Stanford Ranch, Inc. v. Maryland Cas. Co.

Decision Date15 July 1996
Docket NumberNo. 95-15549,95-15549
Citation1996 WL 391774,89 F.3d 618
Parties96 Cal. Daily Op. Serv. 5212, 96 Daily Journal D.A.R. 8427 STANFORD RANCH, INC., a California corporation, Plaintiff-Appellant, v. MARYLAND CASUALTY COMPANY, Defendant-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

Patrick Markham, Law Offices of Patrick Markham, Sacramento, California, for plaintiff-appellant.

James C. Nielsen, Wright, Robinson, McCammon, Osthimer & Tatum, San Francisco, California, for defendant-appellee.

Appeal from the United States District Court for the Eastern District of California; David F. Levi, District Judge, Presiding; CV-94-01578-DFL.

Before: T. G. NELSON and TASHIMA, Circuit Judges, and BURNS, * District Judge.

OPINION

T.G. NELSON, Circuit Judge:

Stanford Ranch, Inc., ("Stanford") brought suit against Maryland Casualty Company and Northern Insurance Company of New York 1 (collectively "Maryland") claiming breach of insurance contracts and breach of the implied covenant of good faith and fair dealing. The parties cross-moved for summary judgment, and the district court granted the motion in favor of Maryland and denied the motion of Stanford. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.

FACTS AND PROCEDURAL HISTORY
A. The Underlying Lawsuits

Stanford is a developer of a master-planned community in Rocklin, California. Stanford, acting as master developer, subdivides the development and sells large tracts of land to other developers ("sub-developers") for separate development. Three such sub-developers, Prudential Development Company, Centex Real Estate Corporation and Covington Homes, Northern California (collectively "claimants"), filed actions in state court against Stanford ("underlying lawsuits"). All three underlying lawsuits allege actions for specific performance, breach of contract, intentional misrepresentation, negligent misrepresentation and nondisclosure.

1. Prudential Development Action

According to the fourth amended complaint in Prudential Development Co. v. Stanford Ranch, Inc., Placer County Superior Court No. 83239, in April of 1988, Prudential entered into an agreement for the purchase and sale of real property in the Stanford Ranch Development, identified as Parcel 17, Phase II ("purchase property"). The agreement requires Stanford to use its best efforts to secure governmental approvals of "(a) a lawful land-division which would create a legal parcel for recordation and transfer of legal title to PRUDENTIAL, and (b) a permit from the Army Corps of Engineers authorizing the filling of wetlands on the development property pursuant to Section 404 of the Clean Water Act (33 USC 1344)." If Stanford's best efforts did not result in the necessary approvals by July 15, 1988, the closing date of escrow would be extended.

The complaint alleges that both before and after the agreement was entered into, Stanford represented to Prudential that it would be able to obtain the necessary governmental approvals by the July 15 deadline.

On May 13, 1988, Prudential and Stanford entered into an amendment to the purchase agreement which requires Stanford to deliver a preliminary title report regarding the purchase property within five days of recordation of the final parcel map. Prudential alleges that escrow is not to close until this title report is delivered.

Prudential's complaint also alleges a series of misrepresentations and concealments with respect to the original agreement relating to the wetlands permits. Prudential claims that Stanford filled in a portion of wetlands on the Stanford Ranch Development in violation of Section 404 of the Clean Water Act before the agreement was entered into; 2 that Stanford misrepresented the amount of wetlands subject to application for a Section 404 permit; and that Stanford knew or should have known that it could not obtain a permit from the United States Army Corps of Engineers ("Corps") by the July 15 closing date due to its unauthorized and undisclosed filling of the wetlands.

Stanford advised Prudential for the first time, in a letter dated June 3, 1988, that it "might not be able to obtain the needed governmental approvals by July 15, 1988," and "that it was unable to close escrow because of 'unanticipated' demands caused by the City of Rocklin."

Prudential claims that on June 30, 1988, Stanford advised Prudential that "the Section 404 permit had been issued and would be received 'momentarily.' " However, Prudential alleges that on July 5, 1988, Stanford informed Prudential that, "in fact, no Section 404 permit had issued. STANFORD then assured PRUDENTIAL that everything would still work out and that PRUDENTIAL should not worry because STANFORD would still honor the Agreement."

