Toll Brothers, Inc v. Lin et al

Filing 287

FINDINGS OF FACT AND CONCLUSIONS OF LAW ON REMAND. Signed by Judge Samuel Conti on 05/23/2012. (sclc2, COURT STAFF) (Filed on 5/23/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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TOLL BROTHERS, INC.,

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Plaintiff,

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v.

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For the Northern District of California

United States District Court

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CHANG SU-O LIN; HONG LIEN LIN;
and HONG YAO LIN,

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Defendants.

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Case No. 08-987 SC
FINDINGS OF FACT AND
CONCLUSIONS OF LAW ON
REMAND

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I.

INTRODUCTION
This case arises from a 2004 agreement for the purchase and

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Ex. 26 ("PSA").1

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sale of land in Dublin, California.

Landowners

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Chang Su-O Lin, Hong Lien Lin, and Hong Yao Lin (the "Lins") agreed

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to sell a homebuilder, Toll Brothers, Inc. ("Toll"), three separate

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parcels of land in three separate closings for a total sale price

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of $241.5 million.

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account, to be paid out in increments with each closing.

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the Lins successfully closed on two parcels of land, Sub-Areas 1

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and 2.

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failure to close on Sub-Area 3 and the disposition of the

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$7,735,000 that remains in the escrow fund.

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had been scheduled for either (1) June 30, 2007 or (2) three days

Toll deposited $21,735,000 into an escrow
Toll and

The present dispute between Toll and the Lins concerns the

The Sub-Area 3 closing

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28

1

"Ex." refers to exhibits accepted into evidence at the March 2009
bench trial of this case.

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after all of the special and general closing conditions had been

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met, whichever came later.

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2007, and on December 7, 2007 Toll terminated the PSA.

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litigation followed, culminating in a nine-day bench trial on the

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parties' claims and counter-claims for breach of the PSA.

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short, Toll claims that it is entitled to the remaining escrow fund

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as a returned deposit, while the Lins say they are entitled to the

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remaining funds as liquidated damages.

The closing did not occur on June 30,
This

In

Of the many matters raised at trial, the Court is presently

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United States District Court

For the Northern District of California

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concerned with only one: a temporary, non-exclusive easement that

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the Lins granted to non-party Pacific Gas and Electric ("PG&E") in

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late 2005.

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ground electrical wires over Sub-Area 3 for the purpose of

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connecting a water pump station needed by the Dublin San Ramon

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Services District ("DSRSD"), a project whose completion was

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required to satisfy conditions in the PSA.2

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ground electrical facilities were a stopgap measure that would have

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to be replaced by permanent, below-ground facilities pursuant to

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local ordinance.

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the above-ground facilities in September 2006, but PG&E did not

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quitclaim the easement until June 2008, roughly a year after Sub-

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Area 3's scheduled closing date of June 30, 2007.

Notably, the above-

The Lins asked PG&E to abandon the easement for

Following trial, the Court issued a memorandum of decision

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The easement allowed PG&E to string temporary, above-

setting forth extensive findings of fact and conclusions of law,

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26
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2

Specifically, the water pump station was needed to complete the
development of a separate property owned by the Lins, Fairway
Ranch. Fairway Ranch, in turn, had to be completed for the Lins to
obtain certain affordable housing credits from the City of Dublin.
These affordable housing credits were needed before Toll could
begin building on Sub-Area 2. See MOD ¶¶ 53-55.

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226 ("Judgment").

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reversed.

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for rehearing.

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Judge Callahan's dissent, agreed with this Court's earlier

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disposition of the issues Toll raised on appeal, but determined

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that, "[i]n ruling on the Lins['] counterclaim for breach of the

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covenant of good faith and fair dealing, the district judge did not

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make any finding that [1] the Lins were acting in good faith in

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United States District Court

and entered judgment in favor of the Lins.

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For the Northern District of California

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ECF Nos. 216 ("MOD"),

attempting to comply with the closing conditions or [2] that the

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delay was not unreasonable under all of the circumstances."

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No. 252 ("Aug. 31 Memo.") at 5-6.

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this Court to make those two findings.

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law, "good faith and reasonableness are questions of fact."

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Las Positas Partners v. Bollag, 172 Cal. App. 4th 101, 106 (Cal.

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Ct. App. 2009).3

Toll appealed, and a Ninth Circuit panel

ECF No. 247.

