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Habitat Trust for Wildlife, Inc. v. City of Rancho Cucamonga

July 21, 2009

THE HABITAT TRUST FOR WILDLIFE, INC., PLAINTIFF AND APPELLANT,
v.
CITY OF RANCHO CUCAMONGA ET AL., DEFENDANTS AND RESPONDENTS;
SPS DEVELOPMENT SERVICES, INC. ET AL., REAL PARTIES IN INTEREST AND RESPONDENTS.
THE HABITAT TRUST FOR WILDLIFE, INC. ET AL., PLAINTIFFS, CROSS-DEFENDANTS AND APPELLANTS,
v.
SPS DEVELOPMENT SERVICES INC. ET AL., DEFENDANTS AND RESPONDENTS
HENDERSON CREEK PROPERTIES, LLC, DEFENDANT, CROSS-COMPLAINANT AND RESPONDENT.



APPEAL from the Superior Court of San Bernardino County. Thomas A. Peterson, Barry L. Plotkin, and Ben T. Kayashima, Judges.*fn1 Affirmed. (Super.Ct.No. RCV084965)(Super.Ct.No. RCV87660).

The opinion of the court was delivered by: Miller J.

CERTIFIED FOR PUBLICATION

OPINION

Plaintiff, The Habitat Trust for Wildlife, Inc. ("Habitat"), appeals from a judgment in favor of defendants City of Rancho Cucamonga and City Council of the City of Rancho Cucamonga (sometimes "City Council" otherwise, collectively "City") on its petition for writ of mandate. By its petition Habitat sought to force City to set aside a resolution determining that Habitat is not a qualified conservation entity ("QCE") and to enter a new resolution based upon substantial evidence and in compliance with California law. Habitat argues that the petition was wrongfully denied by the trial court because it employed the wrong standard of review, because City denied Habitat due process, because City‟s criteria for determining what was a QCE were vague and uncertain and conflicted with federal and state law, and because City‟s findings in support of its resolution were not supported by the evidence before it.

In a second, related case, plaintiffs Habitat and Spirit of the Sage Council, Inc. ("Sage," collectively "Habitat/Sage"), appeal from a judgment entered in favor of defendants Henderson Creek Properties, LLC ("Henderson"), SPS Development Services, Inc. ("SPS," collectively "Henderson/SPS"), Rancho 2004, LLC, Granite Homes of California, Inc., Granite Homes, Inc., Granite Construction Services, LP (collectively, "Granite") and County Service Area 70, Improvement Zone OS-1 (hereinafter sometimes, "County") after their motions for summary judgment were granted. Habitat/Sage sought damages for breach of contract, breach of the covenant of good faith and fair dealing and constructive trust. They claim that the trial court erred in granting summary judgment because it exceeded its authority by invading the province of the trier of fact, made findings unsupported by fact or law, improperly struck most of their evidence, failed to consider reasonable inferences that supported a triable issue of material fact and failed to give effect to the contract‟s savings clause. Habitat/Sage also challenge the judgment insofar as it was entered against them on Henderson‟s cross-complaint for rescission.

In the third appeal Habitat/Sage challenge the postjudgment order awarding Henderson/SPS and Granite their attorney fees and costs. In their opening brief they expressly state that their challenge to these orders is based solely upon their claim that the underlying judgment should be reversed.

We affirm the challenged judgments and orders.

