Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-03758/USCOURTS-cand-3_05-cv-03758-6/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1332 Diversity-(Citizenship)

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United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

DARLING INTERNATIONAL, INC., et al.,

Plaintiff,

v.

BAYWOOD PARTNERS, INC., et al.,

Defendants.

___________________________________/

No. C-05-3758 EMC

ORDER DENYING PLAINTIFF’S

MOTION FOR PARTIAL SUMMARY

JUDGMENT; DENYING DEFENDANT’S

MOTION FOR PARTIAL SUMMARY

JUDGMENT; GRANTING

DEFENDANT’S REQUEST FOR

JUDICIAL NOTICE; AND FINDING

MOOT PLAINTIFF’S OBJECTIONS

AND MOTION TO STRIKE

(Docket Nos. 64, 67, 74, and 90)

Plaintiff Darling International, Inc. (“Darling”) and Defendant Baywood Partners, Inc. have

filed cross-motions for partial summary judgment. 

In its motion, Darling asks that the Court declare that the 1990 Purchase Agreement between

the parties terminated by its own terms on May 31, 1997, and order that the Memorandum of

Agreement which memorialized the Purchase Agreement be cancelled. Darling further asks the

Court to grant Darling partial summary judgment on Baywood’s counterclaims for specific

performance, breach of contract, and declaratory relief because they are all “premised on the

continuing validity of the Purchase Agreement.” Pl.’s Mot. at 1. 

In turn, in its motion, Baywood asks that the Court grant Baywood partial summary

judgment on Darling’s claim for declaratory relief. Baywood’s motion is based on its fourteenth

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 In response to an argument raised in Darling’s opposition to Baywood’s motion, Baywood

claims that the Court should also declare the Purchase Agreement to be valid and in force because its

“motion is based on its Fourteenth Affirmative Defense and Darling’s conduct after accepting the

Second Deposit.” Def.’s Reply at 14 (citing Mot. at 1). The Court rejects Baywood’s attempt to expand

its motion for partial summary judgment. Its opening brief specifically states that it “is based on its

fourteenth affirmative defense, which alleges that Darling waived these contentions and is estopped

from asserting them because it accepted the tender of the Second Deposit, and thereafter conducted itself

in a manner consistent with the Contract’s continued vitality.” Mot. at 1 (emphasis added).

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affirmative defense -- i.e., that Darling waived and is equitably estopped from claiming that the

Purchase Agreement terminated.1

Having considered the parties’ briefs and accompanying submissions, as well as the

argument of counsel, the Court hereby DENIES both parties’ motions for partial summary judgment.

I. DISCUSSION

A. Legal Standard

Federal Rule of Civil Procedure 56(c) provides that summary judgment shall be rendered “if

the pleadings, depositions, answers to interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any material fact and that the moving

party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). An issue of fact is genuine

only if there is sufficient evidence for a reasonable jury to find for the nonmoving party. See

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). “The mere existence of a scintilla of

evidence . . . will be insufficient; there must be evidence on which the jury could reasonably find for

the [nonmoving party].” Id. at 252. At the summary judgment stage, evidence must be viewed in

the light most favorable to the nonmoving party and all justifiable inferences are to be drawn in the

nonmovant’s favor. See id. at 255. 

Where the plaintiff has the ultimate burden of proof, it may prevail on a motion for summary

judgment only if it affirmatively demonstrates that there is no genuine dispute as to every essential

element of its claim. See River City Mkts., Inc. v. Fleming Foods W., Inc., 960 F.2d 1458, 1462 (9th

Cir. 1992). 

In contrast, where the plaintiff has the ultimate burden of proof, the defendant may prevail on

a motion for summary judgment simply by pointing to the plaintiff’s failure “to make a showing

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sufficient to establish the existence of an element essential to [the plaintiff’s] case.” Celotex Corp.

v. Catrett, 477 U.S. 317, 322 (1986). 

Of course, if the defendant is moving for summary judgment based on an affirmative defense

for which it has the burden of proof, the defendant “must establish beyond peradventure all of the

essential elements of the . . . defense to warrant judgment in [its] favor.” Martin v. Alamo Cmty.

College Dist., 353 F.3d 409, 412 (5th Cir. 2003) (internal quotation marks omitted; emphasis in

original); see also Kinghorn v. Citibank, N.A., No. C 97-3111 FMS, 1999 U.S. Dist. LEXIS 442, at

*7-8 (N.D. Cal. Jan. 20, 1999) (noting same).

