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Mountain Air Ent. v. Sundowner Towers

Filed 7/31/17 IN THE SUPREME COURT OF CALIFORNIA MOUNTAIN AIR ENTERPRISES, LLC, ) ) Plaintiff and Respondent, ) ) S223536 v. ) ) Ct.App. 1/2 A138306 SUNDOWNER TOWERS, LLC, et al., ) ) Marin County Defendants and Appellants. ) Super. Ct. No. CIV081957 ____________________________________) In this complex real estate purchase transaction, the seller brought a breach of contract action against the buyers for failing to purchase the subject property. The defendant buyers asserted an affirmative defense of novation, arguing that they were not liable under the purchase agreement because it had been superseded by the parties‟ option agreement; that option agreement granted them the exclusive right, but not the obligation, to purchase the property. The trial court agreed. The question we must answer is whether the defendants‟ assertion of the option agreement as an affirmative defense triggers the attorney fees provision in that agreement. For reasons that follow, we conclude that it does not. However, as we also explain, defendants are nonetheless entitled to attorney fees under that provision. SEE DISSENTING OPINION FACTUAL AND PROCEDURAL BACKGROUND Like the Court of Appeal, we draw most of the underlying facts from the trial court‟s over-40-page final statement of decision. (See Chapala Management Corp. v. Stanton (2010) 186 Cal.App.4th 1532, 1535.) The principals to this dispute are Steven Scarpa of Mountain Air Enterprises (Mountain Air) and Bijan Madjlessi of Sundowner Towers (Sundowner), both of whom are described as experienced real estate investors and developers. In early 2004, Madjlessi explored possible real estate investments outside of California. Madjlessi discovered the subject single parcel of real property located at 450 Arlington Avenue, in Reno, Nevada (Property). The improvements consisted of the “North Tower,” the “Casino Building,” and the “South Tower.” As relevant here, the Property remained a single parcel until February 17, 2006, when it was separated into three parcels, the North Tower, the South Tower, and the Casino Building. On or about December 12, 2005, when the Property was still a single parcel, Scarpa and Sundowner entered into two separate agreements: (1) an agreement wherein Sundowner agreed to sell the South Tower to Scarpa for $7 million (the purchase agreement); and (2) an agreement whereby Sundowner agreed to later repurchase the South Tower from Scarpa for $7 million plus an “inflation factor” of 12 percent (the repurchase agreement). Madjlessi and Glenn Larsen, a business associate of Madjlessi‟s and a member of Sundowner, guaranteed Sundowner‟s obligations under the repurchase agreement. Scarpa subsequently assigned his rights under both agreements to Mountain Air. On or about April 25, 2006 — just days before Sundowner transferred the South Tower to Mountain Air — Mountain Air as seller, and Larsen and Madjlessi individually, as buyers, executed a written option agreement whereby Mountain Air granted Larsen and Madjlessi the exclusive right to purchase (or rather 2 repurchase) the South Tower during the option period (the option agreement). Larsen and Madjlessi personally guaranteed their obligations under the option agreement. On April 27, 2006, Sundowner, after acquiring the South Tower from a …
Original document
Source: California Supreme Court