Filed 6/26/13 County of San Diego v. Lumbermans Mutual CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

COUNTY OF SAN DIEGO, Plaintiff and Appellant,

v.

LUMBERMANS MUTUAL COMPANY et al., Defendants and Respondents. G046970
(Super. Ct . No. 30-2010-00363666)

O P I N I O N

Appeal from a judgment of the Superior Court of Orange County, Luis A. Rodriguez, Judge. Affirmed. Thomas E. Montgomery, County Counsel, Thomas Deák, Deputy County Counsel, for Plaintiff and Appellant. Booth, Mitchel & Strange, Craig E. Guenther and Stacie L. Brandt for Defendants and Respondents.
* * *2 San Diego County (the County) a ppeals from a judgment in favor of Lumbermans Mutual Casualty Company and American Mo torists Insurance Company (collectively the sureties) following the tria l court’s order granting the sureties summary judgment. The sureties wrote completion bo nds on a number of street and other improvements that were ultimately not comple ted by the developers of a subdivision. The County did not bring this action until more than four years had passed since the expiration of the developers’ fi nal extension. Thus, the su reties argued, the statute of limitations had expired. The County now appe als, arguing the sureties either made a new promise to satisfy the bonds, or alternatively, that the tim e to complete the improvements was extended, and thus the bonds remained in effect. The sureties respond that the writing the County relies upon expressly disc laimed any further obligation, and the purported extension was not lawfully enacted under the County’s own ordinances. As we shall discuss, the sureties are co rrect, and we therefore affirm.
I
FACTS In 1989, a draft environmental impa ct report (the EIR) for a San Diego
subdivision called The Pointe was completed. The Pointe was proposed as a mixed-use development project, including approximately 900 homes, a resort and golf course, and
commercial facilities. The draft EIR concluded that th e development would cause significant traffic impact, including traffic on a two-lane road called Jamacha Boulevard. The EIR proposed mitigation me asures, including the widening of Jamacha Boulevard. In June 1990, the San Diego County Board of Supervisors (the Board) approved a tentative subdivision map. As a condition of the approval, the developers were required to complete a number of spec ified road, water and sewer improvements, comprising approximately seven pages of the Board’s resolution. In February 1992, the Board approved the final map, although the re quired work had not been completed.3 Shortly thereafter, the C ounty and The Pointe’s de velopers entered into three agreements, in which the developers pr omised to complete improvements required by the final map. The Streets Improveme nt Agreement, the Water Improvements Agreement, and the Sewer Im provements Agreement (collectively the improvement agreements) were subsequently executed by the parties. The improvement agreements, pursuant to Government Code § 66499.1, requir ed the developers to furnish surety bonds to secure their performance. Accordingl y, Lumbermans Mutual Casualty Company issued a bond for completion of the street improvements, and American Motorists Insurance Company (American Mo torists) issued a bond for completion of the water and sewer improvements. All of the bo nds issued on March 2, 1992. In 1996, The Pointe was transferred to new develo pers. Between 1994 and 2003, the Board extended the time for completion (which had originally been 730 days from the approval of the final map) on several occasions. During this period, in February 2000 , representatives of the sureties, the County, and the developers met to discuss wa ys to fund the needed work. In 2001, the County asserted claims against all three bonds. In January 2002, the County, the developers, and American Motorists entere d into a tri-party agreement under which American Motorists deposited an agreed- upon amount (approximate ly $2.46 million) to pay for specified improvements. American Motorists’ bond obligation was accordingly reduced by the same amount. In 2003, the County gave the develope rs a final extension, which expired on January 29, 2005. In April 2005, the County notified the deve lopers that they were in default. Meanwhile, the traffic situati on on Jamacha Boulevard was dismal, with
increased accidents and a traffic level of se rvice grade of “F” (a pparently the worst possible grade). Work on the improvements funded by the tri-party agreement was approved in 2004, but by September 2005, the County notified the de velopers that the4 funds deposited by American Motorists were no longer sufficient. Th e amount needed to complete the work was appr oximately $500,000. The County and the developers ev entually entered into discussions regarding an amended agreement. While discussion regarding the amended agreement was taking place, the sureties were aware of the ongoing issues. At one point, the sureties seemed surprised that they had any potential liability remain ing on the bonds. The developers told the sureties an ame nded agreement had been prepared, and the sureties’ chief surety counsel, Stephen Bea tty, responded that it had been forwarded to outside counsel for review. Beatty also po sed a number of questio ns, and then stated: “After further review on my pa rt, and by my counsel, it is lik ely that there will be other questions that will need to be addressed. I tr ust, however, that you realize that due to the nature of this matter and what is involved, the Surety needs to ha ve a full and complete understanding of what has tran spired, and what is intended by any agreement to which it is being asked to become a party.” The developers responde d and addressed Beatty’s questions. Discussions apparently continued, and th e developers eventually fo rwarded Beatty “a revised agreement that has been modi fied to include ju st the County and The Pointe.” The developers agreed once again to complete the needed improvem ents, and under the amended agreement, the street improvements b ond was to remain in effect. Beatty was asked to advise the County that it was aware of the amended agreem ent and did not have any objections. Beatty responded: “I’ve lo oked at the revised ag reement. Since the revised agreement deals with the circumstance s between the County and Pointe Builders, and does not otherwise alter the rights or exte nd the obligations of th e Surety, I have no objections to it.” The sureties did not sign the amended agreement, which was executed
in November 2006. By April 2007, all work had once again stopped, and the developers no longer planned to proceed w ith improvements. Between December 2007 and September5 2009, numerous meetings were held between th e County, the developers , and the sureties. The parties were unable to re solve matters, and on Septembe r 22, 2009, the County filed the instant lawsuit against the sureties for breach of contract, breach of bond, and declaratory relief. In January 2012, the sureties moved for summary judgment, arguing that the four-year statute of limitations in Code of Civil Procedure section 337, subdivision (1), barred any claim against the bonds. They contended that any cause of action accrued when the improvement agreements expired on January 29, 2005. In opposition, the County argued the tri-part y agreement extended the time for performance, equitable estoppel, and equitable tolling. After a hear ing, the court rejected these arguments and granted summary judgment. Judgment was subsequently entered. The County now appeals.

