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South Sutter, LLC v. Lj Sutter Partners

March 16, 2011

SOUTH SUTTER, LLC, PLAINTIFF AND APPELLANT,
v.
LJ SUTTER PARTNERS, L.P., ET AL., DEFENDANTS AND RESPONDENTS. SOUTH SUTTER, LLC, PLAINTIFF AND APPELLANT,
v.
ANDERSON WEST, LLC, DEFENDANT AND RESPONDENT.



Super. Ct. No.CV-CS-07-2068 APPEAL from a judgment of the Superior Court of Sutter County, Perry Parker, Judge. Case No. C058206 affirmed. Case No. C059554 dismissed.

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

CERTIFIED FOR PUBLICATION

Super. Ct. No.CV-CS-07-2068

Plaintiff in these actions, South Sutter, LLC (South Sutter), owned an option to acquire a large tract of land from defendant Odysseus Farms. South Sutter claimed the option agreement also gave it an exclusive interest in other lands owned by Odysseus Farms and a right of first refusal should Odysseus Farms acquire additional property and enter into a joint venture with third parties regarding the new property.

When Odysseus Farms entered into an agreement with defendant LJ Sutter Partners, L.P. (LJ Sutter), optioning its other lands, and when Odysseus Farms allegedly formed a joint venture with defendant Anderson West, LLC, regarding new property it had acquired, South Sutter sued. It alleged contract and tort causes of action.

South Sutter voluntarily dismissed the complaint, however, after LJ Sutter and its owners filed a special motion to strike the complaint under Code of Civil Procedure section 425.16, more commonly known as an anti-SLAPP motion.*fn1 LJ Sutter was later awarded its attorney fees for bringing its motion. In awarding fees, the trial court determined on the merits that South Sutter's first complaint was a SLAPP. It arose from the defendants' exercise of constitutional rights of speech and petition regarding governmental development entitlements both South Sutter and LJ Sutter had sought to obtain, and South Sutter failed to prove it would have prevailed on the merits of its complaint.

South Sutter appealed the trial court's attorney fees order to our court. We subsequently dismissed the appeal at South Sutter's request, as the parties had settled their dispute. The parties did not, however, seek a stipulated reversal of the trial court's order.

Meanwhile, shortly after dismissing its first complaint, South Sutter filed a second complaint, which is the subject of these appeals. South Sutter sued Odysseus Farms and its owners for breach of contract, and it sued Odysseus Farms and its owners, LJ Sutter and its owners, and Anderson West for declaratory relief. South Sutter omitted all of the tort causes of action it had alleged in the first complaint.

LJ Sutter and its owners again filed an anti-SLAPP motion. They claimed the second complaint's lack of new facts established that South Sutter's second complaint arose out of the defendants' exercise of constitutional rights. They also argued South Sutter was not likely to succeed on the merits of its complaint. The trial court agreed with LJ Sutter and its owners, granted the motion, and dismissed the complaint against those defendants.

Anderson West filed a demurrer to South Sutter's complaint. It argued South Sutter could not allege facts sufficient to state a cause of action against it. The trial court agreed with Anderson West and sustained the demurrer without leave to amend.

South Sutter appeals from both judgments against its second complaint. It claims the trial court erred in granting LJ Sutter's anti-SLAPP motion as the motion was not filed timely, there was insufficient evidence the complaint arose from the defendants' exercise of constitutional rights, and there was sufficient evidence South Sutter was likely to succeed on the merits of the complaint.

South Sutter also claims the trial court erred in sustaining Anderson West's demurrer without leave to amend, as it allegedly pleaded sufficient facts to state a cause of action against Anderson West.

We consolidated the appeals for purposes of argument and decision. After we consolidated the appeals, South Sutter informed us it had settled with Odysseus Farms and its owners, who were not parties to this appeal, and it had dismissed them from this action. LJ Sutter and Anderson West then requested we dismiss these appeals as moot.

At oral argument, South Sutter conceded its settlement with Odysseus Farms had rendered the appeal against Anderson West moot. We therefore dismiss case No. C059554 against Anderson West, and we will not discuss that appeal in this opinion.

As to case No. C058206 against LJ Sutter and its owners, we deny the request to dismiss the appeal and we affirm the judgment. We conclude the trial court did not err in granting LJ Sutter's anti-SLAPP motion. The trial court's determination in the attorney fees order that South Sutter's cause of action arose from LJ Sutter's exercise of constitutional rights acts as a direct estoppel and precludes relitigation of that issue here. Even if there was no direct estoppel, the evidence demonstrates South Sutter's cause of action against LJ Sutter arises from the latter's exercise of constitutional rights.

