Ellis v. Mihelis
60 Cal.2d 206, 32 Cal. Rptr. 415, 384 P.2d 7 (1963)
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Rule of Law:
A contract for the sale of land signed by the seller may be specifically enforced by the buyer even if the buyer's agent lacked written authorization at the time of signing, as the buyer's subsequent tender of full performance satisfies the mutuality of remedy doctrine. However, under the Uniform Partnership Act, one partner cannot bind another to a contract for the sale of real property without written authority if the sale is not in the usual course of the partnership's business.
Facts:
- Brothers Pericles and Elias Mihelis owned a ranch in Stanislaus County as joint tenants.
- The brothers agreed to sell the ranch, authorizing Pericles to handle the negotiations.
- Herbert Ellis orally authorized Antone Ratto to find and arrange for the purchase of a ranch to facilitate a three-way property exchange.
- On April 17, 1958, Pericles signed an "Agent's Deposit Receipt" agreeing to sell the ranch to Ellis for $165,000.
- Two days later, following Ellis's oral instructions, Ratto signed the agreement on Ellis's behalf and delivered a $5,000 deposit check.
- Pericles saw the signed agreement and check, expressed his satisfaction, and the deposit was placed in escrow.
- On May 2, 1958, Pericles repudiated the agreement, stating a recent frost had damaged other vineyards but not his, making his grape crop too valuable to sell the ranch.
- On May 12, Ellis formally ratified Ratto's actions in writing and tendered full performance by depositing the remaining required funds and documents into escrow.
Procedural Posture:
- Herbert Ellis sued Pericles Mihelis and Elias Mihelis in a state trial court, seeking specific performance of a real estate contract and damages.
- The trial court entered a judgment in favor of plaintiff Ellis, decreeing specific performance against both defendants and awarding damages.
- The defendants, Pericles and Elias Mihelis, appealed the trial court's judgment to the Supreme Court of California.
- The plaintiff, Herbert Ellis, filed a cross-appeal challenging the trial court's calculation of damages.
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Issue:
Does a buyer's failure to provide written authorization to their agent to sign a real estate contract prevent the buyer from later enforcing that contract against the seller who did sign it, and does one partner have the authority to bind another partner to a contract for the sale of real property without written authorization where selling property is not in the usual course of the partnership's business?
Opinions:
Majority - Gibson, C. J.
No. The buyer's failure to provide written authorization does not prevent enforcement, but one partner cannot bind the other to this type of sale without written authorization. The court abandoned the old doctrine requiring mutuality of remedy at the time of contract formation. The modern, equitable consideration is whether the court can assure the defendant will receive the agreed-upon performance at the time of the decree. By filing for specific performance and tendering the full purchase price, Ellis has submitted to the court's jurisdiction and guaranteed his performance, satisfying the mutuality requirement. It would be inequitable to allow Pericles to use the Statute of Frauds as a defense regarding the buyer's agent when the buyer fully performed and Pericles's true motive for repudiation was a change in the property's value. However, the agreement cannot be enforced against Elias. The Uniform Partnership Act distinguishes between acts within the usual course of business and those outside of it. Because the partnership's business was farming, not selling real estate, the sale of the ranch was not an act 'for apparently carrying on in the usual way the business of the partnership.' Therefore, the exception to the Statute of Frauds for partners does not apply, and Pericles needed Elias's written authorization to bind him to the sale, which he did not have.
Analysis:
This decision significantly modernized the 'mutuality of remedy' doctrine in California, shifting the focus from the moment of contract formation to the time of the legal decree. It established that a plaintiff's tender of performance or the act of suing for specific performance can cure any initial lack of mutuality. The ruling also clarifies the application of the Uniform Partnership Act to real estate transactions, confirming that the Statute of Frauds' writing requirement for agent authority still applies to partners for acts outside the ordinary course of partnership business. This creates a critical distinction between a partner's inherent authority for routine business acts and the requirement for express written authority for extraordinary transactions like selling the partnership's primary asset.
