Clark v. Fletcher
Filed 3/27/07 Clark v. Fletcher CA1/5
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FIVE
DAVID CLARK et al.,
Plaintiffs and Appellants,
A112378
v.
(LakeCounty
RICHARD I. FLETCHER, etc., Super. Ct. No. 400686)
Defendant and Respondent.
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David Clark and David Furia appeal from a judgment entered in a real property dispute. They contend the trial court interpreted the underlying sale and deed of trust documents incorrectly. We conclude the courts interpretation is supported by substantial evidence and affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
Respondent Richard I. Fletcher is the trustee of a trust that owned 9.5 acres of property in Lakeport, designated AP#28-051-94-00. Fletcher hoped to develop the property and in 1984, he submitted plans to divide it into a 34 lot, two street subdivision. After Fletcher was unable to obtain the necessary approvals for his plan, he abandoned the project. He eventually put the property up for sale.
Ron Rose and David Furia are business partners. In December 2000, Rose told Furia about Fletchers property and the three began negotiations about a possible sale. During the course of the discussions, Fletcher provided Furia with a copy of his 1984 development plans. Fletcher did not warranty that the 1984 plans would be approved, nor did he require that Furia use those plans. Furia was free to develop the property however he wished. Fletchers son Ken owned property designated AP#28-051-93-00 adjacent to the property at issue. Ken also hoped to develop his property. During their negotiations, Fletcher told Furia that if he did develop the property, Furia would be obligated to install a roadway and utilities to his son Kens property.
Ron Rose dropped out of the project and respondent David Clark was added in. Thereafter Fletcher, as seller, and Furia and Clark, as buyers, executed a purchase and sale agreement and [escrow] instructions. Furia and Clark agreed to purchase the property for $200,000. Of that amount, $5,000 was to be paid as a deposit, $95,000 was due at close of escrow, and the remaining $100,000 was to be paid by an interest bearing promissory note secured by a deed of trust. The requirement that Furia and Clark build a road to Ken Fletchers property was addressed in paragraph 8.2 of the agreement. It states:
During development of Property, when roadway improvements are constructed on Property by or on behalf of Buyer, a roadway to the east end of the south side of AP#28-051-93-00 is to be completed with a minimum of 50 feet of frontage on AP#28-051-93-00 and driveway access provided with AP#28-051-93-00 in like form.
An escrow for the transaction was opened at a local title company. As part of the transaction, Fletcher asked the title company to attach the purchase and sale agreement to the deed of trust. The title officer complied, using a short form deed of trust. The
printed language in the deed of trust included the following provision: Trustor IRREVOCABLY GRANTS, TRANSFERS AND ASSIGNS to TRUSTEE IN TRUST, WITH POWER OF SALE, that property . . . described as follows: AP#028-051-94 . . . For the Purpose of Securing: 1. Performance of each agreement of Trustor incorporated by reference or contained herein.
After the sale was completed, Furia and Clark, (hereafter appellants unless more specificity is required) prepared and submitted to the county a plan to divide the property into a 34 lot subdivision. Appellants plan was based on Fletchers earlier 1984 plan. Like Fletchers 1984 plan, appellants plan proposed two streets. Like Fletchers 1984 plan, one of those streets was short stub street and cul-de-sac that provided access to the south side of Ken Fletchers property and to another lot in the development, lot 29.
The county rejected appellants plan because, among other things, the stub street caused the adjoining lots to violate the countys minimum lot width requirements. The county said appellants could solve the problem by eliminating the stub street and redesigning lot 29 as a flag lot. Another way to solve the problem would be to eliminate one of the proposed lots.
Appellants redesigned their project by eliminating the stub street and by redesigning lot 29 as a flag lot. They then submitted this second plan to the county for approval.
County officials evaluating appellants second plan prepared a report that discussed the roads appellants were proposing. As is relevant, it states, The applicant has a recorded agreement with the previous owner of this site (who currently owns the parcel north of proposed lot 29) to provide a stubbed road that could serve the back of that parcel in the future. A condition is included in the tentative map requiring that the final map include the road stub, which shall be constructed to county standards and irrevocably offered for dedication.
The county approved appellants second plan at a hearing in January 2002. The approval was subject to several conditions one of which stated, The proposed roadway, stub street and cul-de-sac shall be irrevocably offered for dedication on the final map as a 50-foot wide roadway and public utility easement. The roadway and stub street shall be named, subject to the approval of the County Surveyor. Furia approved those conditions in writing on January 30, 2002.
