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Turkey Creek, L.P v. Elizabeth Layn et al

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT Placer


February 25, 2011

TURKEY CREEK, L.P., PLAINTIFF AND APPELLANT,
v.
ELIZABETH LAYN ET AL., DEFENDANTS AND RESPONDENTS.

Super. Ct. No. SCV23876

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

Creek v. Layn 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NOT TO BE PUBLISHED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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

Plaintiff Turkey Creek, L.P. (plaintiff) operates a golf course in Placer County on real property leased from defendants Elizabeth G. Layn and Jeannette W. Duff (collectively, defendants). In this action, plaintiff sued defendants for breach of contract, unfair competition, and declaratory relief arising out of defendants' proposal to develop adjacent property that defendants own. The essence of plaintiff's complaint was that under defendants' development proposal, a disproportionate amount of the open space required for the development would be situated on the property leased by plaintiff, thus interfering with plaintiff's rights under the lease by limiting plaintiff's ability to develop the leased premises in the future as something other than a golf course.

Defendants filed a special motion to strike the complaint under Code of Civil Procedure section 425.16.*fn1 The trial court granted the motion, concluding that because the development proposal did not "purport to change the status quo in any way," defendants could not "be held to have breached the lease or engaged in unfair competition by submitting their development application."

On plaintiff's appeal, we conclude the trial court did not err in granting the special motion to strike. By depicting the bulk of the leased premises as open space in connection with their proposed development of their own property, defendants did not breach any express term of the lease, violate the implied covenant of good faith and fair dealing, or engage in unfair competition. Accordingly, we will affirm the order granting the special motion to strike.

FACTUAL AND PROCEDURAL BACKGROUND

In 1994, defendants and their father, Edward A. Grey (since deceased), owned approximately 469 acres of real property in unincorporated Placer County.*fn2 In September 1994, they agreed to lease part of that property, consisting of approximately 320 acres, to Steele Family Partners, L.P. for the development of a golf course. Steele Family Partners, L.P. is the general partner of plaintiff. Sometime after the lease was signed, Steele Family Partners, L.P. assigned its interest in the lease to plaintiff.*fn3

Under the terms of the lease, the owners' property was to be divided into two legal parcels: (1) the golf course parcel, which would be leased to the lessee, and (2) the remaining parcel (also known as Walkup Ranch), over which the owners would retain full control (except that they could not use it for a golf course).

In a paragraph entitled "Permitted Uses," the lease provided that "[u]ntil such time as a separate legal parcel is created for the Golf Course Parcel . . . , Tenant shall only use the Leased Premises for agricultural purposes. Thereafter, it is Tenant's intention to construct an 18-hole public golf course on the Leased Premises. Said golf course may have all ancillary uses including pro shop, restaurant, driving range and maintenance facility."

The lease was for an initial term of 29 years, but also provided for seven automatic extension terms of 10 years each, so that the effective term of the lease was 99 years. Additionally, the lease provided the lessee with a right of first refusal and an option to purchase upon expiration of the lease.

Subsequently, the lessee developed about 130 acres of the golf course parcel as the Turkey Creek Golf Club, which has been in operation since approximately 1998; the other 190 acres remain undeveloped.

Both the golf course parcel and the remaining parcel are within the sphere of influence of the City of Lincoln (the city).*fn4 The city's general plan (most recently updated in March 2008) establishes seven village areas encompassing the land within the city's existing and proposed sphere of influence. The general plan requires a specific plan for each village area. Thus, any land use application for development of property within a village area must include a specific plan for the entire village.

Both the golf course parcel and the remaining parcel are located within the city's village 1 planning area, which consists of approximately 1,780 acres owned by approximately 38 separate owners.

Under the city's general plan, at least 40 percent of each village area must be reserved for open space. A golf course qualifies as open space. With respect to village 1 in particular, the general plan specifies that the specific plan for that village "should consider and address" "[c]are in designing around the existing golf course to avoid any land use conflicts."

In 2006, defendants entered into an agreement with Lake Development-Lincoln, LLC (Lake) to assist them in securing entitlements from the city for development of the remaining parcel. To that end, from May 2006 through May 2007 Lake worked to draft and refine a specific plan for village 1. This process included multiple public and private meetings with affected landowners. Consistent with the general plan, Lake designed the specific plan around the golf course. Thus, in the proposed specific plan defendants ultimately submitted to the city in May 2007, the golf course continued to be shown as a golf course and made up much of the open space required for the village 1 specific plan.

