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NMSBPCSLDHB v. County of Fresno

Court of Appeals of California, Fifth District.
Nov 6, 2003
No. F042194 (Cal. Ct. App. Nov. 6, 2003)

Opinion

F042194.

11-6-2003

NMSBPCSLDHB, Plaintiff and Appellant, v. COUNTY OF FRESNO, Defendant and Respondent.

Marks & Golia, Robert J. Marks and Laurence R. Phillips, for Plaintiff and Appellant. Phillip S. Cronin, County Counsel, and Kevin B. Briggs, Chief Deputy County Counsel for Defendant and Respondent.


Appellant NMSBPCSLDHB, a California limited partnership (hereinafter "NMS") brought this civil action against respondent County of Fresno (hereinafter "the County"). The action arose out of a contract for the sale of real estate. The contract called for NMS to sell the County three acres of a 16-acre parcel for $651,900. The County was to build a library on the land. NMS was developing the adjoining 13 acres. NMS deemed the library design approved by the County to be architecturally incompatible with NMSs adjoining 13-acre development. NMSs civil action contended that the library design approved by the County (described by NMS as "futuristic") was not architecturally compatible with NMSs adjoining development (described by NMS as "Tuscan/Traditional"), and that the Countys approval of the futuristic library design breached a clause of the contract ("clause 5.F.") entitled "Architectural Continuity." The County moved for summary judgment and argued that the contract did not obligate the County to approve a library design that was compatible with the adjacent NMS development. The superior court agreed, granted the Countys motion for summary judgment, and entered judgment in favor of the County.

NMS contends on this appeal that a triable issue of fact exists with regard to the meaning of the "Architectural Continuity" clause (clause 5.F.) of the contract. NMS further contends that the court erred in applying the parol evidence rule to refuse to admit NMSs evidence on the meaning of the "Architectural Continuity" clause of the contract. As we shall explain, we agree with NMS and will reverse the judgment.

FACTS

A motion for summary judgment "shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law." (Code Civ. Proc., § 437c, subd. (c); see also Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) The Countys motion took the position that the plain words of the contract did not obligate the County library to be architecturally compatible with the NMS development. The County relied on clause 5.F. and clause 21 of the contract. These clauses stated:

"F. Architectural Continuity.

"SELLER agrees to provide BUYER with a design vocabulary of materials, colors, forms, etc. necessary to ascertain compatibility between BUYERS and SELLERS building projects. BUYER will provide the design vocabulary to BUYERS architect. If necessary, and only by mutual agreement of the parties, their architects may meet to discuss design compatibility.

"SELLER shall receive one voting position on the Woodward Park Library Project Committee. The Committee makes design recommendations to the Fresno County Board of Supervisors. [& para;] … [¶]

21. ENTIRE AGREEMENT.

"This Agreement constitutes the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes all previous negotiations, proposals, commitments, writings, advertisements, publications, and understandings unless expressly included in this Agreement."

In opposition to the motion, NMS offered extrinsic evidence on the meaning of the first sentence of clause 5.F. of the contract. NMS contended that the phrase "necessary to ascertain design compatibility between BUYERS and SELLERS building projects" meant that the parties intended the design of the library to be architecturally compatible with the adjacent NMS development. Specifically, NMS offered the declaration of NMS representative Greg Eger. Mr. Egers declaration stated in pertinent part:

"3. The County, as buyer, and NMS, as seller, entered into a written Real Estate Purchase and Sale Agreement (the `Agreement) pursuant to which NMS sold the County a three-acre parcel of land on Perrin Avenue (the `Property). The County intends to build the Woodward Park Regional Library (the `Library) on the Property.

"4. Prior to its sale, the Property was part of a sixteen acre development owned by NMS and being developed as a retail and office complex (`the Development). From the inception of its negotiations with the County, NMS made it clear to the County that it wanted the architecture of the Library to be integrated into the overall architecture of the Development and that the sale of the Property would be conditional upon the Countys agreement to design the Library accordingly. The Countys agreement to this condition was made clear to us through a pamphlet it faxed to NMS on March 29, 2000 entitled `Woodward Regional Library — Background Information About The Library & Parent Institution, which specifically sets forth parameters for the design and construction of the Library and the Property. A true and correct copy of the `Woodward Regional Library — Background Information About The Library & Parent Institution (the `Pamphlet) is separately lodged as Exhibit `1.

