Filed 9/18/23 Perera v. Moine CA2/7

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions 

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

LIONEL PERERA et al., as 

Trustees, etc.,

Plaintiffs, Cross-defendants

and Appellants,

v.

CHARLES A. MOINE,

Defendant, Cross-complainant

and Appellant.

 B317395

 (Los Angeles County

 Super. Ct. No. 

 19STCV12537)

APPEALS from a judgment of the Superior Court of

Los Angeles County, Terry Green, Judge. Reversed and 

remanded with directions.

Law Offices of Jeffrey B. Ellis and Jeffrey B. Ellis for

Plaintiffs, Cross-defendants and Appellants.

Robert D. Feighner; Hitchcock Bowman & Schachter and 

Robert B. Schachter for Defendant, Cross-complainant and 

Appellant.
2

Charles A. Moine sold contaminated commercial property 

to Lionel and Nirmala Perera as Trustees of the Perera Family 

Trust. Following a bench trial the court found Moine had 

breached his obligation under the parties’ purchase agreement to 

provide regulatory approval in the form of a “No Further Action 

Letter” (NFA) regarding the contamination, but reduced the 

damages awarded to the Pereras (from approximately 

$1.12 million to approximately $750,000) based on its finding the 

Pereras had breached the implied covenant of good faith and fair 

dealing by failing to authorize payments from an account created 

by a separate holdback agreement and refusing to execute a deed 

restriction to expedite regulatory approvals. The court also found 

in favor of Moine on his cross-complaint for a common count, 

further reducing the total award of damages through an offset. 

On appeal Moine contends he did not breach the purchase 

agreement and, even if he did, the Pereras were not entitled to a 

judgment because of their own material failure of performance, 

breach of the implied covenant and failure to mitigate damages. 

In a cross-appeal the Pereras contend the trial court erred in 

finding they had breached the implied covenant of good faith and 

fair dealing and ruling in favor of Moine on his cross-complaint. 

We reverse the judgment, agreeing with the Pereras’ positions in 

Moine’s appeal and their cross-appeal, and remand for entry of a 

new judgment in favor of the Pereras on both their breach of 

contract action and Moine’s cross-complaint that includes a new 

damage award consistent with our opinion.
3

FACTUAL AND PROCEDURAL BACKGROUND

1. The Parties’ Agreements

a. The purchase agreement

On November 17, 2006 Moine, Kathleen M. Kokawa-Moine 

and Daniel M. Moine as “Seller” and the Pereras as “Buyer” 

entered into an agreement to sell 3.27 acres of land in Compton, 

California for $6.65 million. It was undisputed that industrial 

operations under ownership prior to the Moines had resulted in 

contamination of the property. Paragraph 12.2 of the purchase 

agreement provided, “Buyer hereby acknowledges that, except as 

otherwise stated in this Agreement, Buyer is purchasing the 

Property in its existing condition and will, by the time called for 

herein, make or have waived all inspections of the Property 

Buyer believes are necessary to protect its own interest in, and 

its contemplated use of, the Property. The Parties acknowledge 

that, except as otherwise stated in this Agreement, no 

representations, inducements, promises, agreements, assurances, 

oral or written, concerning the Property, or any aspect of the 

occupational safety and health laws, Hazardous Substance laws, 

or any other act, ordinance or law, have been made by either 

Party or Brokers, or relied upon by either Party hereto.”

Paragraph 12.4 of the purchase agreement provided in 

part, “Any environmental reports, soils reports, surveys, and 

other similar documents which were prepared by third party 

consultants and provided to Buyer by Seller or Seller’s 

representatives, have been delivered as an accommodation to 

Buyer and without any representation or warranty as to the 
4

sufficiency, accuracy, completeness, and/or validity of said 

documents, all of which Buyer relies on at its own risk.” 

Paragraph 26(d) of the purchase agreement—central to the 

instant litigation—provided, “Seller shall continue to monitor the 

groundwater until Seller provides a No Further Action Letter 

from the County of Los Angeles.”1

b. The holdback agreement

On March 20, 2007, a month prior to the close of escrow, 

the Pereras as “Buyer,” the Moines as “Seller,” CDC Small 

Business Finance as “Lender” and Exchange Resources, Inc. as 

“Holder” executed a holdback agreement. The agreement 

provided as part of the recitals, “After the close of escrow, ground 

water sampling and any related environmental work necessary for 

the issuance of a ‘No Further Action Letter’ will be required by the 

Lender as part of the SBA[2] environmental clearance 

requirements. The estimated cost of these samplings, and any 

remediation work required, is Fifty-four thousand dollars 

($54,000). The SBA requires that 110% of the estimated cost be 

deposited and held for the testing. The parties agree that Seller 

will deposit into this Holdback Account funds totaling Sixty 

thousand dollars and 00/100 ($60,000) to be held for payment of 

the semi-annual testing.” (Original italics.)

1 The purchase agreement also contained an integration 

clause (paragraph 17) providing, “This Agreement supersedes 

any and all prior agreements between Seller and Buyer regarding 

the Property,” and specifying, “Amendments to this Agreement 

are effective only if made in writing and executed by Buyer and 

Seller.” 

