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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1 2 3 4 IN THE UNITED STATES DISTRICT COURT 5 FOR THE NORTHERN DISTRICT OF CALIFORNIA 6 TOLL BROTHERS, INC., 7 Plaintiff, 8 v. 10 For the Northern District of California United States District Court 9 11 CHANG SU-O LIN; HONG LIEN LIN; and HONG YAO LIN, 12 Defendants. ) ) ) ) ) ) ) ) ) ) ) Case No. 08-987 SC FINDINGS OF FACT AND CONCLUSIONS OF LAW ON REMAND 13 14 I. INTRODUCTION This case arises from a 2004 agreement for the purchase and 15 Ex. 26 ("PSA").1 16 sale of land in Dublin, California. Landowners 17 Chang Su-O Lin, Hong Lien Lin, and Hong Yao Lin (the "Lins") agreed 18 to sell a homebuilder, Toll Brothers, Inc. ("Toll"), three separate 19 parcels of land in three separate closings for a total sale price 20 of $241.5 million. 21 account, to be paid out in increments with each closing. 22 the Lins successfully closed on two parcels of land, Sub-Areas 1 23 and 2. 24 failure to close on Sub-Area 3 and the disposition of the 25 $7,735,000 that remains in the escrow fund. 26 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 27 28 1 "Ex." refers to exhibits accepted into evidence at the March 2009 bench trial of this case. 1 after all of the special and general closing conditions had been 2 met, whichever came later. 3 2007, and on December 7, 2007 Toll terminated the PSA. 4 litigation followed, culminating in a nine-day bench trial on the 5 parties' claims and counter-claims for breach of the PSA. 6 short, Toll claims that it is entitled to the remaining escrow fund 7 as a returned deposit, while the Lins say they are entitled to the 8 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 9 United States District Court For the Northern District of California 10 concerned with only one: a temporary, non-exclusive easement that 11 the Lins granted to non-party Pacific Gas and Electric ("PG&E") in 12 late 2005. 13 ground electrical wires over Sub-Area 3 for the purpose of 14 connecting a water pump station needed by the Dublin San Ramon 15 Services District ("DSRSD"), a project whose completion was 16 required to satisfy conditions in the PSA.2 17 ground electrical facilities were a stopgap measure that would have 18 to be replaced by permanent, below-ground facilities pursuant to 19 local ordinance. 20 the above-ground facilities in September 2006, but PG&E did not 21 quitclaim the easement until June 2008, roughly a year after Sub- 22 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 23 24 The easement allowed PG&E to string temporary, above- setting forth extensive findings of fact and conclusions of law, 25 26 27 28 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. 2 226 ("Judgment"). 3 reversed. 4 for rehearing. 5 Judge Callahan's dissent, agreed with this Court's earlier 6 disposition of the issues Toll raised on appeal, but determined 7 that, "[i]n ruling on the Lins['] counterclaim for breach of the 8 covenant of good faith and fair dealing, the district judge did not 9 make any finding that [1] the Lins were acting in good faith in 10 United States District Court and entered judgment in favor of the Lins. 2 For the Northern District of California 1 ECF Nos. 216 ("MOD"), attempting to comply with the closing conditions or [2] that the 11 delay was not unreasonable under all of the circumstances." 12 No. 252 ("Aug. 31 Memo.") at 5-6. 13 this Court to make those two findings. 14 law, "good faith and reasonableness are questions of fact." 15 Las Positas Partners v. Bollag, 172 Cal. App. 4th 101, 106 (Cal. 16 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- 17 18 II. FINDINGS OF FACT 19 The Court has already made findings of fact covering the 20 period between the Lins' initial grant of the easement to PG&E on 21 December 12, 2005 and PG&E's quitclaim of the easement on June 16, 22 2008. 23 previous findings that in September 2006, the Lins had completed 24 their portion of the work that had to be done before PG&E could 25 build the permanent underground electrical service, abandon the 26 temporary overhead service, and, consequently, terminate the See MOD ¶¶ 58-63. Of particular import are the Court's 27 28 3 The parties have submitted briefs on the remanded issues. Nos. 278 ("Toll Br."), 286 ("Lin Br."). 3 ECF 1 easement. 2 for PG&E to do its part. 3 additional findings: 1. 