CASE 18-3
REAL ESTATE ANALYTICS, LLC v. VALLAS
Court of Appeal, Fourth District, Division 1, California, 2008
160 Cal.App.4th 463, 72 Cal.Rptr.3d 835, review denied 2008
http://scholar.google.com/scholar_case?case=16761955053572987435&q=72+cal.rptr.3d+835&hl=en&as_sdt=2,34
Haller, J.
Real Estate Analytics, LLC (REA) is a limited liability company formed by Troy Shadian. In
January 2004, Shadian and his business partner, Roshan Bhakta, became interested in
[Theodore Tee] Vallas’s 14.13-acre property (the Lanikai Lane property) located in Carlsbad
[California] near the Pacific Coast Highway. The property contained a mobilehome park
* * *
* * * [I]n March 2004, REA and Vallas entered into a written purchase and sale
agreement. Under the agreement, the sales price was $8.5 million, with REA to pay an
immediate $100,000 deposit, and then pay $2.9 million at closing. In return, Vallas agreed to
finance the remaining $5.5 million, with the unpaid balance to be paid over a five-year
period, with the balance due on April 1, 2009.
REA’s primary goal in purchasing the property was to make a profit for its investors.
* * *
[On June 14 Vallas cancelled the contract. The next day REA brought a breach of
contract action seeking specific performance. The court, sitting without a jury, found Vallas
breached the contract but refused to grant specific performance and instead awarded REA
damages of $500,000, reflecting the difference between the contract price and the fair
market value at the time of the breach.]
* * * [T]he court declined to award specific performance based on its finding that
damages would provide REA adequate relief. * * * [T]he court found specific performance
* * *
To obtain specific performance after a breach of contract, a plaintiff must generally
show: (1) the inadequacy of his legal remedy; (2) an underlying contract that is both
reasonable and supported by adequate consideration; (3) the existence of a mutuality of
remedies; (4) contractual terms which are sufficiently definite to enable the court to know
what it is to enforce; and (5) a substantial similarity of the requested performance to that
promised in the contract. [Citations.] * * *
In this case, the court refused to specifically enforce the contract based on its finding that
the first element (inadequacy of legal remedy) was not satisfied because REA sought to
Although these historical reasons no longer apply, most jurisdictions have continued the
rules requiring special treatment of land sale contracts, reflecting the enduring view that: (1)
each parcel of land is unique and therefore there can be no adequate replacement after a
breach; and (2) monetary damages are difficult to calculate after a party refuses to complete
a land sales contract, particularly expectation damages. (See Rest.2d Contracts, § 360.) * * *
[L]egislatures and the courts have largely adhered to the rule that specific performance is the
appropriate remedy upon a breach of a real estate contract.
In California, these principles are embodied in section 3387. Section 3387 states:
It is to be presumed that the breach of an agreement to transfer real property cannot be
adequately relieved by pecuniary compensation. In the case of a single-family dwelling
which the party seeking performance intends to occupy, this presumption is conclusive.
* * *
* * * By imposing a rebuttable presumption on the inadequacy of remedy element for
certain types of purchases, the Legislature necessarily contemplated that there may be
circumstances when the presumption that damages are inadequate can be overcome. * * *
But the specific issue presented here is not whether a defendant can ever rebut the
inadequacy of remedy presumption. The issue is whether Vallas did so in this case. And on
this issue, we agree with REA that Vallas did not make a sufficient evidentiary showing to
establish damages were adequate to compensate REA for the breach. * * * Although it did
not need to do so, REA produced strong evidence to support the presumption. This evidence
Given the statutory presumption that damages were inadequate and the largely
undisputed evidence strongly supporting this presumption, Vallas had a high threshold to
satisfy his burden to show damages would be an adequate remedy. * * *
* * *
* * * Thus, although REA did not necessarily intend to benefit from its personal or
commercial use of the land, the land did have a particular unique value because of the
manner in which it could be used to earn profits upon a resale. * * * Missing from the
court’s analysis was the recognition that to rebut the presumption that damages are an
Mitigation of Damages — The injured party may not recover damages for
loss that he could have avoided (or mitigated) with reasonable effort and
without undue risk, burden, or humiliation.
Note: See Case 3-3.
*** Chapter Outcome ***
De!ne the various types of equitable relief and explain when the courts will grant such
relief.
C. REMEDIES IN EQUITY
Equitable remedies are granted in the court’s discretion and only where legal
remedies (monetary damages) are inadequate to redress an injury. They will
not be granted:
• where there is an adequate remedy at law;
• where it is impossible to enforce them, as where the seller has already
transferred the subject matter of the contract to an innocent third
person;
Specific Performance
A remedy requiring the breaching party to perform per the contract. Speci!c
performance is generally available in contract cases involving real estate and
unique items of personal property but not where personal services are the
subject matter of the contract. As a matter of policy courts will not impose
involuntary servitude.