2 The SBA refers to the Small Business Administration. 
5

The agreement then provided, “The Parties agree that 

Holder will disburse the funds held as follows: [¶] Seller, Buyer 

and/or Lender will deliver to Holder a copy of the Invoice for 

ground water sampling. Upon receipt of the Invoice, Holder will 

issue an instruction authorizing payment of the Invoice. Lender 

will advise Holder when all Invoices have been delivered. Holder 

will issue a final instruction authorizing the release of the 

balance of funds to Seller. [¶] Funds will be placed in an Interest 

Bearing Account with Union Bank of California. Interest to 

accrue for the benefit of Seller, so long as a W-9 is deposited with 

Holder at the time the account is opened.” In bold typeface and

all capital letters, the agreement provided, “Parties acknowledge 

that Holder will not release any funds without mutually 

approved instructions.”3

2. Moine’s January 25, 2019 Letter

On January 25, 2019 Moine’s attorney sent a letter to the 

Pereras’ counsel stating Moine would not be submitting any 

additional documents regarding the property to any 

governmental agency. It was undisputed that no NFA was 

issued. The Pereras initiated this lawsuit three months later.

3. The Operative Pleadings

In their operative first amended complaint the Pereras 

alleged the prior owners of the Compton property conducted soil 

sampling in the mid-to-late 1990’s that detected concentrations of 

trichloroethylene (TCE). The investigation of contamination at 

the property came under regulatory oversight by the Los Angeles 

3 The holdback agreement provided Exchange Resources 

would be paid as “Holder” an annual fee of $500 “to be paid by 

Seller.” 
6

Regional Water Quality Control Board. Moine purchased the 

property in 2003, and the Board designated him the sole party 

responsible for the contamination. 

The Pereras further alleged they agreed with Moine to 

purchase the property for $6.65 million (attaching the 

November 17, 2006 purchase agreement as an exhibit) and 

Moine, in turn, agreed to provide an NFA from the regulator 

regarding the contamination. From 2006 to 2021, however,

Moine failed to obtain an NFA. On January 25, 2019 Moine’s 

attorney notified the Pereras’ attorney that Moine would not be

submitting any additional documents to any governmental 

agency. The Pereras alleged they had incurred damages as a 

result of Moine’s breach. 

In his cross-complaint for a common count against the 

Pereras, Moine alleged, although he had approved the release of 

holdback agreement funds to pay expenses, the Pereras failed to 

authorize, or delayed in authorizing, release. The Pereras’ 

breach of the holdback agreement, Moine averred, damaged him. 

4. The Trial, Statement of Decision and Judgment

At the bench trial, which commenced on August 2, 2021,

multiple witnesses testified over the course of several days. The 

purchase agreement, the holdback agreement and the 

January 25, 2019 letter were admitted into evidence; and the 

parties stipulated, “Under Paragraph 26(d) of the Purchase 

Agreement, Moine agreed to ‘provide[ ] a No Further Action 

Letter from the County of Los Angeles’ for the Property.” 
7

The trial court issued a statement of decision4 on 

August 16, 2021. The court found that Moine, in selling the 

property, promised to obtain a letter from the Board absolving

the Pereras of responsibility for cleaning up the TCE. Although 

there were full disclosures of the contamination of the property 

and the property was sold “as is,” paragraph 26(d) of the 

purchase agreement required Moine to “continue to monitor . . . 

the groundwater until [S]eller provides [an NFA] from the 

[C]ounty of Los Angeles.” Quoting excerpts of the holdback 

agreement, the court stated it “extended [Moine’s] obligations 

beyond the completion of payment.”

The court further found that in January and March 2007

the parties had expected an NFA from the Board would be 

forthcoming. As the court explained, there were two components

to obtaining an NFA: “soil closure” and “groundwater closure.” 

The property had been under the Board’s review for years with 

only regular groundwater monitoring required. “Several times 

during the period 2008 to 2015 the Board seemed ready to issue 

[an NFA] with respect to soil,” with the “only conditions 

precedent to issuance [being] a deed restriction—that the 

property would not later become residential—and payment of 

outstanding fees.” Although the property was zoned for 

commercial use and there was no evidence the Pereras ever 

intended any other use, the Pereras refused to sign the deed 

restriction and also refused to timely authorize payments to the 

Board from the holdback account. As a result, a soil closure 

letter was never issued.

4 We omit unnecessary capitalization of letters in any 

document quoted in this opinion.
8

The groundwater had been monitored for several years. 

From 2001 to 2020 monitoring showed a steady decline in 

contaminants. It was Moine’s position this was due to natural 

processes that should be allowed to continue. The Board, 

however, starting around 2014, became convinced more proactive 

remediation was required. On January 25, 2019 Moine 

abandoned efforts to obtain the NFA, and it then became the 

Pereras’ burden, as a “co-responsible party,” to satisfy the Board. 

The Pereras claimed to have paid $209,448 for environmental 

consultants and board oversight fees. The NFA contemplated by 

the purchase agreement was never issued.

The court’s rulings included: (1) Paragraph 26 of the 

purchase agreement imposed an obligation on Moine to furnish 

the Pereras an NFA for the property, and Moine’s obligation was 

unconditional; (2) no NFA had been issued by the Board, which 

decides when issuance of the NFA is warranted; (3) the 

January 25, 2019 letter reflected an anticipatory breach by Moine 

of the purchase agreement; (4) the Pereras unreasonably refused 

to sign the deed restriction; (5) the holdback agreement 

contemplated that funds be spent on groundwater sampling and 

any related environmental work necessary for the issuance of an 

NFA; (6) the Pereras unreasonably refused to authorize 

payments of funds from the holdback agreement; (7) the Pereras’ 

refusal to sign the deed restriction and/or refusal to authorize 

funds to reimburse the Board prevented the issuance of the soil 

closure letter; (8) issuance of the soil closure letter would not 

have necessarily led to the issuance of a groundwater closure 

letter and the NFA for the property; (9) the Pereras’ refusal to 

sign the deed restriction and/or authorize the transfer of funds 

constituted a breach of the implied covenant of good faith and fair 
9

dealing, but only excused Moine’s performance of the obligation 

to obtain a soil closure letter and did not excuse Moine from 

performing his obligation to obtain the other component of an 

NFA for the property, a groundwater closure letter; and 

(10) obtaining a soil closure would constitute 33 percent of the 

potential costs of cleanup. 