In November 2008, plaintiff filed a complaint against defendants for breach of contract, unfair competition, and declaratory relief. Plaintiff alleged that defendants had breached the lease, and engaged in unfair competition, "by attempting as part of their application to the City of Lincoln for approval of a specific plan to (a) annex the [golf course parcel] to the City of Lincoln over Plaintiff's objection, [and] (b) have a disproportionate amount of the required 'open space' within the specific plan area located within the [golf course parcel]." Plaintiff further alleged that defendants had breached the covenant of good faith and fair dealing by seeking "to improperly and unilaterally restrict the permissible uses of the [golf course parcel] during the lease term . . . and to limit the uses to which Plaintiff can put the [golf course parcel] after exercising the option to purchase."

In January 2009, defendants filed a special motion to strike plaintiff's complaint. Defendants asserted that all three causes of action in the complaint "arise from . . . statements or writings that Defendants made before the City of Lincoln in connection with their pursuit of development entitlements for [their] property, or in connection with an issue under consideration and review by the City." Defendants further asserted that plaintiff could not demonstrate a probability of succeeding on the merits of any of its causes of action.

In opposing the motion, plaintiff conceded that its complaint was based on defendants' actions in petitioning the city for approval of their proposed development. Plaintiff argued, however, that there was ample evidence to support a judgment in its favor because the lease/option agreement did not limit plaintiff's use of the property to a golf course and therefore by designating the golf course parcel mostly as open space on their proposed specific plan for village 1 defendants were attempting to take plaintiff's development rights.

The trial court granted the special motion to strike, concluding that "the issue in this case is not whether the lease between the parties permits Plaintiff to develop the leased property in any way Plaintiff sees fit" but "whether the application submitted by Defendants interferes with the parties' contractual relationship." Because defendants' proposed special plan did not "purport to change the status quo in any way," the court concluded that defendants "cannot be held to have breached the lease or engaged in unfair competition by submitting their development application to the City of Lincoln."

Plaintiff timely appealed.

DISCUSSION

I

Overview Of The Anti-SLAPP Statute

The Legislature enacted section 425.16 to address "a disturbing increase in lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances." (§ 425.16, subd. (a).) Under this section, a "cause of action against a person arising from any act of that person in furtherance of the person's right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue," is subject to a special motion to strike "unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim." (Id., subd. (b)(1).)

"Section 425.16 posits . . . a two-step process for determining whether an action is a SLAPP. First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. (§ 425.16, subd. (b)(1).) 'A defendant meets this burden by demonstrating that the act underlying the plaintiff's cause fits one of the categories spelled out in section 425.16, subdivision (e).' [Citation.] If the court finds that such a showing has been made, it must then determine whether the plaintiff has demonstrated a probability of prevailing on the claim. [Citations.]" (Navellier v. Sletten (2002) 29 Cal.4th 82, 88.) "Only a cause of action that satisfies both prongs of the anti-SLAPP statute--i.e., that arises from protected speech or petitioning and lacks even minimal merit--is a SLAPP, subject to being stricken under the statute." (Id. at p. 89.)

On appeal, "[w]e review the trial court's rulings on an anti-SLAPP motion de novo." (HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204, 212.)

II

Arising From Protected Activity

In moving to strike plaintiff's complaint, defendants argued that all of plaintiff's causes of action arose from acts in furtherance of their right of petition or free speech because the causes of action were based on "statements or writings that Defendants made before the City of Lincoln in connection with their pursuit of development entitlements for [their] property, or in connection with an issue under consideration and review by the City." (See § 425.16, subd. (e)(1) & (2).)

In opposing the special motion to strike, plaintiff did not dispute that its claims against defendants were based on defendants' "actions in petitioning the City of Lincoln for approval of their proposed development." (Bolding and underlining omitted.) Instead, plaintiff argued only that there was "ample evidence which . . . would support a judgment in Plaintiff's favor."

In granting defendants' motion, the trial court noted plaintiff's concession "that the complaint is based on Defendants' exercise of their right to petition."

In its opening brief in this court, plaintiff pointed out that "the parties do not dispute that the first prong of the [anti-SLAPP] analysis is met, i.e., that [plaintiff]'s lawsuit arises from an act by [defendants] in furtherance of their rights of petition or free speech" and thus "this Court's inquiry is limited to the question of whether [plaintiff]'s breach of contract and Section 17200 claims have at least minimal merit." (Italics omitted.) As a result, defendants did not argue the first prong of the analysis in their brief.

In its reply brief, plaintiff -- for the very first time in the action -- argues that the first prong of the analysis was not met. Plaintiff acknowledges that it conceded this issue in the trial court and did not argue it in its opening brief on appeal but nonetheless asks us to consider the point now because "a subsequent review of the issue by counsel has revealed arguments that should have been made, but were not, on the 'first prong' of the anti-SLAPP analysis."

