SCI California Funeral Servs., Inc. v. Five Bridges Found.

• Decision Date: 14 February 2012
• Docket Number: A126337.,Nos. A126053,s. A126053
• Citation: 137 Cal.Rptr.3d 693,2012 Daily Journal D.A.R. 2018,12 Cal. Daily Op. Serv. 1886,203 Cal.App.4th 549
• Court: California Court of Appeals Court of Appeals
• Parties: SCI CALIFORNIA FUNERAL SERVICES, INC., Plaintiff, Cross-defendant and Appellant, v. FIVE BRIDGES FOUNDATION, Defendant, Cross-complainant and Appellant.SCI California Funeral Services, Inc., Plaintiff, Cross-defendant and Respondent, v. Five Bridges Foundation, Defendant, Cross-complainant and Appellant.

12 Cal. Daily Op. Serv. 1886

137 Cal.Rptr.3d 693

2012 Daily Journal D.A.R. 2018

203 Cal.App.4th 549

SCI CALIFORNIA FUNERAL SERVICES, INC., Plaintiff, Cross-defendant and Appellant,

v.FIVE BRIDGES FOUNDATION, Defendant, Cross-complainant and Appellant.SCI California Funeral Services, Inc., Plaintiff, Cross-defendant and Respondent,

v.Five Bridges Foundation, Defendant, Cross-complainant and Appellant.

Nos. A126053

A126337.

Court of Appeal, First District, Division 5, California.

Feb. 14, 2012.Certified for Partial Publication.*

Shartsis Friese LLP, San Francisco, Joel Zeldin, Anthony B. Leuin and John J. Stein; Morgan, Lewis & Bockius LLP, San Francisco, and Thomas M. Peterson for Five Bridges Foundation.

Gurnee & Daniels LLP, Roseville, Steven H. Gurnee, Nicholas P. Forestiere and Candace H. Shirley for SCI California Funeral Services, Inc.

SIMONS, J.

These cross-appeals arise from a long-running dispute over a business deal gone sour. In 1998, SCI California Funeral Services, Inc. (SCI), contracted with the predecessor of Five Bridges Foundation (Five Bridges) to purchase the assets of a cemetery in Colma, California. The asset purchase agreement provided SCI would acquire certain real estate assets, including an option agreement to purchase additional cemetery acreage and an easement giving it signage rights on nearby property. SCI, however, did not receive the option agreement or easement and sued Five Bridges, alleging breach of the asset purchase agreement and other claims. Five Bridges countersued.

After disposing of a number of the claims prior to trial, the superior court rendered a decision that has satisfied neither party. While the court ruled against SCI on SCI's contractual claim regarding the option agreement, it ultimately found Five Bridges liable for breach of contract because of Five Bridges's failure to deliver the easement. It awarded SCI significant damages, although the sum was substantially less than SCI had sought. SCI claimed it was the party prevailing on the contract and requested an award of attorney fees on that basis. The trial court denied its request.

Both parties have appealed from the resulting judgment. Five Bridges contends it was not liable on the contract for various reasons, and it disputes the validity and sufficiency of SCI's damages evidence. Among other conclusions, we determine that, in the circumstances of this case, the trial court properly relied on the unique value of the easement to the servient estate in determining SCI's damages. SCI seeks reversal of the trial court's denial of its request for attorney fees. We affirm the judgment, but reverse the attorney fee order in part.

FACTUAL AND PROCEDURAL BACKGROUND

The long history of this case has produced a voluminous record. ¹ We set forth only those facts relevant to resolution of the issues on appeal. We recite the facts in the manner most favorable to the judgment and resolve all conflicts and draw all inferences in favor of the prevailing party. ( Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1233, fn. 2, 19 Cal.Rptr.3d 416.) Many of the facts were hotly disputed, and we describe those evidentiary conflicts necessary to an understanding of the issues on appeal. (See ibid.)

Olivet Memorial Park

In approximately 1895, Olivet Memorial Park (Olivet) began operating a cemetery in Colma. All of the land on which Olivet's cemetery was located was owned by Cypress Abbey Company (Cypress Abbey), which also owned a cemetery known as Cypress Lawn. Olivet would develop land owned by Cypress Abbey for cemetery purposes; and, as it sold gravesites, Olivet would pay Cypress Abbey a portion of the sales price. Thus, under the terms of the contract between them, Olivet acquired land from Cypress Abbey and sold it as it was needed.

In the late 1970's, Olivet and Cypress Abbey decided to restructure their relationship. In 1982, each conveyed to the other various rights and interests, two of which are central to this litigation. First, Olivet received an easement for signage purposes (the Ornamental Easement) in an area of Cypress Abbey's property on both sides of Olivet Parkway at the intersection with El Camino Real.² The terms of the Ornamental Easement permitted Olivet to place and maintain at that location “signs, embellishments and other structures as are appropriate and befitting to an entranceway of a cemetery.” The Ornamental Easement would endure so long as Olivet or its successors were actively operating the cemetery and selling graves.