Turning to the allegation the Pereras had breached the 

implied covenant of good faith, the court concluded the Pereras’ 

breach by failing to authorize payment of fees and/or by their 

refusal to sign the deed restriction was material and Moine’s 

obligation to obtain soil closure was dependent on the Pereras’ 

cooperation. Accordingly, the Pereras’ breach excused Moine 

from his obligation to obtain soil closure. Because Moine’s 

obligations with regard to groundwater remediation were 

independent of that breach, however, Moine remained liable for 

his failure to provide groundwater remediation. The Pereras’ 

damages, the court ruled, were limited to amounts necessary for 

that portion of any future remediation efforts.

Determining the damage award—the amount it would cost 

to satisfy the Board and obtain the NFA—the court rejected the 

Pereras’ proposed figure of $4.1 million based on their expert

Frank Edward Reynolds, Jr.’s opinion and adopted Moine’s 

estimate of $911,000 based on his environmental consultant 

Mark Leymaster’s calculations. In addition to that sum, the 

court included as damages $209,448 for payments by the Pereras 

to environmental consultants and the Board. However, because 

the court found the Pereras could not recover one-third of their 

damages due to their breach of the implied covenant related to 

soil closure, the court found the Pereras were entitled to total 

damages of $750,700.16. Under the subheading “The Cross-
10

complaint,” the court, without any explanation specific to that 

subheading, found for Moine and assessed damages at $61,000.

The court entered its judgment on October 26, 2021

awarding the Pereras as plaintiffs damages of $750,700.16 plus 

prejudgment interest, attorney fees and costs, and awarding

Moine as cross-complainant $61,000 as an “[o]ffset of Plaintiffs’ 

damages.” Moine filed a timely notice of appeal of the judgment, 

and the Pereras filed a timely notice of cross-appeal.

DISCUSSION

1. The Trial Court Did Not Err in Concluding Moine

Committed Anticipatory Breach of Contract

a. Governing law and standard of review

“‘Under statutory rules of contract interpretation, the 

mutual intention of the parties at the time the contract is formed 

governs interpretation. [Citation.]’ [Citation.] In determining 

this intent, ‘[t]he rules governing policy interpretation require us 

to look first to the language of the contract in order to ascertain 

its plain meaning or the meaning a layperson would ordinarily 

attach to it.’” (Hartford Casualty Ins. Co. v. Swift Distribution, 

Inc. (2014) 59 Cal.4th 277, 288; accord, Wind Dancer Production 

Group v. Walt Disney Pictures (2017) 10 Cal.App.5th 56, 69 [“[w]e 

ascertain ‘“the intent and scope of [an] agreement by focusing on 

the usual and ordinary meaning of the language used and the 

circumstances under which the agreement was made”’”].)

When no ambiguity is asserted or there is no conflicting 

extrinsic evidence concerning the meaning of a purported 

ambiguity in a contract, interpretation of the contract is a legal 

determination subject to de novo review. (City of Hope National 

Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375, 393-395; 

see Hanna v. Mercedes-Benz USA, LLC (2019) 36 Cal.App.5th 
11

493, 507 [“in the absence of any conflict in extrinsic evidence 

presented to clarify an ambiguity,” written agreements are 

interpreted de novo].) “‘It is solely a judicial function to interpret 

a written contract unless the interpretation turns upon the 

credibility of extrinsic evidence, even when conflicting inferences 

may be drawn from uncontroverted evidence.’” (Hess v. Ford 

Motor Co. (2002) 27 Cal.4th 516, 527; accord, Gilkyson v. Disney 

Enterprises, Inc. (2021) 66 Cal.App.5th 900, 915.) But where “the 

facts to which a contract provision must be applied are disputed 

or require the weighing of evidence, the application of that 

provision presents a question of fact,” and our review is for 

substantial evidence. (Scheenstra v. California Dairies, Inc.

(2013) 213 Cal.App.4th 370, 391, fn. 15.) 

b. The Trial Court Did Not Err in Concluding the 

January 25, 2019 Letter Reflected Moine’s 

Anticipatory Breach of the Purchase Agreement

Moine contends the trial court erred in finding he 

anticipatorily breached the purchase agreement on January 25, 

2019 for three reasons. First, the Pereras purchased the property 

“as is” and Moine continually monitored the groundwater as 

required. Second, the holdback agreement provided a $60,000

ceiling for the cost of monitoring. Third, evidence of the parties’ 

conduct demonstrated they did not contemplate remediation 

would be required. None of Moine’s arguments has merit.

With respect to Moine’s primary contention, the purchase 

agreement did provide the Pereras were acquiring the property 

“in its existing condition.” However, paragraph 12.2’s as-is 

provision is expressly limited by the additional language “except 

as otherwise stated” in the parties’ agreement. As discussed, 

paragraph 26(d) required Moine to continue monitoring the 
12

groundwater until he provided an NFA, a dual obligation 

recognized by the parties in their trial stipulation, which 

acknowledged Moine had agreed to provide an NFA from the 

County. Moine’s attempt to negate that second aspect of his 

contractual promise by referring to extrinsic evidence purportedly 

demonstrating the agreement required only monitoring, not an 

NFA, is groundless in light of the plain, unambiguous language of 

paragraph 26(d), fortified by the parties’ stipulation. (See People 

v. Farwell (2018) 5 Cal.5th 295, 300 [“Farwell’s stipulation 

conclusively established the stipulated facts as true”].)