Appellants allowed the tentative approval to expire. In July 2004, they resubmitted their proposal using the same plan that had been approved previously, i.e., a plan that eliminated the stub street to Ken Fletchers property.
Richard Fletcher wrote a letter to county officials complaining that appellants most recent plan did not include a stub street that would be offered for dedication. County officials declined to become involved in the dispute: In reviewing the applicants proposal and Mr. Fletchers concerns, staff has determined that these deed restrictions are civil matters, and are therefore beyond the scope of the public hearing for renewal of the subdivision. In retrospect, the requirement that a street be stubbed to lot 29 should not have been included in the previously approved tentative map conditions, since the applicant was also proposing a flag lot configuration at that time.
Appellants tendered the balance due on the promisory note secured by the deed of trust and requested a reconveyance from Fletcher. He refused, taking the position that the borrowers had satisfied their performance obligations under the deed of trust, including failing to complete the requirement of section 8.2 of the purchase agreement.
Appellants believed that they had the right to eliminate the stub street that led to Ken Fletchers property, and had no obligation to build a public roadway to Fletchers parcel. In August 2004, they filed the complaint that is at issue in the current appeal. It alleges three causes of action. The first is for quiet title. Appellants alleged they had paid the full amount due under the purchase agreement, but that Fletcher had refused to reconvey the promissory note and deed of trust. The second cause of action is for declaratory relief. Appellants sought a declaration that their most recent plan that provided access to Ken Fletchers property through a private road on the pole portion of the lot 29 flag lot complied with their obligation under the purchase and sale agreement. The third cause of action was for reformation. Appellants alleged that when the title officer who handled the escrow for the sale attached the purchase and sale agreement to the deed of trust, she mistakenly used a trust deed form that said performance of all attached agreements were secured by the deed of trust. According to appellants, the trust officer should have used a form that said only monetary obligations were secured by the deed of trust.
The case was tried before a judge who ruled in favor of Fletcher. The judge explained his reasoning[1]as follows:
The Deed of Trust signed by plaintiffs . . . secured not only the payment of the monetary obligations of the $100,000 promissory note referenced in the Deed of Trust, but also the construction obligations set forth in the Purchase and Sale Agreement and [Escrow] Instructions which was attached to and made a part of the recorded Deed of Trust. Paragraphs 8.2 and 8.3 of the Purchase and Sale Agreement and [Escrow] Instructions require plaintiffs to provide a roadway to [Ken Fletchers property] and to provide underground utilities to that parcel, in accordance with the terms set forth in paragraphs 8.2 and 8.3. . . . [] Defendant has no obligation to reconvey the Deed of Trust until the obligations of paragraphs 8.2 and 8.3 are performed. Defendant is not presently required to deliver a deed of reconveyance even though plaintiffs have satisfied the monetary obligations of the promissory note. [] The roadway which plaintiffs are obligated to build to [Ken Fletchers property] pursuant to paragraph 8.2 of the Purchase and Sale Agreement and [Escrow] Instructions must be a public roadway similar to the other public roadways plaintiffs construct in their development of the property purchased from the defendant.
II. DISCUSSION
A. Interpretation of the Purchase and Sale Agreement
Appellants contend the trial court interpreted the purchase and sale agreement incorrectly.
The rules that govern contractual interpretation are well settled. A contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful. (Civ. Code, 1636.) The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity. (Civ. Code, 1638.) When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible . . . . (Civ. Code, 1639.)
Parol or extrinsic evidence may be admitted to resolve ambiguity in a contract. (Pacific Gas & E. Co. v. G. W. Thomas Drayage Etc. Co. (1968) 69 Cal.2d 33, 38-39.) In such cases, the court engages in a two-step process: First, the court provisionally receives (without actually admitting) all credible evidence concerning the parties intentions to determine ambiguity, i.e., whether the language is reasonably susceptible to the interpretation urged by a party. If in light of the extrinsic evidence the court decides the language is reasonably susceptible to the interpretation urged, the extrinsic evidence is then admitted to aid in the second step-interpreting the contract. [Citation.] (Winet v. Price (1992) 4 Cal.App.4th 1159, 1165.) The trial courts determination of whether an ambiguity exists is a question of law, subject to independent review on appeal. (Ibid.) The trial courts resolution of an ambiguity is also a question of law if no parol evidence is admitted or if the parol evidence is not in conflict. (Id. at p. 1166.) However, where the parol evidence is in conflict, the trial courts resolution of that conflict is a question of fact and must be upheld if supported by substantial evidence. (Ibid.)