B. Darling’s Claims for Declaratory Relief and Cancellation

In its motion for partial summary judgment, Darling asks that the Court declare that the

Purchase Agreement between the parties terminated by its own terms on May 31, 1997, and order

that the Memorandum of Agreement which memorialized the Purchase Agreement be cancelled. 

Summary judgment should be denied so long as there is a genuine dispute as to whether the

Purchase Agreement did in fact terminate on May 31, 1997. 

Baywood argues that there is a genuine dispute in two ways: (1) the Purchase Agreement

was ambiguous as to whether it would automatically terminate if the Second Deposit was not made

or whether it would not terminate until the party seeking cancellation of the contract actually

cancelled the contract (“presumably, notice of cancellation by letter”) and instructed the Escrow

Holder to return the initial deposit to Baywood, Def.’s Opp’n at 5; and (2) the Purchase Agreement

could not terminate based on Baywood’s failure to make the Second Deposit because Darling did not

satisfy a condition precedent (or concurrent) to Baywood’s making the Second Deposit -- i.e.,

Darling failed to provide documents regarding the physical condition of the property as required by

Paragraph 3.4 of the Purchase Agreement and failed to provide the Tank Report as required by the

First through Fourteenth Amendments. Baywood further argues that there is a genuine dispute as to

contract termination on May 31, 1997, because of evidence demonstrating waiver by Darling and

estoppel. The waiver and estoppel arguments are addressed in Part I.D, infra (discussing summary

judgment on these affirmative defenses).

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Baywood’s first argument -- i.e., that the Purchase Agreement was ambiguous as to whether

it would automatically terminate -- is not persuasive. “Whether a contract provision is ambiguous is

a question of law.” Maffei v. Northern Ins. Co., 12 F.3d 892, 898 (9th Cir. 1993). Here, the

Purchase Agreement provides that, if the Second Deposit is not made by a certain date, “then this

transaction shall be cancelled, and on the day after the failure of condition, the Escrow Holder shall

return to [Baywood] the Initial Deposit, together with all interest earned thereon.” Purchase

Agreement ¶ 3.1 (titled “Property Inspection”). Baywood has not offered any extrinsic evidence to

show that this language is reasonably susceptible to the interpretation it advocates -- i.e., that a party

must affirmatively cancel the contract and notify the escrow holder to return the initial deposit. See

Dore v. Arnold Worldwide, Inc., No. S124494, 2006 Cal. LEXIS 9288, at *12 (Aug. 3, 2006)

(stating that “[e]ven if a contract appears unambiguous on its face, a latent ambiguity may be

exposed by extrinsic evidence which reveals more than one possible meaning to which the language

of the contract is yet reasonably susceptible”) (internal quotation marks omitted); Wolf v. Superior

Court, 114 Cal. App. 4th 1343, 1351 (2004) (noting that the first step in contract interpretation is for

a court to “provisionally receive[] (without actually admitting) all credible evidence concerning the

parties’ intentions to determine ambiguity, i.e., whether the language is reasonably susceptible to the

interpretation urged by a party”). Therefore, the Court is left with the language of the Purchase

Agreement alone in deciding whether the above provision is ambiguous.

Based on the language, the provision is unambiguous. If the Second Deposit is not timely

made, then the contract terminates and the escrow holder returns the initial deposit to Baywood. 

Contrary to what Baywood argues, nothing in the language of the provision “suggests” that the

contract will not terminate absent a party’s affirmative cancellation of the contract and affirmative

instruction to the escrow holder to return funds. Def.’s Opp’n at 5. If that was what the parties

intended, the contract could easily have been worded differently. Rather, the termination provision

of Paragraph 3.1 is self-executing. See also Purchase Agreement ¶ 6.4 (“In the event any condition

set forth in Paragraph 6.3 above, shall not be satisfied or waived, then this Agreement shall

terminate . . . .”); id. ¶ 6.3.1 (“Purchaser must have approved the Subject Property in the manner

described in Paragraph 3.1.”). 

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That being said, even though the Purchase Agreement did contain an automatic termination

provision, that does not mean summary judgment in favor of Darling is warranted. As Baywood

argues, there is a genuine dispute about whether Darling had to give Baywood the Tank Report

before the Second Deposit would be due. The various Amendments suggest that the parties

contemplated that Baywood would make a decision about the Second Deposit after having a chance

to inspect the property and that Baywood would have the benefit of the Tank Report as part of its

inspection of the property. In other words, arguably, Darling’s obligation to provide a copy of the

Tank Report (and perhaps other documents) was a condition concurrent with Baywood’s obligation

to inspect and approve the property. See Cal. Civ. Code § 1439 (“Before any party to an obligation

can require another party to perform any act under it, he must fulfill all conditions precedent thereto

imposed upon himself; and must be able and offer to fulfill all conditions concurrent so imposed

upon him on the like fulfillment by the other party . . . .”); Rubin v. Fuchs, 1 Cal. 3d 50, 53 (1969)

(“As applied to a contract for the sale of real estate calling for concurrent performance, neither party

can place the other in default unless he is fully able to perform or make a tender of the promised

performance.”). 