FACTUAL AND PROCEDURAL HISTORY

Henderson sought to develop 65.3 acres of land within the sphere of influence of City, into a residential subdivision to be annexed to the City.*fn2 The draft environmental impact report ("EIR") proposed that Henderson convey 58 acres of off-site land to San Bernardino County Special District OS-1 ("County Special District") in order to mitigate the potential loss of habitat for sensitive plant and animal species and the loss of raptor foraging land caused by the project. Sage, a nonprofit environmental advocacy group, opposed the project on the grounds that the mitigation required in the draft EIR was inadequate to protect the environment. Sage suggested that Henderson donate mitigation lands to Habitat, a tax exempt nonprofit land trust created by Sage to own three parcels of mitigation land obtained through litigation over earlier City approved projects. The final EIR, issued April 30, 2004, required that Henderson transfer a minimum of 54 acres of off-site mitigation land for permanent habitat conservation to "the County of San Bernardino Special District OS-1 or other qualified conservation entity approved by the City . . . " along with funding to maintain the land, and responded to the other concerns in Sage‟s letter of objections. The staff report for the planning commission stated that the open space transfer for the project allowed the property owner to select an appropriate nonprofit entity, other than the County Special District, to receive the mitigation land, subject to City planner approval. On May 12, 2004, Sage wrote to City‟s planning commission that it was concerned the final EIR was not specific enough with regards to what entity would receive the mitigation lands for the Henderson project. The EIR was approved by resolution of the planning commission requiring the property owner to "transfer to the County of San Bernardino Special District OS-1 or other qualified conservation entity approved by City, in fee, a minimum of 54-acres of off-site land for permanent open space and habitat preservation; along with funding in an amount to be mutually agreed upon by the property owner and the conservation entity, to provide for long-term maintenance of said land."

Sage and Habitat appealed the resolution of the planning commission and informed the mayor and the City Council that they did not agree with the final EIR, which they found deficient in a number of respects. At its meeting on June 16, 2004, the City Council certified the final EIR, denied the appeal of the planning commission resolution, and approved other resolutions related to Henderson‟s project. The resolution approving the tentative tract map contained the same land transfer mitigation as required by the planning commission, as quoted above.

City and Henderson entered a development agreement dated July 7, 2004. The agreement provided that "[t]he the City shall not be prevented, in subsequent actions applicable to the Project, from applying new ordinances, rules[,] regulations and policies" so long as they do not conflict with laws existing at the time the agreement was entered. The agreement mirrored the final EIR in that it further provided, "[t]he Property Owner shall transfer to the County of San Bernardino Special District OS-1 or other qualified conservation entity approved by the City, in fee, a minimum of 54-acres of off-site land for permanent open space and habitat preservation; along with funding in an amount to be mutually agreed upon by the Property Owner and the conservation entity, to provide for long-term maintenance of said land." In addition, with respect to future entitlements (which included all of the conditions and mitigation measures stated in the resolutions of approval made by the planning commission and the City Council) City specifically retained its discretionary review authority. The agreement was specifically made enforceable by the parties. Further, it provided that "[w]here the consent or approval of any of the Parties is required in or necessary under [the development agreement], unless the context otherwise indicates, such consent or approval shall not be unreasonably withheld."

In July and August 2004, Sage filed three petitions for writ of mandate against City based upon its certification of documents required by the California Environmental Quality Act ("CEQA") on three residential development projects. However, in order to prevent a CEQA challenge to the Henderson project based upon inadequate mitigation of environmental impacts, Henderson, Sage and Habitat entered into an agreement, dated July 18, 2004 ("Agreement"). Henderson agreed to convey a specified parcel of real property consisting of 86 acres to Habitat for conservation purposes, along with providing gates, fences and barriers in an amount not to exceed $15,000, plus $100,000 for administration costs, $25,000 for attorney fees and an endowment of $430,750 ($5,000 per acre for 86.15 acres). It also agreed to let Habitat onto the property to be developed to collect plant life for conservation purposes prior to grading. Habitat and Sage agreed to withdraw the objections to the Henderson project that they had lodged with the City, agreed not to challenge the EIR nor any of the required project approvals, and released Henderson and its assigns and successors from all claims arising out of or related to the Henderson project. The enumerated conditions to the close of escrow on the property to be conveyed to Habitat did not include its approval by City as a QCE. The Agreement was binding on all successors and assigns. The Agreement also stated that all provisions of the contract would remain in effect if any other provision was found illegal or unenforceable and should be interpreted as if mutually prepared.