As the trial court found, the January 25, 2019 letter, in 

which Moine’s attorney stated Moine would not be submitting

any additional documents to any governmental agency, 

constituted an anticipatory breach of Moine’s obligation to 

provide an NFA. The inescapable import of the January 25, 2019 

letter was that Moine had abandoned any effort to obtain an NFA 

from the Board and did not intend to pursue obtaining an NFA 

after that date. 

With regard to the contention that responsibility for the 

cost of monitoring was limited to $60,000 and that this limitation 

precluded the court from finding a breach of contract when Moine 

ceased efforts to obtain an NFA, Moine does not contend the 

purchase agreement contains any such limitation. Rather, Moine

argues the holdback agreement should be considered an 

amendment to, or extension of, the purchase agreement and the 

holdback agreement shows the parties anticipated the cost of all 

monitoring or other environmental clearance requirements would 

not exceed $60,000. 

The holdback agreement did state the estimated cost of 

groundwater sampling and any required remediation work was 
13

$54,000 and explained the SBA required 110 percent of the 

estimated cost to be deposited for the testing. However, the 

holdback agreement did not purport to condition Moine’s

obligation under the purchase agreement to monitor and provide 

an NFA on the cost of doing so not exceeding $60,000, an amount 

the holdback agreement indicated was calculated to satisfy the 

SBA requirement.

5

Moine’s contention the parties’ conduct shows they did not, 

at the time they entered into the purchase agreement, 

contemplate remediation would be required does not support, let 

alone compel, a contrary result. Moine relies on testimony

indicating the parties were not aware until 2014 or 2015 that the 

Board would actually require remediation. However, nothing in 

the record suggests the parties communicated before the 

property’s sale their subjective beliefs as to whether Moine’s

obligations would include any remediation necessary to obtain an 

5 Moine’s testimony that he believed his exposure was 

limited to $60,000 was contradicted by the testimony he gave at 

trial: Asked whether, at the time the $60,000 figure was 

developed, Moine had any expectation that semi-annual testing 

would exceed $60,000, he responded, “Well, we were prepared to 

go over. . . . [T]hese are based on estimation [sic] projections, so I 

thought it was realistic, a little more or a little less, but I thought 

it was a reasonable estimate.” Significantly, Moine points to no 

evidence he expressed to the Pereras before sale of the property 

any belief his obligations to provide monitoring and an NFA were 

conditioned on a $60,000 cost limitation. Even if Moine had such 

a subjective belief, it is not relevant to our interpretation of the 

parties’ agreements. (See Zissler v. Saville (2018) 29 Cal.App.5th 

630, 644 [the parties’ undisclosed intent or understanding is 

irrelevant to contract interpretation]; Iqbal v. Ziadeh (2017) 

10 Cal.App.5th 1, 8 [same].) 
14

NFA.6 (See Reigelsperger v. Siller (2007) 40 Cal.4th 574, 579

[“‘mutual consent is gathered from the reasonable meaning of the 

words and acts of the parties, and not from their unexpressed

intentions or understanding’”]; Zissler v. Saville (2018) 29 

Cal.App.5th 630, 644 [same]; Iqbal v. Ziadeh (2017) 

10 Cal.App.5th 1, 8 [“‘California recognizes the objective theory of 

contracts [citation], under which “[i]t is the objective intent as 

evidenced by the words of the contract, rather than the subjective 

intent of one of the parties, that controls interpretation”’”; “‘[t]he 

parties’ undisclosed intent or understanding is irrelevant to 

contract interpretation’”].) 

As discussed, the parties stipulated that under 

paragraph 26(d) Moine agreed to provide an NFA; and it was 

undisputed no NFA had been issued. The most reasonable 

interpretation of that agreement is that Moine also agreed to do 

what would be necessary to provide the NFA, including any 

remediation work the Board required. The trial court did not err 

in concluding Moine anticipatorily breached the purchase 

agreement when he abandoned his efforts to provide an NFA.

6 Moine on appeal relies in part on his testimony answering 

“No” to the questions, “At any time before close of escrow, did you 

indicate to Mr. Perera that you would do remediation work on the 

site,” and, “Did you indicate to him that you would do any 

cleanup on the site?” That testimony, however, does not establish 

that Moine had communicated to the Pereras that he would not 

do remediation work or cleanup on the site. Indeed, Perera 

testified he did not have any discussions with Moine about the 

condition of the property before the close of escrow, nor had any 

environmental issues been discussed with Moine. 
15

2. The Trial Court Erred in Concluding the Pereras 

Breached an Implied Covenant To Sign the Deed 

Restriction7

a. Additional background

In a September 5, 2008 letter to Moine (trial exhibit 21), 

the Board indicated a soil closure restricted to 

commercial/industrial land use “could be considered.” The letter 

stated, “Upon completion, submittal and concurrence of [a 

‘Certification Declaration for Compliance with Fee Title Holder 

Notification Requirements’ and a ‘Covenant and Environmental 

Restriction on Property’] from this Regional Board, a soil closure 

will be granted.” The letter continued, “If an unrestricted soil 

closure is preferred a human health risk assessment must be 

completed and submitted to this Regional Board. If the results 

from this health risk assessment indicate that soil contamination 

remaining at the site does not pose a significant risk for human 

health under the unrestricted land use scenario, a[n] unrestricted 

soil closure will be considered.” 

