Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_04-cv-06111/USCOURTS-caed-1_04-cv-06111-1/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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 The facts are taken from MTC’s Statement of Undisputed 1

Material Facts (“UMF”) unless otherwise noted.

 KXVO(TV) was formerly known as KPQC(TV). 2

1

IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

CFM COMMUNICATIONS, LLC ) 

 )

Plaintiff, )

)

vs. )

)

MITTS TELECASTING COMPANY, )

 )

Defendant. )

)

) 

No. CV-F-04-6111 REC DLB

ORDER GRANTING IN PART AND

DENYING IN PART DEFENDANT’S

MOTION FOR SUMMARY JUDGMENT

OR, IN THE ALTERNATIVE,

SUMMARY ADJUDICATION. 

(Doc. 8)

On March 7, 2005, the Court heard Defendant’s motion for

summary judgment or summary adjudication. Upon due consideration

of the written and oral arguments of the parties and the record

herein, the Court GRANTS IN PART and DENIES IN PART the motion as

set forth below.

I. Factual Background1

This case centers around the ownership of and purchasing

rights to television station KXVO(TV) Channel 15 in Omaha, 2

Nebraska (the “Station”). As of January, 2000, the Station had

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an appraised value of $18,750,000. To summarize, Plaintiff CFM

Communications, LLC (“CFM” or “Plaintiff”) claims that it has a

valid purchase option contract for the Station. Defendant Mitts

Telecasting Company (“MTC” or “Defendant”) argues that the option

contract is unenforceable. 

Pappas Telecasting of the Midlands (“Pappas” or “PTM”)

purchased the FCC construction permit for the Station from the

original grantee. Pappas Decl. ¶ 2. The purchase was on the

condition that Pappas could build the Station but could not put

it on the air unless Pappas divested itself of another station it

owned in Omaha. Id. Pappas sold the FCC authorization to

construct and operate the Station to Gary M. Cocola (“Mr.

Cocola”). 

On November 4, 1994, Mr. Cocola executed a promissory note

in favor of Pappas in the amount of $410,000 (the “Cocola Note”). 

The Cocola Note provided that the holder could tender it to Mr.

Cocola and that all of Mr. Cocola’s obligations would be

satisfied if (a) Mr. Cocola cooperated with the holder of the

Cocola Note in forming a limited partnership (the “Cocola Limited

Partnership”) in which the holder would be the sole general

partner and own 97 percent of the equity of the Cocola Limited

Partnership and Mr. Cocola would be the limited partner and own

the remaining 3 percent of equity; and (b) Mr. Cocola would

transfer to the Cocola Limited Partnership, with the consent of

the FCC, all of Mr. Cocola’s right, title and interest in KXVO,

including all FCC licenses, permits and authorizations. 

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The Cocola Note provided that, at any time after the Cocola

Limited Partnership was formed, the general partner (note holder)

could require the limited partner (Mr. Cocola) to convey his 3

percent interest to the general partner for a purchase price

equal to 3 percent of the then fair market value of the Station,

including the FCC license. It also provided that the note could

be assigned by the holder at any time with notice to Mr. Cocola.

On or about November 5, 1999, Defendant MTC, of which Thomas

Mitts, M.D. (“Dr. Mitts”) is the president and sole shareholder,

and Pappas executed two agreements, a “Note Power and Assignment”

and an “Option Agreement.” Under the Note Power and Assignment,

Pappas, for $425,000, sold and assigned to MTC the Cocola Note

and “all rights running to the holder thereof including, without

limitation, all rights of the holder to exercise the 97% Option

and the 3% Option.” The Note Power and Assignment defined “97%

Option” as “an option to acquire a 97% general partner interest

in a newly-formed limited partnership which will hold the [FCC]

licenses and certain other assets used in the operation of [the

Station],” and the “3% Option” as “an option, exercisable by the

holder of the Note, to acquire from Cocola a 3% limited partner

interest.” 