In addition to the Ornamental Easement, the parties entered into an agreement giving Olivet the option to purchase adjacent property from Cypress Abbey (the Option Agreement). The option property consisted of two parcels—a 2.11–acre parcel and an 8.71–acre parcel, a combined total of almost 11 acres. ³ The additional property was necessary to enable Olivet to expand its cemetery and continue to make profits.⁴ The Option Agreement contained a provision governing how the parties would calculate the purchase price of property subject to the option. In addition, section 12 of the Option Agreement stated, “should either party breach this Agreement, money damages would not be an adequate remedy for the non-breaching party and for that reason, the parties agree that each shall be entitled to specific performance of any term, covenant or condition of [the Option] Agreement.” Both the Ornamental Easement and the Option Agreement were recorded on July 2, 1982.

Olivet's Negotiations With SCI and Cypress Abbey

In the mid–1990's, Olivet began exploring the possibility of selling its cemetery assets. In late 1995, Olivet began to furnish information to SCI so that SCI could evaluate whether to purchase those assets. Kallgren represented Olivet in these discussions; his primary contacts at SCI were Lowell Kirkpatrick, Jr., SCI's director of corporate development, and Kirkpatrick's assistant, Deborah Fisher Young.

SCI was seeking to acquire a cemetery that would have a useful life of 40 to 50 years. Because Olivet's existing inventory was very limited, SCI was only interested in acquiring its assets if the deal included the option to acquire additional land for graves from Cypress Abbey. It was clear that SCI would not have gone forward with the transaction if it had not included the option to acquire the additional acreage. Kallgren was aware of the importance SCI attached to the ability to acquire additional land for graves.

After it had entered into discussions with SCI, on November 26, 1996, Olivet informed Cypress Abbey it intended to exercise its option to buy the 2.11–acre parcel. Olivet proposed a purchase price based upon the formula contained in the Option Agreement. Cypress Abbey did not respond to Olivet's notice for several months. When Cypress Abbey did respond, it disagreed with Olivet's calculation of the purchase price. In addition, Cypress Abbey indicated its desire to discuss other issues. Among them was Olivet's possible release of the Ornamental Easement, in exchange for which Cypress Abbey would provide Olivet with a new water well.

Eventually, at a meeting on January 8, 1998, at which a number of issues were discussed, Olivet and Cypress Abbey reached an agreement on the sale price for the 2.11 acres. After the meeting, Kallgren exchanged correspondence with Cypress Abbey's counsel, Peter Wohlfeiler. On the day following the meeting, Wohlfeiler sent Kallgren a draft letter agreement summarizing what Olivet and Cypress Abbey had agreed upon. The draft letter agreement dealt with both the sale of the 2.11–acre parcel and Olivet's release of the Ornamental Easement to Cypress Abbey. Wohlfeiler's draft called for Olivet to pay $800,000 for the 2.11–acre parcel. Regarding the Ornamental Easement, the draft letter agreement stated that “Olivet and [Cypress Abbey] have agreed as follows: [¶] ... Olivet will release all of its right, title and interest in the [Ornamental Easement]....” (Italics added.) In return for release of the Ornamental Easement, Olivet and Cypress Abbey would enter into an agreement giving Olivet the right to drill a well within the area burdened by the easement. Wohlfeiler stated he believed his letter “accurately and completely set[ ] forth the agreement reached on January 8,” but he invited Kallgren to identify any inaccuracies.

Kallgren responded to Wohlfeiler's letter on January 12, stating, “[t]he agreement respecting the [Ornamental Easement] was and is separate and independent of our agreements respecting the 2.11 acres,” and insisting the proposal be modified to reflect that. On January 19, Wohlfeiler replied with a revised letter agreement incorporating Kallgren's suggestions. While it stated that the agreement regarding the Ornamental Easement was “separate and independent” and “not in any respect contingent upon any term or provision relating to the purchase and sale of” the 2.11 acres, it reiterated that Olivet and Cypress Abbey had agreed Olivet would release the Ornamental Easement. This proposed agreement was not signed by the parties. Instead, Olivet and Cypress Abbey executed an agreement drafted by Kallgren addressing only the sale of the 2.11–acre parcel. In a January 22, 1998 letter to Kallgren returning the signed copy of that agreement, Wohlfeiler wrote that he expected Olivet to continue to discuss the well agreement “so that Olivet's release of the [Ornamental Easement] can be consummated in due course.”

Although Olivet and Cypress Abbey had settled upon the purchase price for the 2.11 acres in January 1998, the sale of the parcel did not close until September 29 of that year, because they disputed what they had agreed to regarding the other issues discussed at the meeting. Kallgren testified that at the January 8, 1998 meeting, he had reached only a “gentleman's agreement” with Cypress Abbey regarding Olivet's release of the Ornamental Easement. Kallgren later insisted that the agreement to release the Ornamental...