Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-03758/USCOURTS-cand-3_05-cv-03758-16/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.,

Plaintiff,

v.

BAYWOOD PARTNERS, INC., et al.,

Defendants.

___________________________________/

No. C-05-3758 EMC

ORDER DENYING PLAINTIFF’S

MOTION TO ALTER JUDGMENT OR,

ALTERNATIVELY, FOR NEW TRIAL;

AND DENYING PLAINTIFF'S

RENEWED MOTION FOR JUDGMENT

ON PARTIAL FINDINGS

(Docket Nos 211, 214)

Currently pending before the Court are two post-trial motions filed by Plaintiff Darling

International, Inc. In its renewed motion for judgment on partial findings, Darling argues that

judgment should be entered in its favor Defendant Baywood Partner, Inc.’s claims are barred by the

statute of limitations. In its motion to alter judgment or for a new trial, Darling’s main arguments

are that it is entitled to relief because Baywood’s claims are barred by the statute of limitations and

because the Agreement between Darling and Baywood contained a conclusive presumption of

contract termination. 

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

argument of counsel, the Court hereby DENIES both of Darling’s motions.

I. DISCUSSION

A. Legal Standard

Federal Rule of Civil Procedure 52(c) governs judgment on partial findings. It provides that,

“[i]f during a trial without a jury[,] a party has been fully heard on that issue and the court finds

against the party on that issue, the court may enter judgment as a matter of law against that party . . .

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or the court may decline to render any judgment until the close of all the evidence.” Fed. R. Civ. P.

52(c). Rule 52(c) is intended to parallel Rule 50(a), see Fed. R. Civ. P. 52(c), 1991 advisory

committee notes, which governs judgment as a matter of law in jury trials. See also 9-50 Moore’s

Fed. Prac. -- Civ. § 50.06[4][a] (“Rule 52(c) parallels Rule 50 by enabling courts to enter judgment

on partial findings against either party on an issue, claim, or defense that cannot be maintained or

defeated under controlling law.”). “A judgment on partial findings is made after the court has heard

all the evidence bearing on the crucial issue of fact, and the finding is reversible only if the appellate

court finds it to be ‘clearly erroneous.’” Fed. R. Civ. P. 52(c), 1991 advisory committee notes. 

Federal Rule of Civil Procedure 59 sets forth the procedures for seeking a new trial and the

alteration or amendment of a judgment in an action pending in federal court. See Fed. R. Civ. P. 59. 

The parties agree that “[t]here are three grounds for granting new trials in court-tried actions under

Rule 59(a)(2): (1) manifest error of law; (2) manifest error of fact; and (3) newly discovered

evidence.” Brown v. Wright, 588 F.2d 708, 709 (9th Cir. 1978); see also Mot. at 2; Opp’n at 2 n.1. 

The parties also agree that one ground for altering or amending a judgment is if a court committed

clear error or its decision was manifestly unjust. See School Dist. No. 1J, Multnomah County v.

ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993); Zimmerman v. City of Oakland, 255 F.3d 734, 740

(9th Cir. 2001); see also Mot. at 2; Opp’n at 2.

B. Statute of Limitations

As noted above, in both of its motions, Darling argues that the Court made a clear error with

respect to the statute of limitations issue. In its FF&CL, the Court stated that

the claim for breach of contract did not accrue until October 1, 2004. 

This was the first time that Darling plainly, expressly, and

unequivocably stated that the Agreement had terminated. As found

above, there was no clear repudiation of the Agreement prior to this

date; Darling’s behavior was at best ambiguous and induced Baywood

reasonably to believe that Darling considered the Agreement in effect

until the Whiting letter of October 1, 2004. This action was therefore

timely filed.

FF&CL at 31. 

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Darling contends that the above ruling was clearly erroneous because any breach by Darling

occurred either in or about May 1997 or in or about February 2000, but not as late as October 2004. 

The Court does not agree.