MTC paid $972,500 for the purchase of the Station; $410,000

to pay off the Cocola Note and the remaining $562,500 which was

the parties’ calculation of the Cocola’s 3% interest in the

Station. As mentioned, the Station was valued at $18,750,000 at

the time. Davis Decl. ¶ 4. Pappas was to provide programming,

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 MTC disputes that all of its expenses have been paid, but 3

does not dispute that it receives a payment of $2,500 per month

pursuant to its contracts with Pappas (and/or its assigns). This

dispute is immaterial. 

4

sales, and other services in connection with the operation of the

Station pursuant to a Time Brokerage Agreement, which is not

before the Court. Davis Decl. ¶ 9. Pappas also pays MTC’s

operating expenses including the cost of MTC’s personnel at the

Station, out of pocket expenses paid by MTC and government fees.3

Davis Decl. ¶ 7. 

The Option Agreement between MTC and Pappas, which is at the

center of this case, defines the 97% and 3% options just as the

Note Power and Assignment does and provides a purchase option in

favor of Pappas as follows:

(a) MTC hereby grants to Pappas or its assignee an

exclusive and irrevocable option (the “Purchase

Option”) as follows:

(i) If, at the time the Purchase Option is exercised,

MTC has not acquired any interest in the Partnership or

the assets used in connection with the Station pursuant

to the 97% Option or the 3% Option, then Pappas shall

have the option to acquire from MTC the Note, including

all of MTC’s rights under the 97% Option and the 3%

Option, for a price equal to $425,000, plus or minus

the CPI Adjustment as defined below (the “Note Exercise

Price”); or

(ii) If, at the time the Purchase Option is exercised,

MTC has acquired, pursuant to the 97% Option, the 97%

general partner interest in the Partnership, but has

not acquired the 3% limited partner interest in the

Partnership, then Pappas shall have the option to

acquire from MTC all of MTC’s interest in the

Partnership, plus MTC’s rights under the 3% Option, for

a price equal to $425,000, plus or minus the CPI

Adjustment as defined below (the “Partnership Interest

Exercise Price”); or

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(iii) If, at the time the Purchase Option is exercised,

MTC has acquired, pursuant to the 97% Option and the 3%

Option, all of the FCC authorizations and other assets

used by Cocola in the operation of the Station, then

Pappas shall have the option to acquire from MTC all of

such authorizations and other assets for a price equal

to $425,000, plus the amount for with MTC acquired the

3% interest in the Partnership from Cocola, plus or

minus the CPI Adjustment (the “Station Assets Exercise

Price”).

The Option Agreement provides that the purchase option is

exercisable for seven years after the effective date, on or about

November 5, 1999. Mitts Decl. Ex. C at 4. Pappas paid MTC

$12,000 as a non-refundable payment for the purchase option. The

Option Agreement also provided a Put Option under which MTC or

its assignee could require Pappas to acquire MTC’s interest in

the Partnership and / or Station assets.

On November 5, 1999, Pappas provided formal written notice

to Mr. Cocola that Pappas had assigned the Cocola Note to MTC. 

On the same day, MTC formally exercised its option rights under

the Cocola Note by letter to Mr. Cocola. The letter notified Mr.

Cocola that MTC was exercising the option and suggested that

counsel for both parties work to finalize a partnership agreement

in accordance with the terms of the Cocola Note.

Counsel for Mr. Cocola sent a letter dated November 10,

1999, to counsel for Pappas confirming receipt of the letters

regarding the assignment and the exercise of the option. Also on

November 10, 1999, counsel for Pappas sent counsel for MTC a

memorandum including a draft of a partnership agreement. On

November 19, 1999, counsel for Pappas sent an email to counsel

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for MTC stating that Mr. Pappas had spoken to Mr. Cocola and Mr.

Cocola was willing to sell the Station to MTC. The message

specified that Cocola “did not want to stay in as a 3% partner

and Harry [Pappas], Tom [Mitts] and Gary [Cocola] think they can

agree on a value for the station so that Mitts could by Cocola

out completely eliminating the need for a partnership.” 

On December 1, 1999, counsel for Pappas sent Mr. Pappas an

email, which was copied to counsel for MTC, confirming that Mr.