The Lins successfully petitioned the panel

See ECF No. 250.

On rehearing, the panel, over

ECF

The panel remanded the case to
Id. at 6.

Under California
Peak-

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II.

FINDINGS OF FACT

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The Court has already made findings of fact covering the

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period between the Lins' initial grant of the easement to PG&E on

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December 12, 2005 and PG&E's quitclaim of the easement on June 16,

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2008.

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previous findings that in September 2006, the Lins had completed

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their portion of the work that had to be done before PG&E could

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build the permanent underground electrical service, abandon the

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temporary overhead service, and, consequently, terminate the

See MOD ¶¶ 58-63.

Of particular import are the Court's

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28

3

The parties have submitted briefs on the remanded issues.
Nos. 278 ("Toll Br."), 286 ("Lin Br.").

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ECF

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easement.

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for PG&E to do its part.

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additional findings:
1.

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Id. ¶ 62.

The Lins also had submitted an application
Id.

The Court now makes the following

During the last week of October 2006, Rodney Andrade4 met

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in person with PG&E representative Brian Bates at least twice to

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review the project of removing the temporary overhead electrical

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service and installing permanent underground service.
2.

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9

Ex. 522.5

From September 6, 2006 through February 2, 2007, Andrade

and PG&E representatives had at least nine telephone contacts

United States District Court

For the Northern District of California

10

concerning the project.

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shifted between PG&E representatives Bates and Brian McCoy several

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times.

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in November 2006.
3.

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During this period, the project was

Bates replaced McCoy in October 2006.

McCoy replaced Bates

Bates replaced McCoy in December 2006.

Id.

On February 15, 2007, Andrade updated James Tong6

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regarding a conversation with Bates.

Bates told Andrade that PG&E

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had done no work to process the Lins' September 2006 application,

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despite McCoy having said more than once in the previous months

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that "all was well."

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requested a processing schedule from him.

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Ex. 95.

Following Bates's admission, Andrade
RT at 952:18-953:22(JT);

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26
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4

For all purposes relevant here, Andrade was the Lins' primary
civil engineer. See MOD ¶ 7; RT at 535:22-25 (Testimony of Andrade
(hereinafter "RTA")), 536:22-537:22(RTA).
5

This exhibit, relied on by Toll in its remand brief, is titled
"Summary of Lin Efforts." It sets forth a chronological list. The
Court finds that, due to typographical errors, the dates listed as
"10/26/07"and "10/31/07" actually refer to October 26, 2006 and
October 31, 2006, respectively.
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Tong was the Lins' authorized representative for the project.
See MOD ¶ 5; Transcript of Record (hereinafter "RT") at 910:9-18
(Testimony of Tong (hereinafter "JT")).

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4.

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On March 23, 2007, Martin Inderbitzen7 sent Toll a letter

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outlining "closing issues" which mentioned the temporary electrical

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facility but did not mention the easement or the status of the

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Lins' application to PG&E.

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minor issue that fell within the infrastructure build-out to which

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Toll had already consented.

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were engaged in discussion of Toll's reconveyance to the Lins of a

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school site located in Sub-Area 2, which was a condition of closing

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Sub-Area 3.

United States District Court

For the Northern District of California

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Inderbitzen regarded the easement as a

At that time, Inderbitzen and Toll

RT at 1267:16-1268:13 (MI), 1400:2-22(MI), 1822:12-

19(MI), 1823:22-1824:20(MI); Ex. 101.
5.

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No earlier than March 23, 2007 and no later than May 2,

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2007, Toll learned for the first time of the existence of the

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easement by independently running a title report on the property

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comprising Sub-Area 3.

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Inouye (hereinafter "WI")); Ex. 114.

RT at 342:9-344:9 (Testimony of Warren

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6.

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from Andrade.

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title report on Sub-Area 3 which reflected the recording of the

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easement and that the temporary facility above Sub-Area 3 was an

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"issue of concern" for Toll.

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the Lins had been told by their title company that the "easement

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was not of record (yikes!)."

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email, Tong stated that the easement would be an important issue

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for Toll if it still existed on the scheduled closing date of June

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30, 2007.8

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7

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On May 2, 2007, Tong and Inderbitzen received an email
Andrade wrote that Toll's title company had issued a

He further explained that to date,

Responding to Andrade's report by

Tong thought that the easement and pole line would give

Inderbitzen was the Lins' attorney. See MOD ¶ 6; RT at 1264:8-23
(Testimony of Inderbitzen (hereinafter "MI").

