Buyer And Seller Can Cure A SMA Violation Under Black Hills Through Subsequent Agreement Modification
By William W. Abbott
The last market downturn has resulted in Subdivision Map Act (“SMA”) cases involving circumstances in which the parties to a purchase or option agreement pertaining to a portion of a legal parcel failed to include express language as a contingency requiring compliance with the SMA. Depending upon whether the real estate market is rising or falling, both buyers and sellers have taken advantage of the limitations of Government Code section 64499.30. To date, these cases include Black Hills Investments, Inc. v. Albertson’s, Inc. (2007) 146 Cal.App.4th 883 and Sixells, LLC v. Cannery Business Park (2008) 170 Cal.App.4th 648.
Sidney Corrie Jr. v. Elizabeth Soloway, Trustee (2013) 216 Cal.App.4th 436 (Corrie) involves a buyer with an option executed in 2004. This option covered up to 7 acres, at a set price per acre, of a 16.65 acre parcel. The option also provided the buyer with a right of refusal on the balance of the property. Corrie paid a non-refundable fee and monthly option payments. The option agreement was amended twice, first in 2009 and again in 2010, the latter by Noelle Flanagan, the successor trustee. Neither the original agreement nor the first option included an express contingency requiring compliance with the Subdivision Map Act. The 2010 amendment, however, contained such a provision.
The seller established a trust including the property subject of the option, with directions that provided for the land to be turned over for a public park. The parks district, a beneficiary under the trust, sued to have Flanagan removed as trustee. Corrie filed a tentative map application and then sought a court order to join the Trust as a co-applicant. The successor trustee and District objected. The successor trustee and district successfully argued to the trial court that the original option agreement was void for non-compliance with the Subdivision Map Act, and that the later amendments could not cure a void agreement. On appeal, the Court of Appeals reversed.
The appellate court acknowledged that the law governing the illegality of contracts is a “vast, confusing and rather mysterious area of the law” and reviewed cases from different practice areas which supported both sides of the enforceability issue. The appellate court noted that this case did not involve issues of serious moral turpitude. Also significant to the appellate court’s reversal was its perspective that the second amendment to the original option agreement was more than just an amendment. Rather, “It was in substance a new and different option agreement relative to those reflected in the Option Agreement and Amendment No. 1. In our view, the parties created a “new and independent option contract…”” Notwithstanding the incorporation of the earlier terms into the second amendment, the later document served to satisfy the SMA’s requirements and was enforceable.
William W. Abbott is a partner at Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.
The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, or the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.