* Thi s dispo s ition is n ot ap p ropriat e for p u blicati o n and i s not p r ecede nt

ex c ept as provi d ed by 9th Cir

. R

. 36-3.

** Th e Hon o rable E dwar d R

. Kor m an

, S e nior U nited S tates D istrict Judge,

Ea s tern Dist r

ict of N ew Yor k

, sittin g b y d e signat i on.

N O T F OR PUBL I CATI ON

U N ITED ST A TES COU R T O F A PPEA LS

FOR THE NI N TH CIRC U IT

TO L L BROT H ERS

, INC

. , a Dela w are

co r porat i on,

Plai n tiff-C o unter

- Defe n dant-

Appe l lant,

v.

CH A NG SU-O LIN ; H O NG LIEN LIN;

H O NG YAO LI N

, indivi d uals,

Def e ndants

- Count e r-

Clai m an t s

, Ap p ellees. No

. 09-16 9 55

D

. C

. N o

. 3:08

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ME M ORAN D UM *

Ap p eal fro m the Unit e d S tates Dis t rict Court *

for th e N o rther n D i strict of Cal i fornia

Sa m u e l C o nti

, D istrict Ju d ge

, P r esiding

Ar g ued and Sub m it t ed N ove m be r 4

, 2010

Sa n F r ancis c o

, Cal i fornia

Be f ore: GO U LD

, C A LLA H AN

, C ircuit Jud g es

, an d K O RMA N

, Dis t rict Judge. **

To l l B rothe r s

, In c

. ( “ Toll ” ) a ppea l s f ro m a j u dg m ent ent e red in the U n ited Stat es



# F I L ED

F EB 03 2011

M O L L Y C

. D W YE R

, C L E RK

U

. S. C O U R T O F A PPEA LS2

Di s trict Court for the Nort h ern Distr i ct of C alifo r nia f ollo w ing a be n ch t

rial in f a vor of

Ch a ng Su- O L in

, H o ng Lien L i n

, a n d H ong Y a o Li n ( “ th e L i ns”)

. T h e c o m plain t

, bas ed

on d iversi t

y of cit i zens h ip

, a

rose o ut of a p u r ch a se an d sale a gree m e n t ( “ PSA” ) in w h ich

th e Lins agre e d to sell T oll–a natio n al h o m e buil d er– three sepa r ate p arcel s of l a nd in

Du b lin

, Calif

o rnia in t h ree se p arat e c losin g s for a tot a l sale p r ice of $ 2 41

, 500

, 000

. Toll

de p osite d $ 2 1

, 7 35

, 000 into a n e s crow ac c ount to be pai d o ut i n i ncre m e n ts w ith each

pr o perty closin g

. Toll a

nd th e Lins succ e ssfull y clos e d on two p a rcels of la n d

, SubAr e as 1 and 2

. T he d isput e d iss u e h e re inv o lves t he S u b-Ar e a 3 closin g sch e duled for

Jun e 3 0

, 2007

.

Sp e cific a lly

, w i thout con s ultin g To l l

, the Lins had ne g otiate d a n d e x ecut e d an

ea s e m ent to PG& E a cross Sub-Ar e a 3 o n D ece m b e r 1 2

, 20 0 5 for the con s tructi o n of

te m po r ary o v erhe a d po w er lin e s

. In a dditi o n

, the Li n s ins t alled s ix ab o ve-g r ound u tility

va u lts o n th e pr o perty

, w hich Tol l cha l leng e d o n the basi s tha t not all of t h e v a ults were

ne c essa r y and the p l ace m en t of th e vaul t s inter f ered w ith T o ll’s d e velop me nt pla n s for

the p roper t

y

. Alt h ough th e L ins had p ropose d langua g e ter m inati n g the rec o rded

ea s e m ent on Dec e m b er 31

, 2 0 06

, P G &E wou l d n ot agr e e to a fixed ter m ination date.

By Sept e m b er 2 006 t

he L ins h ad c o m p leted all of th e w o rk n e cessa r y fo r the re m ov al

of t he te m p o rary p o wer l ines f

r o m Sub- A rea 3a n d ap p lied t o PG& E for r e m oval o f the

te m pora r y o verhea d p o w e r l i nes

. De s pite nu m e r ous uns u ccess f ul e m ails an d p hone

cal l s fro m the L ins t o PG & E th r ough o ut 20 0 7 at t emp t ing t o get the e ase m ent1 Secti o n 4

. 4 o f the PS A p rovid e s that if th e s ale of pr o perty is n o t “ c onsu mm ated

as a r e sult of t h e buye r ’s defa u lt und e r the agr e e m en t a n d i f s eller is no t a l so in defa u lt ,”

th e d e posit “ shall be ret a

ined by sell e r a s l iquid a

ted da m ag e s

. ”

3 ex t inguis h ed

, PG & E d i d no t quit c lai m th e power line ease me nt ba c k to the Lins prior

to t h e sch e duled c losin g of Su b -Are a 3

. With t h e ease m e n t still co n vey e d to PG & E

, a nd

no kno w ledge or r easo n able expe c tation of when it wo u ld be exting u ished

, To ll

ter m i n ated the PSA in D ece m b e r 2 0 07

, m ore than fiv e m ont h s af t er t h e c l osing dat e for

Su b -Are a 3 spe c ified in the PSA.

Tol l t h en filed s u it for a retur n o f escro w f or Sub- A rea 3 in the a m o u nt of

$7

, 73 5

, 0 0 0 alleg i ng that t he con v eyan c e and c o ntinu e d exis t ence o f the po w er line

ea s e m ent to P G &E o v er Sub

- Area 3 and th e inst a llatio n of t he ut i lity v aults cons t

ituted

br e ache s of th e P S A

. In the alter n ative

, To l l a llege d t h at t he PSA wa s il l egal an d v o id

be c ause it fail e d t o c o m

ply with the Su b division Ma p A c t

. P u rsuan t to § 4

. 4 of the PSA,

the Li n s s e ek to retain T o ll’s $7

, 735

, 000 de p osit as liquid a ted da m ag e s. 1

Alt h ough nu m e r ous issue s a r e r aised

, we nee d o nly addr e ss two of th e m he r e to

re s olve the ap p eal

.

