City of Novato v. MCCE Development CA1/3 filed
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Filed 3/30/11 City of Novato v. MCCE Development CA1/3 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION THREE CITY OF NOVATO, Cross-Complainant and Respondent, A127298, A128928 v. (Marin County Super. Ct. No. CV 024679) MCCE DEVELOPMENT, LLC, et al., Cross-Defendants and Appellants. These are the third and fourth appeals this court has been asked to resolve arising out of a dispute over a subdivision in respondent City of Novato (City).1 The owners and developers of the subdivision appellants MCCE Development, LLC, and MCCE Investors, LLC (collectively, MCCE) agreed to build streets and other improvements to support the development of seven homes, to repair and restore a creek that runs through the subdivision, and to preserve the balance of the subdivision as open space. During the course of the dispute MCCE conveyed four buildable lots to a third party, appellant George Morf. In this court s consolidated decision in the earlier appeals, we concluded it was error to order Morf to specifically perform contractual obligations contained in the agreements between MCCE and the City. We held that his liability to construct 1 On the court s own motion, we consolidate the appeals in case numbers A127298 and A128928 for purposes of decision. In a decision filed on June 17, 2009, this court decided two earlier appeals arising out of the same trial court case in case numbers A116957 and A120137. A fifth appeal, in case number A105589, was dismissed involuntarily. 1 improvements and undertake repairs to the subdivision resulted from a covenant running with the land he acquired, and we remanded for the limited purpose of reconsidering the scope of the remedy as to Morf. We also reversed the attorney fee award to the extent it applied to Morf and remanded for reconsideration of the award in light of our disposition. On appeal from the modified judgment, Morf claims the injunctive relief ordered by the court is inequitable in light of the nature and extent of his property interest in the subdivision. In addition, MCCE and Morf challenge the deadline contained in the modified judgment for completing creek and landslide repairs. MCCE and Morf also appeal from the order awarding attorney fees, arguing that the court lacked jurisdiction to reconsider the attorney fee award while the modified judgment was on appeal. We shall affirm the modified judgment and the award of attorney fees. FACTUAL AND PROCEDURAL BACKGROUND Our previous opinion in cases A116957 and A120137 contains a comprehensive discussion of the factual and procedural history of this matter. We need not repeat that detailed history here but instead summarize the facts relevant to the issues considered on remand. The Agreements to Develop the Subdivision The subdivision at issue in this case (hereafter the Subdivision) is located in the City and consists of 54 acres. In 1997, Daniel Morgan approached the City about pursuing development of the Subdivision. Morgan, a developer, is president of Centennial Homes Inc. (Centennial). Morgan represented that he would fix drainage problems on the Subdivision property, develop seven of the lots on nine acres, and convey the balance of the Subdivision, or 45 acres, to the Marin County Open Space District (Open Space District) to be preserved as open space. Morgan purchased the entire Subdivision for $200,000 in late December 1998. Centennial, Morgan, and another individual, Mark Cunningham, created the MCCE entities MCCE Development, LLC (MCCE Development) and MCCE Investors, LLC (MCCE Investors) to take title to the property and undertake development of the Subdivision. MCCE Development took title to lots one through 2 seven of the Subdivision with the intent of developing those parcels. MCCE Investors took title to lots eight through thirty-seven with the intent of donating the property to the Open Space District as a charitable contribution. Except where necessary to distinguish between MCCE Development and MCCE Investors, we shall refer to the two entities collectively as MCCE. MCCE and the City memorialized the agreement to develop the Subdivision in three Subdivision Improvement Agreements (SIA s), which are referred to in this opinion as SIA 1, SIA 2, and SIA 3. As more fully explained in our earlier opinion, SIA 1 concerns the development of lots one through seven. SIA 2 concerns lots eight through thirty-seven and gave MCCE the option to transfer the lots to a preservation organization such as the Open Space District. SIA 3 concerns the dedication of land for a park but comes into effect only if lots eight through thirty-seven are ultimately developed. SIA 2 and SIA 3 are not at issue in