Fine

In 1979, respondents owned a tavern—the Toehold Saloon—which they agreed to sell to Leanna Knemeyer. This transaction was handled by Southern California Business Sales, Inc., a real estate broker, which also acted as the escrow holder. Leanna Knemeyer agreed to pay the respondents $3,500 in cash, provide them with a $8,000 secured note, and assume an existing note for $7,000. To prevent the liquor license from lapsing, Knemeyer took possession of the property before the escrow closed.

At that time, the escrow holder told respondents that everything was going smoothly, and that the purchase price and the notes had been placed into escrow. In fact, the only money put into escrow was $2,250 to cover Southern California Business Sales’s commission on the transaction. Knemeyer failed to assume the outstanding note or to make any payments on it. The holder of that memorandum subsequently sued the respondents for the $7,000 due under the acceleration clause.

After some nine months of operating the tavern, Knemeyer offered to return it to the respondents. All of the fixtures had been removed from the building, the liquor license revoked, and the lease terminated. In short, the…