A

. Th e P ower Lin e E asem e nt

Th e fir s t an d m ost signi f

icant is s u e is w hethe r the po w er li n e e a se m ent acro ss

Su b -Are a 3 that co n tinue d to exi s t f o r m or e th a

n fi v e m on t

hs a f ter the s ched u led c lose

of S u b-Ar e a 3 con s titute d a breac h of the P S A suffi c ient to per m it Tol l t o resci n d the

co n tract an d r e cover its de p osit.4

Th e d i strict judg e f

ound that th e L ins’ gr a

nt of an ea s e m ent to P G &E for t he

ins t allati o n of te m

por a ry p o wer lines did n ot c o nstit u te a brea c h of the PSA beca u se it

di d n o t i n terfe r e w ith Toll ’ s p lanni n g f or Sub- A rea 3

. I n a

rrivin g at this co n clusi o n

, the

dis t rict jud g e r elied o n t h e f

ollow i ng findi n gs of f

a ct: 1) Toll k n ew the p ower li n es were

int e nded t o b e a te m

por a ry inst a llatio n ; 2) Toll h a d ceas e d m aking p lans to d e velop

Su b -Are a 3 at the ti m e o f t he sch e dule d c losin g i n June 2 0 07; an d

, 3) T oll’s p l anning

fo r t he dev e lop m ent o f Sub- A rea 3

, if re s tarted

, wou l d hav e take n at leas t a yea r so the

ease m ent

, exting u ished in June 200 8

, did not li m it T o ll’s abilit y to dev e lop t he l and.

D e spite fi n ding t h at the Li n s “h a d not co m p l ied wit h a ll the re q uire m e n ts in the P S A”

in gran t ing t h e e a se m ent

, t h e di s trict judg e held t hat t h e Lin s ’ viol a

tion o f the PSA “ was

no t sig n ifica n t e n ough to justi f y T oll’s ter m in a

tio n of the co n tract

. ” I n su m

, a l though

th e Li n s ma

y h ave viol a

ted the con t

ract

, t heir condu c t di d not a m oun t to a ma t erial

br e ach suffi c ient to justif y T o ll’s resci s sion

. W e d i sagre e.

Un d er C alif

o rnia law

, t h e b u yers of r eal p rope r ty a re e n title d to take title cle a r of

en c u m branc e s or d e fects. See Ea s on v. Mo n tgom e ry

, 27 P

. 2 80

, 2 82 (C a l

. 1 8 91 ) (in

co n tracts “ fo r the sale of land t h ere is a n i m pl i ed co n diti o n tha t the t i tle o f the v endor

is good

, a

nd t h at h e w i ll tr a

nsfer to t he v ende e

. . . a t i tle u n e ncu m bered and with o ut

de f ect” ); Cri m v

. Umbsen

, 10 3 P

. 1 7 8

, 180 (Cal

. 1 909) (it i s a buye r ’s “ rig h t

. . . to recei ve

a perfe c t tit l e of rec o rd

. .. wi t hin t he ti me spe c ified in t

h e agree m ent ” )

. A m arke t able

titl e “ m e ans a title whic h a re a sona b le p u rchas e r

, we l l info r m e d as t o the f

acts a nd th e ir5

le g al be a rings

, w illing and anxio u s to perf o r m his cont r act

, wo u ld

, in t h e ex e rcise of t h at

pr u denc e whi c h b u sines s m en ordin a rily b ring to b ear o n s u ch t r ansac t ions

, b e wil l ing

an d ou g ht t o a c cept

. ” Ho c king v

. Titl e Ins

. & Trust Co

. , 234 P

. 2 d 625

, 649-50 (Cal.

19 5 1).

A se l ler’s fai l ure to del i ver une n cu m ber e d

, m ar k etabl e o r agree d -upo n t i tle when

a c o ntra c t m ature s cons t

itutes a bre a ch an d allo w s res c ission

. Se e Post v

. P a lpar

, Inc

.,

7 C al

. Rptr

. 82 3

, 8 2 6 (Ca l

. C t

. A pp

. 1960 ) (hol d ing th a t the “ fa i lure t o tend e r m arke t able

title at the ti m e the contra c t ma tur e s is a m ater i al bre a ch”); Fri s tad v

. T homp s on

, 2 76

P

. 2d 11 6

, 1 1 8 (Cal

. Ct

. App

. 195 4 ) (whe n seller de e ds a per p etual e a se m ent t o t h e city

for t he con s tructio n of a se w er ac r oss pro p erty u n der co n tract t o a ho m ebui l der,

res c issio n by the ho m ebu i lder is v a lid b ecau s e h e w as “ e n titled to a c onve y ance of the

ful l title a nd to p osses s ion o f all o f the p r opert y ”); Tho m as v

. Sp i tzer

, 260 P

. 833

, 833- 34

(C a l

. C t

. A p p

. 1 927) ( w here a selle r ’s fail u re to o btai n a gu a rant e e of title a s sti p ulated

in the a gree m e n t pe r

mi t ted b uyer’ s res c issio n ); Sw i tzler v

. R ober t A

. Klei n & Co

. , 2 71

P

. 367

, 36 9 -70 (C a l

. C t

. A pp

. 1928) (when seller g r an t s an e a se m ent t o the ci t y to b u ild

a se w er line wit h out the kn o wledg e o r conse n t o f buyer s w ho had ent e red into an

ag r ee m ent t o purc h ase t h e land

, c o nside r ation f ailed a nd th e plain t

iffs w e re en t

itled to

re s cind the con t

ract).