these appeals. SIA 1 obligates MCCE Development to construct all improvements needed to support the development of lots one to seven of the Subdivision, including grading, storm drainage, streets, street lights, utilities, and landscaping. In addition, SIA 1 requires MCCE Development to undertake creek repair and off-site improvements. SIA 1 required MCCE Development to complete the improvements and creek restoration work within two years. In the event MCCE Development breached SIA 1 by failing to complete the work, the City had the option of initiating proceedings to revert the entire Subdivision to acreage.2 Performance under SIA 1 MCCE Development began constructing the improvements required by SIA 1 in 1999. In the winter of 2000-2001, a slowly progressing landslide occurred on lot twentyfive. The landslide caused debris and sedimentation to flow into the creek toward downstream properties. An investigation by the Regional Water Quality Control Board 2 Reverting property to acreage is a process by which the subdivided lots would revert to a single parcel. (See Gov. Code, § 66499.11 et seq. [describing procedures for reverting subdivided lands to acreage].) 3 (RWQCB) resulted in the issuance in November 2001 of a notice of violation against MCCE and the City requiring repair of the creek. The City agreed to extend the time for completion of MCCE s obligations under SIA 1 on five occasions. The Fifth Amendment to SIA 1 extended the deadline to complete the improvements to August 1, 2002. The Fifth Amendment to SIA 1 also directed MCCE to remove a gate blocking vehicular access to lots four to seven and to install bollards on the property. On December 10, 2002, the City Council passed a resolution declaring MCCE in breach of SIA 1. A letter from the City s attorney to MCCE Development dated December 23, 2002, stated that MCCE was in breach of SIA 1 because it had failed to timely complete creek restoration work, had failed to construct the improvements required by SIA 1, and, as a result of the landslide caused by MCCE s work, had breached the warranty that its work would not adversely affect any portion of adjacent property. The City s attorney explained that any breach of SIA 1 is deemed a breach of SIA 2, and advised MCCE Development of its intent to begin the process of reverting lots four through thirty-seven to acreage. Transfer of Lots Four through Seven to Morf Later that month, on December 31, 2002, MCCE Development transferred lots four through seven, which remained undeveloped, to appellant George Morf. Morgan described the transaction with Morf as follows:3 (1) Morgan would lend Morf $5,000; (2) Morf would pay the $5,000 for title to lots four through 7; (3) Morf would assume the existing indebtedness on lots four through seven, totaling $938,000; (4) MCCE Development would make all mortgage and tax payments associated with lots four through seven; and (5) MCCE Development would hold an option, with no termination date, to repurchase lots four through seven for $5,000, as long as MCCE Development made the mortgage payments and paid the taxes. Morgan told Morf that the SIA s were 3 As explained in our earlier opinion, the letter agreement was not included in the record on appeal. The only evidence of the transaction was the trial testimony of Morgan, who described the terms of the letter agreement with Morf. 4 recorded against the property and that anyone who purchased the property took subject to the SIA s. Thus, Morf paid no money out of pocket to purchase lots four through seven and was not obligated to pay mortgage payments or taxes on the property as long as MCCE Development did so and retained its repurchase option. The Trial and Original Judgment MCCE filed a complaint against the City for breach of contract, among other causes of action. The City filed a cross-complaint against MCCE Development and MCCE Investors, as well as Morgan and Cunningham, the individual members of the MCCE entities. The City alleged that cross-defendants had breached SIA 1 by failing to construct required improvements, repair and restore the creek, take corrective action to remedy the RWQCB Notice of Violation, remediate the landslide, and remove the gate across a public right of way. The City later filed a first amended cross-complaint that added causes of action and named Centennial as a cross-defendant. As relevant here, the City amended its first amended cross-complaint by substituting Morf as a cross-defendant in place of a fictitiously named Doe cross-defendant. Before trial, MCCE Investors and MCCE Development dismissed their complaint against the City. The City s case against MCCE, Centennial, Morgan, Cunningham, and Morf proceeded to trial in March 2006. The City s legal claims for