Cocola and Mr. Pappas “had essentially agreed that it makes no

sense to go through a two-step process whereby Cocola would be

reduced to a 3% limited partner role, and then [require MTC buy

him out].” The email further confirmed that counsel for Cocola

and Mr. Pappas “agreed just to have [MTC] take Cocola out as the

owner of KXVO(TV) altogether, 100% in one single transaction.” 

On February 25, 2000, counsel for Pappas sent an email to

counsel for MTC with a proposed Asset Purchase Agreement

attached. The proposed agreement did not discuss the 97% Option,

the 3% Option, a limited partnership between Mr. Cocola and MTC

or the Pappas Option. Counsel for MTC provided counsel for Mr.

Cocola and Pappas’ Vice President and Chief Financial Officer

Dennis Davis with a letter agreement, the final form of the

agreement to be entered into between MTC and Mr. Cocola.

On April 10, 2000, counsel for MTC sent Mr. Davis the

execution copy of the letter agreement so that Mr. Davis could

arrange for Dr. Mitts to sign it on behalf of MTC. On April 17,

2000, Dr. Mitts executed the letter agreement, which provided for

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the sale of the Station’s assets directly to MTC. 

There were three conditions to the transaction between MTC

and Cocola. The first was the FCC’s approval of the assignment

of the license; this was obtained on June 13, 2000. The second

was the written consent of Pappas to the assignment from Mr.

Cocola to MTC of two agreements between Mr. Cocola and Pappas; a

Time Brokerage Agreement by which Pappas provides programming for

the Station, and an Equipment Lease Agreement. Written consent

was obtained on August 1, 2000. The third was providing Mr.

Cocola with the Cocola Note marked “Paid and Canceled;” this was

done on August 3, 2000 when Mr. Davis faxed MTC a copy of the

Cocola Note so marked. The transaction was finalized on August

4, 2000. 

By letter dated February 10, 2003, counsel for MTC sent the

FCC a letter and a copy of the Option Agreement. By letter to

MTC dated August 20, 2003, Pappas purported to exercise the

Pappas Option of the Option Agreement. On February 20, 2004,

Pappas assigned its rights under the Option Agreement to

Plaintiff CFM for consideration of ten dollars cash as well as

other consideration. Pappas Decl. Ex. E. Pappas informed MTC of

the assignment by letter dated February 25, 2004. CFM informed

MTC that it was exercising the Pappas Option of the Option

Agreement, also by letter dated February 25, 2004. Sometime

thereafter, counsel for MTC informed CFM that the Option

Agreement was unenforceable. Def.’s Reply to Pl.’s UMF No. 38.

///

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II. Procedural History

CFM filed its Complaint, which is based on diversity, on

August 16, 2004. The Complaint states three claims for relief. 

The first is for specific performance of the Option Agreement. 

CFM alleges that the Option Agreement is a valid contract and

that MTC has breached it by refusing to agree to the option,

including the purchase price. CFM alleges that the parties

waived the necessity of establishing a partnership or that, in

the alternative, the asset purchase agreement constitutes a

novation of the original transactions and became fully

enforceable notwithstanding the absence of a partnership. The

second claim is in the alternative and is for breach of contract

based on the Option Agreement. The third claim seeks a

declaration of the rights and liabilities of the parties under

the Option Agreement. 

MTC moved for summary judgment on October 14, 2004. MTC

argues that the Option Agreement became unenforceable after the

agreement between MTC and Cocola was finalized. MTC argues that

formation of the Cocola Limited Partnership was a condition

precedent to the Pappas Option being exercisable and that the

Option Agreement became unenforceable when MTC acquired the

Station without the formation of the Cocola Limited Partnership. 

MTC also argues that CFM’s theories of novation and waiver fail

as a matter of law and that CFM cannot assert estoppel.

///

///

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III. Discussion 

A. Legal Standard

Summary judgment is proper when it is shown that there

exists “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. A fact is “material” if it is relevant to an

element of a claim or a defense, the existence of which may

affect the outcome of the suit. T.W. Elec. Serv., Inc. v.

Pacific Elec. Contractors Ass’n, 809 F.2d 626, 630 (9th Cir.

1987) (citing Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio

Corp., 475 U.S. 574, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986)). 

Materiality is determined by the substantive law governing a

claim or a defense. Id. The evidence and all inferences drawn

from it must be construed in the light most favorable to the

nonmoving party. Id. 

