Procedural Posture: PAGA defense attorneys

Appellant buyer challenged the decision of the Superior Court of Los Angeles County (California), which found in favor of respondent seller in the buyer's action for recission of their contract and restitution of the consideration paid.

 

Overview

Appellant buyer and respondent seller entered into a contract wherein the buyer agreed to purchase a half interest in the seller's cocktail lounge. The parties were going to run the cocktail lounge as a partnership until the buyer had the money to purchase the rest of the business. Pursuant to the parties' agreement, the money was put in an escrow fund. The seller then directed the escrow agent to disburse some of the funds to his creditors. The buyer later filed an action against the seller for rescission and for restitution of the consideration paid. The trial court found in favor of the seller. On review, the court found that Cal. Bus. & Prof. Code §§ 24073 and 24074 were established to protect the interests of creditors of sellers by allowing them to satisfy their claims out of the purchase price. Furthermore, the code protected the buyer in that he could recover from the seller's unjust enrichment. The trial court's decision was reversed insofar as it denied the buyer restitution of any part of the consideration paid, and the trial court was directed to retry the issue of the amount thereof to which he was entitled.

 

Outcome

The trial court's decision that found in favor of respondent seller was reversed and remanded. Appellant seller was entitled to recision of the parties' contract as well as restitution regarding consideration that was already paid because there was a mutual recission of the contract.