Re s cissi o n b y t

he buye r w hen s e l ler can n ot d eliv e r m a r ketab l e t itle afte r a

re a sona b le p e riod of ti m e is j ustifi e d e v en w hen sell e r cl a i m s th a t a re m ed y to the6

en c u m bran c e or d e fect i s avai l able o r forth c o m ing

, bec a use a buye r “i s entitl e d to a t itle

th a t is f a irly d educ i ble o f rec o rd

, fr e e fro m re a sona b le do u bt an d litiga t ion

. ” W h elan v.

Ro s seter

, 82 P

. 1 082

, 10 8 3 (C a l

. C t

. App

. 19 0 5); Cri m v

. Umbs en

, 103 P

. 17 8

, 1 80 ( Cal.

19 0 9); se e also

, Fri s tad v

. T h ompson

, 276 P

. 2d 1 1 6

, 118 ( Cal

. Ct

. A pp

. 1954 ) (a buyer

is “ not oblig e d t o a ccept a m e re pap e r title

, to br i ng an a c tion fo r posse s sion ag a inst

an o ther par t

y

, an d to re l y u pon thei r p o ssible su c cess in su c h an act i on”)

. A m a rketa b le

titl e “m ust not only be free of act u al d efects but also of reas o nable dou b t a n d p robab le

lit i gatio n .” La n sburg h v

. Ma r ket St

. R y

. Co

. , 220 P

. 2d 423

, 426 (Cal

. Ct

. A p p

. 195 0 ).

Pa r ticul a rly appo s ite here is Lei t

er v

. Ha n delsm an

, 27 0 P

. 2d 563

, 564-65 (Ca l.

Ct

. A pp

. 1 954)

, w here the sell e r w as u nable to deli v er clear titl e o n th e cl o sing date

be c ause t h e lan d cont a

ined g u y wir e s and a

n eas e m e nt in f

a vor o f the p o wer c o m p any.

Alt h ough the p o wer c o m

pany a gree d to re m o v e th e guy w ires a nd q u itclai m t h e land

ba c k to the seller

, t

hese actio n s w e re d e laye d

, l eadin g the buy e rs t o can c el e s crow and

de m a n d a r e turn of thei r d e posit

. Id

. a t 5 6 4

. Des p ite the fact th a t t h e powe r c o m p any

re m ov e d the w i r es and exec u ted a quitclai m de e d th e day afte r the buye r ’s r e scissi o n,

on l y three w e eks af

t er the sc h edul e d closin g date

, id

. , th e r escissi o n was u p held be c ause

th e s eller s were u nable t o deli v er m arke t able tit l e “ [ w ] ithin a re a son a ble ti m e aft e r the”

sc h edule d clo s ing

. Id

. at 56 8

. S i m ilarly

, in Wa r d v

. Dow n ey

, 213 P

. 2d 5 2 3

, 526 ( Cal.

Ct

. A pp

. 195 0 )

, it w a s h e ld th a t th e pos s ibility of an estat e ta x in an u nspe c ified a m ou nt2 W h ile the s e are

, for t he m ost p a

rt

, i n ter m edi a

te ap p ellat e c ourt d ecisi o ns

, u nder

Eri e R a ilroa d C o

. v

. T

o mpkins

, 3 0 4 U

. S

. 64

, 78 (1 9 38)

, “ [ w ]he r e a n i n ter m edia te

ap p ellat e state c o urt r e sts its c o nsid e red ju d g m ent u p on the r ule of l aw w h ich it

an n ounc e s

, t

hat is a datu m f

o r asc e rtain i ng sta t e law w hich is not t o be d i srega r ded by

a fe d eral c o urt unl e ss it is co n vinc e d by oth e r pe r suasi v e data th a t t he high e st court of

the state w ould d ecide other w ise

. ” W est v

. A meri c an T

e l

. & Tel

. Co

. , 3 11 U

. S

. 223,

23 6 -37 (1 9 40); se e also

, Ha n garter v

. P rovid e nt Lif e and A c c

. Ins

. Co.

, 3 73 F

. 3 d 998,

10 1 2-13 (9th Cir

. 2004 ).

7 on property to be sol d cons t ituted a defe c t in title t h at m ade i t u n m arke t able

, the r eby

all o wing buye r s to resci n d th e con t ract e ven tho u gh t

he e xact a m oun t of suc h ta x w as

de t er m ined wit h in 1 2 d ays of the sche d uled c losing and could hav e be e n cu r ed b y the

sel l ers if t hey paid the ta x es. 2 M o r e o v e r

, a s t h e d i s s e n t po i n t s o u t

, un d e r C a li f o r n i a l a w,

m o t i v e “ i s i rr e l e v a n t t o d e t e r m i n i ng i f t h e r e w a s a b r e a c h o r i n e v it a b l e b r e ac h on c l o s i n g .”

D i s s e n t a t 4

. N e v e r t h e l e ss

, r e l y i n g o n t h e R e s t a t e m e n t ( S e c o n d ) o f C o n t r a c t s

, t h e d i s s e nt

s u g g e s t s t h a t m o ti v e i s r e l e v a n t “ i n a ss e ss i n g w h e t h e r t h a t b r e a c h w a s m a t e r i a l

. ” Di s sent at

4

. Rese a rch has not unc o vere d a Cal i forni a c a se relyi n g o n t he Rest a te m ent (Se c ond)

of Contr a cts § 241 (198 1 ) (or a c o m parabl y wo r ded s ection in t h e R e state m ent (Firs t)

of Co n tracts § 275 (1 9 32)) in the cont e xt of a contr a ct f or t h e s a le o f r e al p ropert y.