We need not here present the text of all of the exhibits referred to in and attached to the Eger declaration. We do note, however, that Egers December 21, 2000 letter to the Countys Director of Administrative Services, mentioned in paragraph 8 of Egers declaration, stated in part: "Paragraph 5F. This section needs to be rewritten. An express condition of our willingness to sell to the County for a Library is that the architecture be consistent."

"5. Section III.D.3 of the Pamphlet indicates that the `library buildings exterior is to follow the common theme set for the entire Center complex yet also retain a sense of dignity appropriate to a building of cultural and educational significance. The Countys departure from its commitment to `follow the common theme set for the entire Center complex was not communicated to us until the Agreement was executed.

"6. On December 14, 2000, I reiterated to the County NMSs requirement that the architecture of the Library be consistent with the Development. (A true and correct copy of the December 14, 2000 letter is separately lodged as Exhibits `2.)

"7. On December 20, 2000, the County provided us with an original draft of the Agreement. Section 5.F. of the draft Agreement read as follows:

"The Buyer and Seller agree to consult to allow for architectural continuity between the library facility and those of the other buildings near the library. Consultation shall not impede the development of either the Buyers or Sellers portion of the property. Neither party shall be obligated to incur additional costs as a result of this section.

"A true and correct copy of the December 20, 2000 draft Agreement is separately lodged as Exhibit `3.

"8. On December 21, 2000, I wrote a letter to Janet Coleman, the Director of Administrative Services for the County, reiterating once again that NMS was unwilling to sell the Property unless the architecture of the Library was consistent with the Development. To that end, I requested the language of Section 5.F. be re-written. In response to NMSs request, Section 5.F. was re-written in a manner that imposed a requirement on the County to `ascertain, i.e., make certain, that compatibility between the Countys and NMSs building projects would be achieved. Further, the County agreed to delete the original language preventing the parties from: (1) impeding one anothers developments as a result of compatibility issues; and (2) causing one another to incur additional architectural design costs. A true and correct copy of the December 21, 2000 letter is separately lodged as Exhibit `4.

"9. Prior to the execution of the Agreement, during numerous telephone conversation[s] with representatives of the County, including Janet Coleman, Jim Witte and John Kallenberg, I was assured by the County that the Library would be designed so as to have the same `look and feel as the Development and that only such designs would be submitted for approval to the Woodward Park Library Project committee (the `Committee) and the Fresno County Board of Supervisors (the `Board).

"10. On or about the time the Agreement was finalized, the Development was well under construction and NMS, through its architect, provided the County with construction plans for the Development, which identified the materials, colors, forms, etc., used for the Development. By providing those construction plans, NMS provided the County with a `vocabulary of materials, colors, forms, etc., necessary for the County to ascertain compatibility.

"11. However, despite the Countys agreement to do so, and over the repeated objections of NMS, the County failed to ascertain compatibility between the Library and the Development. Instead, the County submitted to the Committee and the Board a design for the Library that is not, by any stretch, comparible [sic] with the Development."

The superior court refused to admit Egers declaration pertaining to the meaning of the "Architectural Continuity" clause of the contract. The courts order granting summary judgment stated in pertinent part: "Because the language of the integrated Agreement is clear and unambiguous, and because it is not reasonably susceptible to an interpretation creating a duty on the part of County to design a library compatible with plaintiffs adjacent development, such extrinsic evidence is inadmissible on the motion for summary judgment."

