Texaco, Inc. v. Ponsoldt

• Decision Date: 25 July 1991
• Docket Number: Nos. 90-55750,90-56088,s. 90-55750
• Citation: 939 F.2d 794
• Parties: TEXACO, INC., Plaintiff-counter-claim-defendant-Appellant, v. William R. PONSOLDT, Defendant-counter-claimant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 794

939 F.2d 794

20 Fed.R.Serv.3d 510

TEXACO, INC., Plaintiff-counter-claim-defendant-Appellant, v. William R. PONSOLDT, Defendant-counter-claimant-Appellee.

Nos. 90-55750, 90-56088.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 4, 1991.

Decided July 25, 1991.

Donald F. Woods, Jr., Dewey Ballantine, Los Angeles, Cal., Mark D. Litvack, White Plains, N.Y., for plaintiff-counter-claim-defendant-appellant.

Laurence D. Strick, Richman, Lawrence, Mann & Greene, Beverly Hills, Cal., for defendant-counter-claimant-appellee.

Appeal from the United States District Court for the Central District of California.

Before D.W. NELSON, O'SCANNLAIN and TROTT, Circuit Judges.

TROTT, Circuit Judge:

Texaco appeals summary judgment in favor of William R. Ponsoldt on multiple claims arising out of an unconsummated land sale. After Ponsoldt failed to close escrow on a ranch located in Santa Barbara, California that he had contracted to purchase, Texaco sued for declaratory relief and specific performance. Failed settlement talks led to a second suit by Texaco for breach of the settlement agreement, fraud, and negligent misrepresentation. Ponsoldt filed counterclaims in both suits, which are still pending. We affirm in part and reverse in part.

I Facts

Texaco and Ponsoldt entered into an agreement under which Ponsoldt agreed to pay $7 million for a large ranch (approximately 3,000 acres) on which Ponsoldt allegedly planned to raise horses. The ranch is known as El Capitan Ranch. Ponsoldt paid a $200,000 deposit to open escrow. The purchase/sale agreement contained a liquidated damages provision that provided:

It is agreed that the seller's sole and exclusive remedy in the event of buyer's default prior to the close of escrow shall be the retention of said deposit [$200,000] as liquidated damages.

The retention of said deposit shall be seller's sole remedy for damages in the event of a default on the part of the buyer, all other claims, damages, expenses, costs and attorneys' fees being expressly waived by seller.

Two lawsuits were filed below based on the purchase/sale agreement, which were consolidated on appeal.

a. The First Action--Breach of the Purchase Agreement

Texaco acquired El Capitan in 1981, and with the purchase assumed an obligation to homeowners in the adjoining subdivision to (1) construct a water system and (2) provide licenses for beach access. A dispute arose as to whether Texaco had performed on these obligations, and the homeowners filed claims against Texaco. Because Texaco was going through Chapter 11 reorganization, two homeowners filed proofs of claim with the bankruptcy court for a total of $3 million. Ponsoldt was informed of these claims. Ponsoldt alleges there were other claims filed against Texaco relating to the El Capitan Ranch that Texaco did not disclose to him. Texaco asserts that it disclosed all potential liability to Ponsoldt, and that Ponsoldt expressly agreed to assume Texaco's obligations relating to the production of water to serve El Capitan Ranch and adjacent properties, as well as providing licenses guaranteeing beach access to the homeowners.

At the closing, Ponsoldt refused to perform, raising the pending homeowners' claims. He filed suit in state court, asserting claims for specific performance, breach of contract, and fraud. He also filed a lis pendens against the property. Texaco filed suit in federal district court on the following day, requesting specific performance and declaratory relief. The state court stayed its action, and Ponsoldt subsequently filed counterclaims against Texaco in the district court for breach of contract, specific performance, bad faith denial of the existence of a contract, breach of the covenant of good faith and fair dealing, fraud, and negligent misrepresentation.

b. The Second Action--Breach of the Settlement Agreement

After the above actions were filed, Texaco and Ponsoldt attempted to resolve the dispute. Texaco entered into a settlement agreement with the homeowners, agreeing to pay for improvements to the water system, record licenses in their favor for beach access, and change the composition of the Board of Directors of the El Capitan Mutual Water Company to increase homeowner representation. Texaco asserts that Ponsoldt agreed to this settlement with the homeowners, to contribute $250,000 toward the payment to the homeowners, to dismiss his claims against Texaco, and to close escrow. Ponsoldt denies this, arguing that Texaco settled with the homeowners without his approval.

After this supposed settlement agreement, Ponsoldt refused to close escrow by paying the balance of the purchase price, or to dismiss his claim for specific performance and expunge the lis pendens. Texaco filed a second action against Ponsoldt, raising claims for breach of the settlement agreement, fraud, and negligent misrepresentation. Ponsoldt counterclaimed for breach of contract, specific performance, fraud, and negligent misrepresentation.