Here, appellants claim the purchase and sale agreement is not ambiguous. They contend that agreement is not reasonably susceptible to an interpretation that would require them to construct a public road to Ken Fletchers property. Interestingly, Fletcher agrees the purchase and sale agreement is not ambiguous. However, he argues it can only reasonably be construed to mean that appellants were obligated to construct a public road to Ken Fletchers property. We do not find either argument persuasive.
The pivotal language is contained in section 8.2 of the purchase and sale agreement. It states: During development of Property, when roadway improvements are constructed on Property by or on behalf of Buyer, a roadway to the east end of the south side of AP#28-051-93-00 is to be completed with a minimum of 50 feet of frontage on AP#28-051-93-00 and driveway access provided with AP#28-051-93-00 in like form.
Fairly read, this language does not state that appellants are obligated to develop the property in any particular way. However, if the property is developed and if roadway improvements are constructed appellants are required to complete a roadway to the east end of the south side of [Ken Fletchers property] . . . . According to the agreement, that roadway must have certain attributes. It must have a minimum of 50 feet of frontage on [Ken Fletchers property] and must have driveway access provided with [Ken Fletchers property] in like form.
However, this interpretation does not clarify the parties obligations because the word roadway is ambiguous. A roadway is simply a road (American Heritage Dict. (4th ed. 2000) p. 1505), and the word road has many definitions. One dictionary defines it as [a]n open, generally public way for the passage of vehicles, persons and animals. (Ibid.) This suggests the word road usually refers to a public road. Another dictionary defines the word more generally as an open way for vehicles, persons, and animals . . . . (Merriam-Websters Collegiate Dict. (11th ed. 2004) p. 1076.) This definition is broad enough to encompass both public and private roads.
Because the word roadway can reasonably be interpreted to encompass both public and private roads, we conclude section 8.2 of the purchase and sale agreement is ambiguous.
Appellants disagree. They contend the purchase and sale agreement is not ambiguous because section 8.2 does not use the word public and courts may not add a term about which the contract is silent. (Moss Dev. Co. v. Geary (1974) 41 Cal.App.3d 1, 9.) While appellants legal argument is correct, we are not adding any term to the agreement. We are simply recognizing that the word roadway is imprecise and is broad enough to encompass both public and private roads.
Next, appellants argue the term roadway is not reasonably susceptible to an interpretation limiting its meaning to public roads. Again, that is not our conclusion. We do not hold that the word roadway is limited to public roads. Rather, we hold that the word reasonably can be interpreted to refer to both public and private roads.
Next, appellants contend the purchase agreement is not reasonably susceptible to an interpretation that would require any roadway to be public because the agreement does not specify a required design. We agree the purchase and sale agreement does not require appellants to use any particular design. However, the agreement does state that if appellants develop the property, and if in the course of the development they construct roads, appellants are then obligated to complete a roadway to the east end of the south side of [Ken Fletchers property] . . . . The precise nature of that roadway is, as we have stated, ambiguous.
Finally, appellants argue it is impossible to interpret the agreement as meaning they are required to construct a public road because such an interpretation would conflict with the agreements express fifty foot limitation on the length of the stub road . . . We reject this argument because the agreement does not place a 50 foot limit on the length of the stub road. The agreement simply states that the roadway must have a minimum of 50 feet of frontage on [Ken Fletchers property]. Appellants argument is based on a false premise.
On the other hand, we are not convinced by Fletchers argument that the only way to interpret the agreement is that appellants must construct a public road. Fletchers argument is based on the last three words of section 8.2; in like form. Fletcher interprets those word to mean that appellants are obligated to construct a road to Ken Fletchers property that is in like form to the other road that is being proposed. Since that other road will be public, Fletcher argues the stub road must be public too. While that is one way to read the last three words of section 8.2, another is that the driveway to Ken Fletchers property must be constructed in like form to other driveways in the project. There is evidence in the record that that is how Fletchers son Kirk interpreted the agreement. Thus, Fletchers argument is not persuasive either.