The statute of limitations on a breach of contract claim accrues when the defendant breaches

its duty to perform an obligation when due or repudiates the contract. See Romano v. Rockwell

Internat’l, Inc., 14 Cal. 4th 479, 488-89 (1996) (“‘There can be no actual breach of a contract until

the time specified therein for performance has arrived.’ Nonetheless, if a party to a contract

expressly or by implication repudiates the contract before the time for his or her performance has

arrived, an anticipatory breach is said to have occurred.”) (emphasis in original).

There could be no breach by Darling in or about May 1997 because, at that time, Baywood

had failed to make the second deposit and so the contract terminated. Because the contract had

terminated, Darling had no obligation to convey the property to Baywood, and Baywood could not

sue Darling for breach of contract. No cause of action therefore accrued. 

Hollywood Turf Club v. Daugherty, 36 Cal. 2d 352 (1950), the case on which Darling relies,

is inapposite. In Hollywood, the court addressed whether a petition for mandamus had been timely

filed. Under the California Government Code, “‘[t]he complete record of the proceedings, or such

parts thereof as are designated by the petitioner, shall be prepared by the agency and shall be

delivered to petitioner, within 30 days after a request therefor by him, upon the payment of the

expense of preparation and certification thereof . . . . Where petitioner . . . requests the agency to

prepare all or any part of the record the time within which a petition may be filed shall be extended

until five days after its delivery to him.’” Id. at 355 (quoting Cal. Gov’t Code § 11523). In the case

under consideration, the petitioner asked the agency to prepare the record on August 28, 1948. See

id. On September 24, 1998, the agency notified the petitioner that the record was completed and

that the cost was some $100. See id. The agency’s letter stated: “‘Upon payment of the expense

involved, the record is ready for delivery to you.’” Id. The petitioner did not take any action until

November 3, 1948, when it delivered a check to the agency to pay for the cost of the record. See id.

The court stated that “the time to commence the mandamus proceeding expired five days

after -- at least no more than -- it would be reasonably possible to deliver to the commissioner the

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cost of the record and receive it; a transaction that should not have required over a month.” Id. “If

the five days commenced to run from the actual delivery of the record to the petitioner, regardless of

when he was notified that it was ready for delivery to him, then he would have it in his power to

extend the time indefinitely by a mere failure to pay the cost and accept delivery of the record.” Id.

at 356. The court emphasized: “When the record was ready and its cost fixed and petitioner was so

notified, all that could be done by the commissioner had been done. The rest was up to petitioner . .

. .” Id. (emphasis added).

Darling highlights that, in Hollywood, the court arrived at the above conclusion by taking

note of the principle that “‘[w]hen the plaintiff’s right of action depends upon some act which he has

to perform preliminary to commencing the suit, and he is under no disability or restraint in the

performance of the act, he cannot suspend indefinitely the running of the statute of limitations by a

delay in performing such preliminary act.’” Id. But that a party against whom a statutory limitation

period would otherwise run may not unilaterally extend or nullify that statute is hardly a remarkable

position. It has nothing to do with a situation -- as here -- where no cause of action ever accrued in

the first place and thus no limitation period would otherwise have run. Baywood’s failure to make

the second deposit did not simply extend the limitation period; it prevented a cause of action from

arising in the first instance.

Contrary to what Darling argues, there was also no breach in or about February 2000. 

Darling claims that there was a breach at this time because Baywood had made the second deposit

and thereafter made statements that it was ready, willing, and able to close. But Darling’s

contention that “[c]laiming that one is ‘ready, willing and able’ is an abracadabra to mean either a

demand to close a transaction, or a declaration that the time has now arrived to perform, ‘or else,’”

Reply at 5, is not well supported. The cases cited by Darling do not equate a statement by one party

that it is ready, willing, and able to perform with a demand for performance by the other party. 

Rather, the cases simply reflect that, in order for a party to demand performance by the other party,

the party must be ready, willing, and able to perform itself. See, e.g., Dell’Orto v. Dell’Orto, 166

Cal. App. 2d 825, 829 (1959) (noting that plaintiffs had made “repeated demands [for conveyance],

and that plaintiffs stand ‘ready, willing and able’ to pay the balance due”) (emphasis added).

