Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court No. 05CC04864 of Orange County, Kirk H. Nakamura, Judge.
Bruce A. Behrens, Jeffrey R. Benowitz and Glenn B. Mueller for Defendant and Appellant.
Millar, Hodges & Bemis and Richard W. Millar, Jr., for Plaintiff and Respondent.
OPINION
ARONSON, J.
The California Department of Transportation (CalTrans, or the department) appeals from a jury verdict awarding Action Boats, Inc. (Action Boats) $2,149,342 for the department’s breach of a statutory duty to offer Action Boats, a longtime tenant, a right of first refusal to purchase excess state land it occupied along Pacific Coast Highway in Huntington Beach. (See Sts. & Hy. Code, § 118.1; subsequent undesignated statutory references are to this code.) The department contends that as a matter of law no duty arose to offer the land to Action Boats because the parcel never became “‘[e]xcess real property . . . available for sale or exchange” within the meaning of the first refusal statutory scheme. (§ 118.6, italics added.) According to the department, the land was unavailable because the department validly ceded it to a third party to settle an inverse condemnation suit in 1978, well before the Legislature enacted the statutory first refusal right for excess state land tenants in 1981. (§ 118.1.) The department acknowledges it did not consummate the actual deed transfer with the third party until 2004 when the third party exhausted state and local permitting processes contemplated by the settlement agreement. Notwithstanding the lengthy delay, the department argues the land remained “unavailable” to offer to Action Boats between 1981 and 2004 because the parcel remained under contract pursuant to the 1978 settlement agreement, which neither the department nor the third party ever repudiated.
Alternatively, the department argues the applicable statutory framework does not create a private right of action for tenants who are not offered the opportunity to purchase excess state land they occupy. The department also contends the measure of damages, if any, should not include prejudgment interest and the unprecedented real estate appreciation between the date Action Boats “lost” the property to the third party in 2004 and the judgment date in 2006. Assuming Action Boats is entitled to damages, the department contends an award of prejudgment interest alone satisfies the federal Just Compensation Clause. (U.S. Const., 5th Amend.) We need not reach the department’s alternative arguments because we conclude as a matter of law that the 1978 settlement agreement rendered the land in question unavailable for sale or exchange. Simply put, by virtue of the 1978 agreement, the parcel in dispute never became “available for sale or transfer” as “excess land” (§ 118.6), and consequently the department never had an obligation to offer the land to Action Boats for first refusal (§ 118.1). We therefore reverse the judgment.
I
FACTUAL AND PROCEDURAL BACKGROUND
In 1905, Mills Land and Water Company (Mills) acquired approximately 51 acres of real property along the Pacific Coast Highway (PCH) in Huntington Beach between what is now Beach Boulevard and Newland Street. Anticipating potential construction of freeways along the routes that PCH and Beach Boulevard now occupy, CalTrans acquired 28 of Mills’s 51 acres by eminent domain in 1965. CalTrans also acquired other property, including the Utt Parcel, in the area near the former Mills parcel. Beginning in 1965, Action Boats leased a plot along PCH from CalTrans.
By 1975, CalTrans abandoned the proposed freeway project. Mills sued CalTrans the next year claiming inverse condemnation of its remaining 23 acres because the property became landlocked in the absence of the planned freeway. The Legislature enacted special legislation (Assem. Bill No. 2816, Mangers Act) in 1978 giving Mills priority in repurchasing its former land. That same year, CalTrans and Mills entered into a settlement agreement to resolve Mills’s inverse condemnation suit.
Under the 1978 settlement agreement, CalTrans agreed to convey 28.126 acres to Mills, comprised of portions of Mills’s former property and the Utt Parcel, including the plot Action Boats leased, and in exchange Mills promised to pay CalTrans $55,000 per acre, for a total of $1,546,930. Mills also agreed to dismiss its inverse condemnation suit. Recognizing Mills sought to develop the property, CalTrans agreed to delay the conveyance until Mills obtained the requisite local governmental, environmental, and Coastal Commission approvals, so Mills would not have to pay taxes on the property in the interim.
The property soon became embroiled in regulatory action and lawsuits. The State Department of Fish and Game classified portions of the property as wetlands or degraded wetlands in 1979. In 1981 and 1982, the Coastal Commission denied Huntington Beach’s land use plan for areas designated as wetlands by the Department of Fish and Game, including portions of the 28.126 slated for reconveyance to Mills. The impasse between the Coastal Commission and Huntington Beach (the city) stymied Mills’s efforts to obtain development permits. Mills and other landowners commenced various lawsuits against the city. Meanwhile, the city and the Coastal Commission batted the city’s local coastal program implementation plans back and forth for nearly a decade between 1987 and 1996. When the city council accepted modifications the Coastal Commission proposed to the city’s implementation plan in 1996, Mills and other affected landowners sued the city. In 2002, the city, Mills, and CalTrans entered a global settlement, which, among other terms, confirmed CalTrans’s obligation to convey the plot “occupied by Action Boat[s]” to Mills. CalTrans finally did so in 2004.
