Alameda Belt Line v. City of Alameda

• Decision Date: 04 November 2003
• Docket Number: No. A099429.,A099429.
• Citation: 5 Cal.Rptr.3d 879,113 Cal.App.4th 15
• Court: California Court of Appeals Court of Appeals
• Parties: ALAMEDA BELT LINE, Plaintiff and Respondent, v. The CITY OF ALAMEDA, Defendant and Appellant.

5 Cal.Rptr.3d 879

113 Cal.App.4th 15

ALAMEDA BELT LINE, Plaintiff and Respondent, v. The CITY OF ALAMEDA, Defendant and Appellant.

No. A099429.

Court of Appeal, First District, Division 5.

November 4, 2003.

Review Denied January 28, 2004.

Douglas Y. Dang, Oakland, Dang and Trachuk; Carol A. Korade, City Attorney (Alameda), for Defendant and Appellant.

Benjamin B. Salvaty, Dean E. Dennis, William M. Bitting, and Robert P. Silverstein, Los Angeles, Hill, Farrer & Burrill for Plaintiff and Respondent.

STEVENS, J.

Appellant the City of Alameda contends the trial court improperly held on summary judgment that a repurchase option in a written contract was not sufficiently definite to be enforceable under the statute of frauds. This appeal raises an issue as to whether extrinsic or parol evidence coming into existence after the execution of a written agreement may be considered in order to satisfy the statute of frauds, and render the agreement sufficiently certain to be enforceable. We conclude such evidence may be considered, and we therefore vacate the trial court's orders, and remand for further proceedings.

I. FACTS AND PROCEDURAL HISTORY

In 1918, the City of Alameda (City) constructed a municipal belt line railroad along Clement Avenue, between Pearl and Grand Street, to serve the newly developing northern industrial area of the City. Six years later, the City council formed a committee to investigate and make recommendations for extending the belt line to serve a large scale project involving California Packing Corporation and Alaska Packers Association, as well as other future industrial development. The committee recommended a separate belt line company be formed to take over the existing municipal railway, and to immediately extend it westerly to Webster Street, and further west as industry expanded.

On September 16, 1924, the City enacted ordinance No. 259 N.S. (new series), setting forth an agreement to sell the railroad to the Western Pacific Railroad Company and The Atchison, Topeka and Sante Fe Railway Company, provided the two railway companies organized a corporation known as the Alameda Belt Line (hereafter ABL) for the purposes of owning and operating the municipal belt line railroad.

The parties formally executed the agreement on December 15, 1924, whereby the City agreed to sell the railroad to ABL for the sum of $30,000. Paragraph 14 of the agreement, which is at issue here, gave the City an option to repurchase the belt line railroad. It provided:

Said City shall have the right at any time hereafter to purchase said belt line railroad including all extensions thereof, for a sum equal to the original cost, together with the cost of any and all additional investments and extensions made therein by said ALAMEDA BELT LINE, provided, that said City shall give at least one year's previous notice of its intention so to do by ordinance to that effect; and provided that at the same time it purchases from the parties of the first part, or either of them as the case may be, the branch railroad, extensions and spur tracks referred to in the twelfth section hereof. [¶] It is agreed that said ALAMEDA BELT LINE will keep an accurate account of the cost of additional investments and extensions, and file a verified report thereof annually with the City Clerk of said City, similar to the report filed with the Railroad Commission. It is further agreed and understood that the term `investments' as herein used shall not include the cost of upkeep and repairs.

On October 6, 1999, the City staff filed a report with the Mayor of Alameda informing him that ABL had been cutting back operations and selling off parcels of its property. The report made specific reference to a 22-acre rail storage yard that ABL was in the process of selling for about $18 million. The staff believed the fair market value of this property alone was significantly more then the original $30,000 that ABL paid the City for the railroad, plus the cost of all investments and extensions they made subsequent to the original purchase. Based on the staff recommendation, the Alameda City Council passed ordinance No. 2817 N.S. on November 2, 1999, giving notice to ABL that the City intended to exercise its option to repurchase the railroad and all extensions thereof on December 4, 2000, pursuant to the requirements of paragraph 14 of the parties' 1924 agreement.

ABL responded to the 1999 ordinance by filing this lawsuit for injunctive relief, declaratory relief, and inverse condemnation. The City filed an amended cross-complaint, seeking a declaration that paragraph 14 gave the City a valid present contractual right to repurchase the railroad and all of its extensions.