4 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 5 in person with PG&E representative Brian Bates at least twice to 6 review the project of removing the temporary overhead electrical 7 service and installing permanent underground service. 2. 8 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. 11 shifted between PG&E representatives Bates and Brian McCoy several 12 times. 13 in November 2006. 3. 14 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 15 regarding a conversation with Bates. Bates told Andrade that PG&E 16 had done no work to process the Lins' September 2006 application, 17 despite McCoy having said more than once in the previous months 18 that "all was well." 19 requested a processing schedule from him. 20 Ex. 95. Following Bates's admission, Andrade RT at 952:18-953:22(JT); 21 22 23 24 25 26 27 28 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. 6 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")). 4 4. 1 On March 23, 2007, Martin Inderbitzen7 sent Toll a letter 2 outlining "closing issues" which mentioned the temporary electrical 3 facility but did not mention the easement or the status of the 4 Lins' application to PG&E. 5 minor issue that fell within the infrastructure build-out to which 6 Toll had already consented. 7 were engaged in discussion of Toll's reconveyance to the Lins of a 8 school site located in Sub-Area 2, which was a condition of closing 9 Sub-Area 3. United States District Court For the Northern District of California 10 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. 11 No earlier than March 23, 2007 and no later than May 2, 12 2007, Toll learned for the first time of the existence of the 13 easement by independently running a title report on the property 14 comprising Sub-Area 3. 15 Inouye (hereinafter "WI")); Ex. 114. RT at 342:9-344:9 (Testimony of Warren 16 6. 17 from Andrade. 18 title report on Sub-Area 3 which reflected the recording of the 19 easement and that the temporary facility above Sub-Area 3 was an 20 "issue of concern" for Toll. 21 the Lins had been told by their title company that the "easement 22 was not of record (yikes!)." 23 email, Tong stated that the easement would be an important issue 24 for Toll if it still existed on the scheduled closing date of June 25 30, 2007.8 26 7 27 28 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"). 8 The Court previously detailed how Toll eventually treated the issue of the easement. MOD ¶¶ 87-107. 5 1 Toll reason to refuse to close on Sub-Area 3. 2 Inderbitzen to ask Toll to waive this closing condition in exchange 3 for a holdback in the purchase price of fifty to one hundred 4 thousand dollars. 5 relocation of the temporary electrical facility with PG&E. 6 955:2-25(JT), 957:12-959:3(JT); Ex. 114. 7. 7 He instructed He instructed Andrade to explore expediting the RT at On May 3, 2007, Andrade updated Tong on his efforts with 8 PG&E. He reported that he had contacted Bates to receive a 9 schedule update. Andrade informed Tong that PG&E would schedule United States District Court For the Northern District of California 10 the work after finishing engineering; preparing and signing work 11 agreements; and receiving funds for the project, estimated at 12 $150,000. 13 8. Ex. 114. On May 22, 2007, Tong and Andrade received an email from 14 Inderbitzen, telling them he had spoken to Gil Yamzon and Yamzon 15 had "agreed to try and help with Brian Bates." 16 representative with whom the Lins, through Tong, had worked during 17 the process of granting the easement. 18 that he would stay in contact with Yamzon. 19 whether Inderbitzen did so. 20 943:23(JT), 1836:14-1837:15(MI); Ex. 121. 21 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 22 telephone conversations with PG&E representatives in an attempt to 23 determine the status of the application. 24 10. Ex. 522. Between June 28, 2007 and November 2, 2007, Andrade sent 25 ten emails to PG&E inquiring about the status of the application, 26 to which he received five responses. 27 28 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 6 1 project. 2 paid PG&E. 12. 3 On October 31, 2007, the Lins signed the agreement and Id. Generally, PG&E was motivated by a desire to gain new 4 customers when completing projects related to new building. 5 prioritized such projects on the basis of which ones were closest 6 to providing PG&E with new customers, and would cooperate with 7 efforts to expedite their projects when PG&E determined there was 8 good reason to expedite. 