Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_03-cv-02013/USCOURTS-cand-5_03-cv-02013-12/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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United States District Court

For the Northern District of California

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ORDER DENYING DEFENDANT'S MOTION FOR LEAVE TO FILE A MOTION FOR RECONSIDERATION—No. C-03-02013

RMW

LJP/SPT

United States District Court

For the Northern District of California

E-FILED on 6/25/07

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

FIRST NATIONAL MORTGAGE

COMPANY, a California corporation,

Plaintiff,

v.

FEDERAL REALTY INVESTMENT TRUST,

Defendant.

No. C-03-02013 RMW

ORDER DENYING DEFENDANT'S

MOTION FOR LEAVE TO FILE A MOTION

FOR RECONSIDERATION

[Re Docket No. 503]

Defendant Federal Realty Investment Trust ("Federal Realty") moves for leave to file a

motion for reconsideration of this court's Order of February 26, 2007, which (1) denied Federal

Realty's motion for judgment as a matter of law or, alternatively, for a new trial and (2) denied

Federal Realty's application for immediate appeal ("JMOL Order"). Federal Realty seeks

reconsideration on the ground that there has been a change in law since the JMOL Order as a result

of the California Supreme Court's decision in Sterling v. Taylor, 40 Cal. 4th 757 (2007). The court

has read the moving papers and considered the arguments of counsel. For the reasons stated below,

the court DENIES Federal Realty's motion for leave to file a motion for reconsideration.

Case 5:03-cv-02013-RMW Document 508 Filed 06/25/07 Page 1 of 6
United States District Court

For the Northern District of California

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1

 Federal Realty also asserts that in rejecting its argument that the statute of frauds bars First

National's claims, the court failed to consider whether the evidence adduced at trial was legally

sufficient under the statute of frauds to "state the duration with reasonable certainty" because the

JMOL Order relied only upon the court's earlier motion in limine ruling. However, if the court's

JMOL Order is not clear, the court did conclude that, as a matter of law, the evidence adduced at

trial was sufficient to establish that the duration was stated with reasonable certainty in the Final

Proposal.

ORDER DENYING DEFENDANT'S MOTION FOR LEAVE TO FILE A MOTION FOR RECONSIDERATION—No. C-03-02013

RMW

LJP/SPT 2

The present action was brought by First National Mortgage Company ("First National")

regarding an alleged lease contract, the Final Proposal, between First National and Federal Realty. 

After a bifurcated trial on the issue of liability, the jury returned a special verdict finding, inter alia,

that the parties intended the language in the Final Proposal concerning the times at which the "put"

and "call" options could be exercised to also set a ground lease duration of ten years. Federal Realty

moved for judgment as a matter of law or, alternatively, a new trial, arguing that the Statute of

Frauds and the parol evidence rule prohibited the introduction of extrinsic evidence where the term

of the lease was not expressly stated in the written document. The court denied the motion because

(1) as made clear in prior orders of the court, the Final Proposal could be interpreted to specify a 10

year duration subject to First National's earlier exercise of its "put," (2) the evidence presented at

trial supported the jury's finding that the Final Proposal included a ground lease with a duration of

10 years, and (3) as set forth in the court's prior orders, the court had previously rejected Federal

Realty's arguments that the statute of frauds and parol evidence rule dictate that judgment should be

entered in its favor.1

 JMOL Order at 3:21-4:8. 

In particular, the court held in its Order of August 3, 2006 on Motions In Limine ("August 3,

2006 Order") that "the lease duration in the Final Proposal is 'ambiguous' and not a 'necessary

missing term'" and thus extrinsic evidence was permissible. August 3, 2006 Order at 7:23-25. In

coming to that conclusion, the court relied in part on Franklin v. Hansen, 59 Cal. 2d 570 (1963). 

Specifically, it stated:

As the California Supreme Court has opined, a contract is binding if it

"demonstrate[s] the existence of a contractual intent on the part of the one to be

charged, and extrinsic evidence [i]s necessary only to define the limits thereof." 

Franklin, 59 Cal. 2d at 573 (emphasis added). Because the Final Proposal expressly

includes every essential element of a valid agreement except the lease's duration, it

arguably manifests the parties' desire to be bound; extrinsic evidence then "define[s]"

the temporal "limits" of this agreement.

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ORDER DENYING DEFENDANT'S MOTION FOR LEAVE TO FILE A MOTION FOR RECONSIDERATION—No. C-03-02013

RMW

LJP/SPT 3

August 3, 2006 Order at 8:2-7; see also JMOL Order at 4:9-15. 

Federal Realty argues that the Sterling court's disapproval of the specific language from

Franklin quoted by this court constitutes grounds for reconsideration of the JMOL Order. However,

Federal Realty misconstrues Sterling's disapproval of Franklin. In surveying the memorandum

requirement of the Statute of Frauds, the Sterling court noted two early cases which "demonstrate

that a memorandum can satisfy the statute of frauds, even if its terms are too uncertain to be

enforceable when considered by themselves," Preble v. Abrahams, 88 Cal. 245 (1891), and Brewer

v. Horst & Lachmund Co., 127 Cal. 643 (1900). 40 Cal. 4th at 767-68. However, "[d]espite this

venerable authority," the court continued, "conflicting statements appear in other California cases." 