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1

 At the hearing, Darling suggested that, if it did breach the Agreement, the breach was its failure

to respond to Baywood’s title objections or its failure to remediate to the standards demanded by

Baywood -- and not its failure to convey the property. See also Mot. at 8. But Baywood’s

counterclaims demonstrate otherwise. See Countercl. ¶ 23 (“Darling breached the Purchase Agreement

by failing and refusing, and continuing to fail and refuse, to honor Baywood’s tender of purchase price

and transfer of title to the Property to Baywood”) (emphasis added); see also Docket No. 101, at 9

(order, dated 8/16/06) (“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.”).

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More important, Darling was not required to convey the property to Baywood in or about

February 2000 -- even after the second deposit was made -- because at that time there were still

outstanding issues that had to be resolved before conveyance could take place.1

 For example, there

were title issues that needed to be resolved, see Ex. B217 (letter, dated 5/15/90, from Mr. Wasem to

Darling) (raising title issues); Ex. B288 (letter, dated May 1, 1997, from Mr. Wasem to Mr. Mellina)

(same), a fact that Darling admits. That Baywood was not overly concerned about the title issues is

irrelevant; until those issues were resolved, Darling was not required to convey the property. See

Agreement ¶ 6.3.2 (providing that one condition percent to closing was that “[t]itle to the Subject

Property must be subject only to the Permitted Conditions of Title”); id. ¶ 5.2 (stating that “[t]itle to

the Subject Property shall be conveyed by Seller to Purchaser at Close of Escrow free and clear of

all liens, encumbrances, restrictions and rights of way of record, subject only to the following

(‘Permitted Conditions of Title’)”). Also, another condition precedent to closing -- and therefore

conveyance of the property -- was that Darling needed to get an estimate for the remediation work

and then enter into a guaranteed contract and prepare for a 125% holdback. See Agreement ¶ 6.3.3

(listing as another condition percent that “Seller has either completed the Remediation Work or has

both entered into the Guaranteed Contract and has delivered to the Escrow Holder instructions to

provide for the Holdback described in Paragraph 6.6”). Darling did not resolve Baywood’s

objections to title, nor did it enter into a guaranteed contract and prepare for a holdback. Instead, it

continued to give Baywood reason to believe that the contract was still in place and headed for

closing at some undetermined date. Furthermore, Baywood did not make a specific demand upon

Darling to close escrow. Cf. Dell’Orto, 166 Cal. App. 2d at 829.

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The Court concludes, therefore, as it did before, that the breach occurred on October 1, 2004,

when Darling sent the repudiation letter, and that the statute of limitations therefore began to run on

that date. This was the date when the basis for the equitable estoppel ended -- i.e., when it was no

longer reasonable for Baywood to rely on Darling’s implied promise to perform. The cause of

action for specific performance did not accrue until then. Darling incorrectly conflates the period

during which it was estopped as a tolling of the statute of limitations. 

Darling argues still that the Court improperly found that the statute of limitations began to

run as of October 1, 2004, because Baywood’s theory was that the statute began to run in 2005, only

after Darling refused to accept Baywood’s tender of the purchase price. See Countercl. ¶¶ 17, 23

(referring to Baywood’s tender of the purchase price and Darling’s refusal to accept). But

Baywood’s counterclaim did refer to the October 1, 2004, repudiation letter, see id. ¶ 16, and by the

time of summary judgment, Baywood had clearly taken the position that the statute of limitations

began to run as of October 1, 2004. See Docket No. 79, at 22 (“Baywood’s claim for specific

performance did not accrue until October 1, 2004.”). That Baywood did not, in the parties’ joint

pretrial conference statement, explicitly state that the statute of limitations ran as of this date is not

dispositive. Nowhere did Baywood foreclose this argument. In fact, in the joint pretrial conference

statement, Baywood noted that one disputed fact was whether it was ever informed by Darling, prior

to October 1, 2004, that the contract had terminated. See Docket No. 150, at 5 (joint pretrial

conference statement).

