The Ninth Circuit Court has ruled that a California family was within their rights not to honor the sale of their insurance business because signatures were missing from the agreement.
The court reversed a judgment finding against a San Bruno, Calif., family and its insurance business.
The action arose out of the Larry Chao family’s attempts to sell their insurance company, Business Alliance Insurance Co. Business Alliance engaged in negotiations with PSM Holding Corp, according to Cotchett, Pitre & McCarthy, which represented the Chaos. A draft purchase agreement was prepared by PSM, but it was only signed by two of the five signatories. PSM claimed that the agreement was binding and sued Business Alliance, its parent company, National Farm Financial Corp., and Larry Chao, president of Business Alliance.
The district court rejected the defendants’ claim that as a matter of law there was no valid contract because of the lack of all signatures and a jury awarded PSM $40 million, the value of the insurance business. Larry Chao and National Farm were forced to declare bankruptcy because PSM would not agree to a stay of the proceedings and subsequently PSM took over Business Alliance.
In an unpublished opinion, the Ninth Circuit unanimously reversed the judgment finding that there was no contract: “The provision at issue required that all parties sign the agreement before it became binding. Several signatures were left blank. We therefore hold that the parties did not form a valid contract.” PSM Holding Corp. v. National Farm Financial Corp. et al., Ninth Circuit Nos. 08-55161 and 08-55271, Central District No. CV-05-08891 VBF.
For a copy of the opinion, visit www.cpmlegal.com.
Source: Cotchett, Pitre & McCarthy
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