M o reove r

, C a liforni a law ho l ds that a buyer ’ s m o tive in r escinding a contr a ct for the

sal e of land i s no t rele v ant t o an assessm e nt o f his legal right s or f ulfill m e n t of legal

o b liga t ion s und e r a c on t

ra c t

, i n c l ud i ng w h e t

he r a ma te r i a l br e a c h oc c urr e d

. Spe c ifi c ally,

as the Su p re m e Court of Ca l iforni a h a s h eld:

W e c a nnot con s ider the m otiv e s w hich pr o m p ted resp o ndent

to resci n d the cont r act o f sal e

. It was h is ri g ht u n der t hat8 ins t ru m ent t o recei v e a p e rfect title o f reco r d at t h e ti m e or

wi t hin t he t i m e sp e cifie d in the agre e m e nt

. T h i s the

pl a intiffs c o uld not gi v e h i m

. He was en t itled to re s t u pon

th e pro v isions of t

he c o ntrac t

, whet h er o r not his r eal p urpose

wa s to avoi d takin g a

nd pa y ing for a tract o f l and th a t had

de p reci a ted in value.

Cr im

, 10 3 P

. 1 7 8

, 180 (Cal

. 1 9 09); se e al s o D e B a iros v

. B a rlin

, 19 0 P

. 1 88

, 19 1 (C a l.

Ct

. A pp

. 1 9 20) (“ T he courts ha v e h e ld t h at th e m otiv e s o f th e v e ndee in resci n ding m ay

not be in q uired int o w h en he has a l egal rea s on for resci n ding and rel i es there o n”)

.

Co n trary t o the d issent

, we do not sugge s t that “ Ca l iforni a law r equir e s us

in v ariab l y to view an y fai l ure to b e in a po s ition to t e nder cle a r titl e on the closi n g da te

as p e r se a m a

terial bre a ch

. ” D issent at 1

. O u r deci s ion t h at th e pow e r line ease m ent

co n stitut e d a b r each of the PS A i s n o t b a sed solel y o n t h e i n abili t y o f t h e L ins to d eliv er

un e ncu m be r ed title on the sch e duled clo s ing date

. Ind e ed

, To l l di d no t re s cind beca u se

th e Li n s h a d n o t c u red the defe c t i n titl e b y th e clo s ing d a te s p ecifi e d i n th e P S A.

Ins t ead

, T oll waite d o v er five m onths be y ond th e s ched u led clo s ing be f ore re s cindi ng

th e c o ntrac t

. M ore o ver

, d espit e th e f a ct that the Pu r chas e S a le Agr e e m ent gav e t h e Lins

th e opti o n to exte n d cl o sing in o r der t o cu r e a br e ach of c ontr a ct

, th e Li n s m ad e it clear

pri o r to the sch e duled closi n g o n Ju n e 3 0

, 2007

, that they wo u ld n ot ex t end closi n g.

La t er

, i n negot i ation s a fter th e sched u led cl o sing

, the Li n s offe r ed to ex t end th e c lose

on l y if To l l pro v ided addit i onal s ecur i ty a n d agr e ed t o acc e pt th e cur r ent l o cati o n of t he

uti l ity vaults w h ich was als o in dis p ute bet w een the par t ies.9

Si g nific a ntly

, the disp u te cr e ated by th e po w er l ine ea s e m ent w as of t h e Lin s own

m aki n g b e caus e th e y c h ose to v iolate the Pur c hase Sal e A g ree m ent by con v eying an

ea s e m ent to PG& E witho u t Toll’ s know l edge o r cons e nt and w ithout r equir i ng a

ter m i n ation da t e o n t h e c onve y ed ease m e n t

. More o ver

, t he breac h c r eate d b y th e p o wer

lin e ease m ent was

, as t h e diss e nt ack n owled g es

, “o f uncer t ain an d unspe c ified

du r ation

. ” D i ssent a t 2

. T hus

, desp i te seeking the r e m o val o f the p o wer l i nes f o llowi ng

the c o m pleti o n of an u nder g roun d trenc h in Sep t e m ber 20 0 6 and n u m erous

co mm un i cation s with P G &E thr o ugho u t 2007

, the Li n s wer e u nsuc c essful in

ex t ingui s hing th e e a se m ent a n d c ould n o t p rovid e a d ate- c ertai n a s t o w hen th e e ase m ent

wo u ld be e x tingui s hed

. Whil e t h e diss e nt arg u es

, w ith the b e nefit o f h indsi g ht

, t h at the

eas e me n t h ad “n o pr a ctical i m pact

, ” D issent at 5

, it ign o res th e f act tha t

, wh e n Toll

re s cinde d the co n tract

, it di d not kn o w wh en or if th e ease m e n t woul d be ex t ingui s hed,

or if doin g s o w ould req u ire legal ac t ion.

No r do we agre e w i th t h e di s sent that the “ L ins s uffer a m a jor forf e iture over

wh a t s e e m s a hype r

techn i cal b reac h

. ” D i ssent at 5

. W e pas s ov e r th e fa c t th a t the m ajor

fo r feitur e h e re m a

y b e t he $7

, 735

, 000 th a

t T oll will forf

e it t o t h e L ins as liqui d ated

da m ages w ithout regard to a n y a ctual d a m age s u ffer e d by t h e Lin s

. I n ess e nce

, if t he

Li n s pre v ail

, they w ill g e t to ke e p their land p l us $7

, 73 5

, 0 0 0

. T his n o twith s tandi n g the

fa c t that they r e

ject e d the o ptio n to ex t end t h e clos i ng of S u b-Ar e a 3

, i nsisti n g inste ad

up o n clo s ing as sched u led d e spite their i n abilit y to c o nvey t itle “ fre e fro m re a sona b le3 To l l does n o t chall e nge th e valid i ty of § 4

. 4

, the cl a use in th e PSA th a

t prov i des

fo r p ay m en t o f liqui d ated d a m ages t o t h e L i ns in t h e a m ou n t equa l to the $ 7

, 735

, 000

he l d in e s crow in the even t of T o ll’s d e fault

, pr o vided that t h e Li n s are not in defa u lt.

