Defendant seller appealed from the decision of the Superior Court of Riverside County (California) which held that plaintiff real estate broker was entitled to compensation under the terms of their exclusive-right-to-sell contract because it contained a withdrawal-from-sale provision.

Overview

Defendant seller and plaintiff real estate broker entered into an exclusive-right-to-sell contract that contained a withdrawal-from-sale provision. When defendant prematurely withdrew from the sale, plaintiff brought an action to enforce the provision. The trial court concluded that plaintiff was entitled to compensation. Defendant challenged the decision. The court affirmed, holding that the withdrawal-from-sale clause in an exclusive-right-to-sell real estate contract was valid and enforceable according to its terms and did not exact an unlawful penalty in violation of Cal. Civ. Code §§ 1670, 1671. The court found that the contract did not contain invidious qualities characteristic of a penalty or forfeiture. Its terms did not contemplate a “default” or “breach” of an obligation by the owner. The provision presented the owner with a true option or alternative. It reserved to the owner the power to make a rational choice in the future with respect to the subject matter of the contract and did contain a merely formal alternative, concealing a penalty for failure to perform the main promise.

Outcome

The court affirmed the decision of the lower court which held that plaintiff real estate broker was entitled to compensation under the withdrawal-from-sale provision of an exclusive-right-to-sell contract he had with defendant seller. The court held that the withdrawal-from-sale provision did not unlawfully penalize defendant.

Procedural Posture

The appellants had advocates that were small business attorney San Diego. Defendant debtors appealed the summary judgment granted in the Superior Court of Sacramento County (California) to plaintiff creditors in an action on a promissory note. Defendants had received the promissory note in exchange for the assignment of their option to purchase a golf course.

Overview

Plaintiff debtors obtained an option to purchase a golf course and assigned their rights in the option to defendant creditors in return for execution of a promissory note. Plaintiffs alleged that the promissory note was not paid. Defendants answered with a general denial and a laundry list of affirmative defenses stating essentially the name of a defense and that it barred recovery. The trial court granted summary judgment to plaintiffs. The court affirmed, holding that no issues of material fact were raised by the conclusory allegations of the affirmative defense in the answer. The court held that the trial court erred in concluding that the parol evidence rule categorically barred a collateral oral agreement that conditioned the payment of a promissory note unconditional on its face. Nevertheless, the court affirmed, holding that defendants’ claim of an unmet, unstated condition to payment was barred by the parole evidence rule. The court concluded that defendants’ remaining claims of frustration of purpose and sham transaction were not subject to the parol evidence rule, but held that defendants did not make out a viable defense to enforcement of the note.

Outcome

The court affirmed the summary judgment, holding that defendant debtors’ general denial of the complaint put in issue only the facts alleged in the complaint, and that the allegations of affirmative defense put no facts in issue. The court held that, in light of the context of the transaction and defendants’ admissions, their contention of error had no merit, and that they did not establish a triable issue of fact.