Rutherford Holdings, LLC v. Plaza Del Rey


January 24, 2014
Rutherford Holdings, LLC v. Plaza Del Rey Law360, New York (January 24, 2014, 3:47 PM ET) — A California appeals court on Thursday breathed new life into real estate group Rutherford Holdings LLC’s attempt to recover a $3 million deposit on a mobile home park it ultimately did not purchase. The decision by a panel in the California Court of Appeal’s Sixth Appellate District said a Santa Clara County Superior Court judge erred by dismissing Rutherford Holdings’ case against Plaza Del Rey and its vice president of operations, Shereen Caswell.

The dispute centered on a contract the two parties signed in May 2008, in which Rutherford Holdings [represented by Hamrick & Evans, LLP] agreed in principle to purchase the Sunnyvale, Calif., property from Plaza Del Rey for $110 million.

The agreement called for a $3 million deposit, which was refundable only if Plaza Del Rey breached the contract or failed or refused to close the sale. The deposit also served as recourse for Plaza Del Rey in case Rutherford Holdings breached the contract, according to the decision.

Discussion over financing played out over several months until March 2009, when, according to Rutherford Holdings’ suit, Caswell asked company representatives to let the closing deadline pass so Plaza Del Rey could save on its tax obligations for the previous year.

“According to Caswell, if the purchase did not close and the closing date was not extended in writing, PDR could pay taxes on the property’s appraised value, as opposed to the higher agreed purchase price,” the decision said.

Rutherford representatives agreed, but were informed at a meeting later that year that they had failed to meet the terms of the agreement, denying them the sale and the ability to recoup their deposit.

A lawsuit was filed by Rutherford Holdings in July 2010. Plaza Del Rey did not dispute the company’s contentions, but demurred in hopes a judge would find no legal basis for the suit. After allowing the complaint to be amended, the judge eventually agreed, saying in March 2012 that Rutherford had failed to establish sufficient grounds to recover the $3 million.

On Thursday, however, the state ruled that Rutherford should be allowed to continue arguing that Plaza Del Rey unfairly benefited at Rutherford’s expense, that it never defaulted on the terms of the contract and that Plaza Del Rey breached the contract by failing to return the deposit. The case is Rutherford Holdings LLC vs. Plaza Del Rey et al., case number 1-10-CV175989 in the Sixth Appellate District of the Court of Appeal of the State of California.