Kramer v. Perdue Foods, LLC
| Docket Number | C096527 |
| Decision Date | 27 October 2023 |
| Parties | SALLY KRAMER, as Successor Trustee, etc., et al., Plaintiffs and Appellants, v. PERDUE FOODS, LLC, Defendant and Appellant. |
| Court | California Court of Appeals Court of Appeals |
NOT TO BE PUBLISHED
This is a breach of contract action arising out of the sale of real property in rural Sacramento County. In 2015, defendant Perdue Foods, LLC (Perdue) purchased a parcel of land from the Suckle Trust[1] for the purpose of operating a commercial scale poultry farm. As part of the purchase and sale agreement (PSA), the Suckle Trust retained the adjacent parcel, which was used for grazing cattle and included a well (Suckle well) that supplied water for the cattle and a mobile home. The terms of the PSA provided that the mobile home would be located on Perdue's parcel, near the new property line. Because the family living in the mobile home would need water, the parties agreed, in section 3.6 of the PSA, to negotiate a separate water service agreement after closing. However, the express terms of section 3.6 of the PSA provided that the separate water service agreement must include five specific terms, including a term requiring Perdue to install a meter to measure its water use, and a term requiring Perdue to pay $1 for each gallon of water it used in excess of 100 gallons per day. Ultimately, the parties did not execute a separate water service agreement as contemplated by the PSA, and the Suckle Trust brought suit against Perdue in 2018 after discovering that Perdue had used a significant amount of water from the Suckle well, including thousands of gallons of water per day during the summer of 2017.
As relevant here, the trial court granted summary adjudication in favor of Perdue in January 2022, leaving the Suckle Trust's breach of contract claim as the only remaining claim. Following a bench trial in March 2022, the court found that Perdue had breached section 3.6 of the PSA. The court awarded the Suckle Trust damages ($1,850,413.68) and prejudgment interest ($832,686.17) in the aggregate amount of $2,683,099.85.
Perdue appeals, arguing that reversal is required because: (1) section 3.6 of the PSA is not enforceable, as it was merely an agreement to negotiate a separate water service contract (2) the Suckle Trust breached the terms of the PSA, thereby "defeating" its breach of contract claim; (3) the trial court erred in rejecting Perdue's mistake of fact defense; (4) the court erroneously excluded an opinion of Perdue's expert; (5) the damages awarded by the court were grossly excessive and improper as a matter of law; and (6) the court erred in awarding the Suckle Trust prejudgment interest.
The Suckle Trust cross-appeals, arguing that the trial court erroneously granted summary adjudication in favor of Perdue on its claims for fraudulent misrepresentation, fraudulent concealment, and breach of the implied covenant of good faith and fair dealing. The Suckle Trust further argues the court erred in determining that punitive damages were not recoverable.
We agree with Perdue that the trial court improperly awarded the Suckle Trust prejudgment interest ($832,686.17). We also find a minor mathematical error in calculating the damages award. We affirm the order granting summary adjudication in favor of Perdue, and affirm with modifications the judgment entered following the bench trial.
We summarize only the pertinent facts. Additional information related to the contentions raised on appeal will be set forth in the Discussion section, post.
Beginning at some point prior to events giving rise to this case, the Suckle family operated a poultry farm on a large parcel of land in Wilton, a rural area in Sacramento County. The family owned three continuous parcels of land that were collectively known as the Suckle Ranch. In addition to the structures for poultry, the Suckle Ranch also included a walnut orchard approximately 440 acres of pasture, and multiple mobile homes that were used by employees working at the ranch. In 1999, the Suckle Trust was created by Marvin and Esther; it included the Suckle Ranch. Before this action was filed, Marvin died and Esther became the sole trustee.
In 2011, Petaluma Acquisition, LLC (Petaluma) entered into a lease agreement with the Suckle Trust to raise poultry on the Suckle Ranch. The lease agreement included a provision granting Petaluma the option to purchase a portion of the Suckle Ranch at a specified price. After Petaluma notified the Suckle Trust of its intention to exercise the purchase option, Petaluma was acquired by Perdue. Thereafter, Petaluma assigned Perdue all of its rights, title, and interest in the purchase option.