Additionally, the evidence demonstrates it is unlikely South Sutter will succeed on the merits of its complaint against LJ Sutter and its owners. A condition precedent on South Sutter's interest in Odysseus Farms's other lands, which interest serves as the basis for South Sutter's complaint, has not been satisfied.

FACTS

A. Option Agreement between South Sutter and Odysseus Farms

In the mid-1990s, Sutter County (the County) designated in its general plan some 10,500 rural acres located in Sutter County's southeast corner as Industrial/Commercial Reserve. The area became known as the Industrial Reserve. This designation allowed for employment-related development to occur on the land.

Defendant Odysseus Farms owns approximately 3,800 acres in the Industrial Reserve. Odysseus Farms is a general partnership. Defendant Leal Family Trust is its general partner, and defendant Robert Leal is the trustee of the Leal Family Trust. (We refer to these three defendants collectively as the Leal defendants.)

In 2002, Odysseus Farms granted to LNR California Investments, Inc., the predecessor in interest to South Sutter, an exclusive option to purchase 2,700 acres of its Industrial Reserve land (the Option Agreement).*fn2 The parties refer to the land optioned under the Option Agreement as the Option Property. The Option Agreement generally calls for South Sutter to acquire parcels of the Option Property in phases over a 20-year term.

During the term of the Option Agreement, South Sutter has the exclusive right under section 9.1 of the Option Agreement to seek the approval of all governmental entitlements necessary or desirable for its contemplated development of the Option Property. Such entitlements include a specific plan, the resolution of endangered species mitigation issues required for compliance with the Natomas Basin Habitat Conservation Plan, any development agreements with the County, and the recordation of parcel maps and final tract maps for the Option Property. Odysseus Farms agrees to reasonably cooperate with South Sutter and do all that is necessary for South Sutter to obtain or seek approval of development entitlements. In addition, Odysseus Farms agrees not to execute any agreement that would "materially and adversely affect the intended development of the [Option] Property by [South Sutter]."

The Option Agreement also addresses other property owned by Odysseus Farms that exists both within and outside of the Industrial Reserve and that surrounds the Option Property. The Option Agreement refers to this property as the Other Property. Under the Option Agreement, the Other Property could possibly be used by South Sutter to fulfill environmental mitigation requirements imposed on it for developing the Option Property. Section 12.1 of the Option Agreement in general states that, provided Odysseus Farms and South Sutter successfully negotiate a conservation easement in favor of a government agency to satisfy South Sutter's mitigation requirements, South Sutter will have exclusive rights to purchase that conservation easement on the Other Property. The parties anticipated that such an easement would consist of one-half of an acre of the Other Property for every acre of the Option Property South Sutter developed.

Other than to allege the Other Property exists both within and outside of the Industrial Reserve, nothing in the Option Agreement or, for that matter, the record on appeal identifies all of the Other Property or describes its size or specific location.

Odysseus Farms also agreed in the Option Agreement to extend to South Sutter a right of first refusal should Odysseus Farms decide to sell or enter into a joint venture regarding any real property Odysseus Farms acquires within the "specific plan area" for south Sutter County. Under section 13.1 of the Option Agreement, any contract for such a sale or joint venture by Odysseus Farms must be forwarded to South Sutter, which then can determine whether to purchase the property or enter into the joint venture being negotiated. If it chooses not to purchase the property or enter into the joint venture, Odysseus Farms is free to proceed with the sale or joint venture.

B. Measure M

In 2004, South Sutter began meeting with County officials to investigate developing the Option Property. At the request of South Sutter and other landowners in the Industrial Reserve, the County Board of Supervisors agreed to place on the ballot an advisory measure for the voters to state whether they approved developing 7,500 acres of the Industrial Reserve. The ballot measure, known as Measure M, proposed developing the land with various uses, including residential and commercial uses, and building the infrastructure needed for that development. The group of landowners who worked to place Measure M on the ballot and who campaigned for its passage became known as the Measure M Group. South Sutter was part of the Measure M Group; the Leal defendants were not.

The voters approved Measure M in November 2004.

Shortly thereafter, the County determined the proposed boundaries of the 7,500 acres of the Industrial Reserve that would be included in a specific plan to be adopted to implement Measure M. This was based on the recommendations and plans of the Measure M Group members. The specific plan area included all of the Option Property. South Sutter alleges the specific plan area also included 210 acres of the Other Property owned by Odysseus Farms and a 239-acre tract of land known as the Brennan Tract. At that time, the Natomas Basin Conservancy, not a party to this action, owned the Brennan Tract.