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The Court previously detailed how Toll eventually treated the
issue of the easement. MOD ¶¶ 87-107.

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Toll reason to refuse to close on Sub-Area 3.

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Inderbitzen to ask Toll to waive this closing condition in exchange

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for a holdback in the purchase price of fifty to one hundred

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thousand dollars.

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relocation of the temporary electrical facility with PG&E.

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955:2-25(JT), 957:12-959:3(JT); Ex. 114.
7.

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He instructed

He instructed Andrade to explore expediting the
RT at

On May 3, 2007, Andrade updated Tong on his efforts with

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PG&E.

He reported that he had contacted Bates to receive a

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schedule update.

Andrade informed Tong that PG&E would schedule

United States District Court

For the Northern District of California

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the work after finishing engineering; preparing and signing work

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agreements; and receiving funds for the project, estimated at

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$150,000.

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8.

Ex. 114.
On May 22, 2007, Tong and Andrade received an email from

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Inderbitzen, telling them he had spoken to Gil Yamzon and Yamzon

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had "agreed to try and help with Brian Bates."

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representative with whom the Lins, through Tong, had worked during

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the process of granting the easement.

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that he would stay in contact with Yamzon.

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whether Inderbitzen did so.

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943:23(JT), 1836:14-1837:15(MI); Ex. 121.

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9.

Yamzon is a PG&E

Inderbitzen's email said
It is not apparent

RT at 974:4-19(JT); RT at 942:12-

From February through June 2007, Andrade had two or more

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telephone conversations with PG&E representatives in an attempt to

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determine the status of the application.

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10.

Ex. 522.

Between June 28, 2007 and November 2, 2007, Andrade sent

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ten emails to PG&E inquiring about the status of the application,

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to which he received five responses.

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11.

Id.

In October 2007, PG&E delivered to Andrade the work

agreement that the Lins had to sign before PG&E would complete the

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1

project.

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paid PG&E.
12.

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On October 31, 2007, the Lins signed the agreement and
Id.
Generally, PG&E was motivated by a desire to gain new

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customers when completing projects related to new building.

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prioritized such projects on the basis of which ones were closest

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to providing PG&E with new customers, and would cooperate with

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efforts to expedite their projects when PG&E determined there was

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good reason to expedite.

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Antonio), 1909:17-25 (Testimony of Thomas Gamble).

United States District Court

For the Northern District of California

RT at 1781:4-25 (Testimony of Walter

*

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PG&E

*

*

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As the Court already found, the parties met in August 2007 to

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discuss the issues that had prevented them from closing Sub-Area 3

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on June 30, 2007, as planned.

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date by four years to June 30, 2011.

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proposal to extend closing for three years if Toll paid an

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additional deposit of $5 million.

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Following the meeting, as found above, the Lins continued to

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inquire with PG&E as to the status of the easement.

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2007, PG&E completed engineering on the project and became ready to

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begin work.

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the Lins that it was terminating the PSA as to Sub-Area 3.

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December 12, 2007, the Lins responded that they continued to

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prepare for the Sub-Area 3 closing, and reminded Toll of its

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obligation to reconvey the school site.

The parties engaged in an

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unsuccessful mediation in January 2008.

MOD ¶¶ 105-07.

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not quitclaim the easement until June 16, 2008.

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///

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///

Toll proposed extending the closing

See supra ¶¶ 9-11.

The Lins countered with a

Toll did not accept.

MOD ¶ 104.

In October

On December 7, 2007, Toll notified

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On

PG&E did

Id. ¶ 63.

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III. DISCUSSION AND CONCLUSIONS OF LAW
A.

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The Lins Acted in Good Faith in Attempting to Comply with

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the Sub-Area 3 Closing Conditions

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1.

The Lins' Grant of the Easement to PG&E Was Made in
Good Faith

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The Court has already concluded that the Lins did not breach

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agreed.

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notwithstanding these prior holdings, the Court nevertheless must

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United States District Court

the PSA by granting the easement to PG&E, and the Ninth Circuit

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For the Northern District of California

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examine the circumstances of the Lins' 2005 grant of the easement

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to determine whether the Lins acted in good faith.

