Opinion ID: 2635294
Heading Depth: 2
Heading Rank: 2

Heading: The Sufficiency of This Memorandum

Text: As noted above, it is a question of law whether a memorandum, considered in light of the circumstances surrounding its making, complies with the statute of frauds. ( Phillippe v. Shapell Industries, supra, 43 Cal.3d at p. 1258, 241 Cal.Rptr. 22, 743 P.2d 1279.) Accordingly, the issue is generally amenable to resolution by summary judgment. (Cf. Kahn v. East Side Union High School Dist. (2003) 31 Cal.4th 990, 1004, 4 Cal.Rptr.3d 103, 75 P.3d 30.) We independently review the record to determine whether a triable issue of fact might defeat the statute of frauds defense in this case. ( Id. at p. 1003, 4 Cal.Rptr.3d 103, 75 P.3d 30.) A memorandum of a contract for the sale of real property must identify the buyer, the seller, the price, and the property. [14] ( King v. Stanley (1948) 32 Cal.2d 584, 589, 197 P.2d 321.) Defendants contend the memorandum drafted by plaintiff Sterling fails to adequately specify the seller, the property, or the price. [15] The Court of Appeal correctly held that the seller and the properties were sufficiently identified. The parties themselves displayed no uncertainty as to those terms before their dispute over the price arose. It is a cardinal rule of construction that when a contract is ambiguous or uncertain the practical construction placed upon it by the parties before any controversy arises as to its meaning affords one of the most reliable means of determining the intent of the parties. ( Bohman v. Berg (1960) 54 Cal.2d 787, 795, 8 Cal.Rptr. 441, 356 P.2d 185.) The same rule governs the interpretation of a memorandum under the statute of frauds. (See Rest.2d Contracts, § 131, com. g, p. 338; Seaman's Direct Buying Service, Inc. v. Standard Oil Co., supra, 36 Cal.3d at pp. 762-763, 206 Cal.Rptr. 354, 686 P.2d 1158.) [16] The memorandum referred to Seller Larry Taylor, & Christina Development. Defendants argue that the omission of the actual owner of the properties, SMC, is fatal. However, they do not dispute Taylor's authorization to act as SMC's agent, or his actual performance of that role. A contract made in the name of an agent may be enforced against an undisclosed principal, and extrinsic evidence is admissible to identify the principal. ( Sunset Milling & Grain Co. v. Anderson (1952) 39 Cal.2d 773, 778, 249 P.2d 24; 2 Witkin, Summary of Cal. Law, supra, Agency, §§ 158 & 159, pp. 202-203; see also California Canneries Co. v. Scatena (1897) 117 Cal. 447, 449-50, 49 P. 462.) If a term is stated in a memorandum with sufficient certainty to be enforced, it satisfies the statute of frauds. ( Seaman's Direct Buying Service, Inc. v. Standard Oil Co., supra, 36 Cal.3d at p. 763, 206 Cal. Rptr. 354, 686 P.2d 1158.) Therefore, the reference to Taylor was adequate, regardless of the apparently mistaken inclusion of Christina Development. (See Rest.2d Contracts, § 131, com. f, p. 337.) Similarly, while the properties were identified in the memorandum only by street address, neither party displayed any confusion over their actual location. The purchase agreements Taylor prepared included full legal descriptions, and when Sterling received those agreements he did not object that he wanted to buy buildings on 4th and 14th Streets in Manhattan rather than Santa Monica. In any event, the better view has long been that extrinsic evidence may be consulted to locate property described in imprecise terms, even though a memorandum with a more complete description would be preferable. ( Beverage v. Canton Placer Mining Co., supra, 43 Cal.2d at pp. 774-775, 278 P.2d 694, citing cases.) As defendants forthrightly conceded in the trial court, [t]he problem here is the price term. The Court of Appeal concluded that the lines in the memorandum stating approx. 10.468 X gross income[,] estimated income 1.600.000, Price $16,750. 00 were ambiguous, given the use of the modifier approx. before the multiplier, the omitted zero in the price, and the uncertain meaning of gross income. The court then considered Sterling's testimony that approx. was meant to modify the total price, not the multiplier; that the missing zero was merely an error; and that gross income was used by the parties to refer to actual gross annual income. It decided that this evidence, if accepted by the trier of fact, could establish an agreement to determine the price based on a formula, which would be binding under Carver v. Teitsworth (1991) 1 Cal.App.4th 845, 852, 2 Cal.Rptr.2d 446. In Carver, a bid for either a specified price or $1,000 over any higher bid was deemed sufficiently certain. ( Id. at pp. 849, 852-353, 2 Cal.Rptr.2d 446.) In this court, plaintiffs also cite Cal. Lettuce Growers v. Union Sugar Co. (1955) 45 Cal.2d 474, 289 P.2d 785, to show that a price term may be