II Procedural History

On April 3, 1989, Ponsoldt moved for summary judgment on Texaco's specific performance claim in the first action, raising the liquidated damages provision as a complete defense. The district court granted the motion, finding that Texaco had specifically waived its right to seek specific performance. Texaco does not appeal this ruling. Five months later, Ponsoldt moved for summary judgment on the declaratory relief claim in the first action, claiming that it was moot because the relief requested was identical to that in the specific performance claim. Ponsoldt simultaneously moved for summary judgment on all claims in the second action, asserting that the settlement agreement was unenforceable under the statute of frauds, and the fraud claims were barred because the agreement was unenforceable.

The district court granted Ponsoldt's motions. It dismissed the declaratory relief claim, holding it was moot because the specific performance claim had been dismissed. The court found that because the settlement agreement affected the disposition of real property, the agreement had to comply with the statute of frauds to be enforceable. Because the agreement was never signed, it was not enforceable. The claims for fraud and negligent misrepresentation were dismissed because the district court concluded they were dependent on the claim for breach of the settlement agreement.

After granting Ponsoldt's motions, the district court certified its judgment for appeal pursuant to Fed.R.Civ.P. 54(b). ¹ Ponsoldt's counterclaims were not ruled upon and are still pending.

III Rule 54(b) Certification

Texaco argues that the district court erred in certifying this appeal because Ponsoldt's pending counterclaims concern the same factual determinations as Texaco's dismissed claims. We disagree with Texaco and affirm.

This panel reviews the certification of an appeal under Rule 54(b) for abuse of discretion. Gregorian v. Izvestia, 871 F.2d 1515, 1520 (9th Cir.), cert. denied, --- U.S. ----, 110 S.Ct. 237, 107 L.Ed.2d 188 (1989). Deference is granted to the district court's decision because it is " 'the one most likely to be familiar with the case and with any justifiable reasons for delay.' " Sheehan v. Atlanta Int'l Ins. Co., 812 F.2d 465, 468 (9th Cir.1987) (quoting Curtiss-Wright Corp. v. General Elec. Co., 446 U.S. 1, 10, 100 S.Ct. 1460, 1466, 64 L.Ed.2d 1 (1980) (citation omitted)).

Rule 54(b) certification is proper if it will aid "expeditious decision" of the case. Sheehan, 812 F.2d at 468. "The Rule 54(b) claims do not have to be separate from and independent of the remaining claims." Id. However, Rule 54(b) certification is scrutinized to " 'prevent piecemeal appeals in cases which should be reviewed only as single units.' " McIntyre v. United States, 789 F.2d 1408, 1410 (9th Cir.1986) (quoting Curtiss-Wright, 446 U.S. at 10, 100 S.Ct. at 1466). The present trend is toward greater deference to a district court's decision to certify under Rule 54(b). Morrison-Knudsen Co. v. Archer, 655 F.2d 962 (9th Cir.1981), which Texaco relies upon extensively, is an outdated and overly restrictive view of the appropriateness of Rule 54(b) certification.

In Continental Airlines v. Goodyear Tire & Rubber Co., 819 F.2d 1519 (9th Cir.1987), we upheld Rule 54(b) certification even though the remaining claims would require proof of the same facts involved in the dismissed claims. Continental Airlines sued McDonnell Douglas Corporation, the seller of a DC-10 airplane, and Goodyear, the supplier of defective tires that caused the DC-10 to crash. McDonnell Douglas was granted partial summary judgment on the basis of an exculpatory clause in the sale contract with Continental. The summary judgment did not reach Continental's claims for fraud or breach of warranty, or for passenger indemnification. In approving the Rule 54(b) certification, the court adopted a "pragmatic approach focusing on severability and efficient judicial administration." Id. at 1525. Even though the summary judgment "eliminated none of the parties and left open potentially full recovery in both of Continental's ultimate areas of loss," the appellate panel approved the lower court's effort to streamline litigation by narrowing the issues for trial, "efficiently separat[ing] the legal from the factual questions." Id.

We find the reasoning of Continental persuasive in the present case. Although the claims disposed of on appeal and the remaining counterclaims require proof of the same facts, the legal issues now appealed will streamline the ensuing litigation. Furthermore, Judge Marshall's rulings separated the legal from the factual questions. As in Continental, certain theories of recovery were eliminated, limiting the issues to be tried below. We hold that the judgment was properly certified for appeal under Rule 54(b).

IV Denial of Leave to Amend

Texaco sought to amend its complaint in the first action to add claims for...