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Greenlaw Grupe, Jr. Operating Company v. Land Utilization Alliance et al

December 29, 2010

GREENLAW GRUPE, JR. OPERATING COMPANY, PLAINTIFF AND APPELLANT,
v.
LAND UTILIZATION ALLIANCE ET AL., DEFENDANTS AND RESPONDENTS. GREENLAW GRUPE, JR. OPERATING COMPANY, PLAINTIFF AND APPELLANT,
v.
SHAWDOWBIRD, INC., DEFENDANT AND RESPONDENT.



(Super. Ct. No. CV018132)

The opinion of the court was delivered by: Robie , Acting P.J.

Greenlaw Grupe Operating v. Land Utilization Alliance

CA3

NOT TO BE PUBLISHED

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super. Ct. No. CV018132)

In this action, plaintiff Greenlaw Grupe, Jr. Operating Company (Grupe) sought to regain title to a parcel of undeveloped property next to a habitat conservation area based on the fact that defendant Land Utilization Alliance (Alliance) had violated a deed condition prohibiting Alliance from transferring the property to anyone else. The party to which Alliance had deeded the property, defendant ShadowBird, Inc. (ShadowBird), successfully defended Grupe's lawsuit, obtaining a ruling from the trial court that the deed condition was void as an unreasonable restraint on alienation under Civil Code section 711.*fn1 On ShadowBird's subsequent motion for attorney fees as a private attorney general under Code of Civil Procedure section 1021.5 (hereafter, section 1021.5), the trial court ordered Grupe to pay ShadowBird over $1 million in fees.

On appeal from the judgment, Grupe contends the trial court erred in determining the deed condition prohibiting Alliance from transferring the property to anyone else was void as an unreasonable restraint on alienation. We disagree. The restraint imposed by the condition on alienation of the property was substantial, but the apparent justification for the condition was not equally weighty. Accordingly, the restraint was void under section 711. Furthermore, notwithstanding Grupe's arguments to the contrary, nothing in the Marketable Record Title Act (§ 880.020 et seq.) affects this conclusion.

On appeal from the postjudgment award of attorney fees, Grupe contends the trial court erred in determining that ShadowBird was entitled to fees as a private attorney general and, in any event, the amount of fees awarded was erroneous. We conclude the trial court abused its discretion in awarding ShadowBird fees that were not supported by any evidence, except for the total amount charged, and we will modify the attorney fee award accordingly. Other than that, however, Grupe has not carried its burden of showing the attorney fee award was clearly wrong.

FACTUAL AND PROCEDURAL BACKGROUND

Sometime in the 1980's, an entity known as Grupe Development Associates (Development Associates) sought entitlements from the City of Stockton (the city) for the development of a master planned subdivision known as Brookside Estates. Concerned about the environmental impact of the project, Alliance, a nonprofit organization, sued the city.

In May 1989, Development Associates and Alliance entered into a "Memorandum of Understanding and Agreement" relating to the project. As part of that agreement, Development Associates committed to provide a 50-acre "Habitat Compensation Site," a 50-acre "buffer" parcel to "be maintained as agricultural or open space" for "protection" of the "Habitat Compensation Site." Title to the buffer parcel was to "be vested in a non-profit entity to be designated by" Alliance, subject to certain "reversionary interests" provided in the agreement. Specifically, the agreement provided that the buffer parcel would be "subject to a reversionary interest to [Development Associates] to the extent [the property was] converted for use(s) other than [its] dedicated and related environmental purpose," such that if "the dedicated and related environmental purpose(s) are vacated or abandoned, by operation of law or activity, then [Development Associates] shall, upon the repayment of the previous purchase monies received, receive a deed to the property and shall be entitled to an appropriate court order to enforce this provision."

In 1990, the litigation between Alliance and the city was settled based in part on the May 1989 agreement between Alliance and Development Associates.

The "Habitat Compensation Site" and the adjacent buffer parcel were apparently never owned by Development Associates, but instead were owned by Grupe -- a related entity.*fn2 In December 1994, to effectuate the terms of the May 1989 agreement between Alliance and Development Associates, Grupe conveyed the buffer parcel to the city, and the city immediately conveyed it to Alliance. Both deeds contained the following provision:

"The grant herein is made on the express conditions that (1) [the buffer parcel] is used only for the purpose of agricultural or open space land for the protection of the Habitat Site . . . , or (2) Grantee herein, or any subsequent owner(s), conveys no interest in [the buffer parcel], except to . . . Alliance, which Grantor expressly consents to such conveyance, or (3) . . . Alliance continues to be legally recognized and/or maintain its status as a nonprofit or not-for-profit entity. If at any time (1) any portion of [the buffer parcel] is used for any purpose other than agricultural or open space land for the protection of the Habitat Site . . . , or (2) should the Grantee herein, or any subsequent owner(s), convey any interest in [the buffer parcel], except to . . . Alliance, or (3) should . . . Alliance not continue to be legally recognized and/or maintain its status as a nonprofit or not-for-profit entity, then Grantor or its heirs, successors and assigns, upon the payment of the purchase price paid to Grantor herein for [the buffer parcel], and for no other consideration and without liability of any kind, shall have the power to terminate all right, title, and interest in the property granted by this deed to the City of Stockton, and its successors and assigns, in the manner provided by law for the exercise of this power of termination. Immediately upon such termination, Grantee shall forfeit all rights or title to the property and the property shall revert to Grantor or its assigns. Each of the above conditions are conditions not personal covenants of Grantee(s), and are made for the benefit of Grantor, their successors and assigns."*fn3

In November 2000, Alliance deeded the buffer parcel to ShadowBird, another nonprofit organization that was formed "specifically to take responsibility for the . . . buffer [parcel]."

In August 2002, Grupe sought to exercise its power of termination by suing Alliance and ShadowBird for cancellation of the deed between the two entities.*fn4 Alliance and ShadowBird initially pursued a joint defense. Later, however, Alliance shifted its allegiance to side with Grupe, and Alliance and ShadowBird pursued cross-complaints against each other, although only ShadowBird pursued its cross-complaint through trial.

Grupe's complaint and ShadowBird's cross-complaint against Alliance were tried to a jury, with the court ruling on equitable issues. The court concluded that the power of termination Grupe sought to enforce, which prohibited Alliance from selling or transferring the buffer parcel on penalty of forfeiture, was "unenforceable [under section 711] as an absolute restraint on alienation of a fee estate." Accordingly, Grupe took nothing on its complaint against ShadowBird.

After the court ruled in favor of ShadowBird on Grupe's complaint, the jury returned a verdict for nearly $60,000 in damages in favor of ShadowBird on its cross-complaint against Alliance. The court entered judgment in November 2008, and Grupe timely appealed.

Thereafter, ShadowBird moved for an award of attorney fees from Grupe as a private attorney general under section 1021.5. The trial court determined that ShadowBird qualified for a fee award under the statute. The court then determined that ShadowBird was entitled to fees at $395 per hour for 565 hours of work by its attorney, plus $112,514 for work by that attorney while he was with another firm, for a total lodestar amount of $335,689. The court also determined that ShadowBird was entitled to a fee enhancement, and so the court tripled the lodestar amount and ordered Grupe to pay ShadowBird $1,007,067 in attorney fees. Again, Grupe timely appealed.

DISCUSSION

I

Restraints On Alienation

Because this case involves restraints on alienation of property, we begin with the basic principles on that point.

"Alienation in real property law has been defined as 'the transfer of the property and possession of lands, tenements, or other things, from one person to another.'" (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 354-355 (Carma).) Section 711 provides that "[c]onditions restraining alienation, when repugnant to the interest created, are void." "This statute does not prohibit all restraints on alienation, [but] only those which are unreasonable . . . . [Citations.] 'Reasonableness is determined by comparing the justification for a particular restraint on alienation with the quantum of restraint actually imposed by it. "[T]he greater the quantum of restraint that results from enforcement of a given clause, the greater must be the justification for that enforcement."'" (Superior Motels, Inc. v. Rinn Motor Hotels, Inc. (1987) 195 Cal.App.3d 1032, 1059.)

II

The Marketable Record Title Act

As its first argument on appeal, Grupe contends that by enacting the Marketable Record Title Act (sometimes, the Act), the Legislature essentially declared, as a matter of law, that powers of termination like the one Grupe sought to exercise here are reasonable restraints on alienation for purposes of section 711. As we will explain, we find no merit in this argument.

"In 1982, the Legislature enacted the Marketable Record Title Act in order to make real property more freely alienable and marketable. (§ 880.020, subd. (a)(1).) To further this goal the legislation sought to simplify and facilitate real property title transactions by enabling persons to determine the status and security of recorded real property titles from an examination of recent records." (Miller v. Provost (1994) 26 Cal.App.4th 1703, 1707-1708.) "To this end, a series of statutes enacted in 1982 and 1984 set forth procedures for both preservation of interest in real property and for termination of old interests in real property." (Worthington v. Alcala (1992) 10 Cal.App.4th 1404, 1409, fns. omitted.)

Of particular significance here is chapter 5 of the Marketable Record Title Act, which deals with powers of termination. (§§ 885.010-885.070.) In section 885.020, the Legislature "abolished" two types of restraints on the alienation of property -- "[f]ees simple determinable and possibilities of reverter." (§ 885.020.) The Legislature determined that "[e]very estate that would be at common law a fee simple determinable is deemed to be a fee simple subject to a restriction in the form of a condition subsequent" and "[e]very interest that would be at common law a possibility of reverter is deemed to be and is enforceable as a power of termination." (§ 885.020.) Thus, as Grupe points out, the Legislature specifically chose to preserve the power of termination as an enforceable interest in real property. (See § 885.010, subd. (b).)