"[A]ppellate courts will not ordinarily consider matters raised for the first time on appeal." (Bayside Timber Co. v. Board of Supervisors (1971) 20 Cal.App.3d 1, 5, italics omitted.) Whether to do so "is largely a question of the appellate court's discretion." (Ibid.) Thus, for example, "we have 'discretion to consider a new issue on appeal where it involves a pure question of the application of law to undisputed facts.'" (Henderson v. Pacific Gas and Electric Co. (2010) 187 Cal.App.4th 215, 225.) "Appellate courts are more inclined to consider such tardily raised legal issues where the public interest or public policy is involved." (Bayside, at p. 5.)

Here, plaintiff offers us no reason why we should exercise our discretion to consider an argument made nearly a year and one-half later than it should have been.*fn5 Plaintiff does not rely on any new cases, does not argue that the issue is of particular public interest, and does not explain why the arguments it now seeks to advance "should have been made [in the trial court], but were not." Absent any compelling reason, we decline to consider arguments made for the first time in plaintiff's reply brief. Accordingly, we find no error in the trial court's determination that plaintiff's complaint is "based on Defendants' exercise of their right to petition."

III

Probability Of Prevailing

To demonstrate a probability of prevailing, the plaintiff must "demonstrate that the complaint is legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the plaintiff's evidence is credited. [Citation.] The court considers the pleadings and the supporting and opposing affidavits stating facts on which the liability or defense is based, and the motion to strike should be granted if, as a matter of law, the properly pleaded facts do not support a claim for relief." (Wilbanks v. Wolk (2004) 121 Cal.App.4th 883, 901.) "Precisely because the statute (1) permits early intervention in lawsuits alleging unmeritorious causes of action that implicate free speech concerns, and (2) limits opportunity to conduct discovery, the plaintiff's burden of establishing a probability of prevailing is not high: We do not weigh credibility, nor do we evaluate the weight of the evidence. Instead, we accept as true all evidence favorable to the plaintiff and assess the defendant's evidence only to determine if it defeats the plaintiff's submission as a matter of law." (Overstock.com, Inc. v. Gradient Analytics, Inc. (2007) 151 Cal.App.4th 688, 699-700.)

As plaintiff points out in its opening brief, the question before us is whether its "breach of contract and Section 17200 claims have at least minimal merit."*fn6 (Italics omitted.) We begin with the contract claim.

A

Breach Of Contract

The elements of a cause of action for breach of contract are "the existence of the contract, performance by the plaintiff or excuse for nonperformance, breach by the defendant and damages." (First Commercial Mortgage Co. v. Reece (2001) 89 Cal.App.4th 731, 745.) Here, the critical element -- at least in our assessment -- is breach. Plaintiff asserts that defendants' "attempt to seek approval of a specific plan which will require the re-designation of the [golf course] Property as 'open space' -- thereby restricting [plaintiff]'s right to develop or improve the property in any other manner -- is a breach of the Lease/Option Agreement." We are not persuaded.

Plaintiff argues that even though the golf course parcel "is presently partially developed as a golf course and partially undeveloped," plaintiff has the right under the lease to put the property to "any reasonable use." Even assuming that to be true, however, plaintiff fails to explain what provision of the lease defendants breached by seeking to have the golf course parcel (or some portion thereof) designated as open space in the proposed specific plan for village 1 that defendants submitted to the city in furtherance of their plan to develop the remaining parcel. Instead, plaintiff simply argues, without explanation, that defendants' "conduct in seeking approval of their plan is a breach."

Plaintiff certainly does not point to any express provision in the lease that precluded defendants from proposing that the golf course parcel, on which plaintiff had chosen to operate a golf course, be designated as open space in a specific plan governing future development of the property in the event it is annexed by the city. At best, as we see it, if plaintiff can substantiate a breach of contract cause of action at all, plaintiff must depend on the implied covenant of good faith and fair dealing, on the theory that by proposing a land use designation that would limit plaintiff's future development opportunities -- either during the term of the lease or in the event plaintiff takes fee title by exercising its option or right of first refusal -- defendants have attempted to deny plaintiff the benefits of the lease/option agreement. As we will explain, however, the implied covenant of good faith and fair dealing will not save plaintiff's breach of contract claim either.

"There is an implied covenant of good faith and fair dealing in every contract that neither party will do anything which will injure the right of the other to receive the benefits of the agreement." (Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 658.) "This covenant not only imposes upon each contracting party the duty to refrain from doing anything which would render performance of the contract impossible by any act of his own, but also the duty to do everything that the contract presupposes that he will do to accomplish its purpose." (Harm v. Frasher (1960) 181 Cal.App.2d 405, 417.) The covenant "exists merely to prevent one contracting party from unfairly frustrating the other party's right to receive the benefits of the agreement actually made. [Citation.] The covenant thus cannot '"be endowed with an existence independent of its contractual underpinnings."' [Citation.] It cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement." (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 349-350, italics omitted.) "'The implied covenant of good faith and fair dealing is limited to assuring compliance with the express terms of the contract, and cannot be extended to create obligations not contemplated by the contract.'" (Pasadena Live v. City of Pasadena (2004) 114 Cal.App.4th 1089, 1094.)