In January 2002, both ABL and the City filed cross-motions for summary adjudication as to their causes of action for declaratory relief. ABL sought a declaration that paragraph 14 was unenforceable on the grounds that the option lacked sufficient specificity to comply with the statute of frauds, and that the fixed price option would be an illegal restraint on alienation. On the other hand, the City sought a declaration that paragraph 14 was enforceable.

On April 11, 2002, the trial court issued orders granting ABL's motion and denying the City's motion on the same grounds. The court ruled as a matter of law that the repurchase option in paragraph 14 was not sufficiently definite to be enforceable under the statute of frauds. After judgment was entered, the City filed this appeal.

II. DISCUSSION

A. STANDARD OF REVIEW

In reviewing an order granting summary judgment, we conduct an independent review to determine whether there are triable issues of material fact, and whether the moving party is entitled to judgment as a matter of law. (Code Civ. Proa, § 437c, subd. (c); Ochoa v. Pacific Gas & Electric Co. (1998) 61 Cal.App.4th 1480, 1485, 72 Cal.Rptr.2d 232.) We must construe the moving party's evidence strictly, and the nonmoving party's evidence liberally, in determining whether triable issues are present. (See D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 20, 112 Cal.Rptr. 786, 520 P.2d 10; Lee v. Electric Motor Division (1985) 169 Cal.App.3d 375, 382, 215 Cal.Rptr. 195.)

B. THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT BASED ON THE STATUTE OF FRAUDS.

The trial court ruled on summary judgment that the option to repurchase in the parties' written contract was not sufficiently certain to survive the requirements of the statute of frauds. In addressing this legal ruling, we must first review relevant legal principles related to the statute of frauds, and general rules regarding the admission of parol or extrinsic evidence in interpretation of written contracts. Then, we must determine whether parol or extrinsic evidence coming into existence after the execution of an agreement may be considered, to make the contract terms sufficiently certain for enforcement.

1. The Statute of Frauds and Parol Evidence

The statute of frauds requires contracts and options for the sale of real property to be in writing. (Civ.Code, § 1624.) "To satisfy the statute of frauds, the memorandum affecting the sale of real property must so describe the land that it can be identified with reasonable certainty." (Beverage v. Canton Placer Mining Co. (1955) 43 Cal.2d 769, 774, 278 P.2d 694 (Beverage).) If one party to the contract is a municipality, as is the case here, an ordinance may also be construed as a memorandum. (American-Hawaiian Steamship Co. v. Home Sav. and Loan Assn. (1974) 38 Cal.App.3d 73, 80,112 Cal.Rptr. 897.)

It is preferable that the writing disclose a description which is itself definite and certain, but this is not always required in order to satisfy the statute of frauds. (Beverage, supra, 43 Cal.2d at p. 774, 278 P.2d 694.) A description fulfills the test of reasonable certainty if it furnishes the "means or key" by which the description may be made certain and identified with its location on the ground. (Ibid.) In this regard, "[c]ourts have been most liberal in construing executory contracts for the sale of real estate and have sought, as far as is consistent with the above established rules, to give effect to the intention of the parties in applying descriptions to property." (Id. at p. 775, 278 P.2d 694.)

In addition to the statute of frauds, the present appeal implicates the general rules regarding consideration of parol evidence. Parol evidence is admissible to identify the property mentioned in a written agreement; however, it has been held that such evidence may not be used to supply a description that the parties entirely omitted from the writing. (Ganiats Construction, Inc.. v. Hesse (1960) 180 Cal. App.2d 377, 384, 4 Cal.Rptr. 706 (Ganiats).)

2. The Statute of Frauds Does not Bar Consideration of Extrinsic or Parol Evidence Coming into Existence After the Execution of the Agreement to Show the Boundaries of the Lands in Question.

The 22-acre rail yard at the heart of this dispute was not owned by either party in 1924, and was not specifically described in the initial repurchase option entered into by the City and ABL. The critical legal issue presented, therefore, is whether the statute of frauds bars admission of parol or extrinsic evidence showing a delineation of the property that occurred after execution of the contract. (See Beverage, supra, 43 Cal.2d at p. 774, 278 P.2d 694.)

ABL maintains that the statute of frauds only permits the use of parol or extrinsic evidence to describe property that was in the seller's possession at the time the agreement was executed. ABL however fails to bring to our attention any authority specifically endorsing or addressing this legal argument, and the City has also been unable to find any such authority. Instead, ABL simply argues it would be inconsistent with the statute of frauds to use extrinsic or parol evidence in identifying property that was to be acquired after the signing of the written...