In sum, we conclude the purchase and sale agreement is ambiguous and that the trial court could validly admit extrinsic evidence as to the meaning of the terms used.
Here, the trial court admitted a wide array of extrinsic evidence, much of it conflicting, about the meaning section 8.2 of the purchase and sale agreement. After weighing that evidence, the court ruled appellants were obligated to construct a public road to Ken Fletchers property similar to the other road that appellants were proposing. The courts ruling on this point is supported by substantial evidence. (Winet v. Price, supra, 4 Cal.App.4th at p. 1166.)
First, Fletchers 1984 development plan clearly shows that both roads will be public, and the first plan appellants submitted was based on Fletchers 1984 plan. Thus, it is reasonable to conclude that appellants were also proposing to construct public roads. Under the rule of practical construction, this is strong evidence of the parties intent. [The] rule of practical construction is predicated on the common sense concept that actions speak louder than words. Words are frequently but an imperfect medium to convey thought and intention. When the parties to a contract perform under it and demonstrate by their conduct that they knew what they were talking about the courts should enforce that intent. (Crestview Cemetery Assn. v. Dieden (1960) 54 Cal.2d 744, 754.)
Second, the countys approval of appellants second development plan was conditioned on appellants constructing a public road to Ken Fletchers property. Furia accepted that condition in writing on January 30, 2002. Again, this practical construction is strong evidence of the parties intent.
Third, and critically, Ron Rose, who introduced appellants to the property and who was a participant in the early meetings regarding a possible sale, testified unequivocally that all the parties to the agreement understood the road to Ken Fletchers property was to be public. The relevant testimony is as follows:
Q. [Fletchers counsel] Mr. Rose, did Mr. Furia say to you that he understood it was to be a public road?
A. Yes, he understood, just as well as I did and everyone else there.
[Appellants counsel] Objection. His understanding -- well, the answer is nonresponsive to the question.
[The Court] The answer is stricken except as to the portion, yes, he understood.
Q. [Fletchers counsel] Now, Ron, listen to me again, please. Did Mr. Furia say to you that he understood it was to be a public road?
A. Yes.
Q. Was that -- was that stated at that meeting in early January?
A. Yes.
Q. And at that time I -- again, you were going to be, perhaps, a partner in that project?
A. Not perhaps. Yes. I was going to be a partner. Thats why I took him there.
Q. Did Mr. Fletcher at the meeting --
A. Say that again.
Q. At the meeting were talking about, did Richard Fletcher say whether it was to be a public road or a private road?
A. Yes.
Q. And Im talking about that cul-de-sac?
A. Yes.
Q. What did Richard Fletcher say about that topic?
A. It was going to be a public road. That whole subdivision was going to be a public subdivision.
Clearly, the courts conclusion that appellants were obligated under the purchase and sale agreement to construct a public road to Ken Fletchers property is supported by substantial evidence.
Appellants contend the courts conclusion on this point is not reasonably supported by the evidence. They argue evidence concerning Fletchers 1984 plan and their own initial development plan was not relevant because they were not required to use Fletchers plan. They claim their agreement to the condition that they build a public road to Ken Fletchers property is not relevant because the county later admitted it imposed that condition unnecessarily. As for Ron Roses testimony, they note his recollection differed from that of the other participants at the meeting and argue that Rose was not a participant in the agreement in any event.
The evidence appellants cite is substantial and would have provided support for the courts decision if it had interpreted the purchase and sale agreement to mean that appellants were not obligated to construct a public road to Ken Fletchers property. However, that is not how the court ruled. The court interpreted the agreement to mean appellants were obligated to construct a public road, and that conclusion is supported by substantial evidence. The fact that the court could have reached a different conclusion does not undermine the conclusion that it did reach.
Alternately, appellants contend the courts ruling is incorrect under two statutory rules of construction. They rely on the rule that a written agreement must be interpreted in the sense in which the promisor believed, at the time of making it, that the promisee understood it, (Civ. Code, 1649) and on the rule that an ambiguous agreement must be interpreted against the party who caused the ambiguity to exist. (Civ. Code, 1654.) While the trial court was entitled to and impliedly did consider these rules of interpretation, they are not invariably determinative. As our Supreme Court stated long ago, [t]he primary object of all interpretation is to ascertain and carry out the intention of the parties. All the rules of interpretation must be considered and each given its proper weight, where necessary, in order to arrive at the true effect of the instrument. (Burnett v. Piercy (1906) 149 Cal. 178, 189, internal citations omitted; see also City of Manhattan Beach v. Superior Court (1996) 13 Cal.4th 232, 238.)
