In Sixells v. Cannery Business Park, (— Cal.Rptr.3d —, Cal.App. 3 Dist., Dec. 29, 2008), a California Court of Appeal considered whether a contract term in a purchase and sale agreement, which allowed the purchaser to waive the recording of a final map of the property, violated the Subdivision Map Act (“SMA”) and therefore made the contract void. The Court of Appeal concluded that the waiver provision of the purchase and sale contract did violate the SMA and consequently the contract was void.
Cannery Business Park (“Cannery”) owned an office park in Sacramento, California. The business park also included four acres of undeveloped land. Sixells, LLC (“Sixells”) entered into a purchase and sale contract with Cannery to purchase the undeveloped four acres.
The purchase and sale agreement provided that Sixells could complete the purchase if the four acres were made into a legal parcel by recording a map of the four acre parcel, or Sixells could waive the creation of the legal parcel. Sixells wrote the contract and both parties signed.
Two months later Cannery terminated the contract, and five months later Cannery sold the entire business park, including the four acre parcel, to third party purchasers. Sixells filed a complaint against Cannery for breach of contract and brought additional claims against the third party purchasers for their involvement. Cannery and the third parties challenged Sixells complaint on the grounds that the original purchase and sale contract between Cannery and Sixells was void because it violated the SMA. The trial court agreed. Sixells appealed the finding of the trial court.
The Court of Appeal began its discussion by highlighting the relevant provisions of the SMA. Specifically the SMA prohibits the sale of “any parcel of a subdivision until the recordation of an approved map in full compliance with the law.” The SMA provides that to make a purchase and sale agreement valid, a final map either needs to have been filed, or the agreement must expressly require the filing of a map for the sale’s completion.
The court noted that Sixells’ purchase and sale contract allowed Sixells to purchase the four acres if a final map was recorded, or Sixells could waive the recording of the final map. Thus, according to the contract, Sixells could purchase the four acres without the recordation of a final map in compliance with the SMA. As a result, the court concluded that the contract was void when it was executed.
Sixells made four arguments against this finding, none of which the court found persuasive. First, Sixells argued that it was never the intent of Sixells or Cannery to circumvent the SMA. The court said that the parties’ intent was irrelevant to conformance with the SMA. Second, Sixells argued that the waiver provision was insignificant because it could waive the waiver provision since it was created for its benefit. The court disagreed and explained that any provision which waives requirements of the SMA is invalid. Third, Sixells argued that the SMA was not applicable here because the contract was an offer to buy land whereas the SMA only applies to “selling property without a recorded final map.” The court dismissed this argument because the contract explicitly stated that it was for the purchase and sale agreement, not just an offer to purchase by Sixells. Finally, Sixells argued that the court should just sever the waiver language from the contract rather than making the entire contract void. The court explained that simply striking the waiver provision from the contract would still allow for the sale of the contract without the necessary recordation requirement and therefore the contract would still be void.
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