Sterling v. Taylor

KENNARD, J., Concurring and Dissenting.

I agree with the majority that extrinsic evidence is admissible to resolve the meaning of an ambiguity in a written memorandum required by the statute of frauds as evidence of an agreement, and that conflicts in the evidence are for the trier of fact to resolve. The majority, however, goes astray when it takes it upon itself to resolve an existing conflict in the evidence. In my view, the ambiguity in the language of the memorandum at issue should be resolved by the trier of fact.

I.

In January 2000, plaintiff Donald Sterling and defendant Lawrence N. Taylor, both of whom are experienced real estate investors, discussed the proposed sale of three apartment buildings in Santa Monica owned by a partnership in which defendant was the general partner. On March 13, 2000, they met again. At the meeting, plaintiff (the prospective buyer) prepared a brief handwritten memorandum entitled “Contract for the Sale of Real Property.” As relevant here, the memorandum identified properties at “808 4th St.,” “843 4th St.,” and “1251 14th St.” This is immediately followed by “approx 10.468 X gross income [j[] estimated income 1.600.000, Price $16,750,OOP.” 1 The memorandum was initialed by plaintiff, but was not signed by defendant. Two days later, on March 15, 2000, plaintiff sent defendant a letter that confirmed the contract of sale but did not mention the price. Defendant signed the letter below the handwritten notation, “Agreed, Accepted, & Approved.” The parties dispute whether the March 13 memorandum was attached to the March 15 letter.

The issue is whether the document entitled “Contract for the Sale of Real Property” is a memorandum sufficient to satisfy the statute of frauds. That *777 statute provides that contracts for, among other things, the sale of real estate are invalid unless evidenced by a note or memorandum signed by the party to be charged. (Civ. Code, § 1624, subd. (a)(3).) Plaintiff here claims that the memorandum meets the requirements of the statute of frauds because extrinsic evidence he offered clarifies that the agreed price was $14,404,841— determined by applying the formula in the memorandum of multiplying the actual rent times 10.468. Plaintiff’s extrinsic evidence includes the “Contract for Sale of Real Property,” the letter dated March 15, 2000, confirming the buildings’ sale signed by defendant, and defendant’s having given plaintiff information showing the actual rent received. Defendant maintains that the price is the figure $16,750,000 expressed in the memorandum.

The trial court granted defendant’s motion for summary judgment. The Court of Appeal, concluding there was a triable issue of material fact as to whether the parties had agreed to a formula for determining the purchase price, reversed.

II.

The parties’ dispute here centers on whether the price description in the memorandum is ambiguous so that extrinsic evidence is admissible to clarify its meaning and satisfy the statute of frauds. Regarding price the memorandum states: “approx. 10.468 X gross income [f] estimated income 1.600.000, Price $16,750,000.” Plaintiff claims that the word “approx.” modified the entire statement, not just “10.468 X gross income,” and that the parties understood the term “gross income” to mean actual annual gross rental income. In other words, plaintiff’s position is that the memorandum sets forth a formula for determining the actual price—10.468 multiplied by actual annual gross rental income, which results in a price of $14,404,841—and that the reference to “Price $16,750,000” is an estimate of the actual price, determined by application of the formula just mentioned, albeit using a somewhat inaccurate estimate of gross annual rental income. (See, e.g., Cal. Lettuce Growers v. Union Sugar Co. (1955) 45 Cal.2d 474,482 [ 289 P.2d 785 ] [price need not be specified if it can be objectively determined]; Carver v. Teitsworth (1991) 1 Cal.App.4th 845, 853 [ 2 Cal.Rptr.2d 446 ] [same].) Defendant disagrees, contending that the memorandum’s mention of “Price $16,750,000” reflects the actual purchase price agreed upon by the parties. Both have a point.

As the Court of Appeal observed, the language in the memorandum is ambiguous; that is, it can reasonably be read as each party proposes. (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 391 [ 46 Cal.Rptr.3d 668 , 139 *778 P.3d 56 ] [“ ‘An ambiguity arises when language is reasonably susceptible of more than one application to material facts’ ”].) To accept plaintiff’s argument would give meaning to the language in the disputed statement of “10.468 X gross income [f] estimated 1.600.000.” To accept defendant’s argument would give meaning to the term “Price $16,750,000.” Which view should be accepted is a determination to be made by the trier of fact, based on its consideration of the extrinsic evidence presented. (See Maj. opn., ante, at p. 767 [“when ambiguous terms in a memorandum are disputed, extrinsic evidence is admissible to resolve the uncertainty”].) Either way, the trier of fact’s resolution would result in a specific purchase price: one arrived at through application of a formula expressed in the memorandum, the other through acceptance of the figure $16,750,000 mentioned in the memorandum.

The majority, however, simply adopts defendant’s view instead of leaving it to the trier of fact to resolve the conflict in the evidence. In accepting defendant’s view, the majority rejects plaintiff’s view as attempting to alter rather than explain the terms of the memorandum. (Maj. opn., ante, at pp. 775-776.) I disagree.

Apparently based on its own evaluation of the evidence, which as discussed above is conflicting, the majority takes it upon itself to decide that the agreed price was $16,750,000 and then concludes that any extrinsic evidence presented by plaintiff would be inconsistent with that figure. (Maj. opn., ante, at p. 775.) The majority reasons that plaintiff is looking only to the first part of the memorandum’s price description of “approx. 10.468 X gross income,” while ignoring the last part stating “estimated income 1.600.000, Price $16,750,000.” (Ibid.) This is both a misapprehension of plaintiff’s view and a failure to appreciate that defendant’s view too is not free from ambiguity.

Plaintiff’s position that the memorandum sets forth a formula for determining the price does not ignore the memorandum’s reference to “estimated income 1.600.000, Price $16,750,000.” According to plaintiff, the memorandum’s stated price is itself an estimate, for it is the product of the estimated income of 1.600.000 times 10.468, while the actual price is to be determined by using the formula 10.468 multiplied by the actual gross income, resulting in a price of $14,404,841. Defendant’s view that the actual price is $16,750,000 finds support in the memorandum’s mention of “Price $16,750,000” but it ignores the memorandum’s formula that plaintiff relies on. Unlike the majority, I see no reason to reject plaintiff’s position as a *779 matter of law when the purchase terms in the memorandum are ambiguous and are as reasonably susceptible to plaintiff’s position as to defendant’s. I would leave it to the trier of fact to resolve the ambiguity.

Unlike the majority, I would affirm the judgment of the Court of Appeal.

Werdegar, J., concurred.

Appellants’ petition for a rehearing is denied April 18, 2007. George, C. J., did not participate therein. Kennard, J., and Werdegar, J., were of the opinion that the petition should be granted.

The memorandum has the word “income” on a line above the words “estimated 1.600.000” and the number “$16,750,00.” As the majority notes, the parties agree that the intended phrasing was “estimated income 1.600.000” and that the intended figure was “$16,750,000.” (Maj. opn., ante, at pp. 762, fn. 1, 764, fn. 3.)