Appellants challenged a judgment of the Superior Court of San Diego County (California) in favor of appellees on appellants’ claims for breach of contract and negligent misrepresentation involving the purchase of a car wash from appellees, and on appellee’s cross-claim to collect on a promissory note. Appellants contended the court committed reversible error by misinterpreting the purchase agreement in finding there was no breach of contract.
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This action arose out of the sale of a car wash business by appellees to appellants. Appellants sued appellees for breach of contract and negligent misrepresentation based in part upon appellants’ discovery that the car wash improvements and business activities encroached on adjoining property. Appellees filed a cross-complaint against appellants seeking to collect on a separate promissory note executed by appellants as part of the purchase price of the car wash. The trial court found in favor of appellees on both claims. On review, appellants argued that the trial court misinterpreted the purchase agreement in finding there was no breach of contract. The appeals court reversed the portion of the judgment denying appellants’ breach of contract claim, but affirmed the remainder. The court ruled that since the encroachment operated as an encumbrance on the title to assets of the business, appellees were liable to appellants under the hold-harmless provision of the purchase agreement, because one of the warranties was that title to the business assets were free from encumbrances. The court also ruled that the warranty did not need to specify a particular asset to be effective.
The appeals court reversed the portion of the trial court judgment denying appellants’ claim for breach of contract, but affirmed the remainder of the judgment. The court ruled that the trial court erred in finding that the warranty and hold-harmless provisions in the purchase agreement did not apply to an encroachment onto an adjoining property.