On September 14, 2004, Larry Henderson, City‟s principal planner ("Planner"), asked a Henderson representative to submit a written proposal that Sage be approved as the receiving entity for the mitigation land, providing documentation on the qualifications of Sage and the reasons for its recommendation. On September 23, 2004, Henderson‟s representative requested that Habitat be approved as the QCE to receive the mitigation lands required by BIO-1 of the final EIR and attached copies of documents from Habitat‟s website, both describing its nature sanctuary in the area and by which it seeks donations, and a letter from the Internal Revenue Service, dated October 8, 2003, finding Habitat to be exempt from federal income taxation under Internal Revenue Code section 501(c)(3). In response, City informed Henderson‟s representative that the transfer plan would need to be approved by the City Council and listed nine items that would need to be submitted: (1) Habitat‟s incorporation papers, (2) its board of directors meeting minutes for the action approving acceptance of the transfer, (3) its bylaws, (4) its most recent auditor‟s report, (5) a copy of the habitat resource management plan for the nearest site currently owned by Habitat, (6) a list of its board members, (7) a list of its office locations, (8) a list of all personnel that would be involved in management of the transfer plan and their qualifications, and (9) a proposed operations plan, including maintenance schedule.

On November 3, 2004, Granite sent City a letter informing it that Granite had acquired Henderson‟s interest in the Henderson project, and had forwarded the request for information about Habitat on to that entity, which had yet to respond. The letter also informed City that if for any number of reasons the transfer to Habitat did not take place, Granite would transfer property under mitigation BIO-1 to the County.

By December 10, 2004, Granite‟s representative informed City that Habitat believed documents it had already submitted addressed all of City‟s requirements and requested information regarding the further processing of the land transfer. On December 14, 2004, Planner informed Granite‟s representative that City still did not have all of the information requested on Habitat, including audited financial records, a land management plan, "etc., etc., . . . ." Granite‟s representative responded that the letters that Habitat‟s attorney submitted with the materials provided to City explained how the information previously provided addressed those specific requests.

On January 5, 2005, Sage and Habitat filed a complaint against SPS and Henderson for breach of contract and fraud based upon their failure to transfer the land as required by the Agreement. The following day, City sent a letter to Granite‟s representative listing the nine items requested by City and outlining its concerns with the items where the responses on Habitat‟s behalf were deemed less than adequate. Granite‟s representative forwarded City‟s letter to Habitat on January 10, 2005. Habitat recorded a notice of pendency of action against four parcels on January 11, 2005.

On January 13, 2005, Habitat‟s attorney refused Granite‟s offer to allow it to process the land transfer application directly to City. He also forwarded to Henderson‟s attorney Habitat‟s response to items four through nine of City‟s list. He communicated directly with City by letter dated January 31, 2005, demanding that City provide Habitat with due process (notice and an opportunity to be heard) relating to City‟s decision to disqualify Habitat from receiving mitigation land in conjunction with the Henderson project, and requesting a continuance of the hearing scheduled for February 2, 2005. On February 2, 2005, Habitat provided City with an operations plan and annual work plan assessment for its currently managed nature sanctuaries. The agenda for the City Council meeting on the same date listed consideration of Granite‟s request to have City approve Habitat as the recipient of mitigation lands for the Henderson project. The staff report prepared by Planner recommended that City determine that Habitat had not demonstrated sufficient qualifications to have the mitigation land transferred to it. Specifically, the report cited the absence of a sufficient auditor‟s report for Habitat to clearly reflect its compliance with annual audit requirements, the habitat resources management plan provided for the nearest site currently managed by Habitat was an unsigned draft containing blanks and without exhibits, a list of all board members had not been provided and none of the three listed were from the local area, a list of the trust offices had not been provided, a list of the personnel who would manage the land and a list of their qualifications had not been provided and Habitat indicated it relied on volunteers to conduct ongoing management responsibilities, and no proposed operations plan and maintenance schedule had been submitted. Staff concluded that the County would provide a more "complete and publicly accountable management entity."

