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Court of Appeal:
Order for Specific Performance Did Not Bar Damage Award
Dissenter Asserts That Order to Convey Precludes Order to Pay Interest Based on Conversion of Deposit
By a MetNews Staff Writer
A trial court did not err in ordering both specific performance in favor of a buyer of real property and awarding damages to that purchaser on the theory that once the full purchase price was deposited in escrow, there was a conversion of it by the seller until he gave orders two years later that it be released, Div. Two of the Fourth District Court of Appeal has held, in a 2-1 decision.
As a general proposition, which was not in dispute, a buyer may either sue for damages based on an alleged breach of a contract to convey real property, or seek specific performance, but must elect the remedy. The issue in the case decided on Wednesday was whether that rule barred an award of damages or whether those damages arose from a wrong that was separate from the refusal to convey.
Majority Opinion
Justice Carol D. Codrington wrote the majority opinion, filed Wednesday, in which Acting Presiding Justice Art W. McKinster joined. Justice Michael Raphael concurred and dissented, taking issue with Codrington’s conclusion that Riverside Superior Court Judge James T. Latting properly ordered payment by the seller of $43,040.80, representing interest on the $330,000 deposit that was tied up in escrow for two years.
Raphael argued that since the outcome was that the sale was ordered, in accordance with a 2012 purchase agreement, the money that was placed in escrow belonged to the seller, and thus could not have been converted by him.
Holocaust Survivor
The seller was real estate magnate Earl Greif, a Holocaust survivor born in Poland in 1925. Acting on behalf of himself and his wife, he entered into a Dec. 18, 2012 agreement to sell 10 acres of raw land in Rancho Mirage to Yardley Protective Limited Partnership.
Although the agreement recited a purchase price of $330,000, evidence indicated that Greif, who was then 87 and suffering from various health problems including cognitive difficulties, might have been confused, thinking the agreed-upon price was $3.33 million.
The agreement called upon Yardley to deposit $30,000 in escrow, which it did the day after the contract was signed.
After Greif tried to back out of the deal a few days later, after realizing the price that was set was too low, Yardley deposited the balance of the purchase price.
“Yardley did so hoping to force consummation of the transaction and take unfair advantage of Earl’s health conditions and cognitive impairment,” Codrington explained.
Deposit Released
Yardley sued for specific performance; Greif agreed in 2013 to release the deposit if Yardley would drop the lawsuit, which it would not; he then rescinded the agreement in 2014 and directed the escrow company to return the deposit.
There were three consolidated appeals in the case. The son of the Greifs, both deceased, contested, as their successor, the award of specific performance and damages in favor of Yardley and, separately, from the award of attorney fees to Yardley, and from the dismissal of his parents’ cross complaint.
The key determination on appeal was that “there was compelling evidence that Earl competently negotiated the purchase price and knowingly agreed to sell the Property for $330,000 when he signed the Purchase Agreement.”
Raphael’s View
Raphael saw no problem with the majority’s resolution except as to the $43,040.80 award. He reasoned:
“Damages for conversion of property was a viable theory for Yardley as an alternative to specific performance. The problem here, however, is that the specific performance remedy treats the escrow money as having been provided to Greif in 2012 for the property.
“Once the court applied specific performance as the remedy, damages for conversion should have been unavailable. Under specific performance, it was Greif’s money, so Yardley suffered no harm by Greif’s keeping it.”
The dissenter argued that “the conversion damages are inconsistent with specific performance.”
Codrington’s Response
Codrington rejected Raphael’s view, saying:
“The general principle that ‘the parties should be placed in the same position as if the contract had been performed,’ does not preclude awarding Yardley conversion damages for wrongfully tying up Yardley’s escrow deposit funds for nearly two years….Under the Purchase Agreement, Greif was required to return the escrow deposit to Yardley when Greif repudiated the Purchase Agreement. Greif failed to do so.”
Greif and a limited liability corporation, she wrote, “committed conversion of the funds and Yardley was entitled to damages, regardless of whether the court ultimately granted specific performance of the agreement.”
No Realtor Liability
In a portion of her opinion addressing the cross complaint, Codrington said that the escrow company had no duty to advise Greif that the purchase price was for a sum below fair market value given that he “knew or should have known the value of his own property before selling it.”
She elaborated:
“[E]ven under the facts alleged in this case, where the seller is elderly and physically infirm, public policy does not favor holding the buyer’s agent responsible for informing the seller that the agreed upon purchase price is below [fair market value].
“That is the responsibility of the seller’s broker and, if the seller chooses not to retain a real estate agent or advisor, the seller is responsible for investigating the value of the Property and determining the sales price.”
Yardley was awarded $776,757.88 in attorney fees. Codrington found such an award was in conformity with the terms of the 2012 agreement.
The case is Greif v. Sanin, 2022 S.O.S. 350.
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