The initial burden in a motion for summary judgment is on

the moving party. The moving party satisfies this initial burden

by identifying the parts of the materials on file it believes

demonstrate an “absence of evidence to support the nonmoving

party’s case.” Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106

S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The burden then shifts to

the nonmoving party to defeat summary judgment. T.W. Elec., 809

F.2d at 630. 

The nonmoving party “may not rely on the mere allegations in

the pleadings in order to preclude summary judgment,” but must

set forth by affidavit or other appropriate evidence “specific

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facts showing there is a genuine issue for trial.” Id. (citing

Fed. R. Civ. P. 56(e)). The nonmoving party may not simply state

that it will discredit the moving party’s evidence at trial; it

must produce at least some “significant probative evidence

tending to support the complaint.” Id. (citing First Nat’l Bank

v. Cities Serv. Co., 391 U.S. 253, 290, 88 S. Ct. 1575, 20 L. Ed.

2d 569 (1968)). 

B. Strict Construction & Condition Precedent

An option contract is “an offer by which a promisor binds

himself in advance to make a contract if the optionee accepts

upon the terms and within the time designated in the option. 

Since the optioner is bound while the optionee is free to accept

or not as he chooses, courts are strict in holding an optionee to

exact compliance with the terms of the option.” Bekins Moving &

Storage Co. v. Prudential Ins. Co., 176 Cal. App. 3d 245, 250-51

(1986) (strictly construing time in which party could exercise

option).

“A condition precedent is either an act of a party that must

be performed or an uncertain event that must happen before the

contractual right accrues or the contractual duty arises.” Platt

Pacific, Inc. v. Andelson, 6 Cal. 4th 307, 313 (1993) (citing

Cal. Civ. Code § 1436; 1 Witkin, Summary of Cal. Law, Contracts §

722 p. 654). A condition may be made express by the terms of the

contract or arise by implication. 1 Witkin, Summary of

California Law § 722. Words of condition such as “if,” “on

condition that,” and “unless” may indicate an express condition. 

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8-31 Corbin on Contracts § 31.1 (Matthew Bender 2004). The law

disfavors conditions precedent; “absent plain and unambiguous

contract language” creating such a condition, “courts shall not

construe a term of the contract so as to establish a condition

precedent.” Frankel v. Bd. of Dental Examiners, 46 Cal. App. 4th

534, 550 (1996). 

MTC argues that the terms of the Option Agreement must be

strictly construed and that its plain language indicates that the

formation of the Cocola Limited Partnership was a condition

precedent to the Pappas Option being exercised. Because that

condition did not and cannot come to pass, the Option Agreement

is not enforceable. 

CFM argues that “there is no plain, unambiguous language

suggesting that the formation of a limited partnership was a

condition precedent” to Pappas’ right to enforce the option. 

Pl.’s Opp’n at 9. CFM claims that Pappas could acquire

substantially all of the Station’s assets other than through the

Cocola Limited Partnership as follows:

Whereas, MTC now desires to grant to Pappas an

irrevocable option to acquire (i) the Note, (ii) the

97% interest in the partnership or (iii) substantially

all of the assets, including the FCC authorizations,

used in the operation of the station, as the case may

be, on the terms and conditions set forth herein; . .

.. 

Pl.’s Opp’n at 9 (citing Pappas Decl. Ex. C) (emphasis in Opp’n). 

Thus, CFM argues, the language in the Option Agreement regarding

the formation of the Cocola Limited Partnership was not a

condition precedent.

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 As MTC points out, the other options are inapplicable. 4

Section (a)(i) contemplates no partnership having been formed but

grants an interest to Pappas in the Cocola Note, which was no

longer in existence when Pappas attempted to exercise the option.

Section (a)(ii) applies only if MTC had acquired the 97% interest

but had not yet bought out Cocola’s 3%. 

12

CFM is mistaken. The relevant provision in the Option

Agreement provides that: 4

If, at the time the Purchase Option is exercised, MTC

has acquired, pursuant to the 97% Option and the 3%

Option, all of the FCC authorizations and other assets

used by Cocola in the operation of the Station, then

Pappas shall have the option to acquire from MTC all of

such authorizations and other assets for a price . . ..