W h ile su c h clau s es in t h e sale of r e al pro p erty a r e vali d if the d own p a y m ent is a

re a sona b le a m ount

, whe n “ th e e viden c e establis h es th a t it wo u ld not ‘ be i m

pr a ctica b le

or ext r e m ely diffic u lt t o fi x th e ac t ual da m age ’

. . . such a pr o visio n m ay n ot b e enf o rced

as o ne for l iquid a

ted da ma ges

. ” Se e Freed m an v

. Rect o r

, W arde n s & Ves t ryme n o

f St.

Ma t hias P a rish

, 230 P

. 2 d 629

, 633 (Cal

. 195 1 ) (int e rnal c itatio n s o m itted ) (Tra y nor

, J

. ).

Be c ause T oll d o es not r aise t h e issu e of th e enfor c eabi l ity of t h e liqu i date d da m ages

cla u se

, h o weve r

, we did not re a ch it h ere.

10 doubt and litigation

, ” W

h elan v

. Ross e ter

, 8 2 P

. a t 1083. 3 Und e r Calif

o rnia l a w

, t h is

wa s m ore t

han a “ hyper t echni c al b r each

. ” Diss e nt at 5; s e e Wa rd

, 213 P

. 2d at 526;

Le i ter

, 2 70 P

. 2 d at 564-6 5

. Mor e over

, altho u gh the dis s ent su g gests t h at at iss u e here

is “ a larg e d e velo p m e nt cont r act tha t p lac e d c ertai n o bliga t ions on ea c h p arty

, and that

cal l ed for coope r ation

, ” D i ssent a t 6

, our re v iew o f the r e cord s u ggest s that it was t he

Li n s rat h er th a

n To l l who s e co n duct w as c onsist e nt wi t h thi s vag u e m and a

te

. Toll

wa i ted m o re t h an f

ive m o n ths after the spec i fied closi n g d a te b efore res c indin g the

co n tract an d

, unli k e t h e L ins

, w as willi n g t o e x tend the clo s ing date ev e n f urthe r.

B

. Th e S c hool Site

Th e PSA o bliga t ed To l l

, a s the b uyer o f Sub

- Area 2

, t o reco n vey a parc e l of S u bAr e a 2 to t

he Li n s afte r desig n ating t his la n d as a “S c hool S ite

. ” Rec o nvey a nce o f the

sc h ool si t e was m a de a speci a l clo s ing c o nditio n for the third closi n g: “ Bu y er s h all h a ve

re c onve y ed to Sell e r o r Selle r ’s assig n ee the ele me ntary sc h ool par c el in Sub

- Area 2 .”

Th e Lins a r gue th a

t reco n veya n ce of t h e scho o l site “ was a fun d ame n tal go v ernm e ntal11

an d regul a tory pr e requi s ite fo r the e n tire d evelo p m e nt

, ” the f ailur e of w h ich p e r m itted

th e Li n s “ to ex t end the clos e o f e s crow pa s t t h e o rigin a l s c hedul e d ‘ close ’ d a te .”

Th e d istric t ju d ge held th a t “ T o ll’s fail u re to r e con v ey the sc h ool sit e w as not a

fai l ure to p e rfor m a c o nditio n pr e cede n t to the Lin s ’ d u ty t o sel l Su b -Are a 3

, ” b ecause

the schoo l site h a d be e n assi g ned t o anoth e r pa r ty pri o r to the closin g of Su b -Are a 3 and

the r efore was not Toll’ s to conve y

. Ac c ordi n gly

, T o ll di d no t br e ach the P SA by f ailing

to r econ v ey th e sch o ol sit e

. N eve r thele s s

, h e hel d that Toll’ s failu r e to c o m ply w ith this

pr o vision gave t

he Li n s the r

ight to exten d closi n g be y ond th e sch e duled d ate o f June

30

, 2007

.

W e agree w ith th e d istric t j udge t h at Toll d id not b r each t h e PSA b y faili n g to

re c onve y th e s chool sit e

– a ho l ding that the Lins do not challen g e o n th i s a p peal.

No t withst a

nding hi s f

i nding th a t t here wa s n o b rea c h

, t h e dist r ict jud g e held t h at Toll ’s

fai l ure to recon v ey th e scho o l site ga v e the Lins t h e rig h t to in d efinit e ly ext e nd the

cl o sing d a

te

. Cons e quen t

ly

, their f ailure to cl o se

, as lat e as f i ve m onths aft e r the

cl o sing da t e speci f

ied in th e P SA

, did not c o nstit u te a bre a ch enti t ling To l l t o resci n d the

ag r ee m ent

. W h ile th e logi c o f this a rgu m ent es c apes u s

, e ven if t he Li n s had t h e right

to ext e nd closi n g

, th i s r ight was ef

f ectiv e l y waiv e d w hen they insist e d

, wit h fu ll

kno w ledg e that the s chool site had yet to be reco n veyed

, that the c losing of S ub-Ar ea

3 proc e ed as sched u led.

Th e j u dg m ent of the Di s trict Co u rt is12

RE V ERSED

.1 

### T h e m a j o r i t y d i sc l a i m s r e l i a n ce o n t h i s p r e m i s e a n d m e n ti o n s o t h er

c i r c u m s t a n ce s

, s u ch a s t he d e l a y f r o m sc h ed u l e d c l o s i n g t o d e c l a r a ti o n o f b r e a c h,

t o s u p p o rt it s c o n c l u s i o n

. H o w e ve r

, I b e l i ev e t he m a j o r it y c o m e s c l o s e t o t h is

p r e m i se b ec a u s e t h e o t h e r c i r c u m s t a n ce s c i t ed d o no t s i g n if i ca n tl y i m pa c t t he

a n a l y s i s.