II
DISCUSSION A. Standard of Review Summary judgment “provide[s] courts with a mechanism to cut through the parties’ pleadings in order to determine whethe r, despite their allegations, trial is in fact necessary to resolve their dispute. [Citations.]” ( Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 844.) The tria l court properly grants a motion for summary judgment if all the papers submitted establish there is no tr iable issue of material fact and the moving party is entitled to judgment as a matter of la w. (Code Civ. Proc., § 437c, subd. (c); Aguilar v. Atlantic Richfield Co. , supra , 25 Cal.4th at p. 843.) “[T]he party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of prod uction, he causes a shift, and the opposing party is then subjected to a burden of pr oduction of his own to make a prima facie6 showing of the existence of a tria ble issue of material fact.” ( Aguilar v. Atlantic Richfield
Co. , supra , 25 Cal.4th at p. 850.)
“We review the trial court’s decisi on de novo, considering all of the evidence the parties offered in connection wi th the motion . . . and the uncontradicted
inferences the evidence reasonabl y supports. [Citation.]” ( Herberg v. California Institute of the Arts (2002) 101 Cal.App. 4th 142, 148.)

B. The Sureties’ Prima Facie Case The sureties’ argument is fairly simple — they asse rt this action is barred by the statute of limitations. Under Code of Civil Procedure section 337, subdivision (1), an action upon an obligation in writing must be filed with in four years from the time it
accrues. This limitation has been held to apply to surety agreements. ( County of Los Angeles v. Security Ins. Co. (1975) 52 Cal.App.3d 808, 816-817.) Here, the sureties argue, the County’s last extension expired on January 29, 2005. Thus, the statute of limitations began running on that date, and expired four year s later, on January 29, 2009.
This action was filed on September 22, 2009. The County does not dispute the date s in question or the applicability of a four-year statute of limitations. “A prima fa cie showing is one that is sufficient to support the position of the party in question.” ( Aguilar v. Atlantic Richfield Co. , supra , 25 Cal.4th at p. 851.) We find the sureties met their bur den and produced evidence
sufficient to establish their prima facie case.

