Llc v. Lakes

Decision Date23 March 2011
Docket NumberNo. C059239.,C059239.
Citation120 Cal.Rptr.3d 797,191 Cal.App.4th 435
CourtCalifornia Court of Appeals Court of Appeals
PartiesMAMMOTH LAKES LAND ACQUISITION, LLC, Plaintiff and Respondent, v. TOWN OF MAMMOTH LAKES, Defendant and Appellant.

APPEAL from a judgment of the Superior Court of Mono County, Roger D. Randall, Judge.* Affirmed.

Law Office of Peter E. Tracy and Peter E. Tracy, Bishop; Morrison & Foerster, Edgar B. Washburn, Maria Chedid, Shaye Diveley, and Anton A. Ware, San Francisco, for Defendant and Appellant.

Meyers, Nave, Riback, Silver & Wilson, Steven R. Meyers, Julia L. Bond, and Peter S. Hayes, Oakland, for League of California Cities and California State Association of Counties as Amici Curiae on behalf of Defendant and Appellant.

Quinn Emanuel Urquhart & Sullivan, Daniel L. Brockett, John M. Pierce, Los Angeles, and Daniel H. Bromberg for Plaintiff and Respondent.

NICHOLSON, J.

Defendant Town of Mammoth Lakes (the Town) entered into a development agreement with Terrence Ballas to make improvements at the Town's airport and to build a hotel or condominium project at the airport. Ballas would initially lease the land for the hotel/condominium project but would later have the option to purchase it. Plaintiff Mammoth Lakes Land Acquisition, LLC (Developer), later acquired from Ballas the right to build the hotel or condominium project.

The Town eventually changed its priorities and no longer wanted the hotel/condominium project. The Town sought help from the Federal Aviation Administration (FAA) to eliminate the Developer's ability to build the hotel/condominium project. The FAA objected to the hotel/condominium project and threatened to cut off federal funding for the airport. However, the Developer demanded that the Town move forward with the hotel/condominium project as contemplated in the development agreement. Despite the demand, the Town refused to move forward unless the parties could resolve the FAA's objections.

Claiming the Town repudiated the development agreement, the Developer sued the Town for anticipatory breach of contract. A jury found that the Town breached the development agreement and awarded $30 million in damages to the Developer. Later, the trial court awarded $2,361,130 in attorney fees to the Developer.

On appeal, the Town contends that the judgment must be reversed because (1) the Developer could not recover in a breach of contract cause of action because it failed to exhaust its administrative remedies, (2) even if contract remedies are available, three clauses of the development agreement give theTown a complete defense, (3) the Developer failed to establish a repudiation of the development agreement, (4) the evidence of damages was too speculative to support the verdict, and (5) the attorney fees award must be reversed along with the judgment. None of the Town's contentions has merit.

The Developer was not restricted to pursuing the administrative remedies available through the Town's land use application process because the Town violated the development agreement by refusing to move forward with the hotel/condominium project unless the FAA's objections were resolved. Therefore, the judicial remedy is a breach of contract action based on the Town's executive decision notto move forward as required by a contract, not an administrative mandamus action to review a quasi-judicial decision of the Town concerning a land use application. Also, a breach of contract action is appropriate because damages for anticipatory breach of the development agreement are not available in an administrative mandamus action.

With respect to the defenses asserted by the Town based on the language of the development agreement, none requires reversal of the judgment. A clause excusing performance of the development agreement because of governmental restrictions is unhelpful to the Town because those restrictions were under the Town's control. Another clause requiring the parties to comply with the rules and regulations of the FAA did not excuse the Town from performing on the development agreement because the FAA's objections were based on grant assurances made by the Town to obtain FAA funding, not on FAA rules or regulations. And the third clause is likewise unhelpful to the Town. It required the Developer to provide matching funds for the FAA's funding. Contrary to the Town's assertion, providing matching funds did not signal the Developer's consent to the FAA restrictions because the evidence established that the Developer neither knew nor ought to have known about the restrictions when providing the matching funds.

The Town asserts that the Developer failed to establish a breach of the development agreement because (A) the Developer failed to establish a breach attributable to the Town; (B) the evidence was insufficient to establish repudiation; (C) the purchase option for the land under the hotel/condominium project was a unilateral contract not yet ripe for breach; and (D) the Town retracted any repudiation. The Developer established a breach attributable to the Town by evidence of the actions of town officials, acting within their authority. Those actions constituted repudiation of the development agreement because they insisted on resolution of the FAA's objections before moving forward with the development agreement, which resolution was not a condition for performance in the development agreement. Although the development agreement included a purchase option for the land under the hotel/condominium project, the breach was of the development agreement,which was not a unilateral contract. And, despite the claims of town officials that they were willing to move forward with the hotel/condominium project, their actions established that they did not retract the repudiation of the development agreement.

