74 Cal.App.5th 412
Cal. Ct. App.2022Background:
- Earl Greif (age/health issues) agreed to sell 10 acres of raw land in Rancho Mirage; the written Purchase Agreement recited a $330,000 purchase price though Greif later claimed he intended ~$3.3 million.
- Buyer was Yardley Protective LP (Yardley); buyer’s broker was Eddie Sanin/Desert Gate; escrow was opened and Yardley deposited $335,000 (initial deposit + later funds).
- Greif (and GNLLC, an LLC holding title/formed by Greif) tried to rescind after signing; Yardley sued for specific performance, conversion, and related relief; Greif cross-complained against Yardley and broker Sanin (claims included negligence and elder abuse).
- On the eve of trial the court granted judgment on the pleadings dismissing Greif’s negligence claim against Sanin for lack of an actionable duty; after a bench trial the court ordered specific performance, awarded conversion interest damages for wrongful retention of escrow, and awarded attorney fees to Yardley.
- Key factual findings: trial court found Greif did not prove a material unilateral mistake of fact; the court found the Property’s value materially depressed (trial court estimated closer to $500,000), and held $330,000 was adequate consideration under the circumstances; GNLLC transfer did not preclude specific performance because Greif retained equitable/control powers.
- On appeal the Court of Appeal consolidated three appeals (dismissal of cross-complaint, enforcement judgment, attorney fees) and affirmed the trial court on all issues; a concurrence/dissent objected to awarding conversion interest alongside specific performance.
Issues:
| Issue | Yardley/Greif (Plaintiff) Argument | Greif/GNLLC (Defendant) Argument | Held |
|---|---|---|---|
| Duty of buyer’s broker to seller (negligence) | Greif: broker Sanin owed seller a duty of honesty/fair dealing to disclose grossly low price and other protections | Sanin: no legal duty to advise seller of FMV in arm’s-length transaction; statutory disclosure section inapplicable | Court: no duty to tell a seller the price is below FMV under these facts; dismissal affirmed |
| Unilateral mistake defense | Greif: Earl mistakenly thought contract price was ~$3.3M; mistake was material and unconscionable to enforce | Yardley: no material mistake proved; evidence shows Earl understood/accepted $330k and later buyer’s remorse | Court: substantial evidence supports trial finding no material mistake; Donovan elements not met; defense rejected |
| Specific performance & adequacy of consideration; GNLLC title | Yardley: contract enforceable; $330k was adequate under circumstances; Greif had power to sell despite recording timing | Greif/GNLLC: price grossly inadequate; Earl lacked title (GNLLC held title), so specific performance improper | Court: trial’s valuation supported (issues re water/entitlements); $330k fair/reasonable; Earl retained equitable/control power — specific performance ordered |
| Conversion damages and tax offset | Yardley: Greif wrongfully delayed signing escrow cancellation; entitled to interest on escrow and no tax-credit offset | Greif: conversion award duplicates remedy and should be offset by property taxes; interest improper when specific performance ordered | Court: conversion award for interest was proper for wrongful retention of escrow; offset for taxes denied; concurrence dissented re inconsistency with specific performance |
| Attorney fees & mediation clause | Yardley: entitled to fees under Purchase Agreement; mediation requirement excused by lis pendens exception | Greif: Yardley waived fee entitlement by not mediating before suit | Court: lis pendens exception applied; Yardley sought to record lis pendens to protect title interest and engaged in mediation afterward; fees awarded |
Key Cases Cited
- Biakanja v. Irving, 49 Cal.2d 647 (Cal. 1958) (factors for imposing duty to third parties)
- Donovan v. RRL Corp., 26 Cal.4th 261 (Cal. 2001) (elements for rescission for unilateral mistake of fact)
- Krug v. Praszker, 220 Cal.App.3d 35 (Cal. Ct. App. 1990) (realtor duty of honesty/fairness to all parties; use Biakanja factors)
- Easton v. Strassburger, 152 Cal.App.3d 90 (Cal. Ct. App. 1984) (seller’s broker duties to investigate/disclose material facts)
- Earp v. Nobmann, 122 Cal.App.3d 270 (Cal. Ct. App. 1981) (broker duties to non-clients in some circumstances)
- Holmes v. Summer, 188 Cal.App.4th 1510 (Cal. Ct. App. 2010) (seller’s broker duty to disclose facts known only to broker)
- Walgren v. Dolan, 226 Cal.App.3d 572 (Cal. Ct. App. 1990) (equitable title/ability to seek specific performance where legal title held by trust/other entity)
- Ellis v. Mihelis, 60 Cal.2d 206 (Cal. 1963) (specific performance and treatment of escrow/interest; offsets for use of purchase money)
- Bravo v. Buelow, 168 Cal.App.3d 208 (Cal. Ct. App. 1985) (specific performance relates back to contract date; remedies incidental to decree)
- Blackburn v. Charnley, 117 Cal.App.4th 758 (Cal. Ct. App. 2004) (lis pendens exception to prelitigation mediation clause applies to preserve real property claims)