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13 (citing Carma Developers (Cal.), Inc. v. Marathon Dev.

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California, Inc., 2 Cal. 4th 342, 372-73 (1992)).

MOD at 32-33; Aug. 31 Memo. at 6-7.

Toll argues that,

Toll Br. at 12-

The Court determines that it need not make such an examination

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because the Court already implicitly made the findings required on

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remand.

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breach of the PSA on December 7, 2007, when Toll repudiated it.

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MOD at 42.

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that conclusion rested, namely, that the Lins acted in good faith

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in attempting to comply with the closing conditions for Sub-Area 3

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and, specifically, in granting PG&E the temporary easement for the

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above-ground power line that crossed Sub-Area 3.

The Court earlier concluded that the Lins were not in

The Court now makes explicit the premise upon which

As the Ninth Circuit explained, the PSA was a valid contract,

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notwithstanding that it gave each party the right to extend the

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Sub-Area 3 closing beyond the scheduled closing date of June 30,

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2007.

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rendered the PSA illusory.

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argument on the ground that the right to extend closing was not

On appeal, Toll contended that this right to extend closing
The Ninth Circuit rejected Toll's

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1

indefinite; rather, it was limited by the implied covenant of good

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faith and fair dealing, which prevented a party from delaying

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closing in bad faith or unreasonably.

4

Aug. 31 Memo. at 4-5.

Consistent with the Ninth Circuit's view, if this Court had

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determined that the Lins had delayed closing unreasonably or in bad

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faith, the Court would had to have held that the Lins were in

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breach of the PSA.

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Lins were not in breach of the PSA when Toll repudiated it on

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December 7, 2007.

The Court did the opposite, concluding that the

This conclusion rested on an implicit

United States District Court

For the Northern District of California

10

acknowledgment that the Lins had conducted themselves in good faith

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in attempting to satisfy the closing conditions and had not been

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unreasonable in extending the date of closing beyond June 30, 2007.

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The Court now makes this conclusion express.

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that the Lins acted in good faith when they granted the power line

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easement to PG&E.

The Court finds that

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Toll's arguments to the contrary amount to little more than an

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attempt to relitigate issues that have already been decided by this

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Court and affirmed by the Court of Appeals.

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Developers (Cal.), Inc. v. Marathon Dev. California, Inc., 2 Cal.

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4th 342 (1992), but nothing in that case dictates a different

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result.

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Lins' conduct in creating the power line easement and that the

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Court cannot restrict its analysis "to a limited time or task."

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Toll Br. at 13.

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merely emphasizes "the difficulty in devising a rule of all-

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encompassing generality" for contractual good faith claims and sets

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forth the few general principles that may be derived from the

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cases.

Toll relies on Carma

Toll states that Carma "mandates" this Court to assess the

But Carma stands for no such principle.

2 Cal. 4th at 373-74.

Carma

Carma does not say that a court must

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1

take into account any and all conduct every time the question of

2

good faith arises, and certainly does not stand for the proposition

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that a court must throw out previous findings of fact.

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Carma acknowledges the difficulty that may arise from time to

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time when "deciding whether . . . conduct, though not prohibited,

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is nevertheless contrary to the contract's purposes and the

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parties' legitimate expectations."

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no such difficulty in this case, however.

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allowed the Lins, inter alia, to encumber the property "as

Id. at 374.

The Court discerns

Section 13.2 of the PSA

United States District Court

For the Northern District of California

10

necessary to comply with the terms of" the PSA.

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previously found, the purpose of the power line easement was to

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allow PG&E to string a temporary, overhead power line across Sub-

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Area 3 to a DSRSD water pumping station.

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was needed to complete the development of a separate property owned

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by the Lins, Fairway Ranch.

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completed for the Lins to obtain certain affordable housing credits

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from the City of Dublin.

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needed before Toll could begin building on Sub-Area 2.

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53-55.

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complying with the PSA.

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could not constitute a breach of the covenant of good faith, even

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if it would have constituted bad faith in the absence of the PSA's

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authorization clause.

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party does not breach covenant of good faith if party was "given

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the right to do what they did by the express provisions of the

26

contract").