Pappas Decl. Ex. C (emphasis added). The word “if” indicates a

conditional clause. CFM’s argument that the Option Agreement

provided for the acquisition other than through the Cocola

Limited Partnership is unavailing. That clause, quoted supra,

specifies that MTC granted the option to acquire “substantially

all of the assets . . . on the terms and conditions set forth

herein.” Formation of the Cocola Limited Partnership is one of

the conditions “set forth herein.” The two provisions are not

inconsistent. 

The Court agrees with MTC that the formation of the Cocola

Limited Partnership was a condition precedent to the exercise of

the Pappas Option. Accordingly, summary adjudication as to this

issue is GRANTED. 

C. Excuse of the Condition Precedent

At oral argument on the motion CFM’s counsel argued that the

condition precedent was excused because MTC caused the condition

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not to occur. 

California courts have held that if a party “prevents or

makes impossible the performance or happening of a condition

precedent, the condition is excused.” Jacobs v. Tenneco West,

Inc., 186 Cal. App. 3d 1413, 1418 (1986); see also Parsons v.

Bristol Dev. Co., 62 Cal. 2d 861, 869 (1965) (stating “a party

who prevents fulfillment of a condition of his own obligation . .

. cannot rely on such condition to defeat his liability”). 

Because this argument was raised by CFM for the first time at

oral argument, MTC has not had an opportunity to respond. While

this theory may well have merit, the Court will not deny summary

judgment on this basis at this time as there are alternate bases

for the denial that have been fully briefed. 

D. Waiver

Given that the language in the Option Agreement created a

condition precedent, the next question is whether there is a

genuine issue of material fact regarding whether the condition

was waived when MTC bought Mr. Cocola’s interest outright rather

than by forming the Cocola Limited Partnership. The condition

specifies that if MTC, pursuant to the partnership, acquired all

the assets of the Station, then Pappas (or its assignee, CFM)

could acquire those assets as set forth in the option. CFM

argues that MTC waived the requirement that the acquisition be

pursuant to the Cocola Limited Partnership.

“Waiver is the intentional relinquishment of a known right

after knowledge of the facts.” DRG/Beverly Hills, Ltd. v.

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Chopstix Dim Sum Café and Takeout III, Ltd., 30 Cal. App. 4th 54,

59 (1994) (citing City of Ukiah v. Fones, 64 Cal. 2d 104, 107-08

(1966)). 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 waiver.’” Id. Waiver may, however, “be shown by

conduct; and it may be the result of an act which, according to

its natural import, is so inconsistent with the intent to enforce

the right in question as to induce a reasonable belief that such

right has been relinquished.” Noel v. Dumont Builders, Inc., 178

Cal. App. 2d 691, 697 (1993) (quoting Medico-Dental Bldg. Co. v.

Horton & Converse, 21 Cal. 2d 411, 432 (1942)). The issue of

waiver is a question of fact. Platt Pacific, 6 Cal. 4th at 319. 

MTC does not dispute that the “primary reason that the

partnership formality was dispensed with was to expedite payment

to Mr. Cocola since he no longer wanted to maintain an interest

in the station and its assets.” Def.’s Reply UMF No. 36. MTC

argues, however, that CFM’s waiver claim must fail because Dr.

Mitts never intended to waive MTC’s right to enforce the

condition in the Option Agreement, essentially arguing that

because Dr. Mitts never considered his rights, he could not have

voluntarily relinquished them. Dr. Mitts avers that:

At no time prior to August 20, 2003, did I consider

whether purchasing the Station from Mr. Cocola in the

manner suggested and agreed to by Mr. Cocola and Harry

Pappas, General Partner of Pappas Telecasting, would

affect the rights and obligations of Pappas Telecasting

under the Purchase Option contained in the Option

Agreement or the rights and obligations of Mitts

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Telecasting under the Put Option contained in the

Option Agreement.