Trial exhibit 39, acknowledged by Moine’s counsel to be the 

deed restriction at issue, was a form titled “Covenant and 

Environmental Restriction on Property.” The form provided it 

“sets forth protective provisions, covenants, conditions and 

restrictions (collectively referred to as ‘Restrictions’) upon and 

7 “It has long been recognized in California that ‘[t]here is an

implied covenant of good faith and fair dealing in every contract 

that neither party will do anything which will injure the right of 

the other to receive the benefits of the agreement.’” (Kransco v.

American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390,

400.) “A breach of the implied covenant of good faith is a breach 

of the contract.” (Thrifty Payless, Inc. v. The Americana at 

Brand, LLC (2013) 218 Cal.App.4th 1230, 1244.)
16

subject to which the Burdened Property and every portion thereof 

shall be improved, held, used, occupied, leased, sold, 

hypothecated, encumbered and/or conveyed” (section 1.1); the 

Restrictions would run with the land (section 1.1); the owners 

executing the form “covenant[ ] that the Restrictions shall be 

incorporated in and attached to each and all deeds and leases of 

all or any portion of the Burdened Property” (section 1.3); 

recordation of the form “shall be deemed binding on all 

successors, assigns, and lessees, regardless of whether a copy of 

[the form] has been attached to or incorporated into any given 

deed or lease” (section 1.3); the purpose of the form was to 

“convey to the Board real property rights, which will run with the 

land” (section 1.4); and the form was to be recorded within 

10 days of execution (section 5.4). Among other limitations it 

required development and use of the burdened property to be 

restricted to industrial, commercial or office space—with no 

residence for human habitation, hospitals, schools for minors or 

day care centers for senior citizens or for children being 

permitted on the burdened property (section 3.1).

On April 6, 2010 Leymaster, whose services for Moine 

included performing the property’s groundwater monitoring,

wrote Moine (trial exhibit 30) stating his understanding that the 

Board had indicated a soil closure letter could be issued for 

commercial/industrial use, with a closure letter likely within one 

to two months if the current property owner executed “the deed 

restriction for commercial/industrial use only.” In his letter 

Leymaster also stated a soil closure for unrestricted use would 

take longer, with a health risk assessment to be sent for review 

and additional work that “could push the final closure letter out 

to 12 months for unrestricted use.” Leymaster testified that, had 
17

Lionel Perera signed a deed restriction, Leymaster had no doubt 

soil closure would have been obtained, but, because Perera did 

not want the restriction, efforts to obtain soil closure for 

residential standards were instead made, with a human health 

risk evaluation submitted shortly after April 2010. Those efforts 

were successful, and the Board indicated it would grant the soil 

closure on the condition its bills were paid.

8

As shown in a string of emails admitted in evidence, on 

September 28, 2012 a Board representative notified Leymaster 

the Board’s invoices needed to be paid before issuance of the soil 

closure letter. After a further exchange of emails about the 

Board’s outstanding invoices, the Board representative on 

November 15, 2013 told Leymaster as soon as the invoices were 

paid the soil closure letter was ready to be issued. Leymaster 

forwarded the email string to Moine. On November 26, 2013 

Moine sent an email to real estate broker David Denitz, who had 

been involved in the sale of the property, stating Perera needed 

to approve payment of the Board’s invoices from the holdback 

account before the Board would mail the closure letter. Perera 

testified that he had seen the November 26, 2013 email and 

Denitz told him he needed to approve payment of the Board’s 

invoices. 

In the meanwhile, on October 2, 2012 the Board notified 

Perera it intended to issue a soil closure, with no mention of any 

requirement for a deed restriction or payment of Board fees for 

its issuance. On May 21, 2015 Moine sent an email to Denitz 

8 In a July 20, 2010 letter the Board informed Moine it was 

permitted under the law to recover its reasonable expenses for 

certain regulatory work. 
18

stating the Board had approved soil closure, pending the 

payment of fees due, more than two and one-half years earlier. 

Denitz testified there was a time when the Board had been 

ready to issue a soil closure if Perera had signed a deed 

restriction. Perera testified the property had never been used for 

residential purposes and he had no intention at the time he 

bought it to use it for residential purposes; but he was reluctant 

to agree to the deed restriction because of concern about its 

impact on his ability to sell the property in the future.

In finding a breach of the implied covenant, the trial court

stated, “While it is true that signing a deed waiver was not an 

affirmative term of [the purchase agreement], there was never 

any need for such a term. There was never any expectation that 

the site be used for residential dwellings. The property is and 

was zoned for commercial use only, and it was always intended 

by the parties for commercial purposes. In failing to sign the 

deed waiver, [the Pereras] neither gained nor gave up anything, 

and given the state of the evidence at the time the waiver was 

sought, Plaintiff’s signature would have resulted in the issuance 

of the soil closure letter.”

b. An implied covenant to sign the deed restriction 

conflicts with the purchase agreement’s express 

provisions and purpose

The trial court reduced the damages awarded the Pereras 

by one-third—from $1,120,448 to $750,700—based on its finding 

that they had breached the implied covenant of good faith and 

fair dealing by refusing to sign the deed restriction prohibiting 

residential use of the property or refusing to authorize payments 

from the holdback account (or both). Challenging the first 

ground, the Pereras essentially argue the obligation the court 
19

identified as encompassed by the implied covenant contradicts

the express provisions and purpose of the purchase agreement, 

which provided for delivery of a general warranty deed conveying 

fee title.