monetary damages and its equitable claims were tried simultaneously before a jury and the court. The jury returned a special verdict finding that MCCE Development, MCCE Investors, and Morf had breached both SIA 1 and SIA 2, as amended. The jury also determined, however, that the total amount of damages caused by the breach of SIA 1, as amended, including damages for slide repair and creek restoration was $0. The jury thus awarded no damages for the breach. Following the jury s verdict, the court invited the parties to brief the issues concerning the equitable remedies sought by the City. The court filed a statement of decision and judgment on January 18, 2007. With respect to SIA 1, the court directed that MCCE and Morf complete all Subdivision improvements and necessary slide repair and creek restoration work. The court found Morf liable under SIA 1, reasoning MCCE Development conveyed lots four through 5 seven to him pursuant to an agreement that had been described at trial by Morgan. The court further reasoned that the obligations of SIA 1 run with the land and bind MCCE s successors in interest. Following entry of the judgment, the parties filed cross-motions seeking attorney fees. The court ordered MCCE and Morf to pay the City a net attorney fee award of $476,713. Reversal on Appeal as to Morf MCCE and Morf appealed the judgment and the attorney fee award in case numbers A116957 and A120137. In a consolidated decision addressing both appeals, we upheld the judgment against MCCE, rejecting claims the trial court had abused its discretion by ordering specific performance of contractual obligations under the SIA s. We also rejected MCCE s various challenges to the attorney fee award. As to Morf, however, we reversed the judgment to the extent it ordered him to specifically perform contractual obligations under SIA 1. Because Morf was not a party to SIA 1 and there had been no contractual assignment of SIA 1 to Morf, we concluded the contractual remedy of specific performance was not an available remedy. Nevertheless, we also concluded that Morf was bound to comply with SIA 1 to the extent its obligations comprise covenants running with the land or equitable servitudes. We held the trial court erred by failing to equitably apportion the burdens of SIA 1 to Morf according to the nature of his interest in the Subdivision. Accordingly, upon remand the trial court was directed to reconsider the scope of Morf s obligations under SIA 1. Specifically, we stated: The court may order injunctive relief against Morf to enforce obligations under SIA 1 that run as covenants with the land, but only to the extent those obligations are proportionate and equitable given the extent of his property interest. We also reversed the attorney fee award to the extent it required Morf to pay attorney fees to the City. We concluded there was no contractual or other basis to require Morf to pay the City s attorney fees. Although our partial reversal of the judgment as to Morf did not compel reversal of the fee award in its entirety, we held that our disposition required the trial court on remand to reassess the amount of the fee award, to avoid a 6 result that compels MCCE to pay for fees incurred by the City that relate solely to Morf s involvement in the case. We expressed no opinion on what type of adjustment, if any, to the fee award against MCCE might be appropriate in light of our reversal of the fee award as to Morf. Procedural History on Remand Upon remand, the parties submitted briefs addressing Morf s proportionate obligation under SIA 1 to undertake Subdivision repairs and improvements. The City explained that there are three types of obligations under SIA 1. First, there are obligations directly related to lots one through seven that involve the improvements necessary to build homes on the lots, such as building streets and installing utilities, storm drainage, and landscaping. Second, there are obligations to undertake repairs and improvements on property in the Subdivision that is not part of the seven buildable lots. These obligations include repairs to the creek running through the Subdivision and work required to remedy a landslide. Finally, the Fifth Amendment to SIA 1 requires removal of a gate blocking vehicular access to lots four though seven and the installation of bollards. The City proposed that the obligations under SIA 1 be apportioned to Morf according to the valuation of the lots as of the date SIA 1 was executed and recorded. With respect to the first set of obligations concerning Subdivision improvements, the City stated that the appropriate measure of value was the total assessed value of the seven buildable lots. The assessed value of Morf s lots comprised 47.23 percent of the total