THE COURT ERRED IN GRANTING SUMMARY JUDGMENT

We respectfully disagree with the superior courts ruling. In the leading case of Pacific Gas & E. Co. v. G.W. Thomas Drayage Etc. Co. (1968) 69 Cal.2d 33, the court stated:

"The test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible. (Continental Baking Co. v. Katz (1986) 68 Cal.2d 512, 520-521 [67 Cal.Rptr. 761, 439 P.2d 889]; Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 864 [44 Cal.Rptr. 767, 402 P.2d 839]; Hulse v. Juillard Fancy Foods Co. (1964) 61 Cal.2d 571, 573 [39 Cal.Rptr. 529, 394 P.2d 65]; Nofziger v. Holman (1964) 61 Cal.2d 526, 528 [39 Cal.Rptr. 384, 393 P.2d 696]; Coast Bank v. Minderhout (1964) 61 Cal.2d 311, 315 [38 Cal.Rptr. 505, 392 P.2d 265]; Imbach v. Shultz (1962) 58 Cal.2d 858, 860 [27 Cal.Rptr. 160, 377 P.2d 272]; Reid v. Overland Machined Products (1961) 55 Cal.2d 203, 210 [10 Cal.Rptr. 819, 359 P.2d 251].)

"A rule that would limit the determination of the meaning of a written instrument to its four-corners merely because it seems to the court to be clear and unambiguous, would either deny the relevance of the intention of the parties or presuppose a degree of verbal precision and stability our language has not attained. [¶] … [¶]

"Although extrinsic evidence is not admissible to add to, detract from, or vary the terms of a written contract, these terms must first be determined before it can be decided whether or not extrinsic evidence is being offered for a prohibited purpose. The fact that the terms of an instrument appear clear to a judge does not preclude the possibility that the parties chose the language of the instrument to express different terms. That possibility is not limited to contracts whose terms have acquired a particular meaning by trade usage, but exists whenever the parties understanding of the words used may have differed from the judges understanding.

"Accordingly, rational interpretation requires at least a preliminary consideration of all credible evidence offered to prove the intention of the parties. (Civ. Code, § 1647; Code Civ. Proc., § 1860; see also 9 Wigmore on Evidence, op. cit., supra, § 2470, fn. 11, p. 227.) Such evidence includes testimony as to the `circumstances surrounding the making of the agreement … including the object, nature and subject matter of the writing … so that the court can `place itself in the same situation in which the parties found themselves at the time of contracting. (Universal Sales Corp. v. California Press Mfg. Co.[(1942)] 20 Cal.2d 751, 761; Lemm v. Stillwater Land & Cattle Co. [(1933) 217 Cal. 474, 480-481.) If the court decides, after considering this evidence, that the language of a contract, in the light of all the circumstances, `is fairly susceptible of either one of the two interpretations contended for … (Balfour v. Fresno C. & I. Co. (1895) 109 Cal. 221, 225 [41 P.876]; see also, Hulse v. Juillard Fancy Foods Co., supra, 61 Cal.2d 571, 573; Nofziger v. Holman, supra, 61 Cal.2d 526, 528; Reid v. Overland Machined Products, supra, 55 Cal.2d 203, 210; Barham v. Barham (1949) 33 Cal.2d 416, 422-423 ; Kenney v. Los Feliz Investment Co. (1932) 121 Cal.App.378, 386-387 , extrinsic evidence relevant to prove either of such meanings is admissible." (Pacific Gas & E. Co. v. G. W. Thomas Drayage Etc. Co., supra, 69 Cal.2d at pp. 37-40, fns. omitted.)

The rule of Pacific Gas & E. Co., supra, has been recognized and followed in many subsequent cases, including Morey v. Vannucci (1998) 64 Cal.App.4th 904. The superior court cited Morey as its authority for granting the Countys motion. In our view, following the dictates of Morey required a denial, not a granting, of the Countys motion for summary judgment. In Morey the court stated:

See, e.g., Gribaldo, Jacobs, Jones & Associates v. Agrippina Versicherunges A.G. (1970) 3 Cal.3d 434, 443; Producers Dairy Delivery Co., v. Sentry Ins. Co. (1986) 41 Cal.3d 903, 913; Hayter Trucking, Inc. v. Shell Western E&P, Inc. (1993) 18 Cal.App.4th 1, 17; Southern Pacific Transportation Co. v. Santa Fe Pacific Pipelines, Inc. (1999) 74 Cal.App.4th 1232, 1241; Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc. (2003) 109 Cal.App.4th 944, 955-956.