Meanwhile, Action Boats had approached CalTrans in 2001 or 2002 about purchasing the property rather than continuing to lease it, but CalTrans rebuffed the inquiry. When Action Boats learned the property had been conveyed to Mills, Action Boats sued both Mills and CalTrans.
In a bifurcated trial, the court determined in the first phase of the action that Mills was a bona purchaser for value without knowledge of any potential right of first refusal Action Boats may have had under section 118.1 to purchase the plot it leased. The trial court determined section 118.1 creates a private right of action for damages in a party with a right of first refusal. In allowing the matter to go to a jury in the second phase of the trial concerning damages, the court impliedly determined section 118.1 vested Action Boats with a right of first refusal that the department violated by conveying the parcel to Mills. The jury entered a verdict in favor of Action Boats for a total of $2,149,342, including prejudgment interest, and the department now appeals.
II DISCUSSION
The department contends enactment of section 118.1 in 1981did not create a right of first refusal for Action Boats to purchase the property it occupied because the department had already entered a binding contract in a 1978 settlement agreement to convey the parcel to Mills. Because the settlement agreement bound the department to transfer the parcel to Mills, the department argues the parcel never became “available for sale or transfer” as “excess land” within the meaning of the right of first refusal statutory scheme (see § 118.6), and therefore the department never had an obligation to offer the land to Action Boats for purchase. We interpret statutory enactments de novo. (Florez v. Linens ’N Things, Inc. (2003) 108 Cal.App.4th 447, 451.) We similarly interpret written settlement agreements de novo where, as here, the parties introduced no parol evidence concerning the meaning of terms in the settlement contract. (Winet v. Price (1992) 4 Cal.App.4th 1159, 1165 (Winet).)
We turn first to the statutory provisions under which Action Boats contends it enjoyed a right of first refusal to the land the department deeded to Mills in 2004. Section 118, subdivision (a), provides: “Whenever the department determines that any real property or interest therein, previously or hereafter acquired by the state for highway purposes, is no longer necessary for those purposes, the department may sell, contract to sell, sell by trust deed, or exchange the real property or interest therein in the manner and upon terms, standards, and conditions established by the [California Transportation C]ommission.”
Enacted in 1981, section 118.1 specifies that “the department shall first offer the real property for sale at its current fair market value to the occupant thereof if the occupant is renting or leasing the real property from the department, has used and occupied the real property, and has made improvements of a value in excess of five thousand dollars ($5,000) on the real property during that time at his or her own expense consistent with the terms of the rental or lease agreement with the department.” The statute further provides: “The failure of the department to first offer excess real property as required by this section shall not affect the validity of any conveyance of this excess real property to any person or entity unaware of the failure of the department to do so. However, this shall in no way be construed as releasing the department from its responsibility in offering that property to the occupants thereof first.”
Section 118.6 provides, in pertinent part: “The department shall, to the greatest extent possible, offer to sell or exchange excess real property within one year from the date that it is determined by the department to be excess. [¶] ‘Excess real property,’ for the purposes of this section, means all land and improvements situated outside of calculated highway right-of-way lines not needed or used for highway or other public purposes, including, but not limited to, those leased to public agencies pursuant to [s]ection 104.15, and available for sale or exchange.” (Italics added.)
The department does not dispute Action Boats made at least $5,000 in improvements to the subject parcel over the course of its lease with the state, or that Action Boats satisfied the occupancy and other baseline requirements for a lessee to qualify for a right of first refusal under section 118.1. Instead, the department argues the parcel never became “available” to offer to Action Boats because the property was at all relevant times already under contract pursuant to a settlement agreement the department and Mills reached in 1978.
We now turn our attention to the operative terms of that settlement agreement, which are straightforward and clear. The agreement provides that, “[s]ubject to approval by the California Transportation Commission,” the department agreed to convey to Mills certain property, including the parcel on which Action Boats later claimed a right of first refusal, and in exchange Mills would pay the department $55,000 per acre for the land and dismiss its inverse condemnation suit. Representatives for the department and Mills signed the agreement in October 1978, and the California Transportation Commission approved it the next month.
In addition to the exchange of consideration that furnished the foundation for the settlement agreement, the parties included a provision allotting Mills “a reasonable time” to obtain “zone changes, subdivision map approvals, Coastal Commission approvals, environmental, and any other clearances necessary for Mills[’]s proposed development” of the land. The agreement specifically provided that “[i]n the event such clearances and zone changes are denied,” Mills could, at its sole option, “terminate[]” the settlement agreement or proceed with the purchase and accept conveyance of the property despite the lack of clearances. The parties contemplated it would take Mills around 12 months to obtain the requisite approvals.