B. Interpretation of the Deed of Trust
The deed of trust appellants signed secured not only their obligation to repay the $100,000 promissory note, but also their [p]erformance of each agreement . . . incorporated by reference or contained herein. The parties then attached and expressly incorporated the Purchase and Sale Agreement to the deed of trust.
At trial, appellants argued Fletcher was obligated to reconvey their promissory note and deed of trust because they had paid the full amount of the note. The trial court disagreed. The Deed of Trust signed by plaintiffs . . . secured not only the payment of the monetary obligations of the $100,000 promissory note referenced in the Deed of Trust, but also the construction obligations set forth in the Purchase and Sale Agreement and [Escrow] Instructions which was attached to and made a part of the recorded Deed of Trust. Paragraphs 8.2 and 8.3 of the Purchase and Sale Agreement and [Escrow] Instructions require plaintiffs to provide a roadway to [Ken Fletchers property] and to provide underground utilities to that parcel, in accordance with the terms set forth in paragraphs 8.2 and 8.3. . . . [] Defendant has no obligation to reconvey the Deed of Trust until the obligations of paragraphs 8.2 and 8.3 are performed. Defendant is not presently required to deliver a deed of reconveyance even though plaintiffs have satisfied the monetary obligations of the promissory note.
Appellants now contend the trial court erred. First, they argue the deed of trust was incorrectly reduced to writing because the escrow officer who prepared the deed of trust used a printed form inadvertently containing a provision securing [p]erformance of each agreement of [Buyers] incorporated by reference or contained herein. We are unpersuaded. The trust officer testified at trial and she stated that appellants specifically approved the deed of trust form that was used. The trial court reasonably could conclude the trust officer used the form because the parties requested it, not because of some inadvertent mistake.
Next, appellants contend it would be unreasonable to interpret the deed of trust as securing each obligation contained in the attached Purchase Agreement because it would be absurd to secure some of those obligations. For example, appellants argue it would not make sense for the deed of trust to secure payment of the $5,000 security deposit or the $95,000 due at close of escrow because both of those obligations would have already been performed prior to or at the close of the escrow. While it might be unreasonable to interpret the deed of trust as securing the particular obligations appellants identify, it is reasonable to interpret the deed of trust as securing appellants obligation to build a road. A deed of trust is simply security for performance of an act, (Civ. Code, 2872) and the courts have long held that parties may use a deed of trust to secure the type of obligation that is at issue here. (Cf. Valley Vista Land Co. v. Nipomo Water & Sewer Co. (1968) 266 Cal.App.2d 331 [deed of trust securing a contract to furnish sewer and water facilities].)
Next, appellants argue the court should not have ruled the deed of trust secures their obligation to build a road because the typewritten purchase and sale agreement only states the deed of trust will secure the promissory note. Appellants rely on the rule that typewritten provisions in a contract prevail over printed portions. (See, e.g., Integrated, Inc. v. Alec Fergusson Electrical Contractor (1967) 250 Cal.App.2d 287, 294.) However, we may ignore printed portions only if they are absolutely repugnant to the typewritten portions. (Civ. Code, 1651.) Absent absolute inconsistency, we must harmonize the two provisions. (Prudential Realty Etc. Co. v. Clarewood Co. (1960) 187 Cal.App.2d 320, 322.) The clauses at issue here can easily be harmonized. The purchase and sale agreement states that the promissory note will be secured by a deed of trust. The deed of trust states that it secures the note and the other agreements that are attached. Both clauses can be enforced.
Finally, appellants argue the court should have reformed the deed of trust to express the true intent of the parties that it secure only the payment of the promissory note. Appellants argument on this point is based on the other arguments we have already discussed; i.e., that the trust officer mistakenly used the wrong deed of trust form, and that the true intent of the parties is described in the purchase and sale agreement. Since we have rejected those other arguments, we reject this argument as well.
We conclude the court did not err when interpreting the deed of trust.
III. DISPOSITION
The judgment is affirmed.
_________________________
Jones, P.J.
We concur:
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Simons, J.
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Needham, J.
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[1] While the judge explained his reasoning in the judgment, appellants did not request and the court did not provide a statement of decision.
