Sessions Inc. v. Morton

• Citation: 348 F. Supp. 694
• Decision Date: 31 July 1972
• Docket Number: Civ. A. No. 71-373-R.
• Court: United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
• Parties: SESSIONS INC., a California corporation, Plaintiff, v. Rogers C. B. MORTON, Secretary of the Interior, et al., Defendants.

348 F. Supp. 694

SESSIONS INC., a California corporation, Plaintiff, v. Rogers C. B. MORTON, Secretary of the Interior, et al., Defendants.

Civ. A. No. 71-373-R.

United States District Court, C. D. California.

July 31, 1972.

COPYRIGHT MATERIAL OMITTED

James M. Schlecht, Allen O. Perrier, Schlesinger, Schlecht & McCullough, Palm Springs, Cal., for plaintiff.

William D. Keller, U. S. Atty., Frederick M. Brosio, Jr., Philip S. Malinsky, Asst. U. S. Attys., Los Angeles, Cal., for defendants.

MEMORANDUM OPINION AND ORDER

REAL, District Judge.

Plaintiff asks review of a decision of the Secretary of Interior terminating Lease No. PSL-37 executed between plaintiff's and defendants' predecessors in interest; for declaratory judgment declaring the rights and obligations of the parties; and for plaintiff's attorneys fees in prosecuting this action.

BACKGROUND

Plaintiff's predecessor in interest, Rancho Trailer Park, Inc., on April 11, 1960 entered into seven separate leases covering 34.5 acres of land owned by seven members of the Agua Caliente Band of Mission Indians. The leases contain identical covenants. Provisions of each lease are adjusted to accommodate the different rent (each was to receive a varying percentage of the gross income on the entire parcel), description of the land, parties, and the costs of improvements for each individual parcel. Each of the leases to become effective required the concurrence of the Secretary of Interior. Approval was given to make the leases effective on January 27, 1961.

Lease PSL-37, the subject of this litigation was entered into between Carrie Pierce McCoy, the predecessor in interest to defendants Lawrence Pierce and Inman McCoy and Rancho Trailer Park, Incorporated, the predecessor in interest of plaintiff Sessions Inc.

The dispute focuses on Articles 7, 8 and 11 of Lease PSL-37 and the claims of non-performance by plaintiff and waiver of performance by defendants.

Article 7 provides in its pertinent part:

"7. IMPROVEMENTS

As a material part of the consideration for this lease the Lessee covenants and agrees that within five (5) years after the date of approval of this lease, Lessee shall have completed construction of permanent improvements on the leased premises at a cost of and having a reasonable value of SEVENTY THOUSAND DOLLARS ($70,000).

Improved trailer spaces on the leased premises at the date of approval of this lease shall be considered as part of such required permanent improvements with a value of FIFTEEN HUNDRED DOLLARS ($1500.00) for each such improved trailer space."

Article 8 provides:

"8. GENERAL PLAN AND DESIGN

Within two (2) years after the approval of this lease, the Lessee shall cause to be prepared and submitted to the Secretary for approval, a general plan and architect's design for the full improvement and complete development of the entire leased premises. The Secretary shall not unreasonably withhold approval and shall either approve or state his reasons for disapproval within thirty (30) days after said plans are presented to him by the Lessee."

Article 11 provides:

"11. COMPLETION OF DEVELOPMENT

It is understood and agreed that the Lessee will complete the full development and improvement of the leased premises in accordance with the general plan and architect's design, approved in accordance with Article 8, above, within five (5) years from the date of approval of this lease. If full improvement and development as specified is not completed within that period of time, the Lessee covenants and agrees that, at the request of the Secretary, Lessee will enter into an amendment of this Lease, deleting from the leased premises those portions thereof not fully improved and developed. In the event that a portion or portions of the leased premises are so deleted, the aggregate minimum and percentage rentals under this lease and the leases on the six contiguous parcels set out in Article 1(b) hereof shall not be decreased, but such aggregate minimum and percentage rentals shall be reapportioned among the Lessors on the basis of the comparative values of the lands remaining under this lease and the leases on the six contiguous parcels. For the purpose of this reapportionment, the value of the leased premises herein described shall be TWO HUNDRED AND FIFTY DOLLARS ($250.00) per front foot for South Palm Canyon Drive frontage, to a depth of two-hundred and fifty feet (250'), and SEVENTY-FIVE HUNDRED DOLLARS ($7500.00) per acre for the remaining area."