At no time prior to August 20, 2003, did anyone discuss

or even mention to me the possible effect on the

respective rights and obligations of Pappas Telecasting

under the Option Agreement if Mitts Telecasting

purchased the Station from Mr. Cocola in the manner

suggested and agreed to by Mr. Cocola and Mr. Pappas

after Mitts Telecasting and Pappas Telecasting entered

into the Option Agreement.

Mitts Decl. ¶¶ 19-20. CFM points out that Dr. Mitts does not

state what his intent was at the time of the transaction. 

MTC has carried its burden of demonstrating that Dr. Mitts

did not intend to waive his rights, although Defendant does not

address the contention that waiver may be found by conduct. The

burden is on CFM to demonstrate a genuine issue of material fact.

CFM argues first that because Mr. Cocola could have insisted

on the formation of the Cocola Limited Partnership, the condition

was for the benefit of Cocola and could be waived by Cocola. 

This is incorrect. Mr. Cocola was not a party to the Option

Agreement and, as CFM acknowledges, “a contracting party may

waive conditions placed in a contract solely for that party’s

benefit.” Pl.’s Opp’n at 10 (quoting Sabo v. Fasano, 154 Cal.

App. 3d 502, 505 (1984)) (emphasis added). CFM cites no

authority for the proposition that a person not a party to the

contract, such as Mr. Cocola, may waive a provision thereof. 

CFM next argues that the MTC waived the condition when it

agreed to the streamlined buyout process. CFM asserts that there

is a dispute as to whether the parties discussed the impact of

the modified transaction on the Pappas Option. In contrast to

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Dr. Mitts’ declaration, Mr. Pappas attests that he “did discuss

with Dr. Mitts that this change [in the manner of the transaction

with Mr. Cocola] would not affect the Pappas Option.” Pappas

Decl. ¶ 4. Mr. Davis, the CFO of Pappas, avers that the intent

of Pappas to utilize the Pappas Option “was disclosed to and

discussed with Thomas Mitts during the negotiations that led to

PTM’s consent to the 2000 transfer of Cocola’s interest in the

station to MTC.” Davis Decl. ¶ 10.

MTC argues that these averments are too vague to demonstrate

a genuine issue of fact because Mr. Pappas does not state what he

claims he said to Dr. Mitts, what Dr. Mitts’ response was, or

that Dr. Mitt’s agreed to waive the provision. MTC asserts that

because elsewhere Mr. Pappas avers that the parties “discussed

and agreed to bypass” the structure of the transaction delineated

in the Option Agreement, the failure of Mr. Pappas to use the

same language is telling. MTC argues that the Davis Declaration

is similarly insufficient because it is conclusory. MTC also

argues that the declarations are contradicted by counsel for

Pappas’ averment that if anyone had suggested that the option was

or would be rendered ineffectual by the transaction it would have

been a “red flag issue for [him] that would have warranted an

immediate discussion, given the interests of Pappas Telecasting

that were at stake.” Johnson Decl. ¶ 5. 

CFM argues that MTC’s conduct indicates that MTC intended to

waive the condition. CFM points out that counsel for MTC sent a

letter and a copy of the Option Agreement to the FCC. The

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letter, dated February 11, 2003, states the following:

On behalf of Mitts Telecasting Company, licensee of

Station KXVO(TV), Omaha, Nebraska, we are transmitting

herewith a copy of an Option Agreement (with financial

terms redacted) between the licensee and Pappas

Telecasting of the Midlands, a California Limited

Partnership. The Option Agreement should be associated

with the ownership file for Station KXVO(TV).

Whitney Decl. Ex. C. 

Bearing in mind that the evidence is to be viewed in the

light most favorable to CFM and that the issue of waiver is a

question of fact, Platt Pacific, 6 Cal. 4th at 319, the Court

finds that summary adjudication of this issue is inappropriate. 

The fault MTC finds with the declarations of Mr. Davis and Mr.

Pappas goes to the weight to be given those statements, not their

admissibility, and it is an issue for the trier of fact. There

is a dispute as to whether Dr. Mitt’s was aware that the Option

Agreement was to continue after the completion of the buyout and,

in being so aware, whether MTC waived the formation of the Cocola

Limited Partnership by its subsequent conduct. 