9 

As the Pereras emphasize, the purchase agreement did not

indicate the fee title conveyed would be subject to any conditions 

or restrictions, including any use restrictions. To the contrary, 

paragraph 12, provided “Seller hereby makes the following 

warranties and representations to Buyer and Brokers. [¶] . . . [¶]

. . . Seller has no knowledge of any actions, suits or proceedings 

pending or threatened before any commission, board, bureau, 

agency, arbitrator, court or tribunal that would affect the 

Property or the right to occupy or utilize same.” Thus, 

interpreting the implied covenant to include an obligation to sign 

the deed restriction reflected in trial exhibit 39 would be 

inconsistent with express provisions of the purchase agreement

regarding the property rights conveyed even if the Pereras never 

intended to develop the property for residential use, and even 

assuming the property was currently zoned for 

commercial/industrial use and a deed restriction would not have 

decreased the Property’s value. (See, e.g., Kransco v. American 

Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390, 400 [“[t]he 

scope of the duty of good faith and fair dealing depends upon the 

purposes of the particular contract because the covenant ‘is 

aimed at making effective the agreement’s promises’”]; Carma 

9 Paragraph 10.2(a) of the purchase agreement provided, 

“Seller shall deliver to Escrow Holder in time for delivery to 

Buyer at the Closing: [¶] (a) Grant or general warranty deed, 

duly executed and in recordable form, conveying fee title to the 

Property to Buyer.” 
20

Developers (Cal.), Inc. v. Marathon Development California, Inc.

(1992) 2 Cal.4th 342, 374 [“as a general matter, implied terms 

should never be read to vary express terms”]; Bevis v. Terrace 

View Partners, LP (2019) 33 Cal.App.5th 230, 252 [“[i]t is well 

settled that ‘an implied covenant of good faith and fair dealing 

cannot contradict the express terms of a contract’”]; see also 

Foothill Properties v. Lyon/Copley Corona Associates (1996) 

46 Cal.App.4th 1542, 1551-1552 [implied covenant of good faith 

and fair dealing “‘requires neither party do anything which will 

deprive the other of the benefits of the agreement’”].)

Moreover, although the trial court found the conditions 

precedent to issuance of an NFA for soil included the deed 

restriction, as discussed the trial exhibits relied upon by the court 

actually showed soil closure could be granted for unrestricted use

through submission of a health risk assessment, albeit the 

process to obtain soil closure for unrestricted use would likely 

take longer. There was thus insufficient evidence to support a

finding that signing of the deed restriction was necessary for soil 

closure or that the failure of the Pereras to do so constituted a 

breach of the implied covenant.

10

10 Moine on appeal asserts the Pereras did not argue in the 

trial court that he had the option to obtain soil closure without 

any deed restriction. Moine’s counsel, however, advised the trial 

court the requirement of a deed restriction was a “nonissue” 

because Moine had submitted additional soil testing and the 

Board agreed to issue closure with an unrestricted deed. In 

addition, Moine’s counsel conceded the deed restriction was 

unnecessary for soil closure, arguing that exhibit 21 “is the letter 

in 2008 which says that [the Board] will issue a soil closure if 

Mr. Perera—if the Pereras would sign a covenant or a deed 
21

3. The Trial Court Erred in Concluding the Pereras 

Breached the Implied Covenant By Failing To Authorize 

Release of Holdback Account Funds To Reimburse the 

Board

The Pereras also contend the trial court erred in concluding 

their refusal to authorize the transfer of holdback account funds 

to reimburse Board expenses constituted a breach of the implied 

covenant of good faith and fair dealing excusing Moine’s 

obligation to obtain a soil closure letter.11 The holdback 

agreement, they assert, required only that they authorize the 

release of funds to pay for groundwater sampling (such as 

Leymaster’s invoices for that work), not the Board’s fees for its

administrative and oversight costs. Moine, in response, argues 

the holdback agreement was established to pay for any 

environmental work necessary for issuance of an NFA, including 

the fees for the Board’s regulatory work, and not simply 

groundwater sampling.

restriction. They went on to say, ‘If you won’t do that, then we 

need a health risk assessment,’ which was done by Moine and 

Leymaster because they couldn’t get Perera to do what he was 

supposed to do.” 

11 The evidence established the Board delayed soil closure for 

failure to pay its fees, not Leymaster’s expenses. Accordingly, 

although the Pereras may have withheld approval of the release 

of holdback account funds to pay Leymaster’s invoices prior to 

2015, the trial court’s finding the Pereras breached the implied 

covenant was not based on any issue of payments to Leymaster. 

Moine does not dispute that characterization of the trial court’s 

finding. 
22

The Pereras’ interpretation of the holdback agreement 

conforms more closely to the plain language of the contract.

12 To 

be sure, the agreement did, as Moine points out, state 

groundwater sampling and any related environmental work 

necessary for the issuance of an NFA would be required by the 

lender as part of the SBA environmental clearance requirements. 

But that language was part of the agreement’s recitals, not its 

operative provisions. (See, e.g., Sabetian v. Exxon Mobil Corp.

(2020) 57 Cal.App.5th 1054, 1069 [“‘[t]he law has long 

distinguished between a “covenant” which creates legal rights 

and obligations, and a “mere recital”’”]; see also O’Sullivan v. 