Furthermore, even if Baywood asserted that the breach occurred in 2005, that would not

make a material difference for the statute of limitations issue. Whether the statute began to run in

2004 or 2005, Baywood’s counterclaim -- filed in January 2006 -- was still timely. The only way

that Darling could prevail on the statute of limitations in this case issue was to show that the statute

began to run before January 2002. See Cal. Code Civ. Proc. § 337 (providing for a four-year statute

of limitations for breach of contract). Nothing occurred before January 2002 which demonstrated

that Darling had an obligation to close escrow and convey the property or which demonstrated that

Darling anticipatorily repudiated the contract by declaring it refused to convey the property. Rather,

prior to and beyond January 2002, Darling engaged in conduct which led Baywood to believe that

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Darling intended to convey the property. In short, there was no finding by the Court -- and the Court

finds none now -- which supports a finding that the statute of limitations began to run prior to

January 2002.

In addition, even if Baywood asserted a breach in 2005, the fact that the Court concluded a

breach occurred earlier in 2004, if anything, is helpful, not prejudicial, to Darling. By concluding

that the breach was on October 1, 2004, rather than in 2005, Baywood had only until October 1,

2008, to file suit rather than until 2009. At the hearing, Darling argued that it was prejudiced

because it would have tried the case differently if it had known that October 1, 2004, was the key

date but, as noted above, Darling was aware of the importance of the letter based on Baywood’s

counterclaims and opposition to summary judgment. See Counterclaim ¶ 16. More important,

Darling already had the incentive to cross-examine Baywood’s witnesses, in particular, Larry

Wasem, to get them to admit that Baywood knew of Darling’s breach or repudiation prior to January

2002.

Finally, the Court notes that, even if it were persuaded by Darling’s argument that the statute

of limitations began to run in or about May 1997 or February 2000, Darling would be estopped from

relying on the affirmative defense. See Salmons v. Jameson, 144 Cal. App. 2d 699, 705 (1956) (“[I]t

is well settled 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.”). Darling admits that the facts

underlying Baywood’s estoppel case with respect to the statute of limitations are the same as those

underlying Baywood’s estoppel case with respect to contract termination. See also Docket No.

Docket No. 101, at 11 (order, dated 8/16/06) (“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.”). Darling’s only contention is that the legal test for the two

estoppels are different. However, in concluding that Darling was estopped from asserting contract

termination, the Court found that Darling’s actions led Baywood to believe that Darling would

perform under the Agreement -- necessarily implying that no suit was necessary and thus no statute

of limitations bar would come into play.

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B. Conclusive Presumption

In its motion to alter the judgment or for a new trial, Darling argues that the Court also made

a clear error with respect to its interpretation of ¶ 3.1 of the Agreement. That paragraph states in

relevant part as follows:

Purchaser’s obligation hereunder is expressly contingent upon and

subject to Purchaser’s approval prior to July 6, 1990 of [inter alia] (i)

the physical condition of the Subject Property . . . and (vi) any and all

other aspects of the Subject Property which Purchaser deems to be

material. . . . Purchaser shall evidence the satisfaction of the condition

precedent described in this Paragraph 3.1 by depositing the Second

Deposit with the Escrow Holder. Purchaser’s failure to deliver the

Second Deposit with the Escrow Holder by July 6, 1990 shall be

conclusively deemed to constitute a failure of the condition precedent

described in this Paragraph 3.1. . . . If this condition precedent is not

satisfied or waived . . . , then this transaction shall be cancelled, and

on the day after the failure of the condition, the Escrow Holder shall

return to the Purchaser the Initial Deposit, together with all interest

earned thereon.