9 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 * 10 PG&E * * 11 As the Court already found, the parties met in August 2007 to 12 discuss the issues that had prevented them from closing Sub-Area 3 13 on June 30, 2007, as planned. 14 date by four years to June 30, 2011. 15 proposal to extend closing for three years if Toll paid an 16 additional deposit of $5 million. 17 Following the meeting, as found above, the Lins continued to 18 inquire with PG&E as to the status of the easement. 19 2007, PG&E completed engineering on the project and became ready to 20 begin work. 21 the Lins that it was terminating the PSA as to Sub-Area 3. 22 December 12, 2007, the Lins responded that they continued to 23 prepare for the Sub-Area 3 closing, and reminded Toll of its 24 obligation to reconvey the school site. The parties engaged in an 25 unsuccessful mediation in January 2008. MOD ¶¶ 105-07. 26 not quitclaim the easement until June 16, 2008. 27 /// 28 /// 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 7 On PG&E did Id. ¶ 63. 1 III. DISCUSSION AND CONCLUSIONS OF LAW A. 2 The Lins Acted in Good Faith in Attempting to Comply with 3 the Sub-Area 3 Closing Conditions 4 1. The Lins' Grant of the Easement to PG&E Was Made in Good Faith 5 The Court has already concluded that the Lins did not breach 6 agreed. 9 notwithstanding these prior holdings, the Court nevertheless must 10 United States District Court the PSA by granting the easement to PG&E, and the Ninth Circuit 8 For the Northern District of California 7 examine the circumstances of the Lins' 2005 grant of the easement 11 to determine whether the Lins acted in good faith. 12 13 (citing Carma Developers (Cal.), Inc. v. Marathon Dev. 13 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 14 15 because the Court already implicitly made the findings required on 16 remand. 17 breach of the PSA on December 7, 2007, when Toll repudiated it. 18 MOD at 42. 19 that conclusion rested, namely, that the Lins acted in good faith 20 in attempting to comply with the closing conditions for Sub-Area 3 21 and, specifically, in granting PG&E the temporary easement for the 22 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, 23 24 notwithstanding that it gave each party the right to extend the 25 Sub-Area 3 closing beyond the scheduled closing date of June 30, 26 2007. 27 rendered the PSA illusory. 28 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 8 1 indefinite; rather, it was limited by the implied covenant of good 2 faith and fair dealing, which prevented a party from delaying 3 closing in bad faith or unreasonably. 4 Aug. 31 Memo. at 4-5. Consistent with the Ninth Circuit's view, if this Court had 5 determined that the Lins had delayed closing unreasonably or in bad 6 faith, the Court would had to have held that the Lins were in 7 breach of the PSA. 8 Lins were not in breach of the PSA when Toll repudiated it on 9 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 11 in attempting to satisfy the closing conditions and had not been 12 unreasonable in extending the date of closing beyond June 30, 2007. 13 The Court now makes this conclusion express. 14 that the Lins acted in good faith when they granted the power line 15 easement to PG&E. The Court finds that 16 Toll's arguments to the contrary amount to little more than an 17 attempt to relitigate issues that have already been decided by this 18 Court and affirmed by the Court of Appeals. 19 Developers (Cal.), Inc. v. Marathon Dev. California, Inc., 2 Cal. 20 4th 342 (1992), but nothing in that case dictates a different 21 result. 22 Lins' conduct in creating the power line easement and that the 23 Court cannot restrict its analysis "to a limited time or task." 24 Toll Br. at 13. 25 merely emphasizes "the difficulty in devising a rule of all- 26 encompassing generality" for contractual good faith claims and sets 27 forth the few general principles that may be derived from the 28 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 9 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 3 that a court must throw out previous findings of fact. 4 Carma acknowledges the difficulty that may arise from time to 5 time when "deciding whether . . . conduct, though not prohibited, 6 is nevertheless contrary to the contract's purposes and the 7 parties' legitimate expectations." 8 no such difficulty in this case, however. 