Sterling v. Taylor

Supreme Court of California · 2007 · Contracts

ContractsStatute of FraudsReal Property Sale Agreementsstatute of fraudsmemorandumextrinsic evidencereal propertyprice term

Facts

Donald Sterling and Lawrence Taylor discussed the sale of three Santa Monica apartment buildings owned by Santa Monica Collection partnership. At a March 13, 2000 meeting, Sterling drafted a handwritten memorandum identifying the properties by street address and listing the price terms as "approx. 10.468 X gross income[,] estimated income 1.600.000, Price $16,750.00," with both parties later agreeing the written price was intended to be $16,750,000. A March 15 letter signed by both parties referred to the buildings by address and confirmed a contract of sale, but did not mention price. After later reviewing rent rolls, Sterling claimed the actual income was lower and sought to enforce a lower purchase price derived from the multiplier formula rather than the $16,750,000 figure stated in the memorandum.

Issue

May a court consider extrinsic evidence to clarify ambiguous essential terms in a memorandum offered to satisfy the statute of frauds? If so, was the memorandum here sufficiently certain to enforce Sterling's claimed lower price for the real property sale?

Rule

A memorandum satisfies the statute of frauds if it identifies the subject of the agreement, shows that the parties made a contract, and states the essential terms with reasonable certainty. If the memorandum includes the essential terms but their meaning is unclear, extrinsic evidence is admissible to explain or clarify those terms and to determine whether the parties intended to be bound; however, extrinsic evidence cannot supply missing essential terms or establish an agreement inconsistent with the memorandum.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Portland, Oregon, Nina Patel signed a short note agreeing to sell "the riverfront warehouse on Harbor Avenue" to Leo Martin for $2.4 million. Nina owned only one warehouse on Harbor Avenue, and before any dispute arose both parties exchanged draft escrow papers identifying that exact parcel by legal description.

If Nina later argues the note is unenforceable under the statute of frauds because the property description is too indefinite, what is the best answer?

Explanation. A memorandum for a real property sale need not be a fully integrated contract, but it must identify the property with reasonable certainty. Under the majority rule, extrinsic evidence may be used to explain or clarify an unclear essential term already present in the memorandum. Here, the note refers to a specific warehouse on Harbor Avenue, and the surrounding circumstances and the parties' own conduct make the parcel reasonably certain. That is enough for statute-of-frauds purposes.