Even if the Court were to ignore the declarations, MTC’s

subsequent sending of the letter to the FCC is conduct of which

the “natural import” is that MTC believed that the Option

Agreement was in full force at the time the letter was sent. 

This is inconsistent with an intent to enforce the condition and

may indicate waiver. Similarly, MTC did not assert that the

Option Agreement was no longer valid when Pappas first notified

MTC that Pappas was exercising the option in August of 2003; it

was not until sometime in 2004 that Defendant asserted the

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 The remainder of CFM’s argument is off point. CFM argues 5

that the Court must look to the intent of the parties in

interpreting contracts, but the citations provided are to cases in

which courts essentially held that the intent of the parties is

paramount where a contract is ambiguous on its face; there is no

such ambiguity alleged here. Of the other cases cited by CFM, none

deal with modification of a written contract and the procedure

therefor.

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invalidity. This is a second act of which the “natural import”

is inconsistent with an intent to enforce the condition. 

Because there are genuine issues of material fact as to

whether the condition was waived, summary adjudication as to this

issue is DENIED. 

E. Modification

CFM argues in the alternative that, “at a minimum, the

option was modified to eliminate the partnership formation step

in identifying the price.” CFM asserts correctly that parties

are free to modify their contracts, including options. See

Bergin v. Van Der Steen, 107 Cal. App. 2d 8, 13 (1951). 

5

Section 1698 of the California Code of Civil Procedure

governs the modification of written contracts. It provides that:

(a) A contract in writing may be modified by a contract

in writing.

(b) A contract in writing may be modified by an oral

agreement to the extent that the oral agreement is

executed by the parties.

(c) Unless the contract otherwise expressly provides, a

contract in writing may be modified by an oral

agreement supported by new consideration. The statute

of frauds (Section 1624) is required to be satisfied if

the contract as modified is within its provisions. 

(d) [omitted].

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Cal. Civ. Code § 1698. Subsection (c) may apply here. The

Option Agreement is silent as to the issue of modification and it

may have been orally modified if supported by consideration.

CFM argues that the parties agreed to streamline the process

by which Mr. Cocola could be bought out and thereby modified the

Option Agreement. As discussed in the preceding section there is

a dispute as to whether the parties discussed the impact of the

modified transaction on the Pappas Option. Additionally, conduct

of the parties that is inconsistent with the written contract may

“warrant the conclusion that the parties intended to modify the

written contract.” Garrison v. Edward Brown & Sons, 25 Cal. 2d

473, 479 (1944). Again, as discussed, MTC included a copy of the

Option Agreement in a letter sent to the FCC in 2003 regarding

the “ownership file” of the Station. Whitney Decl. Ex. C. This

transmission indicates that MTC still believed that the Option

Agreement was in full force, thereby acknowledging that the

buyout did not terminate the Option Agreement. The failure of

MTC to assert the invalidity of the Option Agreement for some

months is also consistent with modification. 

Pappas’ consent to the form of the buyout and agreeing to

the assignment of the Time Brokerage and Equipment Lease

Agreements may be consideration for the modification. Indeed,

MTC notes that “Pappas Telecasting had the power to prevent the

closing unless the sale occurred on terms acceptable to Pappas

Telecasting.” Def.’s Mot. at 15. Further, the Davis declaration

indicates that the continued viability of the Option Agreement

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was paramount to Pappas’ giving its consent to the buyout

transaction, which the parties agree was required. See Davis

Decl. ¶¶ 3, 5, 10. 

Again bearing in mind that the evidence on summary judgment

is to be viewed in favor of CFM, the Court finds that summary

adjudication of this issue is inappropriate. CFM has presented

admissible evidence that tends to support its position that the

parties intended to modify the Option Agreement. 

Because there are genuine issues of material fact regarding

the whether the Option Agreement was modified, summary

adjudication as to this issue is DENIED. 

F. Estoppel

Estoppel may apply where one party induces another to take a

position such that it would be injured if the first party is

allowed to repudiate its acts. Equitable estoppel requires four

elements: 

(1) The party to be estopped must know the facts;

(2) he must intend that his conduct shall be acted

upon, or must so act that the party asserting the

estoppel had the right to believe it was so intended;

(3) the party asserting the estoppel must be ignorant

of the true state of the facts; and,

(4) he must rely upon the conduct to his injury.

