(Contra Costa County Super. Ct. No. P09-01129) Trial Judge: Hon. John H. Sugiyama
The opinion of the court was delivered by: Margulies, Acting P.J.
CERTIFIED FOR PUBLICATION
Appellant Sidney J. Corrie, Jr., petitioned the probate court to enforce an option he held to purchase a portion of a property owned by the Armand Borel Trust Dated June 20, 1994, as Amended and Restated in 2008 (Borel Trust or the trust). Respondents, successor trustee, Elizabeth Soloway, and trust beneficiary, the East Bay Regional Park District (the District), objected to the petition on the grounds that Corrie's option agreement with the trust was void and unenforceable for illegality in that it failed to comply with the Subdivision Map Act, Government Code*fn1 section 66410 et seq. (SMA). Following a separate trial on the issue, the trial court ruled in favor of respondents, finding that amendments to the option agreement executed by Corrie and a previous trustee to cure the illegality were ineffectual.
Corrie contends the trial court erred as a matter of law in holding that no subsequent acts by the parties could revive the option agreement. We agree, and will reverse the trial court's orders on this issue.
Armand Borel was the settler and trustee of the Armand Borel Trust Dated June 20, 1994, a revocable trust. On June 14, 2004, Borel and Corrie entered into a "Real Property Option and Purchase Agreement" (the Option Agreement) pertaining to a 16.65-acre parcel of real property Borel owned in Danville, California (the Danville property). The Option Agreement granted Corrie a five-year exclusive and irrevocable option to purchase up to seven acres of the Danville property at a price of $500,000 per acre. In return for the purchase option, Corrie was required to pay Borel a nonrefundable option fee of $100,000 up front, plus another $5,000 per month during the option period. The Option Agreement provided that if the option was exercised, "Buyer shall purchase and Seller shall sell the Property on the terms and conditions set forth in this Agreement," and it included detailed provisions specifying buyer's and seller's covenants and conditions precedent to closing the sale, the deposits required to be made into escrow by buyer and seller, and the title company's duties at the closing. The Option Agreement also gave Corrie a right of first refusal to purchase "the balance of the [Danville property] that is not part of this Option Agreement." No language in the Option Agreement expressly conditioned a future sale of property subject to the option on compliance with the SMA.*fn2
As required by the Option Agreement, Borel, individually and as trustee, and Corrie executed a "Memorandum of Option," incorporating the Option Agreement by reference, which was recorded on August 3, 2004.
On July 14, 2008, Borel executed a revised trust instrument, creating the Borel Trust. The Borel Trust provided that upon Borel's death the Danville property would be distributed to the District "so long as it used [sic] as and for an agricultural park." In the event the District could not create and operate such a park, the Borel Trust provided that the property would go to the City of San Ramon or the Town of Danville to create and operate the park.
In July 2008, Corrie was contemplating exercising the option. On July 24, 2008, Borel wrote a letter to the Town of Danville's planning director authorizing Corrie to proceed with a tentative parcel map application and the creation of a second parcel on the Danville property for all or any portion of the seven acres covered by Corrie's option. The 2008 transaction did not proceed, and Corrie continued to make option payments. On March 25, 2009, Borel and Corrie amended the Option Agreement to (1) extend the option period by one year to June 14, 2010; (2) increase the option fees from $5,000 per month to $10,000 per month; and (3) give Corrie the option to extend the option period to June 14, 2011, by payment of an additional $100,000 to Borel, which would count toward the purchase price of the property if Corrie exercised the option (Amendment No. 1). Corrie timely made the $100,000 payment required for extension of the option period until June 14, 2011.
In March 2009, Borel and Corrie entered into and recorded an agreement with a lender entitled "Subordination, Nondisturbance and Attornment Agreement Regarding Option and Right of First Refusal" (the subordination agreement). The subordination agreement recited that the lender had conditionally agreed to make a $1.4 million loan to Borel as trustee of the Borel Trust, secured in part by a deed of trust on the Danville property. The agreement generally addressed the relative rights and duties of Corrie, the lender, and the foreclosure purchaser in the event of a future foreclosure sale pertaining to the Danville property. A promissory note for $1.4 million secured by the property was recorded on April 14, 2009.
Borel died on April 19, 2009, and Noelle Flanagan became the successor trustee of the Borel Trust. At the end of April 2010, Corrie and Flanagan (as trustee) signed a writing, in the form of a letter addressed to Flanagan, stating: "The option agreement provides that the parties will fully cooperate with each other during the term of the option. In order to facilitate our parcel map application with the Town of Danville, we both need to acknowledge that the terms and conditions of the Option Agreement are incorporated . . . herein and allow Sidney Corrie, Jr. to proceed with an application for a parcel map, while the Borel Trust remains the record owner of the Property. Corrie and the Borel Trust also acknowledge that the obligations of each expressed in the Option Agreement are conditioned upon the approval and filing of a final subdivision map or parcel map as required pursuant to Government Code sections 66410 et seq." (Italics added.)
On November 16, 2010, Flanagan and Corrie executed a document captioned "Amendment #2 to Real Property Option and Purchase Agreement" (Amendment No. 2). The amendment recited that the Option Agreement had been amended on March 25, 2009 (Amendment No. 1) and on March 1, 2010 (the March 2010 letter agreement). Amendment No. 2 extended the option period to June 14, 2013, in return for Corrie making "advance principal payments" totaling $500,000 over the succeeding five months, as well as continuing to pay monthly option fees, not applicable to the purchase price, at the higher rate of $14,286 per month, instead of $10,000 per month, until the option was exercised. Further, Amendment No. 2 gave Corrie an option to purchase "an additional adjacent three acres" at $500,000 per acre, "thus bringing the total property subject to an option to purchase to ten acres." Finally, Amendment No. 2 stated: "All other terms and conditions of the Agreement and its amendments remain the same. Seller and Buyer again acknowledge that the obligations of each expressed in the Agreement and its amendments are conditioned upon the approval and filing of a final subdivision map or parcel map . . . ."
In April 2011, the District, as a beneficiary of the restated Borel Trust, filed a probate petition to have Flanagan removed as trustee. With Flanagan's authorization, Corrie filed a parcel map application with the Town of Danville on September 27, 2011. In November 2011, he applied to the probate court for an order authorizing and instructing the trustee to join in the application and to execute a deed conveying the seven acres covered by the application, as the Town of Danville was requiring. The District opposed the application, stating that sale of the seven acres subject to the option at a below-market price would undermine or destroy its ability to operate and maintain an agricultural park on the Danville property by reducing the net monetary inheritance it would receive along with the land.
Flanagan died in December 2011, and in January 2012, Elizabeth Soloway was appointed as successor trustee of the Borel Trust. Soloway filed an objection to Corrie's petition shortly after becoming trustee. She requested a separate trial be held on the issue of whether the Option Agreement was void for failing to condition sale of the property on compliance with the SMA, and the District joined in that request. The trial court decided to proceed on that basis.
Following briefing and argument, the trial court ruled the Option Agreement was void and unenforceable. The court held (1) the agreement was void at its inception because it permitted the sale of a parcel of real property before the filing of a final subdivision or parcel map and without being expressly conditioned upon the approval and filing of such a map; and (2) subsequent acts by the parties, such as Amendment No. 2, were ...