Purchasers of the land for use by a winery http://www.ramsgatewinery.com/ sued the seller for not disclosing an earthquake fault on their property four years before closing escrow. Buyers sued in tort for nondisclosure but also in contract for breach of a provision in the sales agreement requiring the vendors to disclose all material facts. The trial court granted summary judgment against the contract claim on the ground that it had not survived the closing of escrow and had merged into the deed which the purchasers accepted the Court of Appeal reversed in favor of the buyer winery.
This case involved a fairly esoteric legal issue concerning the merger by deed doctrine and found in this case, it did not bar admission of extrinsic evidence under Code Civ. Proc., § 1856, subd. (h), concerning a buyer’s understanding of a disclosure covenant and warranty as continuing after the close of escrow because the declaration proposed an interpretation of the real estate purchase agreement to which it was reasonably susceptible.
The Court found that the contract provisions are deemed merged into deeds only when there are inconsistent provisions in the two documents or where their was a clear intent to do so in this case, there was no such inconsistency or obvious intent to have the disclosure provision not survive close of escrow, and therefore no merger.
The Court seemed to really like the winery, as it also found that on all of the buyer winery’s other theories, the buyer winery won. These other theories included that the breach of contract already had accrued upon the alleged breach of the disclosure covenant prior to the close of escrow, damages had not yet been incurred when escrow closed, and thus could not be extinguished by the merger doctrine; and the collateral terms exception would apply to preclude the application of the merger doctrine because if the alleged breach in fact occurred, equity would treat the disclosure covenant and warranty as collateral promises.
So let’s buy a glass of this Sonoma County wine and toast their great lawyers with L’chaim! Cheers! Salute! Skoal! Kan-pie! Sei gesund!