"`The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264 [10 Cal.Rptr.2d 538, 833 P.2d 545]; Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865 [44 Cal.Rptr. 767, 402 P.2d 839].) The mutual intention to which the courts give effect is determined by objective manifestations of the parties intent, including the words used in the agreement, as well as extrinsic evidence of such objective matters as the surrounding circumstances under which the parties negotiated or entered into the contract; the object, nature and subject matter of the contract; and the subsequent conduct of the parties. (Civ. Code, §§ 1635-1656; Code Civ. Proc., §§ 1859-1861, 1864; Hernandez v. Badger Construction Equipment Co. (1994) 28 Cal.App.4th 1791, 1814 ; 1 Witkin, Summary of Cal. Law (9th 3d. 1987) Contracts, §§ 688-689, pp. 621-623.)

"Where the meaning of the words used in a contract is disputed, the trial court must provisionally receive any proffered extrinsic evidence which is relevant to show whether the contract is reasonably susceptible of a particular meaning. (Pacific Gas & E. Co. v. G. W. Thomas Drayage Etc. Co.[, supra, 69 Cal.2d at pp. 39-40] [69 Cal.Rptr. 561, 442 P.2d 641, 40 A.L.R.3d 1373]; Pacific Gas & Electric Co. v. Zukerman (1987) 189 Cal.App.3d 1113, 1140-1141 .) Indeed, it is reversible error for a trial court to refuse to consider such extrinsic evidence on the basis of the trial courts own conclusion that the language of the contract appears to be clear and unambiguous on its face. Even if a contract appears unambiguous on its face, a latent ambiguity may be exposed by extrinsic evidence which reveals more than one possible meaning to which the language of the contract is yet reasonably susceptible. (Pacific Gas & E. Co. v. G. W. Thomas Drayage Etc. Co., supra, 69 Cal.2d at p. 40 & fn. 8; Pacific Gas & Electric Co. v. Zukerman, supra, 189 Cal.App.3d at pp. 1140-1141.)

"Extrinsic evidence is thus admissible to interpret the language of a written instrument, as long as such evidence is not used to give the instrument a meaning to which it is not reasonably susceptible. Where the interpretation of contractual language turns on a question of the credibility of conflicting extrinsic evidence, interpretation of the language is not solely a judicial function. (Civ. Code, §§ 1647, 1649; Code Civ. Proc., §§ 1856, 1861; Parsons v. Briston Development Co., supra, 62 Cal.2d at p. 865; New Haven Unified School Dist. V. Taco Bell Corp. (1994) 24 Cal.App.4th 1473, 1483 ; 1 Witkin, Summary of Cal. Law, supra, Contracts, §§ 688-689, pp. 621-623.) As a trier of fact, it is the jurys responsibility to resolve any conflict in the extrinsic evidence properly admitted to interpret the language of a contract. (Medical Operations Management, Inc. v. National Health Laboratories, Inc. (1986) 176 Cal.App.3d 886, 891-892 & Fn. 4 [where conflicting extrinsic evidence is admitted to interpret language of agreement, the proper procedure is `for the trial court to require the jury to make special findings on the disputed issues and then base its interpretation of the contract on those findings].)" (Morey v. Vannucci, supra, 64 Cal.App.4th at pp. 912-193, fn. omitted.)

The Morey court further stated:

"This principle should not be confused with the dictates of the parol evidence rule. That rule of substantive law generally prohibits the introduction of any extrinsic evidence, whether oral or written, to vary, alter or add to the terms of an integrated written instrument intended by the parties thereto as the final expression of their agreement. (Code Civ. Proc., § 1856, subd. (a); Alling v. Universal Manufacturing Corp. (1992) 5 Cal.App.4th 1412, 1433-1434 ; Price v. Wells Fargo Bank (1989) 213 Cal.App.3d 465, 486 [261 Cal.Rptr.735]; Rest.2d Contracts, § 209, subd. (1); 2 Witkin, Cal. Evidence (3d ed. 1986) Documentary Evidence, §§ 960, 967, pp. 908, 915-916.) The courts have long recognized that even when a contract is integrated — that is, intended to constitute the parties final and complete understanding of the terms of their agreement — the meaning of the terms of the contract must still be ascertained. The California Supreme court has repudiated the obsolete `plain meaning component of the parol evidence rule, and permits the admission of extrinsic evidence to interpret the language of an integrated written instrument where such evidence is relevant to prove a meaning to which the contractual language is `reasonably susceptible. (Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co., supra, 69 Cal.2d at pp. 38-40; 2 Witkin, Cal. Evidence, supra, Documentary Evidence, §§ 975, 977-978, 983-984, pp. 920-921, 923-924, 929-931.) There is thus no parol evidence issue in this case." (Morey v. Vannucci, supra, 64 Cal.App.4th at pp. 912-913, fn. 4.)

