Red Mountain v. Fallbrook Pud

• Decision Date: 25 September 2006
• Docket Number: No. D044546.,D044546.
• Citation: 48 Cal.Rptr.3d 875,143 Cal.App.4th 333
• Court: California Court of Appeals Court of Appeals
• Parties: RED MOUNTAIN, LLC., Plaintiff, Cross-defendant and Respondent, v. FALLBROOK PUBLIC UTILITY DISTRICT, Defendant, Cross-complainant and Appellant. Fallbrook Public Utility District, Plaintiff and Appellant. v. Red Mountain, LLC., Defendant and Respondent.

48 Cal.Rptr.3d 875

143 Cal.App.4th 333

RED MOUNTAIN, LLC., Plaintiff, Cross-defendant and Respondent, v. FALLBROOK PUBLIC UTILITY DISTRICT, Defendant, Cross-complainant and Appellant.

Fallbrook Public Utility District, Plaintiff and Appellant. v. Red Mountain, LLC., Defendant and Respondent.

No. D044546.

Court of Appeal, Fourth District, Division 1.

September 25, 2006.

Asaro, Keagy, Freeland & McKinley, Richard R. Freeland, Steven A. McKinley and Charles F. Campbell, Jr., San Diego, for Plaintiff and Respondent.

Best, Best & Krieger, Bruce W. Beach, Shawn Hagerty, San Diego, Sachse, James & Lopardo and Stephen V. Lopardo, Fallbrook, for Defendant and Appellant.

OPINION ON REHEARING

AARON, J.

Red Mountain, LLC., (Red Mountain) owns undeveloped land adjacent to a drinking water reservoir (the reservoir) and surrounding property owned by Fallbrook Public Utilities District (Fallbrook). Red Mountain sued Fallbrook for breach of contract, specific performance, and inverse condemnation based on Fallbrook's refusal to perform a written agreement to convey to Red Mountain a 60-foot easement for ingress and egress (the access easement) across Fallbrook's property. Fallbrook filed a cross-complaint to quiet title and for declaratory and injunctive relief, in which it alleged that approximately 127 acres of Red Mountain's property was encumbered by a nonexclusive "sanitary easement" (the sanitary easement), which entitled Fallbrook "to patrol, control and maintain sanitary conditions" in the easement area in order to keep the reservoir water free from contamination. Fallbrook alleged that the easement precluded Red Mountain from developing the land within the easement area.

While this litigation was pending, Fallbrook filed an eminent domain complaint against Red Mountain condemning a 134.24 acre parcel of land that included all or most of the sanitary easement area.¹ Fallbrook also condemned any and all rights Red Mountain might have had to the 60-foot access easement. The two actions were consolidated and, following a bifurcated trial, the trial court entered judgment pursuant to a jury verdict that awarded Red Mountain damages of $1,464,928 for breach of contract and inverse condemnation, and compensation of $872,560 for the direct taking in eminent domain. After it entered judgment, the trial court awarded Red Mountain attorney fees and other litigation expenses under Code of Civil Procedure sections 1036 and 1250.410.

Fallbrook appeals from the judgment, contending that the trial court committed reversible error by (1) failing to construe the access easement in a manner consistent with the undisputed evidence, and with Civil Code section 1069; (2) relocating the access easement and failing to limit the scope of the easement to Red Mountain's personal ingress and egress; (3) failing to interpret the scope of the sanitary easement pursuant to Fallbrook's declaratory relief cause of action; (4) determining that Fallbrook was liable for inverse condemnation; (5) admitting evidence of speculative damages; (6) incorrectly instructing the jury and refusing certain jury instructions that Fallbrook requested; (7) refusing Fallbrook's request to include questions regarding Fallbrook's contract defense of impossibility or impracticability of performance in the special verdict form, and failing to ensure that the verdict form protected against duplicative damages; and (8) awarding Red Mountain attorney fees and litigation expenses under Code of Civil Procedure section 1250.410. We reverse the judgment and the order awarding litigation expenses.

FACTUAL AND PROCEDURAL BACKGROUND

In 1949, Frank and Lucille Capra sold 53 acres of land to Fallbrook to be used for the construction of a dam and reservoir. The contract between Fallbrook and the Capras (the 1949 agreement) included the following provision creating the sanitary easement:

"[The Capras] also grant to [Fallbrook] a non-exclusive easement over the area of the water-shed lying back of the dam to be constructed by [Fallbrook], which area consists of approximately 127 acres, for the purpose of enabling [Fallbrook] to patrol, control and maintain sanitary conditions thereon necessary and adequate to keep the water stored in [the] reservoir pure, wholesome, potable and free from contamination from [the] surrounding water-shed area and to enable [Fallbrook] at all times to comply with the Public Health Laws of the State of California and the rules and regulations of the State Board of Public Health; it being agreed that nothing herein contained shall be deemed to prevent [the Capras] having free and ready access to [the] 127 acres."

