The opinion of the court was delivered by: Honorable Larry Alan Burns United States District Judge
ORDER DENYING AS MOOT MOTION TO AMEND COMPLAINT; AND ORDER OF JUDGMENT
This case was tried to the Court without a jury. After all the evidence was presented and argument heard from both sides, the Court delivered its verdict from the bench. At that time, the Court explained that the oral verdict was a summary, and would be supplemented by a written decision setting forth the Court's findings of fact and conclusions of law. The Court now does so.
This case was originally assigned to Judge Thomas J. Whelan, but was reassigned to Judge Larry A. Burns after Judge Whelan's recusal. As explained at trial, the Court saw no reason to revisit Judge Whelan's earlier rulings, which are law of the case. The Court went beyond this, mentioning its agreement with Judge Whelan's determination. The Court is sitting in diversity, and applies California substantive law.
Joseph and Machelle Cardenas, and Robertson Whittemore own residential property in La Jolla, California. Their lots are adjacent and enjoy an ocean view. Together with three other lots, they form the Ocean Front Terrace subdivision. Beginning in 1950, the subdivision was subject to a recorded Declaration of Restrictions created and recorded by Alice Ewing, who owned the land out of which the subdivision was created. The Declaration's terms provided that the restrictions could not be cancelled for approximately 40 years. But after that time, and in the future, they could be cancelled if owners of a majority of the lots agreed to do so and followed a prescribed procedure.
The former owner of the Cardenas' house, Warner Lusardi, testified, as did the Cardenas' and Whittemore's neighbor Richard Sulpizio, that they and a third neighbor signed a termination of restrictions in 2005. They knew at the time Whittemore was interested in adding rather than eliminating restrictions, so they did not ask him to participate in their discussions about the termination. The termination was recorded on May 10, 2005.
Whittemore's primary interest in restrictions concerned lateral views towards the ocean and beach. The Declaration concerned itself with views, but also other issues, including the appearance and design of the houses that could be built on the lots. The evidence showed that every house in the subdivision materially violated the restrictions, and at least one material violation (a flat garage roof on the property Whittemore now owns) began in the early 1950s. The restrictions called for an architectural jury before the construction of any house, but it was uncontested this requirement was never observed by any of the owners.
Declaratory Relief: Whether the Declaration of Restrictions Was Still in Force
Whether the Declaration Was Effectively Terminated
The Declaration of Restrictions was admitted as Plaintiff's Exhibit U. In its entirety, the document is two pages long. It includes no provision for amending the restrictions. The only provision for making any change was the termination provision set forth in section V. That provision reads, in its entirety:
That the foregoing restrictions and covenants shall terminate and be of no further force and effect after January 1, 1990, but will automatically be renewed thereafter for successive periods of ten years unless the owners of fifty-one per cent (51%) of the above described parcels of real property shall file a protest or relinquishment of restrictions in the Office of the County Recorder, within the year preceding the year 1989 or any other successive date, as provided herein.
Uncontested evidence showed that the owners of 60% of the parcels signed and filed a termination of the restrictions in 2005. The Court concludes this termination amounts to a "protest or relinquishment of restrictions" so, if it meets the provision's other requirements, it would have terminated the restrictions.
Because Judge Whelan ruled that this provision was ambiguous (a determination the Court agrees with), extrinsic evidence was received to shed light on the parties' intent. Because the Court is both the arbiter of law and the trier of fact here, it decides both the factual issue (what the ambiguous term means) and the legal issue, what the contract means. See City of Santa Clara v. Watkins, 984 F.2d 1008, 1012 (9th Cir. 1993) ("The interpretation of contracts under California law involves a complex interplay of questions of fact and questions of law.")
The continuation of the restrictions for the original 40-year period is unambiguous: they were to remain in place and to bind the property owners from the effective date in 1950 until January 1, 1990. If a majority of the ownership filed a termination "within the year preceding the year 1989," i.e., during 1988, the restrictions would be of no effect after January 1, 1990. This created a one-year termination window (the year 1988), followed by a "dead" year (1989), and then by either termination on January 1, 1990 or by automatic renewal of the restrictions for a successive ten year period. When it comes to the later ...