Texaco, Inc., Plaintiff-Counter-Claim-Defendant-Appellant v. William R. Ponsoldt, Defendant-Counter-Claimant-Appellee

Texaco appeals summary judgment in favor of William R. Ponsoldt on multiple claims arising out of an unconsummated land sale. After Ponsoldt failed to close escrow on a ranch located in Santa Barbara, California that he had contracted to purchase, Texaco sued for declaratory relief and specific performance. Failed settlement talks led to a second suit by Texaco for breach of the settlement agreement, fraud, and negligent misrepresentation. Ponsoldt filed counterclaims in both suits, which are still pending. We affirm in part and reverse in part.

I

Facts

Texaco and Ponsoldt entered into an agreement under which Ponsoldt agreed to pay $7 million for a large ranch (approximately 3,000 acres) on which Ponsoldt allegedly planned to raise horses. The ranch is known as El Capitan Ranch. Ponsoldt paid a $200,000 deposit to open escrow. The purchase/sale agreement contained a liquidated damages provision that provided:

Two lawsuits were filed below based on the purchase/sale agreement, which were consolidated on appeal.

a. The First Action — Breach of the Purchase Agreement

Texaco acquired El Capitan in 1981, and with the purchase assumed an obligation to homeowners in the adjoining…