9 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. 11 previously found, the purpose of the power line easement was to 12 allow PG&E to string a temporary, overhead power line across Sub- 13 Area 3 to a DSRSD water pumping station. 14 was needed to complete the development of a separate property owned 15 by the Lins, Fairway Ranch. 16 completed for the Lins to obtain certain affordable housing credits 17 from the City of Dublin. 18 needed before Toll could begin building on Sub-Area 2. 19 53-55. 20 complying with the PSA. 21 could not constitute a breach of the covenant of good faith, even 22 if it would have constituted bad faith in the absence of the PSA's 23 authorization clause. 24 party does not breach covenant of good faith if party was "given 25 the right to do what they did by the express provisions of the 26 contract"). 27 28 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." 3 appears to argue that any action contemplated in Section 13.2 could 4 be made unnecessary by the existence of an alternative. 5 its logical conclusion, this interpretation would read the "except 6 as necessary" clause out of Section 13.2 because, in all but the 7 most extraordinary circumstances, some alternative will be 8 available at some cost. 9 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. 11 13.1. 12 meaning to the language of the exception for acts "necessary to 13 comply with the terms of [the PSA]." 14 reasonably necessary to comply with the closing conditions for Sub- 15 Area 3, the Court declines to find that granting the easement 16 violated Section 13.2 of the PSA. 17 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 18 upholds the parties' legitimate expectations at the time of its 19 execution. 20 signed, the exact steps needed to develop Sub-Area 3 were difficult 21 to predict, though it was foreseeable that unforeseeable 22 difficulties would arise. 23 parties locked into the deal despite these difficulties. 24 why the parties bargained for each other's mutual cooperation and 25 the right to extend closing. 26 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, 28 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). 14 1 large, complex development project like the one contemplated in the 2 PSA, the Lins' efforts to resolve the easement issue were 3 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. 9 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 11 under no obligation to close on that date. 12 right to extend close of escrow because Toll had not complied with 13 all closing conditions). 14 even as Toll backed away from it. 15 postponing and canceling meetings, removing personnel); see also 16 MOD at 28 (Toll stopped cooperating), 33 (same), 42 (same). 17 Looking at all the circumstances, including market conditions which 18 provide strong circumstantial evidence of the parties' motives and 19 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 22 email that the Lins' title company had told him the "easement was 23 not of record (yikes!)." 24 Lins were caught in the act of trying to pull the wool over Toll's 25 eyes about the true title condition of the property. 26 16 n.7. 27 Andrade's statement is more consistent with an innocent exclamation 28 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, 15 1 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 5 a triviality now might take on inflated importance. 6 does not establish a lack of good faith. In that context, Andrade's remark plausibly suggests Either way, it 7 B. 8 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. 13 attributable to PG&E's initial misrepresentations to the Lins, as 14 suggested supra in Sections II and IV.A.2. 15 delay in obtaining the quitclaim from PG&E is that Toll had ceased 16 its planning process for developing the property; consequently, 17 PG&E de-prioritized the power line replacement project. 18 Toll itself was unable to close on Sub-Area 3 until it had arranged 19 for the school site to be reconveyed to the Lins. 20 Before that day ever came, Toll had repudiated and canceled the 21 PSA, extinguishing the Lins' obligation to perform under it. 22 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. 7 8 IT IS SO ORDERED. 9 United States District Court For the Northern District of California 10 11 Dated: May 23, 2012 UNITED STATES DISTRICT JUDGE 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 18

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