In March 2015, the Suckle Trust and Perdue executed a PSA in the amount of $4,030,000. Under the terms of the PSA, which was primarily drafted by Perdue, a new property line was established that divided the Suckle Ranch, with Perdue taking ownership of the western portion of the property, which included the poultry farm and the walnut orchard (Perdue parcel). The Suckle Trust retained the eastern portion of the property, which was used to graze cattle and included a well that supplied water for the cattle and a mobile home (Suckle parcel).[2] The PSA provided that the mobile home, which was approximately 400 feet from the Suckle well, would be located on Perdue's parcel, near the new property line. The utility pole next to the Suckle well supplied power to the well's pump and the mobile home.
During the negotiations of the PSA, Perdue represented that it planned to install a new well to provide water to the mobile home. In connection with this representation, Perdue requested a utility easement from the Suckle Trust, authorizing the installation of an electrical line from the utility pole next to the Suckle well to the Perdue parcel, which would provide electricity for Perdue's new well. Alternatively, Perdue requested a water easement from the Suckle Trust, which would have allowed Perdue to "take whatever water [it] wanted" from the Suckle well. The Suckle Trust, however, made clear that it would not grant Perdue a utility or water easement, as it did not want to encumber the Suckle parcel "in any way, shape or form." As a result, the parties agreed to add section 3.6 to the PSA.
Under section 3.6 of the PSA, the parties agreed to work in "good faith" after closing to "promptly" execute a water service agreement regarding Perdue's use of water from the Suckle well and "appurtenant utilities." Section 3.6 of the PSA expressly provided that the water service agreement had to include five specific terms, including a term requiring Perdue to install a meter to measure its water use in gallons, and a term requiring Perdue to pay $1 for each gallon of water it used in excess of 100 gallons per day. The parties expressly agreed that section 3.6 of the PSA would "survive [c]losing."
It is undisputed that section 3.6 was added to the PSA "relatively late in the process," after it was discovered that the mobile home relied upon water from the Suckle well and electricity from the utility pole next to that well. At the time the PSA was executed, the parties understood that Perdue's use of water from the Suckle well would be a "temporary" or "very short-term" arrangement, which would allow the family living in the mobile home to continue using water from the Suckle parcel until a new well was installed on Perdue's parcel. The parties also understood that water from the Suckle well would only be used for "internal" household purposes (e.g., toilet, sink), and they estimated that the family living in the mobile home would need approximately 50 to 60 gallons of water per day. Because the Suckle Trust wanted to discourage Perdue from using water from the Suckle well, it initially proposed that Perdue pay $2.50 for each gallon of water used in excess of 100 gallons per day. However, the parties ultimately agreed to Perdue's counteroffer to pay $1 for each such overage.
The parties did not enter into a separate water service agreement after the PSA was executed in March 2015.[3]
In May 2015, the parties agreed to delay in executing a separate water service agreement because Perdue planned on installing a new well on its property to provide water to the mobile home, which would be completed and operational within a few months. Perdue told the Suckle Trust that it "no longer need[ed] water" from the Suckle well, "just an electricity easement." In June 2015, Perdue provided the Suckle Trust a map showing the approximate location of the "power line" easement. In October 2015, Perdue provided the Suckle Trust a draft of the utility easement authorizing the installation of an electrical line from the utility pole next to the Suckle well to the Perdue parcel, which would require the installation of a new utility pole on the Suckle parcel.
Several months later, in January 2016, the Suckle Trust advised Perdue that, given Perdue's request for a utility easement, the Suckle Trust was "extremely concerned" that Perdue was using water from the Suckle well and electricity from the utility pole next to the well. The Suckle Trust told Perdue that the PSA does not "provide for a utility easement," and that if Perdue was diverting water from the Suckle well, the parties needed to draft a water service agreement immediately and calculate the amount Perdue owed for prior water usage. The Suckle Trust encouraged Perdue to "submit an offer" if it wanted to "utilize the well and electricity via a utility easement."
The next day, Perdue responded as follows: ...
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