At the February 2, 2005, meeting, the City Council voted to continue the item to its February 16, 2005, meeting in order to allow Planner to review the additional materials received from Habitat. Planner issued a staff report for the February 16, 2005, meeting, which again recommended that Habitat had not demonstrated sufficient qualifications to accept the land transfer for substantially the same reasons listed previously. On February 16, 2005, Habitat‟s counsel faxed City a letter challenging the conclusions reached in the staff report as well as the findings in support of the proposed resolution, and including additional attachments. At the meeting, Planner presented his report advising that he believed the County was "a more appropriate entity to receive the land" based upon its position as a "complete and publicly accountable management entity." The City Council was informed by the City attorney that as of February 11, 2005, Habitat was suspended as a California corporation. Habitat‟s attorney also addressed the City Council. The City Council unanimously adopted the resolution establishing criteria for the designation of conservation entities to manage open space habitat transfer lands and denying Granite‟s request to allow the transfer of mitigation lands for the Henderson project to Habitat. The criteria established to determine whether an entity was qualified to accept mitigation lands were: "a. The entity must have fulfilled the legal requirements necessary for the creation of the public or private entity. [¶] b. The entity must demonstrate sufficient capability in terms of resources, available staff, and offices to provide sufficient management of the land and to respond in a timely manner to issues that arise thereupon. [¶] c. The entity must have proposed a site-specific Habitat Resource Management Plan and an Operations Plan to ensure management and operation of the land in compliance with any applicable mitigations measures. [¶] d. The entity must be accountable to the members of the immediate community for the entity‟s management of the land."

In the meantime, on February 14, 2005, Granite filed a demurrer to the complaint for breach of contract based on the fact that satisfaction of mitigation condition BIO-1, which had yet to occur, was a prerequisite to a binding contract between the parties, and that the causes of action were not pled with sufficient specificity. The demurrer was overruled. Granite filed its answer on May 2, 2005, alleging affirmative defenses of commercial frustration, failure of consideration, and that the allegations were contrary to the parties‟ intent, among others.

On February 18, 2005, Henderson/SPS filed their answer to the breach of contract complaint alleging the affirmative defenses of failure of consideration and commercial frustration among others, and also filed a cross-complaint for rescission based upon failure of consideration, mutual mistake and duress. Habitat/Sage‟s special motion to strike the cross-complaint under Code of Civil Procedure*fn3 section 425.16 was denied. They filed their answer to the cross-complaint on May 5, 2005.

Habitat filed a petition for writ of mandate under sections 1085 and 1094.5 on May 17, 2005, challenging City‟s determination that it was not a QCE for the purpose of receiving and managing land to mitigate the environmental impacts of projects within the City. On June 27, 2005, Habitat filed a first amended petition alleging that City‟s determination that Habitat was not a QCE was not supported by substantial evidence, but instead resulted from collusion between City and Henderson and/or Granite. It also contended that City acted contrary to law. City‟s decision allegedly prevented Habitat from conducting and growing its business and damaged Habitat‟s reputation as a land trust and thereby deprived it of a fundamental, vested right. In its memorandum of points and authorities filed May 18, 2006, Habitat argued that City unreasonably withheld its consent to approval of Habitat as a QCE despite an agreement with Henderson to the contrary, that City exceeded its authority in denying QCE status to Habitat under state and federal statutes, that City‟s hearing was arbitrary, unfair and capricious because its criteria were vague and because Habitat was not a part of the proceedings but instead had to rely on the project applicant who made false and inaccurate statements about Habitat‟s qualifications, and that City‟s findings were not supported by the evidence and some were not legally permissible. City filed an answer and responsive memorandum of points and authorities challenging Habitat‟s contentions regarding the proper standard of review and denying that any argument in the petition had merit.

On June 13, 2005, pursuant to motions by Henderson/SPS and Granite the trial court ordered the lis pendens recorded by Habitat expunged. Habitat/Sage‟s July 2005 application to file a second lis pendens and for attachment and protective orders was also denied.

As the result of a stipulation and order Habitat/Sage filed a first amended complaint for breach of contract on September 19, 2005, alleging breach of contract, breach of the covenant of good faith and fair dealing, constructive trust and unjust enrichment. The only copies of the first amended complaint contained in the record on appeal have no file stamp and state causes of action for breach of contract and fraud only. In addition, it appears from the trial court‟s remarks at a subsequent hearing that Cecil Johnson and County Service Area 70, Improvement Zone OS-1 were added as defendants to the first amended complaint. There are no documents that confirm these facts contained in the record on appeal.