For example, the Second Amendment (which is representative of all fourteen Amendments)

states:

2. Extension of Property Inspection Period: Pursuant to the terms

of Paragraph 4.4.1 of the Agreement [titled “Tank Report”],

Seller is required to authorize EEI to finalize the Tank Report. 

Seller has authorized EEI to finalize the Report but has

discovered that the Tank Report will take longer than Seller

anticipated for EEI to generate the Tank Report. In

recognition thereof, Seller and Purchaser extended the

Property Inspection in the Manner described in the First

Amendment. As of the date of execution by this Second

Amendment, the Tank Report is not complete.

In light of the foregoing and in order to afford Purchaser the

opportunity to inspect the . . . Property in the manner

originally contemplated by the Agreement and the First

Amendment and to preserve otherwise the benefits to Seller of

the Agreement and the First Amendment, Seller and Purchaser

agree to extend the time period for inspection of the . . .

Property in the manner described in Paragraph 3.1 of the

Agreement [titled “Property Inspection”] as amended by

Paragraph 3 of the First Amendment from September 15, 1990

to November 15, 1990. If Purchaser should approve of the . . .

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Property, the date Purchaser must make the Second Deposit

shall similarly be extended from September 15, 1990 to

November 15, 1990.

Pl.’s Ex. 41 (Second Amendment) (emphasis added). The fact that the parties extended the time

within which Baywood was required to make the Second Deposit fourteen times because the Tank

Report had not been completed further suggests the parties considered these obligations concurrent

and dependent. 

Baywood argues that in addition to the Tank Report referenced in the Fourteenth

Amendment, Darling also had to provide other documents regarding the physical condition of the

property -- including the environmental condition -- before the Second Deposit would be due. 

Baywood points out that, under Paragraph 3.4 of the Purchase Agreement, within thirty days of the

execution of the contract -- i.e., by May 30, 1990 -- Darling was required to deliver to Baywood

“complete and accurate copies of all reports, studies and other documentation in [Darling’s]

possession or subject to [its] control concerning [inter alia] (i) the physical condition of the . . .

Property; . . . and (v) the presence of Hazardous Materials on the . . . Property.” Purchase

Agreement ¶ 3.4 (titled “Document Delivery”). In turn, by July 6, 1990 -- i.e., a month later --

Baywood had to inspect the property and approve, inter alia, its physical condition and “any and all

other aspects . . . which [Baywood] deem[ed] to be material.” Id. ¶ 3.1 (titled “Property

Inspection”). 

Given these contract provisions, including the fourteen amendments, it is plausible that the

conditions might be found concurrent, i.e., before Baywood had to make the Second Deposit,

Darling had to turn over certain documents including the Tank Report to enable Baywood to inspect

the property and decide whether to make the Second Deposit. So construed, if Darling failed to turn

over the documents, then Baywood’s performance of funding the Second Deposit was not yet due. 

Baywood has submitted evidence that Darling did not turn over the necessary documents. 

See Wasem Decl. ¶ 14 (stating that “Darling did not provide Baywood with any written

documentation of Darling’s remediation efforts during this time [i.e., between 1991 and 1997]”). 

And, according to Mr. Wasem, Baywood never received a copy of the Tank Report. See Wasem

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2

 Darling has objected to other portions of ¶ 18, but not this portion.

3

 The Court notes that Baywood has presented evidence on Darling’s state of mind as to the

continuing existence of the contract. Most notably, in a document dated August 31, 2002, and titled

“Estimate on Property Reserves,” Darling characterized the contract as being alive and well, stating that

the property is “[c]urrently under contract for sale dated 1990.” Def.’s Rule 56(f) Decl., Ex. B

(emphasis added). Darling contends that this document is not admissible evidence because “an

accounting reserve ‘is neither an admission of liability nor evidence of the validity of the claim.’” Pl.’s

Reply at 4 (quoting California Viking Sprinkler Co. v. Pacific Indem. Co., 213 Cal. App. 2d 844, 853

(1963)). This argument is not persuasive. First, as a factual matter, California Viking is distinguishable,

involving the establishment of a reserve by an insurance company on a potential liability. See

California Viking, 213 Cal. App. 2d at 852-53. Second, and more important, the case only states that

the “establishment of a reserve . . . is neither an admission of liability nor evidence of the validity of [a]

claim.” Id. at 853 (also referring to “[t]he existence of a potential claim”). Baywood is not using the

establishment or existence of Darling’s reserve as evidence; rather, Baywood is relying on Darling’s

characterization of the reserve, characterization which is probative to intent. However, while perhaps

probative, this evidence is not dispositive. For the reasons stated herein, there is substantial conflicting

evidence of what the parties conduct and understandings were post-1997.