The flaw in the superior courts reasoning, in our view, is that the superior courts order leaves unanswered the question of what purpose the parties intended the "Architectural Continuity" clause to serve. If the parties did not intend to have "compatibility between BUYERS and SELLERS building projects," then what do those words mean, and why are they in the contract? NMS offered one possible explanation — that the parties intended for the library to have "Architectural Continuity" and "design compatibility" with the NMS development. This appears to us to be one "reasonably susceptible" meaning of the language used in the contract. The Countys position, on the other hand, was and is that because the contract does not explicitly say "BUYERS library shall be designed so as to be `architecturally compatible with SELLERS adjacent building projects," the parties did not intend for there to be such a requirement in the contract. The actual language of the contract appears to us to be "reasonably susceptible" to the Countys interpretation as well. If the parties had intended, for example, for NMS to provide a "design vocabulary" to the County so that the County could design an architecturally compatible library if the County, in its sole discretion, wished to have a compatible design, that also would appear to be one reasonably susceptible interpretation of the language used. The contract of course does not explicitly say that either. (If that were its purpose, the contract could have been written to say, for example: "SELLER agrees to provide BUYER with a design vocabulary of materials, colors, forms, etc. necessary to ascertain compatibility between BUYERS and SELLERS building projects so that BUYER may, if BUYER in BUYERS sole discretion wishes to do so, design a building which is architecturally compatible with SELLERS building projects.") But the Countys interpretation of the contractual language is not the only reasonably susceptible interpretation of that language.

The Countys superior court motion for summary judgment took the express position that "the county owed no duty under that contract to design the Woodward Park Regional Library to be `architecturally compatible with plaintiffs adjacent development." As a respondent on the NMS appeal, the County now argues to this court that "if the parties had intended to give Appellant an absolute right to determine architectural compatibility, they would have stated so in the agreement." The issue of whether the parties intended the contract to require architectural compatibility at all appears to us to be a different issue than the issue of who, if the parties intended a requirement of architectural compatibility, the parties intended to make the determination of whether or not a proposed library design was or was not compatible with the NMS development.

Because the County took the position that the contractual language is so clear and unambiguous that the language is not reasonably susceptible to any interpretation which would include an agreement that the BUYERS library have "design compatibility" with the SELLERS building projects, the County did not of course offer (on this motion for summary judgment) any extrinsic evidence on the meaning or purpose of the "Architectural Continuity" clause. We thus have no evidence from the County as to what the County contends clause 5.F. was intended to mean. Nor do we really have any clear argument from the County as to what the County maintains the parties did intend by their inclusion of clause 5.F. in the contract. We might succinctly characterize the Countys argument as "clause 5.F. means something, and were not going to tell you what that is, but the clause does not require the county to design a library which NMS deems compatible with NMSs adjacent development." We do not know, for example, whether the County actually does deem its library design to be architecturally compatible with the NMS development, or whether instead the County is of the view that the contract permits the County to build a library of any design type the County wishes to build, compatible or not, and that the Countys library design is not architecturally compatible with the NMS development. The closest thing we have to an explanation of the Countys view of the meaning of clause 5.F. is in the argument of the Countys counsel at the hearing on the summary judgment motion. The Countys attorney there stated:

"We — it goes without saying that we disagree with their interpretation of section (5)(f). We do agree with the Courts interpretation of section (5)(f) in the tentative agreement. [Sic.] Section (5)(f), the first sentence, does not say `necessary to ascertain compatibility only. It actually says `seller agrees to provide buyer with a design vocabulary of materials, colors, forms, etcetera, necessary to ascertain compatibility between buyers and sellers building project.