C. Option Agreement between Odysseus Farms and LJ Sutter, and acquisition of the Brennan Tract

In January 2005, Odysseus Farms entered into another option agreement (the Miller Option Agreement), this time with defendant LJ Sutter, by and through LJ Sutter's general partner, defendant Miller Holdings Investments, Inc. (Miller Holdings) (collectively, the Miller defendants). By this agreement, LJ Sutter obtained a 10-year option to purchase all or a portion of the Other Property, including 386 acres of the Other Property known as the Natomas Bennett Subdivision. Based on a comparison of assessor's parcel numbers provided by South Sutter, it appears the Natomas Bennett Subdivision is not included within the specific plan area. It is otherwise unclear from the record where the Natomas Bennett Subdivision is located.

In 2006, LJ Sutter terminated a portion of the Miller Option Agreement with Odysseus Farms, allegedly as part of an agreement and joint venture for Odysseus Farms and the Miller defendants to obtain the Brennan Tract, which was then owned by the Natomas Basin Conservancy and was within the proposed specific plan area. LJ Sutter quitclaimed its interest in the Natomas Bennett Subdivision back to Odysseus Farms for one dollar. Odysseus Farms transferred the Natomas Bennett Subdivision to the Natomas Basin Conservancy. The Natomas Basin Conservancy transferred a "50% co-tenancy" fee interest in the Brennan Tract to Odysseus Farms, and another "50% co-tenancy" fee interest in the Brennan Tract to defendant Anderson West, LLC (Anderson West), a limited liability company whose managing agent is defendant Miller Holdings, LJ Sutter's general partner.

D. Sutter I lawsuit

In March 2007, South Sutter filed a lawsuit in Sutter County Superior Court against the Leal defendants; the Miller defendants; Miller Holdings' president, Larry L. Miller; and John Nicholson, a representative of LJ Sutter. (The parties refer to this action as Sutter I.) (Sutter County Super. Ct. case No. CV-CS-07-0578.) South Sutter alleged various contract and tort causes of action arising from the Leal defendants' entering into the Miller Option Agreement with the Miller defendants, the Leal defendants' acquisition of the Brennan Tract, and actions taken by the Leal defendants and the Miller defendants that interfered with South Sutter's efforts to develop the Option Property.

To better understand the anti-SLAPP motion before us, it is necessary to review Sutter I's allegations in greater detail. In Sutter I, South Sutter alleged a dispute had arisen between it and the Leal defendants in November 2004, around the time Measure M passed, regarding the amount of Leal's land, including the Other Property, which would be included in the Measure M specific plan area. Leal wanted more of his land developed than was contemplated by Measure M. He specifically wanted some of his Other Property that was located outside the specific plan area to be designated for residential land use. The parties could not reach agreement on this matter. Shortly thereafter, Odysseus Farms and Leal entered into the Miller Option Agreement with LJ Sutter for the Other Property.

Afterward, the Leal defendants and the Miller defendants allegedly took steps to oppose South Sutter's development of the Option Property. In February 2005, they proposed to the County a different boundary and development plan for the specific plan area than the one being proposed by South Sutter and the Measure M group.

In April 2005, Leal refused to sign a consent form on behalf of Odysseus Farms authorizing the Option Property to be within the boundaries of the specific plan area. Leal also called the County Administrator to tell him the Option Property could not be planned without Leal's written consent.

In that same month, Leal and Miller appeared before the County's Public Works/Support Services committee to oppose a funding agreement which the County required the Measure M group to sign. The funding agreement was a precondition for the County to begin work on the specific plan, and it required the Measure M group to reimburse the County for its planning expenses. Miller also spoke with the Director of the County's Services Department (which performs the County's planning functions) and told him that South Sutter did not control the Option Property.

In May 2005, Leal and Miller submitted letters to the Board of Supervisors opposing the approval of the funding agreement. In those letters, Leal and Miller stated South Sutter did not control the Option Property for purposes of the specific plan effort. Miller also testified at the Board's hearing on the funding agreement, and he again stated South Sutter did not control the Option Property for purposes of obtaining entitlements. Undeterred, the Board approved the funding agreement.

In July 2006, South Sutter and the Measure M group submitted their specific plan application to the County, at a cost to them of approximately $6 million. Nearly six months later, the Leal defendants and the Miller defendants submitted on behalf of LJ Sutter a competing specific plan application to the County. The LJ Sutter plan proposed adding more of Leal's Other Property to the specific plan area and removing some 50 acres of South Sutter's Option Property from the plan area. It also proposed different land uses for the Option Property than those proposed by South Sutter in its specific plan application.*fn3

Also in 2006, the Leal defendants, the Miller defendants, and Anderson West consummated their acquisition of the Brennan Tract from the Natomas Basin Conservancy.