Id. at 768. The court cited Franklin and elaborated in a footnote:

The Franklin court attempted to straddle the two lines of authority on this point by

also stating that when a memorandum "imports the essentials of a contractual

obligation although it fails to do so in an explicit, definite or complete manner, it is

always permissible to show the circumstances which attended its making." The court

referred to Brewer, among other cases, as an instance in which "the memorandum

itself demonstrated the existence of a contractual intent on the part of the one to be

charged, and extrinsic evidence was necessary only to define the limits thereof." This

was a stretch too far. If extrinsic evidence is necessary to clarify or complete the

essential terms of a memorandum, the sufficiency of the memorandum has been

established by extrinsic evidence. And the Brewer court plainly endorsed the

consideration of extrinsic evidence not merely to "define the limits" of the parties'

agreement, but to determine in the first instance whether the telegrams reflected a

contract with sufficient certainty to comply with the statute of frauds.

Id. at 769 n.9 (citations omitted). Federal Realty interprets this as meaning the language in Franklin

was "a stretch too far" because it was too permissive in allowing extrinsic evidence. See Mot. Leave

to File Mot. Recons. at 5:19-24. However, the full footnote makes clear that Franklin went too far

in restricting the use of extrinsic evidence. After criticizing Franklin's interpretation of Brewer, the

court goes on to say that Brewer, which it cites favorably, "plainly endorsed the consideration of

extrinsic evidence" to do more than "'define the limits' of the parties' agreement." Sterling, 40 Cal.

4th at 769 n.9. 

In summary, the court explicitly states, "[t]o clarify the law on this point, we disapprove the

statements in California cases barring consideration of extrinsic evidence to determine the

sufficiency of a memorandum under the statute of frauds." Id. at 770. The court further expressly

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ORDER DENYING DEFENDANT'S MOTION FOR LEAVE TO FILE A MOTION FOR RECONSIDERATION—No. C-03-02013

RMW

LJP/SPT 4

rejected the rigid approach to the statute of frauds that Federal Realty suggests should apply,

reasoning that: 

[t]he purposes of the statute are not served by such a rigid rule, which has never been

a consistent feature of the common law. 

***

"The Statute of Frauds was not enacted to afford persons a means of evading just

obligations; nor was it intended to supply a cloak of immunity to hedging litigants

lacking integrity; nor was it adopted to enable defendants to interpose the Statute as a

bar to a contract fairly, and admittedly, made. In brief, the Statute 'was intended to

guard against the perils of perjury and error in the spoken word.' Therefore, if after a

consideration of the surrounding circumstances, the pertinent facts and all the

evidence in a particular case, the court concludes that enforcement of the agreement

will not subject the defendant to fraudulent claims, the purpose of the Statute will

best be served by holding the note or memorandum sufficient even though it is

ambiguous or incomplete." 

Id. at 770-71 (quoting 10 Williston on Contracts (4th ed. 1999) § 29:4, pp. 437-438). Thus, to the

extent that Sterling results in a change in law, it appears to change the law in exactly the opposite

direction from what Federal Realty argues for.

This court relied on Franklin to find that, under the facts of this case, extrinsic evidence

could be introduced to show that the Final Proposal set a lease term of ten years, consistent with the

duration implied by the put and call options in the Final Proposal. By contrast, the Sterling court

rejected the use of extrinsic evidence to satisfy the statute of frauds based on the record before it

because, there, the proffered extrinsic evidence was inconsistent with the price term that appeared in

the memorandum. Id. at 775. In other words, the extrinsic evidence was being offered to supply a

term not found in the memorandum. The court held, "[u]nder these circumstances, we conclude the

evidence is insufficient to establish Sterling's price term with the reasonable certainty required by

the statute of frauds. In sum, neither the law nor facts of Sterling provides grounds for

reconsideration. 

Federal Realty also moves, in the alternative, for leave to file a motion for reconsideration of

this court's denial of its request to file an immediate interlocutory appeal. Federal Realty relies

essentially on the argument that Sterling has created a substantial ground for a difference in opinion,

presumably between this court and the California Supreme Court. However, as discussed above,

Sterling does not set forth a legal standard different than the one applied by this court.

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United States District Court

For the Northern District of California

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ORDER DENYING DEFENDANT'S MOTION FOR LEAVE TO FILE A MOTION FOR RECONSIDERATION—No. C-03-02013

RMW

LJP/SPT 5

ORDER

For the foregoing reasons, the court DENIES defendant's motion for leave to file motion for

reconsideration. 

DATED: 6/25/07

RONALD M. WHYTE

United States District Judge

Case 5:03-cv-02013-RMW Document 508 Filed 06/25/07 Page 5 of 6
United States District Court

For the Northern District of California

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ORDER DENYING DEFENDANT'S MOTION FOR LEAVE TO FILE A MOTION FOR RECONSIDERATION—No. C-03-02013

RMW

LJP/SPT 6

Notice of this document has been electronically sent to:

Counsel for Plaintiff:

Brian Patrick Hennessy bhennessy@thelenreid.com

Daven Gerald Lowhurst dglowhurst@thelenreid.com

Patrick Martin Ryan pryan@thelenreid.com

Counsel for Defendants:

Nicholas B. Waranoff nwaranoff@allenmatkins.com

Marlene Moffitt mmoffitt@allenmatkins.com

William W. Huckins whuckins@allenmatkins.com

Counsel are responsible for distributing copies of this document to co-counsel that have not

registered for e-filing under the court's CM/ECF program.

Dated: 6/25/07 SPT

Chambers of Judge Whyte

Case 5:03-cv-02013-RMW Document 508 Filed 06/25/07 Page 6 of 6