In the remainder of the chapter, however, the Legislature imposed three limitations on powers of termination. First, the Legislature provided for the expiration of a power of termination after 30 years, unless the power is renewed through recording a notice of intent to preserve it. (§ 885.030.) Second, the Legislature provided for the expiration of a power of termination that has become obsolete.*fn5 (§ 885.040.) Third, the Legislature provided for exercise of a power of termination only by notice or civil action within five years after the breach of the restriction triggering the power. (§ 885.050.)

Beyond these specific provisions relating to powers of termination, Grupe points to two general "intentions" behind the Marketable Record Title Act in support of its argument, so we turn our attention to those.*fn6 First, the Legislature declared that "[i]nterests in real property and defects in titles created at remote times, whether or not of record, often constitute unreasonable restraints on alienation and marketability of real property because the interests are no longer valid or have been abandoned or have otherwise become obsolete." (§ 880.020, subd. (a)(2).) Second, the Legislature stated that its purpose "in enacting this title [was] to simplify and facilitate real property title transactions in furtherance of public policy by enabling persons to rely on record title to the extent provided in this title, with respect to the property interests specified in this title, subject only to the limitations expressly provided in this title and notwithstanding any provision or implication to the contrary in any other statute or in the common law." (§ 880.020, subd. (b).)

With these provisions in mind, we turn back to Grupe's arguments. First, Grupe contends that because the Legislature's purpose in enacting the Marketable Record Title Act was "to purge from the State's land records 'unreasonable restraints on alienation,'" but the Legislature "specifically preserv[ed] the . . . power of termination" as an enforceable interest in real property, "the Legislature necessarily found the . . . power of termination [as limited by the Act] to be [a] reasonable restraint[]" on alienation. Second, Grupe points out that the Legislature's purpose was to enable "persons to rely on record title . . . 'with respect to the property interests specified in'" the Marketable Record Title Act -- including, powers of termination -- and points out that the power of termination here was a matter of record. From those observations, however, Grupe draws no clear conclusion. Finally, Grupe contends that because "the Act was to apply regardless of any other 'provision or implication to the contrary in any other statute or in the common law,'" and because of the Legislature's "avowed purpose of ridding records of 'unreasonable restraints on alienation,'" "the Legislature meant this thorough and thoughtful modern statute to control over the single sentence of section 711 of the 1872 Code of Civil Procedure."

In effect, then, Grupe contends that the effect of the Marketable Record Title Act was to render powers of termination like the one here valid and enforceable, notwithstanding the restriction in section 711 against unreasonable restraints on alienation. Thus, in Grupe's view, the Marketable Record Title Act controls over section 711 and makes powers of termination like the one here reasonable as a matter of law for purposes of section 711.

Of course, not even Grupe contends the Legislature intended the Marketable Record Title Act to establish that every power of termination is reasonable, regardless of the terms under which that power may be exercised. Acknowledging that "[r]acially restrictive conditions, for example, have been unenforceable in state courts for more than 60 years," Grupe suggests that powers of termination that "discriminate on ground[s] of race, religion or other suspect classification" or "transgress any explicit other state policy" are indeed invalid, but powers of termination that do not transgress any explicit state policy are valid.

We do not agree with Grupe's strained interpretation of how the Marketable Record Title Act and section 711's restriction on unreasonable restraints on alienation intersect and interact. Unlike Grupe, we find nothing in the Act indicating the Legislature intended to limit the judicial application of the rule embodied in section 711 that unreasonable restraints on alienation are void. What the Legislature sought to address in the Marketable Record Title Act was the reliability of record title, particularly with respect to old interests in real property. Thus, the Legislature recognized that old interests "often constitute unreasonable restraints on alienation and marketability of real property because the interests are no longer valid or have been abandoned or have otherwise become obsolete." (§ 880.020, subd. (a)(2).)

With respect to powers of termination in particular, the Legislature sought to eliminate, or at least reduce, this problem by eliminating powers that were old (beyond a reasonable expiration date) or obsolete. In this way, the Legislature furthered its goal of eliminating "unreasonable restraints on alienation" -- the same goal served by section 711. In no way, however, can the Legislature's action in this regard be taken as a wholesale validation of all powers of termination that were neither old nor obsolete, regardless of the terms under which those powers could be exercised. Even a brand new power of termination -- freshly minted, of record, and not inconsistent with any other express state policy -- may be "unreasonable" pursuant to the balancing test traditionally applied under section 711. (See Superior Motels, Inc. v. Rinn Motor Hotels, Inc., supra, 195 Cal.App.3d at p. 1059.) We find nothing in the Marketable Record Title Act to contradict this, nor to ...


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