C. The County’s Burden of Production Because the sureties set forth a prima facie case, the burden then shifted to the County to establis h a triable issue of material fact. “There is a triable issue of material fact if, and only if, the evidence woul d allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the mo tion in accordance with the7 applicable standard of pr oof. [Fn. omitted.]” ( Aguilar v. Atlantic Richfield Co. , supra , 25 Cal.4th at p. 850.) The County offers tw o arguments, which we consider separately.
1. New Promise The County’s first argument is that the sureties made a new promise to satisfy their obligations, relying on the amended agreement and the circumstances surrounding its negotiation and execution. To the extent the County relies on the amended agreement itself, their argument is unpersuasive. Su rety agreements are subject
to the statute of frauds and must be in a writi ng signed by the surety . (Civ. Code, § 1624, subd. (a)(2).) The sureties did not sign the amended agreement and therefore cannot be bound by the contract itself. The County also looks to the principle that where a prior contractual obligation has become unenforce able, a new promise to satis fy the prior obligation is binding. It asserts that a ll that is required is that th e writer treat the obligation as subsisting and as one the de btor is willing to pay. ( Van Cauteren v. Forger (1941) 45 Cal.App.2d 388, 392.) The County points to Be atty’s statement that “I’ve looked at the revised agreement. Since the revised agreemen t deals with the circumstances between the County and Pointe Builders, and does not otherwise alter the rights or extend the obligations of the Surety , I have no objections to it,” as evidence of a renewed promise by the sureties. (Italics added.) We disagree with the County that th is statement, written in correspondence, is sufficient by operation of law to begin the clock anew on the statute of limitations. The County’s authority on th is point is inapposite. Unlike the situation in Sterling v. Title Ins.
& Trust Co. (1942) 53 Cal.App.2d 736, there is no “‘distinct and unqualified admission of an existing debt’” ( id. at p. 741) here. At best, and taken together with the other relevant correspondence, the sure ties were only acknowledging the possibility of liability. Such liability did exist at the time, because in 2006 the stat ute of limitations had not yet run. Further, the County’s argument ignores that Beatty’s statement expressly disclaims8 any intent to “alter the rights or extend the obligations of the Surety,” although it seeks to
use this statement to do exac tly that. A statement expressly disclaiming any intent to alter or extend a party’s obligations is insuffi cient, as a matter of law, to create a new legal obligation and therefore recommence the running of the statute of limitations. To
hold otherwise would turn the doctrine of “‘ distinct and unqualified admission of an existing debt’” ( ibid. ) completely on its head.
2. The Amended Agreement The County next argues the amen ded agreement extended the time to perform and the sureties consen ted to the extension. If th e County and the developers were operating under a legal extension, the sureties woul d be bound by the following language used in each of the su rety agreements, which is near ly identical to the language of Government Code § 66499.1: “Surety he reby stipulates and agrees that no change, extension of time, alteration or addition to th e terms of the Agreement to Improve or to the work to be performed thereunder or th e specifications accompanying the same shall in anywise affect its obligations on this su rety bond, and it does hereby waive notice of any such change, extension of time, alterati on or addition to the terms of the Agreement to Improve or to the wo rk or to the specifications.” Th e County argues, therefore, that the amended agreement “implicitly extended the time” to complete the improvements,
and the sureties consented in advance. As the sureties point out, howe ver, San Diego County Code Section
81.403.1 1 explicitly addresses the procedure to obtain extensions of time to complete required work pursuant to the approval of su bdivision maps. It states: “Where the subdivider agrees to install the required public improve ments pursuant to Section 81.403,

1 This section has since been amended a nd is now San Diego C ounty Code Section 81.709. The County does not di spute the older version was in effect at all times relevant here. In any event, the current version also requires the Board to grant extensions beyond two years.9 the agreement shall provide th at the public improvements sh all be completed within two years following recordation of the map. The time for comple tion of the public improvements may be extended once, for no more than tw o additional years, by the Director of the Department of Public Works. . . . The Board of Supervisors, however, . . . may grant additional time extensions , on a case-by-case basis, as it deems appropriate, for completion of public impr ovements pursuant to agreements secured either by (i) security provided at the time of recordation of the map, or (ii) security substituted for the original security furnished under Se ction 81.406.” The sureties argue that because the Board never granted an extension, any “implicit” agreement could not co ntinue their bond obligations. We agree. The terms of these bonds are statutory, tr acking the language in Govern ment Code section 66499.1 nearly word for word. The only reasonable meaning of th e phrase “extension of time” in the language of the bonds is an authorized extension of time, duly permitted by law, which in this case is San Diego Coun ty Code Section 81.403.1. (See Roden v. AmerisourceBergen Corp

. (2010) 186 Cal.App.4th 620, 651 [“we must interpret a
contract in a manner that is reasonable and does not lead to an absurd result.”].) Interpreting the phrase “extension of time” to mean any extension of time, even if that extension is granted in a manner that defies the relevant local law, would indeed be
absurd. The bonds at issue here are creatu res of statute, and the County offers no argument as to why the bonds should not be interpreted acc ording to their terms. The County also argues that because the developers “received the benefits of the Amended Agreement, it may not now asse rt the agreement was invalid because [it] was not approved by the Board of Supervis ors; [the developers are] bound by the agreement.” This may be true, but it is not the developers who are the relevant parties here, but the sureties. The sureties did no t sign the amended agreement, indeed, they expressly declined to do so . They did not receive a ny benefits under the amended agreement. They are therefore not estoppe d from arguing that the amended agreement10 was invalid to function as an “extension of time” under the surety agreements, because the amended agreement was not accompanied by Board action. The County is a sophisticated actor, certainly w ith respect to the requirements of its own ordinances, and it offers no reasoning as to why Board approv al was not obtained. There are simply no facts here that would justify restarting the clock on the statute of limitations. The County has failed to present eviden ce of a triable issue of material fact
to demonstrate the statute of limitations do es not bar this action. Summary judgment, therefore, was properly granted.

III
DISPOSITION The judgment is affirmed. The suretie s are entitled to their costs on appeal.

MOORE, ACTING P. J.

WE CONCUR:

ARONSON, J.

THOMPSON, J.