Steiner[1]

Steiner[1] - Steiner V. Thexton —— California Supreme...

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Unformatted text preview: Steiner V. Thexton —— California Supreme Court In 2003, Steiner, a real estate developer, was interested in purchasing and developing several residences on a 10—acre portion of Thexton’s 12.29-acre parcel of land.1 County approvals for a parcel split and development permits were required. Thexton had previously rejected an offer from a different party for $750,000 because that party wanted Thexton to obtain the required approval and permits. The written agreement between Steiner and Thexton, prepared by Steiner, provided for Thexton to sell the 10- acre parcel for $500,000 by September 2006 if Steiner decided to purchase the property after pursuing, at his own expense, the county approvals and permits. Paragraph 7 of the “Contingencies” section of the agreement provided Steiner was not obliged to do anything and could cancel the transaction at any time at his “absolute and sole discretion . 992 1 The factual and procedural history is largely taken from the Court of Appeal’s opinion. 2 The agreement was titled “REAL ESTATE PURCHASE CONTRACT” and stated in part: “Martin A. Steiner and/or Assignee, hereinafter called ‘Buyer,’ offers to pay to FAS Family Trust, Paul Thexton, hereinafter called ‘Seller,’ the purchase price of Five Hundred Thousand Dollars ($ 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 the Seller’s acceptance escrow shall be opened and $1,000 . . . shall be deposited by Buyer, applicable toward purchase price. “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. [11] . . . [1]] “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. [1]] . . . [fl] “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 the 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. [1]] . . . [11] “17. Buyer hereby agrees to purchase the above described Property for the price upon the terms and conditions herein expressed. . . . [1]] . . . [1]] “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 After Steiner and Thexton signed the agreement on September 4, 2003,3 Steiner began pursuing the necessary county approvals and, together with his partial assignee Siddiqui, ultimately spent thousands of dollars.4 In May and August 2004, Thexton cooperated with Steiner’s efforts by signing, among other things, an application to the county planning department for a tentative parcel map. In October 2004, however, Thexton asked the title company to cancel escrow and told Steiner 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. Steiner opposed cancelling escrow and filed suit seeking specific performance of the agreement. In his answer, Thexton asserted various defenses, including that the agreement constituted an option unsupported by consideration.S 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.” 3 In January 2004, the parties executed an addendum allowing Steiner to purchase up to 10.17 (instead of 10) acres and eliminating several requirements the original agreement had imposed on Steiner. 4 Plaintiffs alleged (and the Court of Appeal assumed without deciding) that they had spent $60,000 on efforts to obtain the parcel split. 5 Siddiqui, with leave of court, intervened based on Steiner’s partial assignment of his rights. Following a bench trial, the trial court entered judgment in favor of Thexton. It concluded the agreement was unenforceable against Thexton “because it is, in effect, an option that is not supported by any consideration.” First, it pointed out that the agreement bound Thexton to sell the property to Steiner for $500,000 for a period of up to three 9 years while Steiner retained “ ‘absolute and sole discretion ” to cancel the transaction. “The unilateral nature of this agreement,” the trial court explained, “is the classic feature of an option.” Second, in concluding, “[b]ased on the evidence and the language of the contract itself, . . . that the option was not supported by consideration,” the trial court noted no money was paid to Thexton for his grant of the option to purchase the property, nor did he receive any other benefit or thing of value in exchange for the option.6 The trial court rejected plaintiffs’ claim that the agreement obligated them to expeditiously proceed with the parcel split and that their work and expenses constituted sufficient consideration for the option. The trial court reasoned that the adequacy of consideration is measured as of the time a contract is entered into and pointed out the agreement did not bind plaintiffs to do anything; rather, it gave them the power to terminate the transaction at any time. Finally, the trial court rejected plaintiffs’ claim that, in the absence of consideration for the option, their efforts merited applying the doctrine of promissory estoppel. The Court of Appeal affirmed for the reasons given by the trial court and we granted review. 6 The agreement required Steiner to pay $1,000 into an escrow account, but the trial court concluded the payment did not constitute consideration. Questions: Was the agreement was an option and, if so, was the option irrevocable because it was supported by sufficient consideration? ...
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Steiner[1] - Steiner V. Thexton —— California Supreme...

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