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Rutherford Holdings, LLC v. Plaza Del Rey

California Court of Appeal, Sixth District

January 23, 2014

RUTHERFORD HOLDINGS, LLC, Plaintiff and Appellant,
v.
PLAZA DEL REY et al., Defendants and Respondents.

Santa Clara County Superior Court, Superior Court No. 1-10-CV175989, Hon. Patricia M. Lucas, J.

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COUNSEL

[166 Cal.Rptr.3d 867] Hamrick & Evans, James M. Pazos, Westlake Village, George Knopfler, Los Angeles, for Plaintiff/Appellant.

Stein & Lubin, Jonathan E. Sommer, Frank R. Petrilli, San Francisco, for Defendants/Respondents.

OPINION

Premo, J.

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Rutherford Holdings, LLC (Rutherford) appeals from a judgment of dismissal entered after the trial court sustained demurrers [166 Cal.Rptr.3d 868] without leave to amend filed by defendants Plaza Del Rey (PDR) and Shereen Caswell (Caswell) (collectively defendants).

Rutherford contracted to purchase a mobile home park from PDR. Pursuant to the purchase agreement, Rutherford delivered a $3 million deposit to PDR, which the agreement provided was nonrefundable unless PDR materially breached the purchase agreement or failed or refused to close. The closing date came and went and neither party performed; PDR never tendered the deed to Rutherford, and Rutherford never tendered the full purchase price to PDR. Rutherford sued to recover the deposit under various theories of recovery.

Defendants successfully demurred to Rutherford's initial complaint and first amended complaint, but Rutherford was— in large part— granted leave to amend those pleadings. The court sustained defendants' demurrers to Rutherford's second amended complaint without leave to amend. We reverse the judgment with directions and remand.

FACTUAL AND PROCEDURAL BACKGROUND[1]

A. The Purchase Agreement and the Parties' Failure to Tender Performance

On May 23, 2008, Rutherford and PDR entered into a purchase agreement under which Rutherford agreed to buy, and PDR agreed to sell, a parcel of

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real property in Sunnyvale, California, for $110 million. Caswell signed the agreement as PDR's vice president of operations. Section 1.2 of the purchase agreement required Rutherford to deliver a $3 million " deposit" to PDR by May 27, 2008, and provided that the deposit " shall be nonrefundable to [Rutherford], except only in the event of [PDR's] material breach ... or [PDR's] failure or refusal to close." Rutherford timely delivered the deposit.

The purchase agreement also contained a liquidated damages provision in section 6.2, which provided that if Rutherford breached the purchase agreement, PDR would be " entitled, as [its] sole and exclusive remedy, to retain the deposit as liquidated damages," and that " [s]uch retention of the deposit by [PDR] is intended to constitute liquidated damages ... pursuant to sections 1671, 1676 and 1677 of the California Civil Code...."

The parties amended the purchase agreement to extend the closing date to January 15, 2009. In January 2009, Rutherford asked Caswell whether PDR was interested in providing " seller financing" to Rutherford in connection with the purchase. Caswell responded that PDR would consider providing seller financing, and the parties again amended the purchase agreement to extend the closing date, this time to March 31, 2009.

Prior to the March 2009 closing date and while the parties were in discussions regarding seller financing, Caswell told Rutherford that PDR could reduce its tax obligations if it was not in contract to sell the property. According to Caswell, if the purchase did not close and the closing date was not extended in writing, PDR could pay taxes on the property's appraised value, as opposed to the higher agreed purchase price. Caswell promised Rutherford [166 Cal.Rptr.3d 869] that PDR would sell Rutherford the property after the closing date and after PDR had filed its tax returns in mid to late 2009. She explained that PDR did not want to document that in the agreement because doing so could undermine PDR's ability to use the property's appraisal value to obtain a tax benefit.

In reliance on Caswell's representations, Rutherford did not tender the full purchase price on March 31, 2009, but it " could have and would have" done so absent those representations. At a meeting about the seller financing option on April 6, 2009, Caswell again represented to Rutherford that PDR would sell Rutherford the property after filing its tax returns. On October 26, 2009, PDR informed Rutherford that the purchase agreement was no longer in place and that Rutherford had " lost" its $3 million deposit.

B. The Initial Complaint and Demurrer

On July 1, 2010, Rutherford filed its initial complaint against defendants, alleging causes of action for (1) money had and received; (2) unjust

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enrichment; (3) conversion; (4) promissory estoppel; (5) declaratory relief; and (6) promissory fraud. Rutherford alleged Caswell was liable under an alter ego theory. The trial court sustained ...


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