In 1977, the Capras sold approximately 710 acres of land adjacent to the reservoir to a group of buyers consisting of James Walter Chaffin and his wife Nola Belle Chaffin, John Roy Chaffin and his wife Mary Lee Chaffin, and Dr. Frederick E. Jackson and his wife Margaret J. Jackson (the Chaffin/Jackson group). The Chaffin/Jackson group immediately transferred approximately 109 of those acres to another group of buyers and planned to develop the remaining land (the Red Mountain Ranch property) into homesites.

In February 1978, Fallbrook notified James Chaffin by letter that it required approximately 18 acres of additional land north of the reservoir for future water storage and treatment. Fallbrook offered to purchase the land for $3,500 per acre "excluding reserved road easement areas[,]" and proposed that the "[o]wner may reserve a 50 foot easement on [the] east and west boundaries of the parcel." The Chaffin/Jackson group proposed certain conditions to its sale of the 18-acre parcel, one of which was that Fallbrook agree "to grant seller a 60-foot easement over the existing road on the west sides [sic] of the parcel being conveyed . . . ." Another was that the 60-foot easement "be sufficient in scope and magnitude to meet the subdivision requirements of San Diego County and will be granted to sellers or their successors in interest upon 90 days notice at any future time."

At a meeting of Fallbrook's board of directors on August 14, 1978, which James Chaffin, Dr. Jackson and their attorney attended, the board approved most of the conditions the Chaffin/Jackson group had proposed. However, the board voted to delete the condition that the access easement "be sufficient in scope and magnitude to meet the subdivision requirements of San Diego County." James Chaffin and Dr. Jackson agreed to the terms that the board approved.

On August 30, 1978, the parties signed escrow instructions setting forth the terms of their agreement (the 1978 agreement). With respect to the access easement, the escrow instructions stated: "[Fallbrook] [a]grees to grant at any future time the following easements to the sellers or their successors in interest upon provision to [Fallbrook] by the sellers, or their successors in interest, 90 days notice, legal descriptions and documentation required to accomplish said granting: a 60 foot easement over the existing road on the West sides [sic] of the parcel being conveyed and the present [Fallbrook] property described in [its 1949 grant deed] . . . ."²

In October 1978, James Chaffin and Dr. Jackson died in an airplane crash. The Chaffin family later acquired the Jacksons' interest in the Red Mountain Ranch property. After James Chaffin's estate was settled, one-third interests in the property were held, respectively, by Nola Belle Chaffin, her six children, and John Roy and Mary Lee Chaffin (collectively the Chaffins). The Chaffins abandoned plans to develop the property sometime after James Chaffin's death, in part because San Diego County designated the Red Mountain Ranch property as a possible site for a landfill in the early 1980s.

In 1981, Fallbrook notified the Chaffins that it was planning to expand the reservoir, and that the expansion project would require it to excavate a portion of the Red Mountain Ranch property. Fallbrook proposed a boundary adjustment to accommodate the project, and offered to place excess fill material removed from the project into two canyons on the Red Mountain Ranch property "to enhance development of that portion of [the] property." The Chaffins ultimately agreed to sell 3.31 acres of land to Fallbrook to be used for the reservoir expansion project.

Construction on the reservoir expansion project began in mid-1983 and was completed in late 1985. The expanded reservoir obliterated approximately 1,000 feet of the road that had run along the west side of the reservoir, placing that portion of the road under a dam and up to 90 feet of water. Fallbrook built a paved road along the west side of the expanded reservoir (Red Mountain Dam Road) to replace the portion of the old road that had been destroyed. At its closest point to the reservoir, the new road is separated from the reservoir by a 6-inch berm. Vehicles traveling at that point on the road are 30 to 40 feet from the reservoir water, depending on the water level. Fallbrook installed a gate across the new road, but provided keys to the lock on the gate to the Chaffins so they could use the road to access the Red Mountain Ranch property.

In the late 1990s the Chaffins learned that the Red Mountain Ranch property was no longer being considered as a possible landfill site. In 1999, James Chaffin, Jr. (Chaffin), with the approval of the other property owners, decided to pursue a subdivision project on the property. The Chaffins formed Red Mountain for that purpose and transferred all of their interests in the property to Red Mountain.

Chaffin hired civil engineer Gary Piro to act as project engineer. Piro's initial subdivision design showed access to the subdivision from Mission Road along Red Mountain Dam Road. In early 2000, Fallbrook objected to the use of Red Mountain Dam Road for access to a subdivision. Fallbrook's chief engineer told Chaffin and Piro that use of the road for a subdivision would cause Fallbrook to have to...