Prior to the July 15 closing date, Stanford proposed an extension of closing to August 15, which "the parties ultimately extended to November 15, 1988." When the parties attempted to put the extension in writing, Prudential alleges that "STANFORD insisted that PRUDENTIAL agree to a number of material modifications," including "elimination of any duty on STANFORD's part to obtain the governmental approvals, and elimination of the Amendment extending the close of escrow for STANFORD's delivery of the preliminary title report to PRUDENTIAL." Prudential refused to modify the agreement as requested.

On September 30, 1988, Stanford sent a letter to Prudential stating that Stanford was terminating the agreement. Prudential alleges that Stanford's motive for repudiating the agreement was to force Prudential "to re-negotiate the purchase and sale of the Purchase Property at a price more favorable to STANFORD, or to put the property back on the market at a higher price."

Based on the foregoing, Prudential asserts claims for specific performance; declaratory relief regarding Stanford's continuing obligation to perform under the contract; breach of contract; breach of the covenant of good faith and fair dealing; intentional misrepresentation; negligent misrepresentation; and nondisclosure.

2. Centex Real Estate Action

According to the third amended complaint in Centex Real Estate Corp. v. Stanford Ranch, Inc., Placer County Superior Court No. 83221, Centex entered into a written sales contract with Stanford on or about January 22, 1988, for the purchase of real property known as Parcel 11, Phase II, of the Stanford Ranch Development ("purchase property"). Under the agreement, Stanford is required to use "good faith and due diligence to obtain approval of a tentative subdivision map ('tentative map') for the property from the City of Rocklin by July 1, 1988." If Stanford "failed to diligently process the tentative map for approval, [Centex] had the option to extend the closing to at least January 1, [1989,] by giving written notice of such extension to Stanford Ranch on or before July 11, 1988."

Centex alleges that Stanford became aware in or about March 1987 that its Phase II project contained wetlands falling under the jurisdiction of the Army Corps of Engineers, "and that prior to the filling of wetlands and development of the property, an appropriate permit would need to be obtained pursuant to Section 404 of the Clean Water Act." Centex also alleges that Stanford was aware that it had to obtain this permit before it could obtain a large parcel map and sell the property.

Centex alleges that by June 1987, Stanford was aware that it had filled in wetlands in violation of Section 404 and that it needed to obtain an appropriate permit from the Corps. Centex also alleges that from November 1987, until the contract was entered into on January 22, 1988, Stanford "failed to disclose, actively concealed, and misrepresented these facts to [Centex]...."

In or about January 1988, the Corps discovered that Stanford had been filling in wetlands unlawfully and without the required Section 404 permit. In or about February 1988, the Corps issued a cease and desist order to prevent further impact on the wetlands.

Stanford disclosed to Centex for the first time on June 3, 1988, that it might not be able to obtain the needed approvals in order to close escrow by July 1, 1988, due to "unanticipated demands by the City of Rocklin." On June 29, 1988, Centex extended the closing date to December 30, 1988. However, on July 6, 1988, Stanford allegedly repudiated the agreement. On August 4, 1988, and September 22, 1988, Centex alleges that it communicated to Stanford that the contract remained valid. Stanford refused to modify its position.

Based on the foregoing, Centex asserts claims for specific performance; breach of contract; breach of implied covenant of good faith and fair dealing; negligent misrepresentation; intentional misrepresentation; and material nondisclosure.

3. Covington Homes Action

According to the fifth amended complaint in Covington Homes, Northern California v. Stanford Ranch, Inc., Placer County Superior Court No. 83185, Covington and Stanford entered into a written agreement for the purchase and sale of Parcel 12, Phase II, of the Stanford Ranch Development ("purchase property") on May 26, 1987. The escrow was originally scheduled to close on August 3, 1987. From time-to-time, Covington exercised its right under the agreement to extend the closing date.

On November 19, 1987, Covington and Stanford modified the agreement, to require Stanford to "comply, if required, with Section 404 of the Clean Water Act and provide [Covington] with proof of compliance prior to the close of escrow." Stanford further warranted and covenanted in the modification "that the Purchase Property was free of wetlands and vernal pools."

Covington alleges that from May 1987 to June 1988, Stanford represented that it was diligently pursuing the Government approvals necessary to complete the sale. Covington also alleges that Stanford was subject to a cease-and-desist order from the Corps in February 1988. On or about June 3, 1988, Stanford...

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