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As the Court

The water pump station

Fairway Ranch, in turn, had to be

The affordable housing credits were
See MOD ¶¶

The easement was therefore a reasonably necessary step for
As such, it was authorized by the PSA and

See Carma, 2 Cal. 4th at 374 (holding that

Toll argues that the easement was not "necessary" within the
meaning of Section 13.1 because, it says, the power line could have

10

1

been strung in a way that avoided Sub-Area 3.

Toll Br. at 13-14.

2

This argument turns on the meaning of the word "necessary."

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appears to argue that any action contemplated in Section 13.2 could

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be made unnecessary by the existence of an alternative.

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its logical conclusion, this interpretation would read the "except

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as necessary" clause out of Section 13.2 because, in all but the

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most extraordinary circumstances, some alternative will be

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available at some cost.

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light of California's implied covenant of good faith and fair

Toll

Taken to

This reading is particularly untenable in

United States District Court

For the Northern District of California

10

dealing, as well as the PSA's mutual cooperation clause.

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13.1.

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meaning to the language of the exception for acts "necessary to

13

comply with the terms of [the PSA]."

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reasonably necessary to comply with the closing conditions for Sub-

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Area 3, the Court declines to find that granting the easement

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violated Section 13.2 of the PSA.

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PSA §

The Court reads Section 13.2 as it was written, giving

Because the easement was

In doing so, the Court effectuates the purpose of the PSA and

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upholds the parties' legitimate expectations at the time of its

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execution.

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signed, the exact steps needed to develop Sub-Area 3 were difficult

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to predict, though it was foreseeable that unforeseeable

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difficulties would arise.

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parties locked into the deal despite these difficulties.

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why the parties bargained for each other's mutual cooperation and

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the right to extend closing.

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granted the easement to PG&E (instead of requiring PG&E to go

27

around Sub-Area 3) solely for the Lins' own benefit -- ostensibly,

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the completion of the Lin-owned Fairway Ranch development.

See Carma, 2 Cal. 4th at 373.

At the time the PSA was

One purpose of the PSA was to keep the
This is

Toll characterizes the Lins as having

11

See

1

Toll Br. at 16.

2

the temporary power line.

3

purpose of the temporary power line was for the Lins to garner

4

affordable housing credits which, once transferred to Toll, would

5

allow Toll to build on Sub-Area 2.

6

easement to PG&E, the Lins acted to benefit Toll as well as

7

themselves, consistent with the purposes of the PSA and

8

expectations of the parties.

9

But this contention misconstrues the purpose of
As the Court already found, the ultimate

In other words, by granting the

This helps to explain why the Lins did not notify Toll of the

United States District Court

For the Northern District of California

10

easement.

11

failure to affirmatively notify Toll of the existence of the

12

easement as proof positive of the Lins' intent to deceive Toll.

13

E.g., Toll Br. at 14-15, 16 n.7.

14

Court sees no such intent.

15

is entirely consistent with a judgment that Toll already had

16

consented to such a grant, as work that was "necessary" to

17

effectuate the PSA within the meaning of Section 13.2.

18

consistent with a view that the easement, like the power line

19

itself, was nothing more than a trivial, temporary prerequisite to

20

other construction.

21

record that the Lins failed to act in good faith when they granted

22

the easement.

23

expensive means of accomplishing one facet of a large project.

24
25
26

In its briefing, Toll frequently points to the Lins'

2.

Looking at the entire record, the

The Lins' initial grant of the easement

It is also

The Court sees no persuasive evidence in the

The Court only sees the Lins pursuing the least

The Lins Conducted Themselves in Good Faith After
Granting the Easement to PG&E

The Lins did not inform Toll of the existence of the easement

27

or of their difficulties with PG&E.

28

in late April or early May 2007 when Toll independently ran a title

12

Toll discovered the easement

1

report.

The Lins had previously been told by their title company

2

that the easement was not of record, and appeared surprised by

3

Toll's discovery.

4

less than perfect, falls short of a breach of good faith.

The Court finds that the Lins' conduct, while

The important consideration here is the change in market

5
6

circumstances.

When the Lins granted the easement to PG&E, the

7

market was strong and both parties had incentives to hold each

8

other to the PSA, despite the hard-to-predict difficulties that

9

inevitably arise in a large construction project.

The Lins had no

United States District Court

For the Northern District of California

10

reason to think of the easement as anything other than one of the

11

myriad details that needed completion before the Sub-Area 3

12

closing.

13

short order, finishing in September 2006.

14

done was for PG&E, the easement's holder, to complete their portion

15

of the work and quitclaim the easement.