Plaintiff came into possession of the leased premises from its predecessor in interest on January 1, 1962. Almost immediately plaintiff requested a one-year extension for submitting the general plan and architect's design required by Article 8 of the lease. Replying to the requested extension, the Bureau of Indian Affairs advised plaintiff that January 26, 1963 was the date contemplated by the term of the lease for the submission of the general plan of development.

Again, on December 22, 1962, plaintiff requested an additional year for compliance with the provisions of Article 8. During the negotiation of this requested extension, plaintiff on February 11, 1963 proposed the elimination of the improvement requirements of the lease. Plaintiff suggested that the property be maintained as a trailer park with a 10% increase in the minimum rental provided in the lease. To determine the acceptability of such a proposal, the Bureau of Indian Affairs requested an economic survey. This survey was never submitted.

Plaintiff was notified on September 23, 1965 that the Bureau of Indian Affairs would be willing, subject to the approval of the Indian lessors, to amend the leases to provide the financing opportunities plaintiff required to develop the property. This development, as required by the lease, was to be completed by January 27, 1966 after the submission of appropriate plans.

On January 8, 1966 plaintiff again requested a one year extension of the lease obligations. Plaintiff with this request detailed the difficulties involved in financing any development under the then existing conditions of the lease. At a meeting of January 5, 1966 the parties had agreed to the preparation of a supplemental agreement to extend the compliance date for one year. As part of the extension, plaintiff was to pay an increased minimum rental of 10%. These arrangements were confirmed to plaintiff by the Bureau of Indian Affairs on February 2, 1966.

On March 24, 1966 plaintiff is claimed to have submitted two plans for development of the leased property.¹ These plans required changes in the terms of the leases. Again, plaintiff offered a 10% increase in the minimum rental if the Lessors would agree to the requested changes.

Pending an appraisal to determine the minimum fair annual rental value of the leased premises, plaintiff agreed to an increase of 10% in the minimum rental. As part of the arrangement, Lessors agreed to suspend any default action until 60 days after the receipt of the appraisal.

On September 20, 1966, plaintiff was notified that the appraised fair rental was $88,000. Plaintiff was given 60 days to pay the new minimum rentals, proceed with the development of the premises, or surrender the property to the Lessors.

On October 28, 1966, plaintiff, through its attorneys, made proposals for amendment of the leases to permit continued possession by plaintiff. This offer included (1) an extension of the term to 65 years with payment of a minimum rental of $88,000 during the last 20 years of the term, but payable over the entire term averaging $64,500 per year, or (2) proceeding with separate development of each separate leasehold according to submitted plans. Both alternatives required substantial changes in the terms of the leases.

After meeting personally, plaintiff was notified on November 16, 1966 of the unacceptability of the proposals made. Lessors, however, agreed to accept a 10% increase in the minimum rentals pending further negotiation of the October 28, 1966 proposals.

Intensive negotiations were undertaken and on February 28, 1967 plaintiff was given 30 days to negotiate a new long term lease at a rental somewhere between the appraised fair rental of $88,000 and the rental then being paid. At that meeting all the Lessors concurred that the leases should be cancelled. Alternatively, plaintiff was offered a new 5 year lease or revocable permit to allow for development. This offer was rejected on April 13, 1962 by plaintiff. Plaintiff then offered its performance and insisted upon compliance with the terms of the leases executed April 11, 1960.

Negotiations continued sporadically without success until September 23, 1969 when plaintiff was mailed an order to show cause why PSL-37 should not be cancelled because of default in performance of Article 5, Annual Accounting, Article 7, Improvements, Article 8, General Plan and Design, and Article 11, Completion of Development.

On October 16, 1969 plaintiff was given 60 days to cure the alleged defaults in performance of Articles 7, 8 and 11. Notification of the cancellation of PSL-37 was given on December 16, 1969 pursuant to the 60 day notice.

Plaintiff filed its Petition For Appeal of the cancellation and proceeded pursuant to 25 CFR Part 2. On December 16, 1970 the Commissioner, Bureau of Indian Affairs, sustained the cancellation of PSL-37 for noncompliance with Article 7, Improvements, Article 8, General Plan and Design, and Article 11, Completion of Developments. The Commissioner's decision is appended as Appendix A hereto.

On January 11, 1971, the Secretary of Interior affirmed the decision of the Commissioner and on February 12, 1971 reconsideration was denied. Termination of the lease was ordered February 17, 1971. The denial of the Secretary is appended as Appendix B hereto.

REVIEW OF THE ADMINISTRATIVE PROCEEDINGS

Judicial review of the action of the Commissioner, Bureau of Indian Affairs and the Secretary of Interior is...