as alleged in the complaint, none of the conditions for liability are satisfied here. Cowan did not receive personal credit in the escrow transaction. Clearly, she acted properly as the representative for First American. She did not enter into a written contract in the name of First American without authority.

As to the third factor, her acts were not wrongful, even if they could be considered negligent. At oral argument, Holgate maintained strenuously that the cross-complaint alleged wrongful conduct by Cowan. We have reviewed the pleadings and do not find any specific factual allegations of wrongful conduct by Cowan, the escrow officer, sufficient to make her directly liable to Holgate instead of First American, the escrow holder. All she is alleged to have done is not send Holgate a copy of the July 3 letter confirming the established closing date of July 15. There is no factual basis for Holgate to impose individual liability on Cowan. Our conclusions about the ruling on Cowans demurrer make moot any issue involving the motion to strike.

III

DISPOSITION

We affirm the judgment. Nichols and Cowan are the prevailing parties entitled to recover their costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

s/Richli

J.

We concur:

s/Ramirez

P. J.

s/McKinster

J.

Publication Courtesy of San Diego County Legal Resource Directory.

Analysis and review provided by El Cajon Property line attorney.

^[1] Plaintiffs and respondents are Robert A. Nichols and Donna M. Nichols as trustees for the Nichols Family Trust.

^[2] Defendants and appellants are Stephen Holgate and Karen Holgate, general partners of Pico Ranch Partners.

^[3] Cowan is another respondent on appeal.

^[4] We reject Holgates effort to rely on Civil Code section 2351. Cowan is not a subagent of First American.