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Decl. ¶ 18 (“The information did not include the Tank Report, which to date I have never

received.”).2

 

Darling argues that Paragraphs 3.1 and 3.4 were not expressly linked in the Purchase

Agreement. The Court acknowledges such and moreover notes that the timing of the Second

Deposit was not expressly linked to the provision of documentation even though the contract could

have been so drafted. Nonetheless, at the very least the contract is ambiguous as to whether these

provisions were implicitly linked and constituted concurrent conditions. If a contract provision is

ambiguous, “ordinarily summary judgment is improper because differing views of the intent of

parties will raise genuine issues of material fact.” Maffei, 12 F.3d at 898. Such is the case here.

Finally, although neither party moved on an implied-in-fact contract claim (based on the

theory that, even if the original contract terminated in 1997, it was revived and reinstated by the

parties’ subsequent conduct) and thus the Court will make no ruling at this point on such a claim, the

Court notes that the subsequent conduct of the parties may be considered as evidence of the parties’

understanding that the contract did or did not terminate on its own accord in 1997. In this regard, as

discussed below in the context of waiver and estoppel, the conflicting evidence further substantiates

there are genuine issues of fact as to whether the contract terminated in 1997.3

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C. Baywood’s Counterclaims for Specific Performance, Breach of Contract, and Declaratory

Relief

Darling moves not only for partial summary judgment on its causes of action but also for

partial summary judgment on Baywood’s causes of action. Baywood has asserted claims for (1)

specific performance, (2) breach of contract, and (3) declaratory relief, i.e., a declaration that the

Purchase Agreement is valid and binding and that Darling waived the argument or is estopped from

arguing that the contract is not enforceable. For Baywood to prevail on the claims for specific

performance and breach of contract, it must show that the Purchase Agreement is still in existence. 

For Baywood to prevail on the claim for declaratory relief, it must show either that the contract is

still in existence or that waiver or estoppel is applicable. The waiver and estoppel arguments are

addressed in Part I.D, infra (discussing summary judgment on these affirmative defenses). This

section focuses on the issue of whether there is a genuine dispute of material fact as to whether the

Purchase Agreement is still in existence, i.e., that it did not terminate on May 31, 1997.

For the same reasons discussed above, there is a genuine dispute that the Purchase

Agreement is still in existence. 

Darling further argues that, at the very least, it should be granted summary judgment on the

specific performance claim because that claim is barred by the statute of limitations. According to

Darling, the statute of limitations began to run as of May 1, 1997, i.e., the day that Mr. Mellina

informed Mr. Wasem by letter that Darling had performed its remediation obligations under the

Purchase Agreement and would not further extend the time for the property inspection. Darling

argues that, “if Baywood believed that the Agreement was ongoing and that Darling was not

fulfilling its obligations thereunder, it was on notice as of May 1, 1997, when Darling took the

position that it had fulfilled its obligations under the Agreement.” Pl.’s Mot. at 18. In response,

Baywood contends that its “claim for specific performance did not accrue until October 1, 2004,”

when Mr. Whiting sent his letter to Mr. Wasem, which stated that “Darling considers the 1990

[Purchase] Agreement to be terminated.” Pl.’s Ex. 163; see also Def.’s Opp’n at 22. Baywood also

argues that “Darling is estopped to assert the statute of limitations for the same reasons it is estopped

to assert that the contract terminated.” Id.

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4 Cf. Spear v. California State Automoblie Assn., 2 Cal. 4th 1035, 1042 (1992) (“[A]n action to

compel arbitration is in essence a suit to compel specific performance of a contractual term, i.e., the

arbitration agreement. A contract cause of action does not accrue until the contract has been breached.

While the parties subject to an arbitration condition are negotiating in good faith before submitting to

arbitration, or are delaying negotiation and arbitration by mutual aagreement, there is no breach of the

contract. Rather, the contract is breached only when one party refuses to submit to arbitration. It is at

that time that the cause of action accrues.”).