1 T o ll B r o t h e rs

, I n c

. v

. S u

- O L i n e t a l.

, N o

. 0 9

- 1 6 9 55

G O U L D, J

. , d i s se n ti n g:

I r e s p e c t f u l l y d i ss e n t

. T h e d i s t ri c t co u rt h e l d a t r i a l t h a t o cc u p i e d n i n e d a y s

.

T he d i s t r i c t c o u rt m a d e d e t a i l e d f ac t u a l f i n d i n g s t h a t i l l u m i n a t e t he g r o u n d s f o r i ts

d e c i s i o n t h a t t h e L i n s h a d n o t m a t e ri a ll y b r ea c he d t he p u r c ha s e an d s a l e a g r e e m en t

.

T ho s e f a c t u a l fi n d i ng s a r e n o t c h a l l e n ge d o n a p p e a l a n d t h u s a

r e c on c e d ed a s t r u e

.

T he m a j o r it y r es t s it s o p i n i o n p r i m a ril y on t h e p r e m i se

, I t h i n k q u e s t i on a b l e

, t h at

C a l i f o r n i a l a w r e q u ir e s u s i n v a ri a b l y t o v i e w a n y f

a il u r e t o be i n a p o s it i on to

t e nd e r c l e a

r ti t l e o n t he c l o s i ng d a t e a s p e r s e a m a t e ri a l b r e ac h. 1 

### H e n ce

, t he

m a j o r it y r ea s o n s

, t he g r a n ti n g o f a t e m p o r a r y ea s e m e n t t o P a c if

i c G a s & E l ec t ric

C o m p a ny ( P G & E ) f

o r o ve r h e ad p o w e r li n e s c o n s tit u t e d a m a t e r i a l b r e a c h o f t he

p u r c h as e a nd s a l e ag r ee m e n t

. T h e m a j o ri t y r e l i e s o n C a li f

o r n i a l a w f

o r t he

p r i n c i p l e t h a t t h e r e i s a n i m p li e d c o n d i t i o n i n e v e r y c o n tr a c t f o r s a l e o f r e al

p r o p e r t y t h a t t h e se l l e r w il l c o n ve y tit l e u n en c u m be r e d a nd w it h o u t de f

ec t

, a n d t h at

t h e f a i l u r e t o t e n d e r m a

r k e t ab l e tit l e a t t h e ti m e a c o n tr a c t m a t u r e s i s a m a t e ri al

b r ea c h g r an t i n g t h e p u r c h a se r t h e ri g h t t o r e s c i n d. S e e

, e

. g

. , C r i m v

. U m b s en

, 1 03 

# F I L ED

F EB 03 2011

M O L L Y C

. D W YE R

, C L E RK

U

. S. C O U R T O F A PPEA LS

### 2

P

. 1 7 8

, 1 8 0 ( C a l

. 1 9 09 ).

I n a c as e s u c h as t h i s

, w e a r e b o u n d t o a p p l y s t a t e l a w, w h i ch r e q u ir e s u s to

m a ke o u r b e s t e s ti m a t e o f ho w t h e C a l if o r n i a S u p r e m e C o u rt w o u l d r u l e on t he

i s s u e i f t e n d e r e d t o it. S e e V e s t a r D e v

. I I

, L L C v

. G en

. D

y na m i c s C

o r p.

, 2 4 9 F

. 3d

9 5 8

, 9 6 0 ( 9 t h C i r

. 2 0 0 1 )

. H e r e

, i n li g h t o f t h e c o n s i s t e n t s t a t e m en t s i n t he

C a li f o r n i a c as e s on t h e i m

p o r t a n ce o f t en d e r i n g c l e a r tit l e

, I c o n cu r i n t he

m a j o r it y ’s c o n c l u s i o n t h a t a t l e a s t t h e t e m p o r a r y p o w e r li n e ea s e m en t

, a n d p e r h a ps

a l s o t h e b u il d i n g o f t h e s i x u t i li t y v a u l t s w i t h o u t c o n se n t o r c o n s u l t a t i o n w a s a

b r ea c h

. N o n e t h e l e ss

, I be l i e v e t h a t i n t h e u n u s ua l c ir c u m s t a n c e s o f t h i s c a se

, t he

C a l i f o r n i a S u p r e m e C o u r t w o u l d v i e w t h e p o w e r li n e an d u ti l it y v a u lt ea s e m e n t s as

a t m o s t p a

r ti a l b r e ac h

. L a r g e l y f

o r r e as o n s s u p po r t e d b y t h e d i s tr i c t c o u r t’s

e x t e n s i ve a n d u nc h a l l e n ge d f a c t u a l fi n d i n g s

, I w o u l d h o l d t h a t on l y a p a rt i a l b r ea ch

o c c u rr e d

, n o t o n e p e r m it t i n g T o l l B r o t h e r s t o r e s c i n d t h e c o n t r ac t

.

H e r e a r e s o m e o f t h e s a li e n t p o i n t s t h a t i m pa c t m y a na l y s i s

. F i r s t

, t h e p o w er

e a se m e n t w a s t e m po r a

r y

, a nd

, a l t h o ug h it w a s o f u n c e rt a i n a n d u n s p ec i fi ed

d u r a ti o n a n d h a d t o b e r e m ov e d b y P G & E

, i t i s a l s o t r u e t ha t t he l o c a l g o v e r n i ng

a u t h o r i t y

, t h e c it y

, w o u l d n o t a l l o w ab o v e g r o un d po w e r l i n e s t o r e m a i n

. G i v en t he

t e m p o r a r y n a t u r e o f t he s e li n e s

, I m u s t v i e w an y b r e ac h by t h e i r i n t r o d u c ti o n o n t he

l a n d a s a de m i n i m i s p r o b l e m t ha t s u r e l y w o u l d h a v e b ee n w o r k e d o u t be f o r e T o ll

### 3

B r o t h e rs h a d t o d o a n y d e ve l o p m e n t w o r k o r c o n s t r u c ti o n o n t h e p r o j e c t

.