Agreement ¶ 3.1 (emphasis added). According to Darling, the italicized language above establishes

that there was a conclusive presumption of contract termination when Baywood failed to provide the

second deposit in May 1997. In other words , Baywood was estopped by the contract from asserting

waiver or equitable estoppel.

The Court does not agree with Darling’s interpretation of ¶ 3.1. This paragraph does not

state that there is a conclusive presumption against waiver or equitable estoppel, which the Court

found in the instant case. The paragraph merely states that a failure by Baywood to fund the second

deposit conclusively establishes that the condition precedent in ¶ 3.1 fails -- in which case, Darling

could treat the contract as terminated and sell the property to another party; and Baywood could not

come back after failing to make the deposit and assert that the condition precedent in ¶ 3.1 was

satisfied and the parties were still in contract in the absence of waiver or estoppel by Darling.

Moreover, Darling’s argument of estoppel by contract is not convincing because, under

California law, estoppel by contract applies only to stated facts and not future conduct. California

Evidence Code § 622, cited by Darling, codifies estoppel by contract. It provides that “[t]he facts

recited in a written instrument are conclusively presumed to be true as between the parties thereto.” 

Cal. Evid. Code § 622 (emphasis added); cf. Aluminum Co. of Am. v. Essex Group, Inc., 499 F.

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Supp. 53, 84 (D.C. Pa. 1980) (“[A]ll that need be shown to establish estoppel by contract is that the

writing settled or, treated as settled, a fact.”). Darling conceded at the argument herein that it could

find no California case which applies estoppel by contract to future conduct occurring after contract

formation (as opposed to facts asserted in the contract). This is consistent with the fact that § 623,

which follows § 622, codifies equitable estoppel, thus implying that estoppel by contract under §

622 does not negate equitable estoppel under § 623. Certainly nothing in this statutory structure

suggests a legislative purpose to the contrary. Cf. Atwater Elementary Sch. Dist. v. California Dep’t

of Gen. Servs., 41 Cal. 4th 227, 233 (2007) (concluding that four-year statute of limitations in

California Education Code § 44944(a) “is not absolute” and “may be evaluated in the context of

equitable estoppel when the basis of equitable relief is established”; adding that this decision “is

supported by the view that courts should not presume the Legislature intended to overthrow

long-established principles of law unless such intention is made clearly to appear either by express

declaration or by necessary implication”) (internal quotation marks omitted). Indeed, the legal

treatise cited by Darling specifically recognizes that estoppel by contract can be overcome by

another estoppel, and the case law cited by Darling suggests the same. See Corpus Juris Secundum

§ 11 (“An estoppel against an estoppel sets the matter at large; so, the setting up of an estoppel by

deed may be prevented or offset by another estoppel, or a different form of estoppel, against the

party seeking to set it up.”); Patco Homes, Inc. v. Rochetti, 522 N.Y.S.2d 903, 904 (1987) (applying

estoppel by contract but taking specific note that there was no allegation that “Patco waived payment

in full of the balance of the purchase price”); Aluminum, 499 F. Supp. at 84-85 (applying estoppel by

contract but taking specific note that “there was no conduct by Essex to warrant an estoppel in pais

preventing Essex from contending that ALCOA should be estopped [by contract]”).

C. Cisterns

Finally, in its motion to alter judgment or for a new trial, Darling argues that the Court

clearly erred by ordering Darling to clean up the cisterns. According to Darling, Baywood asked

only for conveyance of the property, and not an order requiring further cleanup. This argument is

without merit. Baywood asked for enforcement of the Agreement, see Countercl. ¶¶ 30-31, and as

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the Court found, the cisterns were part of the remediation obligations of Darling under the

Agreement.

II. CONCLUSION

Accordingly, for the foregoing reasons, the Court denies both Darling’s motion to alter

judgment or for a new trial and Darling’s renewed motion for judgment on partial findings.

This order disposes of Docket Nos. 211 and 214.

IT IS SO ORDERED.

Dated: October 2, 2007 _______________________________

EDWARD M. CHEN

United States Magistrate Judge

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