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As a preliminary matter, the Court notes that, although Baywood has asserted specific

performance as a claim for relief, specific performance is actually “a remedy for breach of contract,

a cause of action which requires proof the contract was breached.” Golden West Baseball Co. v.

City of Anaheim, 25 Cal. App. 4th 11, 49 (1994) (emphasis in original). Under state law, “[t]he

general rule is that a cause of action for breach of contract accrues at the time of breach.” Whorton

v. Dillingham, 202 Cal. App. 3d 447, 456 (1988); see also 3 Witkin Cal. Proc. Actions § 459 (“The

cause of action ordinarily accrues when, under the substantive law, the wrongful act is done and the

obligation or liability arises, i.e., when a suit may be brought.”) (emphasis in original). Therefore,

the question in the instant case is when Darling allegedly breached the contract.4

Contrary to what Darling argues, the breach of which Baywood complains is Darling’s

refusal to sell the property at issue to Baywood, not any failure by Darling to satisfy its remediation

obligations. Accordingly, there is a genuine dispute of material fact as to when Darling allegedly

breached the contract. A reasonable fact finder could find that, given Mr. Mellina’s letter of May 1,

1997, Darling would not sell the property if the Second Deposit was not funded by May 31, 1997. 

Even if a reasonable fact finder were not persuaded by this letter alone, a reasonable fact finder

could still find that Darling repudiated the contract much earlier than October 1, 2004, based on,

e.g., the letter from Mr. Mellina, dated February 4, 1998, which stated that certain environmental

reports were being provided to Baywood “solely as a courtesy to facilitate possible continuing

discussions concerning the potential sale of the Property to Baywood Partners, Inc. This delivery

shall not imply any acknowledgment of continuing obligations on the part of Darling under that

certain Agreement of Purchase and Sale dated April 30, 1990, between Darling and Baywood

Partners, Inc.” Pl.’s Ex. 94. On the other hand, a reasonable fact finder could also conclude that, in

spite of both Mellina letters, Darling was not unwilling to sell the property to Baywood after May

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31, 1997, because, inter alia, Darling never explicitly repudiated the contract thereafter and its

conduct after May 31, 1997, suggested the parties were operating under the contract. The

conflicting evidence on these matters is discussed in greater detail below.

Moreover, even if the alleged breach by Darling on its purported failure to provide

environmental documentation were relevant, Baywood contends that it waived that breach. 

Specifically, Baywood asserts that, 

[e]ven if Darling’s failure to provide information about the

environmental condition of the Property between 1997 and 2000 were

construed as a breach of contract, Baywood waived that breach when

it made the Second Deposit in February 2000, before the four-year

statute in C.C.P. § 337(a) expired, and starting a new limitations

period in which no further beach by Darling occurred until October 1,

2004.

Def.’s Opp’n at 22. Baywood’s position that a party can waive a breach by the other party -- in

which case the statute of limitations does not begin to run because of that breach -- is supported by

case law. See, e.g., Romano v. Rockwell Internat’l, Inc., 14 Cal. 4th 479, 489 (1996) (“[W]hen there

are ongoing contractual obligations the plaintiff may elect to rely on the contract despite a breach,

and the statute of limitations does not begin to run until the plaintiff has elected to treat the breach as

terminating the contract.”); McMillan Process Co. v. Brown, 33 Cal. App. 2d 279, 285 (1939) (“‘The

plaintiff was not bound to treat the contract as abandoned on the first breach of it, or on any

particular breach, but had his election still to rely upon it. The statute could not begin to run until he

made his election to rely no longer upon the contract. . . .’”); see also BAJI 10.88 (“Instead of

treating a breach as a termination of the contract, the injured party may waive the breach, by electing

to treat the contract as still alive, and remaining ready and able to perform on [his] [or] [her] own

part, thereby limiting the claim to damages caused by the breach. A waiver may be [express] [or]

[implied]. [It is implied when the injured party continues to perform, with knowledge of the other’s

breach and accepts further performance from the breaching party following the breach.]”). Darling

argues that Romano is factually distinguishable but Darling fails to address the broader issue of

waiver of breach, which is permissible under state law.

Finally, Baywood argues that Darling should be estopped from asserting a statute-oflimitations defense. See Salmons v. Jameson, 144 Cal. App. 2d 699, 705 (1956) (“[I]t is well settled

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that a person by his conduct may be estopped to rely upon these defenses (of laches or the statute of

limitations) and that where the delay in commencing action is induced by the conduct of the

defendant it cannot be availed of by him as a defense.”). The facts which comprise this estoppel

argument largely overlaps with Baywood’s argument that Darling waived or is estopped to assert the

breach and termination by Baywood in 1997. As discussed below, the material facts regarding

waiver and estoppel are in dispute.

