Q: As Buyer, I deposited $200,000 into escrow with the Seller for the purchase of Seller’s California LLC and business.
I additionally paid $18700 to the Seller to cover his rent and obtained a promissory note for this amount through escrow as well towards the purchase of Seller’s type 47 liquor license.
I have signed to cancel escrow but Seller is not willing to sign mutual cancellation agreement to release my funds. The LLC I was purchasing has been suspended by CA Sec of State during the entirety of this transaction and remains so currently. Currently the Seller wishes me to sign a document through the escrow company that renders the $18,700 I had paid him for his rent non-refundable and simultaneously releases the $200000 from escrow.
I additionally have a signed personal letter from the Seller addressed to me spelling out that he will release the $200000 if we comply with his demands as mentioned.
Is this considered extortion on the Seller’s part? Can I sign this document and get back my $200000 knowing that it is not enforceable and sue him in court for extortion and get back my $18700?
A:
Why do you wish to cancel the transaction? Is it because the LLC is suspended? What would it cost to reinstate it? THe has probably not paid the $800 minimum franchise tax for a couple of years. Escrow could find out because a clearance from the Franchise Tax Board is probably a requirement in you escrow documents as well as your Purchase/Sale agreement.
If being current on all taxes is a requirement of your agreement, he must clear that up, which can be done through escrow with the payment coming from the funds due him. If he refuses, then he has violated the agreement and is in default. You should point that out to escrow and demand release of all our funds. If they will not do that over his objections, you have the option of going to mediation/arbitration if your agreement provides for that, or Superior Court. Extortion is a crime, negotiating and bargaining is not. You have options. Make your choice.
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