16

application for PG&E to do its part, PG&E told the Lins for four

17

months that all was going well.

18

had any reason to disbelieve PG&E.

The Lins finished their portion of the required work in
All that was left to be

After receiving the Lins'

No one has suggested that the Lins

It was not until February 15, 2007 that PG&E informed the Lins

19
20

that all, in fact, was not well, and that PG&E had yet to start

21

work on the Lins' September 2006 application.

22

previously strong real estate market had gone soft.

23

44.

24

"under water" by $40 million on the homes in Sub-Area 2, and was

25

facing high rates of cancellation on home purchase contracts.

26

¶¶ 46, 48-49.

27

build houses on Sub-Area 2 would be unprofitable and, rather than

28

doing so, forfeited a $30 million deposit.

By that time, the
See MOD ¶¶ 42-

Toll had sold only 50 out of 450 homes in Sub-Area 1, was

Id.

Toll determined that continuing with its plan to

13

Id. ¶¶ 49-50.

Toll

1

also had stopped its planning process for Sub-Area 3.

Id. ¶ 47.

2

Toll even considered selling part of Sub-Area 3 to an apartment

3

developer in an attempt to make at least some profit.

Id. ¶ 52.

In short, Toll, which had been gunning the accelerator during

4
5

the rising housing market, hit the brakes now that the market was

6

falling.

7

When the market was rising, both parties had an incentive to keep

8

the contract together.

9

the market began to fall, Toll had an incentive to get out of the

The falling market transformed the parties' incentives.

But, as the Court already determined, when

United States District Court

For the Northern District of California

10

PSA with respect to Sub-Area 3.

See MOD at 42 ("[D]eteriorating

11

market conditions explain why Toll wanted to get out of its

12

commitment to purchase Sub-Area 3.").

13

sophisticated real estate professionals in their employ could not

14

have failed to be aware of Toll's incentives, and they had a

15

corresponding incentive to keep Toll in the deal in what had

16

quickly become a buyer's market.

The Lins and the

It is therefore unsurprising that the Lins continued to prod

17
18

PG&E to abandon the easement and move toward closing Sub-Area 3.

19

Their representatives queried PG&E with reasonable consistency,

20

given that it was far from the only issue related to closing and

21

that Toll itself was late in focusing attention on the easement,

22

even after Toll discovered its existence.9

In the context of a

23
24
25
26
27
28

9

See MOD ¶¶ 92 (Toll expressing concern about utility vaults at
same May 2, 2007 meeting where Toll stated that it had learned of
recorded easement), 95 (June 8, 2007 letter from Toll expressing
concern about utility vaults and overhead line, but not easement),
98 (June 15, 2007 letter from Toll stating that utility vaults
violated provisions of PSA, mentioning for first time that
temporary power line encumbered property, and opining that location
of vaults likely would negatively effect development of Sub-Area
3), 100 (June 27, 2007 letter from Toll informing Lins that Toll
regarded them as having defaulted on the PSA).

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1

large, complex development project like the one contemplated in the

2

PSA, the Lins' efforts to resolve the easement issue were

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reasonable.

4

the status of the project; PG&E told them the project was

5

progressing.

6

them, they increased their efforts, frequently prodding PG&E in a

7

series of phone calls and emails that received only fitful

8

responses from PG&E.

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approached, the Lins' representatives took the lead in identifying

Initially, the Lins periodically queried PG&E about

When the Lins discovered that PG&E had misinformed

As Sub-Area 3's scheduled closing date

United States District Court

For the Northern District of California

10

issues that could impede the closing, even though the Lins were

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under no obligation to close on that date.

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right to extend close of escrow because Toll had not complied with

13

all closing conditions).

14

even as Toll backed away from it.

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postponing and canceling meetings, removing personnel); see also

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MOD at 28 (Toll stopped cooperating), 33 (same), 42 (same).

17

Looking at all the circumstances, including market conditions which

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provide strong circumstantial evidence of the parties' motives and

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intent, the Court concludes that the Lins acted with good faith in

20

attempting to comply with the closing conditions.

21

MOD at 33-34 (Lins had

In short, the Lins moved toward closing,
E.g., MOD ¶¶ 97, 99, 101 (Toll

Toll makes much of Andrade's statement in his May 2, 2007

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email that the Lins' title company had told him the "easement was

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not of record (yikes!)."