S ec o n d

, a l t h o u g h C a lif

o r n i a l a w m a y c o m pe l u s t o c o n c l u d e t h e r e w as a

b r ea c h b y i n a b i l it y t o t e n de r c l e a r tit l e

, I d o no t a cc e p t t h e i d e a t h a t a l l o f t he

c i r c u m s t a n ce s d e t a il e d b y t he d i s t r i c t c o u rt i n i t s fi n d i n g s a ft e r tri a l a r e w h o lly

i r r e l e v a n t t o w h e t h e r t h e b r e a ch w as a p a rt i a l b r ea c h o r a m a t e r i a l b r e a ch

. T he re

a r e C a l if o r n i a c as e s

, e

. g

. F r i s t

a d v

. T h o m p s on

, 2 7 6 P

. 2 d 1 1 6

, 1 1 8 ( C a l

. C t

. A p p.

1 9 5 4 )

, s u g g e s t i ng t h a t a f a il u r e t o d e l i v e r c l ea

r t itl e w a r r a n t s r e sc i ss i o n

, b u t I s ee

n o t h i n g f r o m t h e C a l if

o r n i a S u p r e m e C o u rt s t a ti n g t h a t t h a t m u s t i n v a ri a b l y be t he

c o n c l u s i o n

. I n s t e a d

, I t a ke t h e p o s i t i o n t h a t c ir c u m s t a nc e s s u c h as T o l l B r o t h e rs

c e a s i n g w o r k o n d e v e l o p m e n t e f f o r t s r e g a r d i n g S u b

- A r e a 3 b e f

o r e t h e p l a n n ed

c l o s i n g d a t e

, i t s f

a i l u r e t o c o o p e r a t e i n a v o i d i n g p r o b l e m s p r e ve n ti n g c l o s i n g

, a nd

i t s m o ti v a t i on t o av o i d p r o ce e d i n g d u r i n g a n ec o n o m i c d o w n t u r n c a n p r o p e rl y be

c o n s i d e r e d i n as s e s s i n g w h e t h e r t h e b r ea c h w as p a rti a l o r m a t e ri a l

. I p r e d i c t t h at

t h e C a lif o r n i a S u p r e m e C o u r t w o u l d n o t v i e w t h i s a s a m a t e r i a l b r eac h

. I a m n ot

p r e p a r e d t o r e s t

, s o h e a v il y i n s u b s t a n c e

, s e e s u p r a n o t e 1

, o n t h e n o t i o n t h a t t he

C a li f o r n i a S u p r e m e C o u r t w o u l d m a ke t h e tr a n s f e r o f c l e a r tit l e a p e r se

p r e r e qu i s i t e t o a v o i d a m a t e ri a l b r e ac h

.

T h ir d

, m u c h t h e s a m e a na l y s i s ap p li e s t o t he u til i t y v a u l t i ss u e

. A g a i n

, ti t le

w as e n c u m

b e r e d by t h e v a u l t s an d a tt e n d an t ea s e m en t s

, b u t I ’ m d i s i n c li n e d t o v i ew

### 4

t h a t as a m a t e r i a l b r eac h

. T h e r e w as c l ea r t es t i m o n y t ha t t he v au l t s c o u l d be

m o v e d a t a c o s t i n t h e r an g e o f $ 3 0 0

, 0 0 0

- 5 0 0

, 00 0

, a n d s o I d o n ’ t s ee w h y

, e v e n if

d a m a g e s a

r e u nc e rt a i n

, a d i s tri c t c o u rt c o u l d no t m a k e a fi n d i ng o n pa r ti a l b r e ach

d a m a g e s a n d d e d uc t t h a t f r o m t h e o b l i g a ti o n s o f T o ll B r o t he r s

. I n t h e t o t a l s c h e me

o f t he c o n t

r ac t

, t h e p l a ce m e n t o f t h e u t i lit y v a u lt s d i d n o t c o n s t it u t e m a t e ri al

b r ea c h

, an d t he e v i d e n c e s h o w e d t h a t a p a rti a l b r e ac h w a s c o m pe n sa b l e

.

F ou r t h

, w h il e s o m e C a lif

o r n i a a u t h o ri t y s u g g es t s t h a t m o ti v e i s ir r e l e v a n t,

s e e

, e

. g

. , C r im

, 1 0 3 P

. a t 18 0

, a n d I w o u l d a g r e e i t i s i rr e l e v a n t t o d e t e r m i n i n g if

t h e r e w a s a b r e a ch o r i ne v it a b l e b r e a c h o n c l o s i n g

, I t h i n k m o ti v e c a n p e r m i s s i b ly

b e c o n s i d e r e d i n a ss e ss i n g w h e t h e r t h a t b r e a ch w as m a t e r i a l

. U n d e r t he

R es t a t e m e n t ( S e co n d ) o f C o n t r ac t s

, t he k e y f

a c t o rs a r e ( 1 ) t he e x t e n t t o w h i ch t he

i n j u r e d p a r t y w i ll b e d e p ri v e d o f t h e b e n e f i t r e a s o n a b l y e x p e c t e d ; ( 2 ) t h e ex t en t to

w h i c h t h e i n

j u r e d pa r t y c a n b e a d e qu a t e l y co m p e n s a t e d f o r de p ri v a t i o n o f b e n e fit;