CASE 18-4
MADISON SQUARE GARDEN CORP., ILL. v. CARNERA
United States Court of Appeals, Second Circuit, 1931
52 F.2d 47
http://scholar.google.com/scholar_case?q=52+F.2d+47&hl=en&as_sdt=2,34&case=133326573442361100&scilh=0
Chase, J.
Suit by plaintiff, Madison Square Garden Corporation, against Primo Carnera, defendant.
From an order granting an injunction against defendant, defendant appeals.
1. Carnera agrees that he will render services as a boxer in his next contest (which
contest, hereinafter called the “First Contest,” shall be with the winner of the proposed
Schmeling-Stribling contest, or, if the same is drawn, shall be with Schmeling, and shall
be deemed to be a contest for the heavyweight championship title; provided, however,
that, in the event of the inability of the Garden to cause Schmeling or Stribling, as the
case may be, to perform the terms of his agreement with the Garden calling for such
contest, the Garden shall be without further liability to Carnera) exclusively under the
auspices of the Garden, in the United States of America, or the Dominion of Canada, at
such time, not, however, later than midnight of September 30, 1931, as the Garden may
direct. * * *
9. Carnera shall not, pending the holding of the First Contest, render services as a boxer
in any major boxing contest, without the written permission of the Garden in each case
had and obtained. A major contest is understood to be one with Sharkey, Baer, Campolo,
Godfrey, or like grade heavyweights, or heavyweights who shall have beaten any of the
above subsequent to the date hereof. If in any boxing contest engaged in by Carnera
Thereafter the defendant, without the permission of the plaintiff, written or otherwise, made
a contract to engage in a boxing contest with the Sharkey mentioned in paragraph 9 of the
agreement above quoted, and by the terms thereof the contest was to take place before the
first contest mentioned in the defendant’s contract with the plaintiff was to be held.
The plaintiff then brought this suit to restrain the defendant from carrying out his
contract to box Sharkey, and obtained the preliminary injunction order, from which this
appeal was taken. Jurisdiction is based on diversity of citizenship and the required amount is
involved.
that, providing either Stribling or Schmeling becomes the contestant as the result of the
match between them and can be induced to box the defendant. The defendant has agreed to
“render services as a boxer” for the plaintiff exclusively, and the plaintiff has agreed to pay
him a definite percentage of the gate receipts as his compensation for so doing. The promise
to employ the defendant to enable him to earn the compensation agreed upon is implied to
the same force and effect as though expressly stated. * * * [Citations.]
*** Chapter Outcome ***
Explain how restitutionary damages are computed and identify the situations
in which restitution is available as a contractual remedy.
D. RESTITUTION
Restitution is the restoration of the injured part to the position he was in
before the contract was made (restitution interest). It permits the injured
party to recover any consideration given to the breaching party.
Party Injured by Breach
A party is entitled to restitution if the other party totally breaches the
contract by nonperformance or repudiation.
Party in Default
Where a party, after having partly performed, commits a breach by
nonperformance or repudiation that discharges the other party’s duty to
perform, the party in default is entitled to restitution for any bene!t she has
conferred in excess of the loss she has caused by the breach.
Statute of Frauds
Parties to a contract that is unenforceable because of the statute of frauds
may, nonetheless, have acted in reliance on the contract. If so, each party
may recover in restitution the bene!ts conferred on the other in relying on
the unenforceable contract.
Voidable Contracts
A party who has rescinded or avoided a contract for lack of capacity, duress,
undue influence, fraud, misrepresentation, or mistake is entitled to
restitution for any bene!t conferred on the other party.
NOTE: See Figure 18-1 for a summary of the remedies for breach of contracts.
*** Chapter Outcome ***
Identify and explain the limitations on contractual remedies.
E. LIMITATIONS ON REMEDIES
Election of Remedies
A party injured by a breach of contract may be able to seek more than one
remedy for the same breach so long as they are not inconsistent. For
example, a party who seeks speci!c performance, an injunction, or
restitution may also be entitled to incidental damages.
NOTE: See Case 18-1.
Loss of Power of Avoidance
The power to avoid a contractual obligation may be lost in certain
circumstances.
A,rmance — A party who has the power to avoid a contract for lack of
capacity, duress, undo influence, fraud, misrepresentation, or mistake will
lose that power by a2rming the contract.
Delay — The power of avoidance may be lost if the party who has the power
does not rescind within a reasonable time. What is a reasonable time
depends on all of the circumstances surrounding the transaction.