"Nowhere does that sentence say that the county is obligated to actually determine design compatibility. Thats not at issue in this summary judgment motion, what is or is not design compatibility. This section was carefully crafted by the parties to allow NMS the opportunity to provide us with what they considered important to ascertaining or figuring out, or whatever it is, design compatibility. They were then given one voting seat on the Woodward park library project committee. Thats what the contract says. It doesnt say the county or the board, or architect, or anybody else will ascertain design compatibility.

We are not sure what this means. We do not know why a clause would be "carefully drafted by the parties to allow NMS the opportunity to provide us with what they considered important to ascertaining or figuring out, whatever it is, design compatibility," if the parties intention was that the County could build a library of whatever design the County pleased, compatible or not. One possible explanation (not offered by the County but nevertheless reasonably susceptible from the language of the contract) is the one we have already alluded to — that the parties may have intended to give the County the "design vocabulary" so that the County could, if it wished, build a library which the County deemed to be architecturally compatible with the NMS development. But that does not appear to us to be the only reasonably susceptible interpretation of the language. Another is that the parties intended that the County would build a library that both parties deemed to be architecturally compatible, and that clause 5.F. was drafted to facilitate that objective. The County has not yet presented any extrinsic evidence stating otherwise.

So we are left with extrinsic evidence on the NMS interpretation of the contract (an interpretation to which the language of the contract is reasonably susceptible), and no evidence from the County on what the Architectural Continuity clause was intended to accomplish. Under these circumstances, the superior court erred in granting the motion for summary judgment because the NMS evidence should have been admitted, and that evidence demonstrated a dispute about what the parties intended by the words used in clause 5.F., and particularly what they intended by the use of the words "necessary to ascertain design compatibility between BUYERS and SELLERS building projects."

To the extent that the County implies, in argument, that the intent of the parties was to limit NMSs control over the library design to granting NMS one voting position on the Woodward Park Library Project Committee, the contractual language appears to us to be reasonably susceptible to another interpretation. Indeed, such a result could easily have been achieved by omitting entirely the first paragraph of clause 5.F. The Committee could theoretically select one or more of a number of compatible designs to recommend to the Fresno County Board of Supervisors.

Countys argument that the integration clause (clause 21) of the contract somehow prohibited the introduction of extrinsic evidence on the meaning of clause 5.F. is unpersuasive. As the Morey court pointed out: "The courts have long recognized that even when a contract is integrated — that is, intended to constitute the parties final and complete understanding of the terms of their agreement — the meaning of the terms of the contract must still be ascertained. The California Supreme Court … permits the admission of extrinsic evidence to interpret the language of an integrated written instrument where such evidence is relevant to prove a meaning to which the contractual language is `reasonably susceptible." (Morey v. Vannucci, supra, 64 Cal.App.4th at p. 913, fn. 4.)

DISPOSITION

The judgment is reversed. The matter is remanded to the superior court, and that court shall enter an order denying the Countys motion for summary judgment. Nothing in this opinion shall be construed as having already determined what evidence shall or shall not be admitted when this case goes to trial. Those determinations will be made by the trial judge when evidence is offered at trial and when specific objections thereto are raised. Costs on appeal are awarded to appellant.

WE CONCUR: Vartabedian, J. and Wiseman, J.


Summaries of

NMSBPCSLDHB v. County of Fresno

Court of Appeals of California, Fifth District.
Nov 6, 2003
No. F042194 (Cal. Ct. App. Nov. 6, 2003)
Case details for

NMSBPCSLDHB v. County of Fresno

Case Details

Full title:NMSBPCSLDHB, Plaintiff and Appellant, v. COUNTY OF FRESNO, Defendant and…

Court:Court of Appeals of California, Fifth District.

Date published: Nov 6, 2003

Citations

No. F042194 (Cal. Ct. App. Nov. 6, 2003)