South Sutter filed the Sutter I complaint in March 2007. It claimed in Sutter I that all of these actions by the Leal defendants and the Miller defendants constituted contractual breaches and tortious conduct. It sought damages, including punitive damages, as well as declaratory relief.

Specifically, Sutter I accused the Leal defendants of (1) breaching section 12.1 of the Option Agreement, the right to acquire a conservation easement in the Other Property, by entering into the Miller Option Agreement and granting an option in the Other Property to LJ Sutter; (2) breaching section 13.1 of the Option Agreement, the right of first refusal, by acquiring an interest in the Brennan Tract without giving South Sutter its right of first refusal; and (3) breaching section 9.1 of the Option Agreement, the exclusive right to seek development entitlements for the Option Property, by opposing South Sutter's efforts before the County Board of Supervisors and County staff to obtain development entitlements for the Option Property, and in particular by submitting the competing specific plan application.

South Sutter accused the Miller defendants of inducing the Leal defendants to breach the Option Agreement. It also accused all defendants of intentionally interfering with South Sutter's prospective economic advantage. It alleged the Miller defendants committed these torts in part by filing the conflicting specific plan application with the County. It also claimed the Miller defendants made false assertions before the County Board of Supervisors regarding their property interests and in opposing South Sutter's development efforts.

E. Anti-SLAPP motion in Sutter I and motion for attorney fees

In response to Sutter I, the Miller defendants, Miller, and Nicholson on May 14, 2007, filed an anti-SLAPP motion pursuant to Code of Civil Procedure section 425.16.*fn4 They argued they were entitled to relief because Sutter I arose out of their constitutional speech and petition rights. Sutter I attacked them for statements they made to the Board of Supervisors and for filing the competing specific plan application. They also claimed South Sutter could not succeed against them on the merits of the Sutter I complaint.

About one week after the Miller defendants filed their anti-SLAPP motion, South Sutter dismissed the Sutter I complaint as to all parties and without prejudice.

Subsequently, in August 2007, the Miller defendants filed a motion pursuant to section 425.16 to have themselves declared to be the prevailing parties in their anti-SLAPP motion in Sutter I and to recover the attorney fees and costs they incurred from bringing their motion.

Because the trial court had to determine who the prevailing party was on the anti-SLAPP motion in order to resolve the attorney fees motion, the Miller defendants and South Sutter submitted evidence and briefing on the merits of the anti-SLAPP motion.

Although the trial court stated its reference to the merits of the anti-SLAPP motion was only within the context of deciding the attorney fees motion, it nonetheless concluded the Miller defendants were the prevailing parties on the anti-SLAPP motion. They had established the causes of action against them in Sutter I arose from their exercise of constitutional rights to petition the government and to free speech. The court also determined that South Sutter had failed to demonstrate a likelihood of success on the merits. It awarded roughly $65,000 in attorney fees to the Miller defendants.

South Sutter appealed the trial court's attorney fees ruling to our court. (South Sutter, LLC v. LJ Sutter Partners, L.P., C057843) However, in 2008, the parties entered into a settlement agreement, and South Sutter requested we dismiss the appeal. We dismissed the appeal and ordered the remittitur to be issued. The parties did not stipulate to a reversal of the trial court's order or seek our approval of such a stipulation.*fn5

F. Sutter II lawsuit

Meanwhile, back on June 22, 2007, South Sutter filed a new complaint in Santa Clara County Superior Court against the Leal defendants, the Miller defendants, and Anderson West.*fn6 ,*fn7 (Santa Clara County Super. Ct. case No. 107CV088499.) The parties refer to this action as Sutter II. This appeal arises from the trial court's judgment on the Sutter II complaint.

South Sutter filed Sutter II about one month after dismissing Sutter I, about one month after the County rejected the Miller defendants' specific plan application for filing, and about two months before the Miller defendants filed their motion for attorney fees for the anti-SLAPP motion in Sutter I.

In Sutter II, South Sutter omitted its tort causes of action that had been included in Sutter I. It also omitted all of its prior allegations from the Sutter I complaint regarding any activities by defendants opposing South Sutter's development of the Option Property, including any references to the Leal defendants and Miller defendants submitting a competing specific plan application to the Board of Supervisors or County staff. Other than those changes, Sutter II contains no new or additional facts from those alleged in Sutter I.

Sutter II alleged causes of action only for breach of contract against the Leal defendants and for declaratory relief against the Leal defendants, the Miller defendants, and Anderson West. South Sutter alleged that each defendant acted as the agent of every ...


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