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Lins were caught in the act of trying to pull the wool over Toll's

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eyes about the true title condition of the property.

26

16 n.7.

27

Andrade's statement is more consistent with an innocent exclamation

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of surprise (namely, that the Lins' trusted title company had been

To Toll, the word "yikes" shows that the

The Court disagrees.

Toll Br. at

Under all the circumstances,

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wrong).

The Lins and Toll were, at that point, attempting to raise

2

and resolve issues that could prevent or delay the Sub-Area 3

3

closing.

4

surprise at the existence of another issue, or perhaps concern that

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a triviality now might take on inflated importance.

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does not establish a lack of good faith.

In that context, Andrade's remark plausibly suggests

Either way, it

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B.

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For several reasons, the Court finds that the Lins' delay in

9

The Lins' Delay in Closing Was Not Unreasonable

closing was not unreasonable.

Some of the Lins' delay can be

United States District Court

For the Northern District of California

10

attributed to Toll's own unwillingness to cooperate with them by

11

extending the close of escrow, which the Court extensively detailed

12

in the Memorandum of Decision.

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attributable to PG&E's initial misrepresentations to the Lins, as

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suggested supra in Sections II and IV.A.2.

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delay in obtaining the quitclaim from PG&E is that Toll had ceased

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its planning process for developing the property; consequently,

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PG&E de-prioritized the power line replacement project.

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Toll itself was unable to close on Sub-Area 3 until it had arranged

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for the school site to be reconveyed to the Lins.

20

Before that day ever came, Toll had repudiated and canceled the

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PSA, extinguishing the Lins' obligation to perform under it.

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Essentially, the Lins performed what they needed to do in advance

23

of the June 30, 2007 closing date, and then waited as other

24

parties, for a variety of reasons, dragged their heels.

25

Some of the delay may be

Another reason for the

Finally,

MOD at 34.

Toll faults the Lins for not having contacted anyone within

26

PG&E's legal department or having sued PG&E to quiet title.

27

Indeed, Toll insists that the Lins were "required . . . to take

28

every possible step to clear title."

16

Toll Br. at 3.

As a legal

1

matter, Toll cites no authority that would impose such an exacting

2

duty on the Lins.

3

the Lins' failure -- if it was "failure" -- to bring or threaten a

4

lawsuit against PG&E was unreasonable.

5

the Lins reached out to PG&E on a consistent basis, including at

6

least a dozen telephone calls and emails by Andrade and at least

7

one contact (by Inderbitzen to Yamzon) aimed at resolving a

8

perceived problem with the Lins' assigned PG&E representative.

9

Court finds that these efforts were reasonable under the

As a factual matter, Toll does not explain why

The record reflects that

The

United States District Court

For the Northern District of California

10

circumstances, which included Toll's having ceased planning on Sub-

11

Area 3 and Toll's having failed to comply with the closing

12

conditions of Sub-Area 3 by causing the school site to be

13

reconveyed to the Lins.

14

In short, neither the parties' covenant of mutual cooperation

15

nor the implied covenant of good faith and fair dealing required

16

the Lins to take any and every measure that bore some possibility

17

of hastening the process.

18

bringing or threatening legal action would have done anything but

19

inflame and prolong the situation.

20

have run the risk of seriously disadvantaging Toll, if Toll

21

actually did desire to close on Sub-Area 3 despite the adverse

22

market conditions.

23

to sue PG&E would have been a more reasonable course of action for

24

the Lins, that does not make the Lins' actual course of action

25

unreasonable.

26

whether the Lins did everything that was possible -- only whether

27

the Lins did something that was reasonable.

28

they did.

Further, the Court is dubious that

This course of action would

Even if Toll is right that suing or threatening

The relevant question here is not, as Toll claims,

17

The Court finds that

1
2

IV.

CONCLUSION
As set forth above, the Court finds that the Lins acted in

3

good faith in attempting to comply with the closing conditions of

4

Sub-Area 3, and that the delay was not unreasonable under all the

5

circumstances.

6

Lins, entered on June 25, 2009, stands.

Accordingly, the Court's Judgment in favor of the
ECF No. 226.

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8

IT IS SO ORDERED.

9

United States District Court

For the Northern District of California

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Dated: May 23, 2012
UNITED STATES DISTRICT JUDGE

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