( 3 ) t h e e x t en t t o w h i c h t h e p a r t y f a ili n g t o p e rf

o r m o r t o o ff

e r t o p e rf o r m w il l s u f

f er

f o rf e it u r e ; ( 4 ) t h e l i ke l i h o o d t h a t t h e p a r t y f a il i n g t o p e rf

o r m o r t o o f

f e r t o p e rf o rm

w ill c u r e h i s f

a il u r e

, t a k i n g ac c o u n t o f a ll t h e c i r cu m s t a n c es i n c l u d i n g a ny

r e as o n a b l e a ss u r a nc e s ; a n d ( 5 ) t h e e x t e n t t o w h i ch t h e b e ha v i o r o f t h e b r e ac h i ng

p a rt y co m p o rt s w i t h s t a n d a r d s o f g o o d f

a it h a nd f a ir d e a l i ng

. R e s t a t e m e nt

( S e c on d ) o f C o n tr a c t s § 2 4 1 ( 1 9 8 1 )

. H e r e

, t h o s e f a c t o r s i n m y as s es s m e n t t e nd to

### 5

f a v o r t h e L i n s r a t h e r t h a n T o l l B r o t h e r s

. A n d I se e n o t h i n g i n C a l i f o r n i a l aw

i n d i c a t i n g t ha t t h i s i n f

l ue n ti a l R e s t a t e m en t p ri n c i p l e o f c o n tr a c t l a w w ou l d n o t be

f o ll o w e d b y t he C a l i f

o r n i a S u p r e m e C ou r t

. T h a t t he b r e a ch b y t he L i n s in

d e li v e r i ng c l ea

r t itl e d o e s no t s ee m m o t i v a t e d b y a n y b ad f a it h o r e r r a n t i n t e n ti o ns

t o m e co u n s e l s f

o r v i e w i n g t he b r e a ch a s n o t m a t e r i a l i n co n t e x t

.

A n o t h e r f a c t o r t ha t m i g h t b e a r g u e d t o f a v o r T o l l B r o t h e r s i s w h e t h e r t he

e n c u m b r an c e d e p r i ve s i t o f w h a t i t e xp e c t e d t o b u y ; h o w ev e r

, g i v en t h e t e m p o r a ry

n a t u r e o f t h e ea s e m en t

, a n d g i ve n t ha t T o l l B r o t h e rs h ad s u s p e n de d de v e l op m e n t,

t h e r e i s n o p r a c ti c a l i m pa c t o f d e p r i v a ti o n

. T o l l B r o t h e rs r e as o n a b l y co u l d h ave

e x pe c t e d t he t e m

p o r a r y e a se m e n t t o h a ve b e e n r e m o v e d be f o r e it w a s ti m e f

o r i t to

s t a r t w o r k o n c on s tr u c t i o n o r an t ec e d en t p l an n i n g

. If t h e t e m p o r a r y e a se m e nt

c a u s ed s o m e d e l a y

, i n m y v i e w it i s n o i n s u r m o u n t ab l e o b s t a c l e f o r e x p e rt s t o g i ve

t e s t i m o n y a n d f

o r t h e d i s tr i c t c o u r t t o m a ke a f i n d i n g on t h e d a m a g e s f

r o m t he

d e l a y

. C o n v e r s e l y

, a s t he m a j o r it y s e e s t h i s c a se

, t h e L i n s s u ff e r a m a j o r f o rf e it u re

o v e r w ha t s ee m s a hy p e r t ec h n i c a l b r ea c h

. A l s o

, i t w a s l i k e l y t h a t t h e L i n s c o u ld

c u r e t h e b r e ac h b ec a u s e o f t h e t e m po r a r y n a t u r e o f t he e a se m e n t

.

T he c r ux o f m a t e ri a l b r e ac h a n a l y s i s i s t h i s : T o ll B r o t h e rs w as n o t d e p r i ved

o f a n y s i g n if

i ca n t p a rt o f i t s b a r g a i n a s a r e s u l t o f t h e L i n s ’ b r e ac h

, i n li g h t o f T o ll

B r o t he r s’ o w n p l a n s

, a t e m po r a r y de l ay o n c l e a

r ti t l e c a u s e d it n o ha

r m

. A t t he

### 6

s a m e t i m e

, t h e L i n s d i d n o t a c t i n b a d f a i t h

. A d e t e r m i n a ti o n o f p a rti a l b r e ac h at

m o s t

, a s m a d e b y t h e d i s tr i c t c o u r t

, i s c o rr e c t.

F i n a ll y

, t h e r e a r e p r a g m a t i c g r ou n d s f av o ri n g t h e d i s tr i c t c o u r t’ s a p p r o a ch

.

T h i s w as a l a r g e d ev e l o p m e n t c o n t r ac t t h a t p l a ce d c e r t a i n o b l i g a ti o n s o n e ach

p a rt y

, a nd t h a t c a ll e d f

o r co o p e r a t i o n

. I f

e a r t h a t t h e m a

j o ri t y ’ s a p p r o a c h w il l o n ly

l e ad t o g a m es m an s h i p an d l es s t ha n co o p e r a t i v e b e h av i o r b e t w ee n l a n do w n e r a nd

d e v e l o p e r

, be t w e en a m a s t e r d e v e l o pe r a n d a de v e l o p e r o f c o m p o n en t p a r t s

, a nd

t h a t a g g r e s s i v e j o c k e y i n g f o r p o s i t i o n w i t h o u t r eg a r d t o co o p e r a t i o n w i l l u l t i m a t e ly

i m p o se h i g h e r p r i c e s o n c o n s u m e r s w h o b u y h o m e s i n t h e d e ve l o p m e n t.

F o r t h e ab o v e r ea s o n s

, I w o u l d c h a r ac t e r i z e t h e f

a i li n g s o f t he L i n s as

b r ea c he s b u t n o t as m a t e ri a l b r e a c h e s

. H e nc e I r es p ec t f u l l y d i ss e n t.