Both Henderson/SPS and Granite filed demurrers and motions to strike. The demurrers concern the third cause of action for constructive trust and the fourth cause of action for unjust enrichment. On January 5, 2006, the trial court sustained the demurrers as to the third cause of action without leave to amend and as to the fourth cause of action with leave to amend. It also struck the allegations regarding specific performance from the complaint without leave to amend and struck those regarding Cecil Johnson‟s ownership of the land at issue with leave to amend. Habitat/Sage subsequently filed a notice of their election not to amend their first amended complaint leaving only the causes of action for breach of contract and breach of the covenant of good faith and fair dealing as to moving defendants.

Granite and Henderson/SPS filed answers and County filed a demurrer to the breach of contract and constructive trust causes of action in the first amended complaint. The trial court entered a default against Cecil M. Johnson as Trustee of the Cecil M. Johnson Family Trust ("Johnson") on March 21, 2006. Later, it sustained County‟s demurrer to the first cause of action without leave to amend and to the third cause of action with leave to amend.

On April 11, 2006, Habitat/Sage filed the operative second amended complaint including causes of action for breach of contract and breach of the covenant of good faith and fair dealing against Henderson/SPS and Granite, and a cause of action for constructive trust against Johnson and County. Granite, Henderson/SPS and County answered. On June 23, 2006, Brody McFarland ("McFarland") was substituted in as a defendant in place of Johnson, who had passed away. McFarland‟s demurrer to the second amended complaint was sustained without leave to amend. Habitat/Sage‟s subsequent motion to have McFarland substituted in as successor trustee in place of Johnson was granted and McFarland filed an answer to the second amended complaint.

While the status of the pleadings was being finalized in the contract action, after a hearing at which the trial court took the matter under submission a statement of decision was issued on September 28, 2006, denying Habitat‟s writ petition in its entirety. Judgment in favor of City was entered on November 9, 2006. Habitat thereafter filed its notice of appeal regarding the writ petition.

On January 29, 2007, Habitat/Sage filed a motion for summary adjudication of issues regarding certain of Henderson/SPS and Granite‟s affirmative defenses and Henderson/SPS‟s cross-complaint for rescission. While that motion was pending, County, Henderson/SPS, and Granite filed motions for summary judgment. On April 17, 2007, the trial court denied Habitat/Sage‟s motion for summary adjudication of issues in its entirety. After a hearing on June 5, 2007, the trial court granted all three motions for summary judgment. Pursuant to a stipulation and order filed on July 2, 2007, McFarland was dismissed from the action as if he had filed a motion for summary judgment on the same grounds as the moving parties. Judgment was entered in favor of the remaining defendants on July 2, 2007. Habitat/Sage then filed a notice of appeal. It also filed a motion to correct a clerical error in the judgment which was denied.

The trial court granted in part and denied in part Habitat/Sage‟s motion to tax costs claimed by Henderson/SPS. Henderson/SPS and Granite then moved for attorney fees based upon a provision in the Agreement. The trial court granted attorney fees of $666,849.50 to Henderson/SPS and $275,916.75 for attorney fees plus $11,195.68 in costs to Granite. Orders were subsequently filed and Habitat/Sage filed its third notice of appeal.

DISCUSSION

A. Petition for Writ of Mandate

1. Standard of Review

Habitat first argues that because the July 7, 2004, agreement between City and Henderson stated that necessary consent or approvals would not be unreasonably withheld by either party, the standard of review that should be applied to its writ petition is a reasonableness standard. It then argues that because City denied Habitat QCE status for the Henderson project knowing both that a contract existed transferring the mitigation land to Habitat and that Habitat had already been deeded mitigation land from City projects, because the denial creates a "stigma" against it, and because City‟s resolution was an adjudicatory action, a fundamental right is implicated, which requires an independent review standard.

Generally, the inquiry for the issuance of a writ of administrative mandamus is whether the entity whose decision is challenged committed a prejudicial abuse of discretion by failing to proceed in the manner required by law, by making a decision that is not supported by the findings it made, or by making findings that are not supported by the evidence. (ยง 1094.5, subd. (b).) In cases in which the court is authorized by law to exercise independent judgment, an abuse of discretion occurs if the reviewing court determines that the findings are not supported by the weight of the evidence. In all other cases abuse ...


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