D. Baywood’s Affirmative Defenses of Waiver and Estoppel

Baywood asserts that it should be granted partial summary judgment on Darling’s claim for

declaratory relief based on Baywood’s affirmative defenses of waiver and estoppel. Darling argues

that it, and not Baywood, should be granted partial summary judgment with respect to the two

affirmative defenses. 

1. Waiver

Baywood’s first affirmative defense is that Darling has waived any claim that the Purchase

Agreement terminated by accepting the Second Deposit in February 2000. A waiver is an

intentional relinquishment of a known right, see Ghirardo v. Antonioli, 14 Cal. 4th 39, 49 (1996), or

“the result of an act which, according to its natural import, is so inconsistent with an intent to

enforce the right as to induce a reasonable belief that such right has been relinquished.” Rheem Mfg.

Co. v. United States, 57 Cal. 2d 621, 626 (1962); see also Noel v. Dumont Builders, Inc., 178 Cal.

App. 2d 691, 696-97 (1960) (noting same). “The burden . . . is on the party claiming a waiver of a

right to prove it by clear and convincing evidence that does not leave the matter to speculation, and

‘doubtful cases will be decided against a waiver.’” City of Ukiah v. Fones, 64 Cal. 2d 104, 107-08

(1966).

The Court concludes that there is a genuine dispute of material fact as to whether there was a

waiver by Darling, thus making both parties’ motions for partial summary judgment on this ground

inappropriate. In other words, there are both facts that favor Baywood and facts that favor Darling

such that a reasonable fact finder could find in favor of either party with respect to waiver. 

Facts that favor Baywood include the following:

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 This fact is relevant regardless of whether there is a duty to speak. Even assuming arguendo

there were no such legal duty under the circumstances, it may be argued that one would expect a party

to say something in the face of the Second Deposit and Baywood’s assertion that the contract still

existed.

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< Darling failed to inform Baywood after May 31, 1997, that Darling believed the contract to

be terminated.

< Darling failed to respond to Mr. Wasem’s letter of March 17, 1998, which stated that

“Baywood is ready, willing and able to proceed to close the transaction under the terms of

the Agreement.” Def.’s Ex. 200.

< At a site visit in March 1998, Mr. Demorest and Mr. Phillips discussed the contract with Mr.

Wasem but failed to tell him that it had terminated. See Wasem Decl. ¶ 17.

< After Baywood funded the Second Deposit on February 16, 2000, Darling failed to tell

Baywood that the contract had terminated.5

< An e-mail from Mr. Demorest to Mr. Wasem in June 2000 suggested that the parties were

still operating under the contract. See Def.’s Ex. 195.

< Darling failed to respond to an e-mail that Mr. Wasem sent to Mr. Phillips on November 28,

2000 (Mr. Demorest was carbon copied), in which Mr. Wasem claimed Mr. Philips had

“assured [him] that Darling intends to honor its Agreement of Purchase and Sale with

Baywood Partners and does intend to sell the Property to Baywood Partners pursuant to the

terms of that Agreement.” Def.’s Ex. 197.

< Darling failed to respond to Mr. Wasem’s letter of March 30, 2001, which stated once again

that “Baywood stands ready, willing and able to close the transaction pursuant to the terms of

the Agreement.” Def.’s Ex. 203.

< Darling acquiesced to Mr. Wasem’s work on the Title Settlement Agreement with the

California State Lands Commission.

< Darling’s annual reports from 2001 to 2005 reflect that the property was an asset held for

sale at $497,000 (i.e., consistent with the $500,000 purchase price in the contract less costs to

sell). See, e.g., Def.’s Ex. 259; Def.’s Req. for Judicial Not., Exs. A-F.

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 Although Darling has provided a supplemental declaration from Mr. Kendall, that declaration

does not completely recant the prior declaration. Instead, Mr. Kendall simply distances himself from

the prior declaration. See Supp. Kendall Decl. ¶¶ 4-5 (stating that he does not recall Mr. McMurtry

using the phrases “currently in contract to sell” or “until the pending transaction closed” or referring to

the existence or validity of a specific contract or agreement with a buyer). In any event, credibility is

not to be judged at the summary judgment stage.

13

< Darling’s “Estimate on Property Reserves,” dated August 31, 2002, states that the property at

issue is “[c]urrently under contract for sale dated 1990.” Def.’s Rule 56(f) Decl., Ex. B

(emphasis added).

< Clifford Kendall, the Chief Building Official of the Petaluma Community Development

Department, submitted a declaration, stating that, during a site visit with Mr. McMurtry, Mr.