Here, in determining whether defendants' action with respect to their proposed specific plan for Village 1 might have breached the covenant of good faith and fair dealing implied in the lease, it is important to examine the express terms of the lease. In doing so, we discover nothing indicating that plaintiff contemplated developing the golf course parcel as anything other than a golf course. While plaintiff may have had the right to pursue other development opportunities, the lease itself did not give any indication that plaintiff intended to do so.

The very name of the document is "GROUND LEASE" "AUBURN RAVINE GOLF COURSE."*fn7 Section 1.03 of the agreement, entitled "Development," provides that the owners' property will be divided into a "Golf Course Parcel" and a "Remaining Parcel." It further provides that "[f]ollowing creation of a separate legal parcel for the Golf Course Parcel, Lessee intends to use the Golf Course Parcel for the construction of an 18-hole public golf course, a clubhouse, restaurant, pro shop, driving range, maintenance facilities, lakes and related improvements."

Section 4.01 of the agreement, entitled "Permitted Uses," provides that after the creation of a legally separate golf course parcel, "it is Tenant's intention to construct an 18-hole public golf course on the Leased Premises. Said golf course may have all ancillary uses including pro shop, restaurant, driving range and maintenance facility." Section 5.01 ("Improvements") provides the tenant with the right to determine "[t]he quality, design, and location of the Golf Course Improvements, including any ancillary buildings, the irrigation system, ponds, lakes, recirculating systems, or other related items."

In the trial court, plaintiff pointed out a few provisions of the lease that refer to "improvements" not defined as "Golf Course Improvements." Based on these provisions, plaintiff argued that the lease "expressly contemplate[d] Plaintiff's development and improvement of the Subject Property beyond a golf course and related improvements." While it is true these provisions are consistent with an interpretation of the lease allowing the lessee to use the property as other than a golf course, the provisions did not suggest that the lessee had any intention of doing so. Thus, the express terms of the lease gave the owners no reason to expect that the lessee intended to do anything with the golf course parcel except develop and operate it as a golf course. Additionally, in opposition to defendants' special motion to strike, plaintiff offered no evidence suggesting that any such contrary intent was communicated to the owners before the signing of the lease.

Under these circumstances, while defendants might have breached the covenant of good faith and fair dealing if they had done something that interfered, or had the potential to interfere, with plaintiff's use of the golf course parcel as a golf course, they did not breach the implied covenant by proposing a specific plan for village 1 that depicted the golf course parcel largely as a golf course, which qualifies as open space under the city's general plan. By their actions, defendants did not do anything that would render performance of the lease impossible, nor did they refuse to do something the lease presupposed they would do to accomplish its purpose. By proposing a special plan under which the golf course would remain a golf course, defendants did not unfairly frustrate plaintiff's right to receive the benefits of the agreement the parties actually made, when every reasonable indication on the face of the agreement was that the lessee intended to develop and use the property as a golf course.

On the facts before us, we conclude the trial court did not err in determining that plaintiff failed to show a probability of success on the merits of its cause of action for breach of contract. Accordingly, there was no error in the trial court's granting of the special motion to strike with respect to that cause of action.

B

Unfair Competition

As for plaintiff's cause of action for unfair competition, that cause of action largely rises and falls with the cause of action for breach of contract. As plaintiff points out, unfair competition is defined (as relevant here) as "any unlawful, unfair or fraudulent business act or practice." (Bus. & Prof. Code, § 17200.) To the extent plaintiff asserts that defendants' actions could be found "unlawful" because those actions constituted a breach of the lease, that argument must be rejected based on the analysis above. Because no reasonable trier of fact could find that defendants breached the lease by proposing that the golf course parcel be designated largely as open space in the specific plan for village 1, it follows that no reasonable trier of fact could find that defendants' actions were "unlawful" on that basis.

Plaintiff nonetheless suggests that defendants' actions can be deemed "unfair" for purposes of the unfair competition law because they acted "for their own separate financial gain, at the expense and on the back of [plaintiff], in order to put themselves at an unfair competitive advantage and to harm competition in the marketplace." Again, we are not persuaded. Effectively, all defendants did was propose a specific plan for village 1 that showed plaintiff's golf course as what it was -- a golf course. On this alone, no reasonable trier of fact could find that defendants engaged in unfair competition. Accordingly, the trial court did not err in granting the special motion to strike with respect to this cause of action either.

DISPOSITION

The order granting the special motion to strike is affirmed. Defendants shall recover their costs on appeal. (Cal. Rules of Court, rule 8.278(a).)

We concur:

RAYE , P. J.

NICHOLSON , J.


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