Griffith (1908) 153 Cal. 502, 506 [“[a] covenant or warranty is 

never implied from a mere recital”].) Moreover, although in its 

recitals the agreement stated the estimated cost of samplings and 

any required remediation work was $54,000, the recitals 

continued by stating the “SBA requires that 110% of the 

estimated cost be deposited and held for the testing,” with no 

mention that the funds be held for payment of any remediation or 

other environmental work. 

In contrast, the substantive provisions of the parties’ 

agreement (what the “parties agree[d]” to) unequivocally stated 

12 The trial court interpreted the holdback agreement on the

fee authorization issue without indicating it was resolving any 

conflicts in extrinsic evidence. We thus review the holdback 

agreement on the fee authorization issue de novo, “exercising our 

independent judgment in interpreting the clause[s] without 

giving any deference to the trial court’s ruling.” (Campbell v. 

Scripps Bank (2000) 78 Cal.App.4th 1328, 1336; accord, Alki 

Partners, LP v. DB Fund Services, LLC (2016) 4 Cal.App.5th 574, 

599; see City of Hope National Medical Center v. Genentech, Inc., 

supra, 43 Cal.4th at p. 395.)
23

the holdback account funds would be held for payment of 

groundwater sampling or testing. There was no mention of 

payment for related, additional environmental work. Indeed, the 

only provision of the contract relating to any obligation of Moine 

and the Pereras to authorize the release of funds stated the 

“[p]arties acknowledge that Holder will not release any funds 

without mutually approved instructions,” and the specific 

contractual provision setting forth what funds would be 

disbursed by “Holder,” Exchange Resources, referred simply to 

the “[i]nvoice for ground water sampling.” 

Despite this clear language, a potential ambiguity was 

arguably created by the fact the recitals stated the amount of 

holdback account funds to be deposited was based on a 

percentage of the estimated cost of samplings and any 

remediation work. Extrinsic evidence in the record fully supports 

interpreting the agreement as ensuring only the payment of

Leymaster’s groundwater sampling work, not the cost of 

remediation or any other related environmental work, including 

the Board’s fees.

Hyung Kim, an environmental consultant who worked for 

the lender, CDC Small Business Finance, in 2006 and 2007, 

testified he had been asked by CDC to estimate the groundwater 

monitoring cost. He had been aware Leymaster was conducting 

periodic groundwater monitoring and had reviewed a test copy of 

a groundwater monitoring report by Leymaster. Kim initially 

proposed to CDC a cost estimate of $70,000 for groundwater 

monitoring, which assumed a certain number of sampling events, 

but later revised that number to $54,000 by reducing the 

estimated rounds of sampling. Because the SBA required setting 

aside 110 percent of the estimated cost, Kim proposed the set 
24

aside amount of $60,000. His cost estimate was not based on any 

remedial action plan.13

Moine’s effort to identify extrinsic evidence to support his 

(and the trial court’s) interpretation of the holdback agreement is 

unavailing. Moine relies in part on the parties’ at times 

ambiguous testimony regarding their subjective understanding of 

the agreement’s language without any evidence those subjective 

understandings had been expressed to the other party before 

execution of the agreement. Similarly, while Moine points to 

evidence a person who was not a party to the agreement (Denitz)

told Perera years after execution of the holdback agreement that 

Perera had to approve payment of the Board’s invoices, Moine 

fails to explain how that evidence demonstrates the mutual 

intent of the contracting parties at the time of contract formation. 

Finally, Moine relies on the fact Perera ultimately 

authorized payment of $22,025.99 in Board fees, as shown by 

trial exhibit 43, an April 22, 2015 letter to Moine from Perera

referring to the Board’s most recent bill. In that letter Perera 

insisted, “It is my view that this payment should have been made 

by you as party responsible for payment long time ago. It is also 

my view that if this payment was duly made, the ‘no further 

action’ letter respecting [the property] may by now have been 

received by us from the [Board].” Then, after explaining his 

secured lender had refused his request for a new loan with a 

lower interest rate when it discovered the absence of the NFA,

Perera stated, “In order that I would reduce any further financial 

13 In the trial court the parties did not dispute Kim’s 

testimony the $60,000 in holdback account funds was based on 

the estimated cost for groundwater sampling or testing and not 

for remediation. 
25

loss to me I have therefore decided to authorize Exchange 

Resources Inc. to release the amount of $22,025.99.” Nothing 

about Perera’s decision to release funds as explained in that 

letter supports a finding that Perera intended at the time he 

entered into the holdback agreement that the holdback account 

funds were to be used to pay for the Board’s fees.14

4. The Trial Court Erred in Finding in Favor of Moine on 

His Cross-complaint

Without explanation or elaboration the trial court found in 

favor of Moine on his cross-complaint and awarded him $61,000 

as an offset to the Pereras’ damages award. In his briefing in 

this court Moine explains that, in support of that $61,000 award, 

he had presented at trial invoices and requests for payment from 

the holdback account of Leymaster’s fees and the Board’s fees, as 

well as a summary showing he had paid out of his own pocket a 

total of $61,302.31 for fees after the close of escrow. Under the 

holdback agreement, according to Moine, the fees were to be paid 

14 Our determination the trial court erred in ruling the 

Pereras breached the implied covenant of good faith and fair 

dealing disposes of Moine’s arguments premised on the trial 

court’s conclusion. For example, in arguing the Pereras cannot 

recover any damages because of their material failure of 

performance, Moine contends the Pereras’ breach of the implied 

covenant excused his own contractual performance. Similarly, 

Moine’s contention the Pereras failed to mitigate damages (what 

he refers to as the avoidable consequences doctrine) is predicated 

on the same erroneous assumptions underlying his breach of 

implied covenant claim that the Pereras were required to sign a 

deed restriction and authorize the release of funds to pay Board 

fees. 
26

from the $60,000 in the holdback account, but Perera refused to 

authorize payment at any time before April 23, 2015. 

