Schellinger Brothers, et al. v. James F. Cotter — Can’t Break That Contract

By Jennifer Feltenbreachofcontract

This case involves the attempted acquisition of a 21-acre parcel in Sebastopol for the purpose of subdivisions.  The parties entered into a sales contract in 1998.  Consummation of the contract was conditioned upon the buyer obtaining approval for their subdivision map and a lot line adjustment from the city of Sebastopol.  Due to numerous issues with permitting, many stemming from proceedings under the California Environmental Quality Act, the subdivision map had still not been approved by 2005.  The lot line adjustment was also still outstanding due to the seller’s refusal to sign it though it had been completed in 1999 at the cost of the buyer.  At that time the seller decided things were taking too long and wrote the buyers a letter stating that he considered the agreement cancelled due to the untimely completion.

The reality was that the seller had commissioned an appraisal and found out that the property had doubled in value since 1998.  The appraisal also suggested that, if developed as proposed by the buyer, the property would be worth triple the value he would be receiving as a result of the 1998 purchase agreement.  At that time, behind the back of the buyer, he attempted to negotiate the sale of the property to a third party.  The buyer thus sued for enforcement of the contract.  After a protracted trial in 2011, the court gave the buyer 2 years to obtain the necessary subdivision map.  Based thereon, the buyer continued on in earnest to try and get the approvals necessary without success.

At some point the seller stopped paying property taxes on the property.  The buyer assumed the responsibility to do so because payment was necessary to obtain approval of both the lot line adjustment and the subdivision map.  Then, in 2012, while still under contract, the seller took inappropriate action on the property in an attempt to ameliorate flooding and drainage problems occasioned by significant rains.  Without obtaining the appropriate permits, the seller hired a landscape contractor who dug a ditch on the property.  Upon discovery of the ditch, the city determined that it would ground to halt the map approval process because of both its illegal nature and the fact that it jeopardized sensitive wetland area.  The city therefore ordered a 5-year monitoring period and required significant restoration on the property as a result of the destroyed habitat.

Thereafter, in violation of the purchase agreement, and while the subdivision map and new lot line adjustments were pending, the seller attempted to meet with the city attorney and manager for the purpose of discussing an offer to donate the property to the city.  Based upon all these facts, the trial court found that the seller had breached his contract to sell the property to the buyer and found the seller liable for consequential damages in the amount of $2,855,431.77.

The seller appealed, claiming that there was not enough evidence to establish a breach on his part.  The appellate court affirmed the trial court’s ruling that seller’s failure to sign the lot line adjustment, refusal to pay property taxes, and actions relative to the trench were all breaches of the contract.  The appellate court also agreed with the trial court that the seller had breached the implied duty of good faith, and instead acted in bad faith in attempting to sell the property to a third party and gift it to the city, in contravention of the purchase agreement.


 

Jennifer Felten

Jennifer Felten, Esq., Relaw Ms. Felten specializes in representing both individuals and legal entities, providing representation and guidance on a variety of real estate related matters.  Relaw APC 699 Hampshire Road, Suite 105 Westlake Village, CA  91361 US Phone: (805) 265-1031 or email her at: [email protected]

Upcoming Speaking Events for Ms. Felten:

Jennifer will be speaking at California Escrow Association’s 61st Annual Conference in Anaheim, California on Saturday, October 22.  

 

For inquiries or questions about any of these events, please email [email protected].

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