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CASE UPDATE: Court Rejects Strict Interpretation Of “Merger Doctrine” In Sonoma Winery Nondisclosure Case.

In Ram’s Gate Winery, LLC v. Roche, (2015) 2015 WL 1570193, the court of appeal reversed the trial court’s summary adjudication judgment and held that there were disputed issues of fact involved in a real estate non-disclosure case.  Plaintiffs purchased property in Sonoma County upon which they intended to build a new winery.  After the close of escrow, the buyers first discovered an active fault trace on the property that substantially increased their cost of development, and they sued the sellers for fraud, negligent misrepresentation and breach of contract for failing to disclose the fault. 

The sellers tried to defend the case by arguing, under the “merger doctrine,” that once buyers recorded the deed all prior terms of the purchase and sale agreement were merged and the deed became the final contract between the parties.  The court rejected the sellers’ interpretation and application of the merger doctrine, adopting a less strict and more equitable interpretation, which the court explained this way: “‘When a provision in a deed is certain and unambiguous it prevails over an inconsistent provision in a contract of purchase pursuant to which the deed was given.’”  The court held that the subject deed was a simple instrument addressing only the mechanics of transferring title, that it did not contain all of the terms of the purchase agreement that were intended to survive closing, and that there were no obvious conflicts between any terms of the deed and the terms of the purchase agreement.

Finally, the court held that even if the merger doctrine applied, the “collateral rights” exception to the merger doctrine would also apply.  Under this exception, if the disputed provision is “collateral to the deed”, that is, if the disputed provision relates to contractual issues that are collateral to essential deed terms such as title and possession, then those collateral terms would survive escrow.  The court held that the facts were at least disputed as to whether the parties intended sellers’ warranties to survive escrow.

©2015 Miles J. Dolinger. This article is not intended to and does not constitute legal advice or a solicitation for the formation of an attorney-client relationship

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