The parties stipulated in their agreement, however, “that the period may be extended during such time as Mills is pursuing in good faith the obtaining of such approvals, provided that Mills furnishes written, satisfactory evidence to the State that diligent efforts have been made toward obtaining said Coastal Commission clearance, environmental clearing, and zoning.” In other words, the department had a duty to honor the contract as long as Mills acted in good faith in seeking the permits. The agreement thus afforded the department the option to cancel the conveyance if it deemed Mills’s efforts unsatisfactory. Because no evidence suggests the department ever exercised this option to cancel the agreement, the department remained obligated to convey the property to Mills.
We agree with the department that as a matter of law the existence of a binding settlement contract in which the department agreed to convey the subject parcel to Mills rendered that land unavailable for sale or transfer to Action Boats, whether in 1981 when section 118.1 was enacted or anytime thereafter. The Legislature specified in section 118.6 that excess state land must be, naturally enough, “available for sale or transfer” (italics added) before the department may dispose of it, whether to a tenant holding a right of first refusal (§ 118.1) or under the general provisions in section 118 for sale or transfer of excess land. The plain meaning of the word “available” is that it does not include land that is already under contract for conveyance to another party. Even if the Legislature had not expressly included the availability requirement, such a stipulation would necessarily be implied because it would be absurd to conclude the Legislature intended section 118.1 to vest tenants with a right of first refusal to land already sold to another party.
Action Boats contends the 1978 settlement agreement between the department and Mills “expired,” and therefore a right of first refusal arose under section 118.1 for Action Boats to purchase the subject property. Action Boats points to the provision in the agreement contemplating Mills would need no more than 12 months to obtain its required approvals. As we have seen, however, the agreement also allotted Mills a period as long as “reasonabl[y]” necessary to secure the clearances, provided Mills pursued them diligently. No evidence establishes the department ever became dissatisfied with Mills’s efforts or its documentation of its efforts.
Action Boats also relies on progress documentation Mills and the department signed in both 1980 and 1981 memorializing that the department was satisfied with Mills’s diligence up to those dates and expressly extending their 1978 agreement to May 14, 1983. Action Boats argues the 1978 settlement agreement “expired” on May 14, 1983, because Mills and the department failed to explicitly extend the agreement again by that date or anytime thereafter. But Action Boats misreads the 1978 settlement agreement. As we have discussed, that agreement immediately placed the subject property under contract for eventual conveyance to Mills, subject to the department’s option to cancel the agreement if it became dissatisfied with Mills’s efforts to secure approvals. The fact the department and Mills memorialized on two occasions, in 1980 and 1981, that Mills made a good faith effort to obtain the requisite permits does not establish the department later became dissatisfied, to the point of canceling the contract, with Mills’s diligence. No evidence in the record suggests the department ever took any steps whatsoever to exercise its option to terminate the settlement agreement. The 1978 settlement agreement therefore remained binding and, because the subject parcel thus remained under contract, no right of first refusal arose in Action Boats.
Taking a slightly different tack, Action Boats claims the June 2004 documentation conveying the property to Mills is “significantly different then [sic] the supposed predecessor [agreement] in 1978 . . . .” Specifically, Action Boats notes the June 2004 conveyance provided not only that Mills obtained property, including the subject parcel, from the department, but that the department also obtained property from Mills. Action Boats persuaded the trial court that this distinction was significant. It is not. Our review is de novo. (Winet, supra, 4 Cal.App.4th at p. 1165.)
As noted, the 2004 conveyance implemented the 2002 global settlement between the city, Mills, and the department. The settlement resolved Mills’s lawsuits against the city over the permit impasse arising from the city’s land use plans that continually ran afoul of state wetlands designations. In exchange for city approval of the long-sought development permits, Mills agreed to deed wetlands property it owned to the department and also agreed to relinquish its right to the wetlands portion of the property the department owed it under the 1978 settlement agreement. The department, in turn, agreed to deed restrict the two parcels to wetlands use.
Action Boats contends the provision for an exchange of property amounted to an entirely new agreement between Mills and the department and, because the new agreement arose after 1981, section 118.1 therefore invested Action Boats with a right of first refusal. The flaw in the argument, however, is that the department’s obligation to convey property to Mills, including the portion leased by Action Boats, arose in 1978 and never lapsed. The 2002 global settlement expressly recognized the department’s conveyance to Mills would “confirm, among other things,” the earlier release, i.e., the 1978 settlement agreement, of Mills’s rights against the department under the Mangers Act. The global settlement also expressly recognized the conveyance included the “side of PCH occupied by Action Boat[s].” In sum, because the parcel occupied by Action Boats remained at all times since 1978 under binding contract for conveyance to Mills, it was never “available” under the statute for the department to offer to Action Boats. (§ 118.6.) Consequently, no right of first refusal arose in Action Boats.
III
DISPOSITION
The judgment is reversed. The department is entitled to its costs on appeal. (Cal. Rules of Court, rule 8.276.)
WE CONCUR: RYLAARSDAM, ACTING P. J., BEDSWORTH, J.