calculated from a formula. There, a price formula was derived from industry custom and the parties' past practice. ( Id. at pp. 482-483, 289 P.2d 785.) Plaintiffs contend the parties here negotiated a 10.468 multiplier to be applied to the actual gross rental income from the buildings in March 2000, as indicated by the fact that Taylor gave Sterling rent rolls before their March 13 meeting. The Court of Appeal erred by deeming Sterling's testimony sufficient to establish his interpretation of the memorandum for purposes of the statute of frauds. Had Taylor testified that the parties meant to leave the price open to determination based on a rental income figure that was yet to be determined, this would be a different case. Then, the admissions of the party to be charged might have supported a reasonably certain price term derived from a negotiated formula. (Rest.2d Contracts, § 131, com. c, p. 335.) Here, however, Taylor insists the price was meant to be $16,750,000, and Sterling agrees that was the number he intended to write down, underlined, as the Price. $16,750,000 is clearly an approximate product of the formula specified in the memorandum, applied to the income figure stated there. [17] On the other hand, Sterling's asserted price of $14,404,841 cannot reasonably be considered an approximation of $16,750,000. It is instead an approximate product of the formula applied to an actual income figure not found in the memorandum. The writing does not include the term actual gross income, nor does it state that the price term will vary depending on proof or later agreement regarding the actual rental income from the buildings. In effect, Sterling would employ only the first part of the price term (approx. 10.468 X gross income) and ignore the last parts (estimated income 1.600.000, Price $16,750.00). He would hold Taylor to a price that is 10.468 times the actual rental income figure gleaned from the rent rolls, but only approximately so because of Sterling's computational errors. (See fn. 2, ante. ) Thus, two competing interpretations of the memorandum were before the court. Taylor's is consistent with the figures provided in the memorandum, requiring only the correction of the price by reference to undisputed extrinsic evidence. Sterling's price is not stated in the memorandum, and depends on extrinsic evidence in the form of his own testimony, disputed by Taylor, that the parties intended to apply the formula to actual gross rental income instead of the estimated income noted in the memorandum. Even if the trier of fact were to accept Sterling's version of the parties' negotiations, the price he seeks is not reflected in the memorandum; indeed, it is inconsistent with the price term that appears in the memorandum. Under these circumstances, we conclude the evidence is insufficient to establish Sterling's price term with the reasonable certainty required by the statute of frauds. (See Beazell v. Schroder, supra, 59 Cal.2d at p. 582, 30 Cal.Rptr. 534, 381 P.2d 390.) The statute of frauds demands written evidence that reflects the parties' mutual understanding of the essential terms of their agreement, when viewed in light of the transaction at issue and the dispute before the court. The writing requirement is intended to permit the enforcement of agreements actually reached, but to prevent enforcement through fraud or perjury of contracts never in fact made. (Rest.2d Contracts, § 131, com. c, p. 335.) The sufficiency of a memorandum to fulfill this purpose may depend on the quality of the extrinsic evidence offered to explain its terms. In Preble v. Abrahams, supra, 88 Cal. 245, 26 P. 99, the memorandum failed to describe the property to be sold with any certainty, but extrinsic evidence established that the parties could only have been referring to the portion of a tract that was not sold to another buyer. ( Id. at p. 250, 26 P. 99.) Similarly, in Brewer v. Horst-Lachmund Co., supra, 127 Cal. 643, 60 P. 418, telegrams that were otherwise inscrutable demonstrated an ascertainable agreement when the court considered the circumstances of the transaction and the parties' understanding of the terms employed. ( Id. pp. 646-647, 60 P. 418.) Here, unlike in the Preble and Brewer cases, the extrinsic evidence offered by plaintiffs is at odds with the writing, which states a specific price and does not indicate that the parties contemplated any change based on actual rental income. Therefore, the evidence is insufficient to show with reasonable certainty that the parties understood and agreed to the price alleged by plaintiffs. The price terms stated in the memorandum, considered together with the extrinsic evidence of the contemplated price, leave a degree of doubt that the statute of frauds does not tolerate. The trial court properly granted defendants summary judgment.