Urging us to reverse the judgment in favor of Moine on his 

cross-complaint, the Pereras argue that the $61,302.31 in 

payments for which Moine sought reimbursement were sums he 

paid to perform his own obligation to obtain an NFA under 

paragraph 26(d) of the purchase agreement and that Moine failed 

to establish any amount of the $60,000 in the holdback account 

had been released to pay for costs unrelated to obtaining an NFA. 

They also argue Moine failed to show anything more than

$15,000 remained in the holdback account and, moreover, any 

balance that may remain is to be released to him. Although there 

was no evidence Moine had ever requested release of the 

remaining fund balance, the Pereras on appeal represent they 

would consent to that request.

We agree the trial court erred in finding in favor of Moine 

on his cross-complaint. Although Moine labeled his cause of 

action a common count, Moine’s theory of liability was breach of 

contract: Moine alleged the existence of the holdback agreement 

under which the parties agreed to hold $60,000 for certain 

expenses; Moine approved the release of funds from the holdback 

agreement; the Pereras, failing or delaying in doing so, breached

the agreement; and, as a result, Moine was damaged. (Compare 

Marina Pacific Hotel and Suites, LLC v. Fireman’s Fund 

Insurance Company (2022) 81 Cal.App.5th 96, 108 [“‘[t]he 

elements of a cause of action for breach of contract are (1) the 

existence of the contract, (2) plaintiff’s performance or excuse for 

nonperformance, (3) defendant’s breach, and (4) the resulting 

damages to the plaintiff’”] with Allen v. Powell (1967) 

248 Cal.App.2d 502, 510 [“[t]he essential allegations of a common 
27

count ‘are (1) the statement of indebtedness in a certain sum, 

(2) the consideration, i.e., goods sold, work done, etc., and 

(3) nonpayment’”].)

15 

Despite having the burden of proving his alleged damages 

(see, e.g., Jeff Tracy, Inc. v. City of Pico Rivera (2015)

240 Cal.App.4th 510, 519-520), Moine failed to establish he was 

injured by a breach of the holdback agreement. As discussed, the 

Pereras’ refusal to authorize release of Board fees did not 

constitute a breach of that contract; and, as for Leymaster’s fees, 

because it was Moine’s obligation under the purchase agreement 

to provide groundwater monitoring and obtain an NFA, he was 

responsible for the costs to do so. Moine neither argues nor 

points to any evidence showing Leymaster’s fees for which he 

sought reimbursement were unrelated to his obligation to provide 

groundwater monitoring and an NFA. 

In addition, the cross-complaint did not allege any amount 

of the $60,000 held in the holdback account had been wrongfully 

diverted by the Pereras. On appeal Moine acknowledges his 

cross-complaint did not seek recovery of any amounts paid out of 

that account. 

Finally, the holdback agreement provided that Exchange 

Resources would issue a final instruction authorizing the release 

15 Even if viewed as a common count, in arguing Moine’s 

cross-complaint was to recoup payments made to perform his own 

obligation, the Pereras essentially contend, and we agree, Moine 

did not carry his burden of proving consideration to support a

common count cause of action: Moine did not allege, much less 

prove, the $61,302.31 he sought was unrelated to groundwater 

monitoring and obtaining an NFA, which were, as we hold,

Moine’s obligation. 
28

of any balance of funds to Moine. Moreover, as discussed, Moine 

explains his cross-complaint sought only those amounts he

directly paid to Leymaster, not any amount that may remain in 

the holdback account, and the trial court’s award of $61,000 

exceeds any amount that could have remained in the $60,000 

holdback account after any disbursements. In sum, Moine fails 

to show he suffered any damage from a breach by the Pereras of 

the holdback agreement as alleged in his cross-complaint.

Moine contends the Pereras forfeited by failing to raise in 

the trial court what he characterizes as their “windfall” 

argument—that is, their contention Moine by his cross-complaint 

improperly sought a double recovery by seeking as damages the 

payment for services he was already obligated to provide. In 

their closing brief in the trial court, however, the Pereras’ 

arguments included that Moine was not entitled to recover 

$61,302.31, comprising entirely of sums paid to Leymaster for his

work, because Leymaster’s services constituted “a necessary 

component to obtain the contracted for No Further Action letter”

and Moine, not the Pereras, was thus obligated to pay for those 

services. The Pereras thus adequately asserted in the trial court 

the crux of their “windfall” argument.

16

16 Moine’s forfeiture argument also ignores that his crosscomplaint was filed on August 13, 2021—after the parties had 

already rested on August 9, 2021 and just three days before the 

court issued its statement of decision on August 16, 2021. 
29

DISPOSITION

The judgment is reversed. On remand the trial court is 

directed to vacate its finding in favor of Moine on his crosscomplaint, including the $61,000 award to Moine, and to enter a 

new finding in favor of the Pereras on the cross-complaint. The 

trial court is further directed to vacate its damage award of 

$750,700.16 in favor of the Pereras on their complaint and to 

enter a new damage award that does not include any reduction 

for the nonexistent breach of the implied covenant of good faith 

and fair dealing and that is otherwise consistent with this 

opinion.

The Pereras are to recover their costs on appeal. 

PERLUSS, P. J.

We concur:

SEGAL, J.

FEUER, J.