McMurtry indicated that “Darling was currently in contract to sell the Property and that it

was the buyer’s responsibility to demolish the structures [as required by the city], and he

requested that I defer any action related to the Property until the pending transaction

closed.”6 Kendall Decl. ¶ 4.

Facts that favor Darling include the following:

< Mr. Mellina’s letter of May 1, 1997, stated that Darling would give Baywood until only May

31, 1997, to do the property inspection. “According to my reading of the Agreement, at the

expiration of the inspection period, Baywood would be required to deposit the second deposit

of $150,000 and would be required to pay the balance of the purchase price and close the

transaction within 30 days thereafter.” Pl.’s Ex. 88.

< Baywood repeatedly asked Darling to sign a Fifteenth Amendment to the Purchase

Agreement but Darling never did. See id. Ex. 87 (letter from L. Wasem to D. Mellina, dated

4/22/97) (proposed amendment extending time for property inspection by one year; also

approving a proposed Title Settlement Agreement with the California State Lands

Commission); id. Ex. 89 (letter from L. Wassem to D. Mellina, dated 5/1/97) (proposed

amendment extending time for property inspection by ninety days); id. Ex. 90 (proposed

amendment extending time for property inspection by approximately two and a half years;

also approving a proposed Title Settlement Agreement with the California State Lands

Commission); id. Ex. 93 (letter from L. Wasem to B. Phillips, dated 9/29/97) (referring to

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letter of 4/22/97 which asked that proposed amendment be signed); id. Ex. 104 (letter from

L. Wasem to B. Phillips, dated 2/9/98) (proposed amendment extending time for property

extension by a year); id. Ex. 106 (proposed amendment extending time for property

extension by a year; also approving a proposed Title Settlement Agreement with the

California State Lands Commission); id. Ex. 98 (letter from L. Wasem to J. Demorest, dated

3/17/98) (asking once again that proposed amendment be signed); id. Ex. 103 (e-mail from L.

Wasem to B. Phillips, dated 11/5/98) (asking “what is happening with the extension of our

contract”); id. Ex. 109 (letter from L. Wasem to B. Phillips, dated 6/16/99) (proposed

amendment extending time for property extension by approximately two and a half years);

id. Ex. 158 (letter from L. Wasem to B. Phillips, dated 4/12/04) (proposed amendment stating

that Second Deposit was timely funded; also eliminating Darling’s hazardous materials

indemnity and lowering purchase price of property from $500,000 to $300,000); id. Ex. 161

(proposed amendment stating that Second Deposit was timely funded; also eliminating

Darling’s hazardous materials indemnity and lowering purchase price of property from

$500,000 to $300,000).

< Mr. Mellina’s letter of February 4, 1998, stated that certain environmental reports were being

provided to Baywood “solely as a courtesy to facilitate possible continuing discussions

concerning the potential sale of the Property to Baywood Partners, Inc. This delivery shall

not imply any acknowledgment of continuing obligations on the part of Darling under that

certain Agreement of Purchase and Sale dated April 30, 1990, between Darling and Baywood

Partners, Inc.” Pl.’s Ex. 94.

< Mr. Demorest testified that, although he could not recall the specific conversations he had

with Mr. Wasem and others at Baywood, the “tenor” of those conversations was that Darling

and Baywood were no longer operating under the contract. See Miller Decl. ISO Def.’s

Mot., Ex. D (Demorest Depo. 12-17).

2. Estoppel

Baywood’s second affirmative defense is that Darling is estopped from claiming that the

Purchase Agreement terminated. 

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Under California law, the elements of equitable estoppel are:

(1) the party to be estopped must be apprised of the facts; (2) [the

party to be estopped] must intend that his conduct shall be relied upon,

or must so act that the party asserting the estoppel had a right to

believe it was so intended; (3) the [party asserting estoppel] must be

ignorant of the true state of facts; and (4) [the party asserting estoppel]

must rely upon the conduct to his injury.

Granite States Ins. Co. v. Smart Modular Techs., 76 F.3d 1023, 1028 (9th Cir. 1996). The parties

agree that the burden of proof with respect to estoppel is a preponderance of the evidence.

As above, there is a genuine dispute of material fact, which precludes partial summary

judgment in favor of either party. For example, partial summary judgment in favor of Baywood is

unwarranted because there is a genuine dispute as to whether Baywood was indeed ignorant of the

true state of facts -- i.e., of Darling’s position that the contract terminated on May 31, 1997. 