DRG/Beverly Hills, Ltd. v. Chopstix Dim Sum Café and Takeout III,

Ltd., 30 Cal. App. 4th 54, 59 (1994).

Defendant argues that Plaintiff cannot establish the first

and third elements, which are, as Defendant puts it “two sides of

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the same coin,” because both it and Pappas were, at all time

throughout their dealings, represented by counsel and that there

is no evidence that indicates that Defendant was aware of facts

of which Pappas, and thereby Plaintiff, was ignorant. Def.’s UMF

Nos. 14-21. Defendant argues that the Option Agreement failed as

a matter of law when the transaction occurred and the condition

precedent failed. 

Plaintiff does not directly address this issue but argues

generally that “MTC takes the position the 1999-2000 transaction

extinguished the Pappas Option. Notably, MTC nowhere asserts it

entertained this notion during the transaction in question. 

Nevertheless, if it harbored such a belief, its failure to

disclose it to PTM caused PTM to rely upon the continued

enforceability of the option to its detriment, continually to the

present.” Plaintiff further argues that it continued to pay the

operating expenses for the station after the buyout in reliance

on the continued viability of the Option Agreement. Plaintiff

asserts that “MTC achieved all this gain – an entire television

station, free and clear – for literally nothing out of pocket. 

If it secretly held the belief the option was nullified in 2000,

it misled PTM to its extreme financial detriment in failing to

disclose that position at the time.” Pl.’s Opp’n at 16-17

(emphasis added).

Pappas’ failure to recognize the operation of law is not

ignorance of the facts. LaRue v. Swoap, 51 Cal. App. 3d 543, 552

(1975). Moreover, as Defendant correctly argues, estoppel may

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not be based on Defendant’s silence regarding the effect of the

buyout of Mr. Cocola on the Option Agreement. Under California

law, estoppel may be based on a party’s silence only if that

party had a duty to speak, an opportunity to speak and knowledge

that the circumstances require him to speak. Keeler v. Haky, 160

Cal. App. 2d 471, 478-79 (1958). Plaintiff does not argue that

any such duty existed here and does not cite to any evidence that

contradicts Defendant’s assertion that both parties were equally

aware of the facts and represented by adequate counsel

throughout.

As Plaintiff has failed to demonstrate a genuine issue of

material fact regarding the first and third elements of estoppel,

the fourth element, reliance, need not be addressed. 

Accordingly, summary adjudication as to the issue of estoppel is

GRANTED.

G. Novation

Defendant also argues that Plaintiff cannot, as a matter of

law, argue that there has been a novation because there has been

no substitution of a new agreement between Defendant and Pappas

for the Option Agreement. Plaintiff does not address the

novation issue in its opposition.

Failure of a party to address a claim in an opposition to a

motion for summary judgment may constitute a waiver of that

claim. Coufal Abogados v. AT&T, Inc., 223 F.3d 932, 937 (9th

Cir. 2000) (stating that where defendant raised issue in summary

judgment motion but where plaintiff did not address it to

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district court, issue waived on appeal); Doe v. Benicia Unified

Sch. Dist., 206 F. Supp. 2d 1048, 1050 n.1 (E.D. Cal. 2002)

(stating that “plaintiff abandons [her equal protection] theory

in her opposition to defendants’ motion for summary judgment by

not mentioning it or citing any equal protection cases”). 

Even if Plaintiff had not waived the issue, which the Court

finds to the be case, the novation argument fails because there

is no evidence of a new contract that completely eliminated the

old one. Accordingly, summary adjudication as to the issue of

novation is GRANTED. 

ACCORDINGLY, Defendant’s request for summary judgment is

hereby DENIED.

FURTHER, Defendant’s request for summary adjudication as to

the issues of the existence of a condition precedent, estoppel

and novation is hereby GRANTED.

FURTHER, Defendant’s request for summary adjudication as to

the issues of waiver and modification is hereby DENIED.

IT IS SO ORDERED.

Dated: May 3, 2005 /s/ Robert E. Coyle 

ia40ij UNITED STATES DISTRICT JUDGE

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