The evidence of damages in the form of lost profits came from three sources: an experienced appraiser of hotel and resort projects, one of the investors in the Developer, and the town manager. Considering the evidence in the light most favorable to the verdict, the evidence of damages was not too speculative to support the $30 million damages award.

And finally, the Town's contention that the award of attorney fees must be reversed is without merit because the Town's sole argument for reversal of the attorney fees award is that it was based on the Developer's status as the prevailing party. The award of attorney fees is valid because we do not reverse the judgment and the Developer remains the prevailing party.

We affirm the judgment and the award of attorney fees.

HISTORY OF DEVELOPMENT AGREEMENTS

A development agreement is a statutorily-authorized agreement between a municipal government (here, the Town) and aproperty owner for the development of the property. (Gov.Code, § 65865, subd. (a).) One of the main components of a development agreement is a provision freezing the municipality's rules, regulations, and policies governing permitted uses of land and density of the land use, as well as standards and specifications for design, improvement, and construction. (Gov.Code, § 65866.) This provision allows a developer to make long-term plans for development without risking future changes in the municipality's land use rules, regulations, and policies. ( Santa Margarita Area Residents Together v. San Luis Obispo County Bd. of Supervisors (2000) 84 Cal.App.4th 221, 227, 100 Cal.Rptr.2d 740 ( SMART ).)

The development agreement must be approved by ordinance and is, therefore, a "legislative act." (Gov.Code, § 65867.5, subd. (a).) Because the development agreement is approved by ordinance, it is subject to referendum, which allows the electorate to overturn approval of the agreement. ( Ibid.) While, as a legislative act, a development agreement can be disapproved by referendum, an unchallenged development agreement is an enforceable contract between the municipality and the developer. Depending on its terms, it may create vested rights in the Developer with respect to land use. ( See SMART, supra, 84 Cal.App.4th at p. 230, 100 Cal.Rptr.2d 740 [development agreement creates commitments to developers].)

After approval by ordinance, the development agreement is enforceable despite subsequent changes in the municipality's land use laws. (gov.code, § 65865.4.) the development agreement may be amended or cancelled only by mutual consent of the parties to the agreement. (Gov.Code, § 65868.)

The Legislature enacted the development agreement statutes in response to the California Supreme Court's jurisprudence on vested rights.

Before 1976, developers in California faced changes in land use laws and policies during the course of long-term development of property. When a change in the land use laws and policies interfered with development already initiated, some developers argued that they had a "vested right" to complete the development despite the changes in the land use laws and policies. It was "the rule in this state and in other jurisdictions that if a property owner has performed substantial work and incurred substantial liabilities in good faith reliance upon a permit issued by the government, he acquires a vested right to complete construction in accordance with the terms of the permit. [Citations.]" ( Avco Community Developers, Inc. v. South Coast Regional Com. (1976) 17 Cal.3d 785, 791, 132 Cal.Rptr. 386, 553 P.2d 546 ( Avco ).)

In 1976, the California Supreme Court, in Avco, decided that no right to complete the work vested until the developer obtained a building permit, even if the developer had already performed substantial work and incurred substantial liabilities on the project. ( Avco, supra, 17 Cal.3d at p. 793, 132 Cal.Rptr. 386, 553 P.2d 546.) The court noted that any change in this common law principle would have to come from the Legislature. ( Id. at p. 796, 132 Cal.Rptr. 386, 553 P.2d 546.)

In 1979, the Legislature's enactment of the development agreement statu...

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  • Llc v. Lakes
    • United States
    • California Court of Appeals
    • 23 Marzo 2011
    ...191 Cal.App.4th 435120 Cal.Rptr.3d 79710 Cal. Daily Op. Serv. 562011 Daily Journal D.A.R. 92MAMMOTH LAKES LAND ACQUISITION, LLC, Plaintiff and Respondent,v.TOWN OF MAMMOTH LAKES, Defendant and Appellant.No. C059239.Court of Appeal, Third District, California.Dec. 30, 2010.Review Denied Marc......

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