According to Baywood, it “did not know of Darling’s position on contract termination until it

received Whiting’s October 1, 2004 letter.” Def.’s Mot. at 24 (emphasis in original). Some of

Darling’s conduct support such an assertion. On the other hand, a reasonable fact finder could also

conclude that Baywood did know of the true state of facts based on the Mellina letter of May 1,

1997. Moreover, even if this letter did not make clear Darling’s position on contract termination, a

reasonable fact finder could conclude that Baywood knew of the true state of facts with the

subsequent letter from Mr. Mellina, dated February 4, 1998. 

As for Darling’s motion for partial summary judgment, there is a genuine dispute as to

whether Darling acted as if the Purchase Agreement was still in existence thereby inducing

Baywood’s reliance. For example, in spite of the two Mellina letters described above, Darling

subsequently remained silent in the face of repeated affirmations of the contract by Baywood. Also,

Darling never told Baywood that the contract terminated before or after Baywood funded the Second

Deposit. Similarly, Darling did not respond to an e-mail that Mr. Wasem sent to Mr. Phillips, in

which Mr. Wasem claimed Mr. Philips had “assured [him] that Darling intends to honor its

Agreement of Purchase and Sale with Baywood Partners and does intend to sell the Property to

Baywood Partners pursuant to the terms of that Agreement.” Def.’s Ex. 197. For similar reasons,

there are genuine issues of fact as to whether any such reliance was reasonable.

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E. Miscellany

1. Baywood’s Request for Judicial Notice

Baywood has filed a request for judicial notice. See Docket No. 74. The documents at issue

consist of (1) Darling’s 10-K and 10-Q reports filed with the SEC and (2) Statement of Financial

Accounting Standards No. 144, which is issued by Financial Accounting Standards Board. Darling

has not opposed the request for judicial notice. 

The Court grants the request to the extent it is “compatible with Federal Rule of Evidence

201 and do[es] not require the acceptance of facts ‘subject to reasonable dispute.’” Cal. ex rel.

RoNo, L.L.C. v. Altus Fin. S.A., 344 F.3d 920, 931 n.8 (9th Cir. 2003); see also United States v.

Southern Cal. Edison Co., 300 F. Supp. 964, 975 (E.D. Cal. 2004) (“[D]ocuments are judicially

noticeable only for the purpose of determining what statements are contained therein, not to prove

the truth of the contents or any party’s assertion of what the contents mean. ‘Judicial notice is taken

of the existence and authenticity of the public and quasi public documents listed. To the extent their

contents are in dispute, such matters of controversy are not appropriate subjects for judicial

notice.’”).

2. Darling’s Objections to Baywood’s Evidence and Motion to Strike

Darling’s objections to certain of Baywood’s evidence and motion to strike are moot as the

Court has not relied on any of the evidence objected to in ruling on these motions.

3. Baywood’s Rule 56(f) Request

Pursuant to Rule 56(f), Baywood has asked the Court to deny Darling’s motion for partial

summary judgment “[b]ased upon Darling’s failure to timely produce documents [i.e., financial

documents and a note written by Mr. Demorest].” Rule 56(f) Decl. ¶ 9. The request is moot given

that Darling’s motion should be denied for the reasons stated above.

Baywood, however, also “requests that the Court grant Baywood the opportunity to reopen

the depositions of Messrs. Phillips, McMurtry and Demorest, (and, if necessary, the deposition of

the person most knowledgeable regarding Exhibits ‘A’ and ‘B’), and to follow-up on written

accounting and financial discovery related to these documents, to enable Baywood to present further

evidence of Darling’s ongoing plan to sell the Petaluma property to Baywood per the terms of the

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Contract.” Rule 56(f) Decl. ¶ 9. The Court does not rule on this request as it was not made in a

properly noticed motion but rather as part of a declaration. However, the Court did note at the

hearing that as to additional discovery, the parties should meet and confer and resolve their

differences. The Court provided guidance by indicating it is inclined to permit each party the full

extent of discovery set forth in the Court’s previous CMC order and allow the parties a reasonable

amount of time beyond the previously imposed deadline to do so. Finally, the Court invited the

parties to fully engage in the impending settlement conference before Magistrate Judge Larson in

view of the significant risk of trial evident herein.

III. CONCLUSION

For the foregoing reasons, the Court grants in part and denies in part each party’s motion for

partial summary judgment; grants Baywood’s request for judicial notice; and finds moot Darling’s

objections and motion to strike.

This order disposes of Docket Nos. 64, 67, 74, and 90.

IT IS SO ORDERED.

Dated: August 16, 2006

 EDWARD M. CHEN

United States Magistrate Judge

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