assessed value of the seven lots. Thus, the City proposed that Morf be held liable for 47.23 percent of the cost of the Subdivision improvements. With respect to the creek repairs and landslide remediation on property located elsewhere in the Subdivision, the City stated that the appropriate measure of value was the assessed value of the entire Subdivision. Because it was the parties intention not to build on lots 8 through 37, those lots had minimal assessed valuations at $500 for each lot. As a consequence, the valuation of Morf s four lots as a percentage of the valuation of the thirty-seven lots in the Subdivision was relatively high, at 38.64 percent. The City proposed that Morf be 7 held liable for 38.64 percent of the cost of the creek and landslide repairs. Finally, with regard to the obligation to remove a gate and install bollards, the City reasoned that Morf should bear the entire burden because the obligation related exclusively to the lots he owned. Morf argued that this court clearly suggested the judgment should be modified to impose an equitable lien against the lots owned by Morf. He contended the intent of the covenant to construct improvements was simply to burden the owners of lots 1-7 with the requirement for completing the subdivision improvements that support development of lots 1-7. Morf characterized the covenant as redundant and unnecessary in view of the fact that Morf would have to satisfy the City s concerns before the City would allow development on his lots. According to Morf, the mere recognition of SIA 1 as a covenant running with the land serves as a sufficient burden upon [him] . . . . Thus, Morf s position was that it would be inequitable to order any injunctive relief against him to complete the improvements and repairs required by SIA 1. Morf advocated that the court simply affirm an equitable lien against his lots or modify the judgment to state that he had no affirmative obligation to undertake the work required by SIA 1. At the hearing addressing Morf s liability, the trial court expressed a concern that an apportionment of liability based on property values would be inequitable in that it would assign too great a percentage of the obligations under SIA 1 to Morf. The court directed the City to prepare a proposed judgment apportioning liability to Morf based upon relative size or acreage instead of relative assessed values. In response to the court s direction, the City submitted a letter brief proposing an apportionment of Morf s liability according to the relative size of the affected lots. The City also submitted a proposed order modifying the judgment. The consequence of apportioning liabilities according to relative size instead of relative assessed value was to (1) increase Morf s liability for Subdivision improvements, and (2) substantially decrease his liability for creek repair and offsite improvements. His obligation to remove a gate 8 and install bollards was unchanged. A comparison of the two apportionment methods is contained in the following table : Work to be performed Subdivision improvements Creek repair/offsite improvements Gate removal and installation of bollards Morf s proportionate obligation: Apportionment by assessed value 47.23% 38.64% Morf s proportionate obligation: Apportionment by size/acreage 60.53% 12.02% 100% 100% At around the same time that the City submitted its letter addressing apportionment by size, counsel for Morf submitted a letter to the court indicating that Morf had asked MCCE Development to exercise its option to repurchase lots four through seven. Morf s counsel indicated that MCCE Development had agreed to repurchase the lots. Thus, according to Morf s counsel, any allocation of liability was moot because Morf would no longer own the property subject to the obligations contained in SIA 1. Morf s counsel stated that MCCE Development would have sole liability for completing the obligations of SIA 1 as both the contracting party and the owner of lots four through seven. The letter gave no indication of when the transfer of lots four through seven to MCCE Development would take place. A letter sent to the court by Morf s counsel the following day again failed to indicate when the transfer would take place other than to state the parties will move forward as planned to effectuate the transfer. As of the date the court entered its order modifying the judgment (modified judgment), the record before the court reflected that Morf remained the owner of lots four through seven. The trial court entered the modified judgment on November 24, 2009. The court accepted the proposed apportionment by relative size, such that Morf s share of the cost of completion of Subdivision improvements was 60.53 percent, his share of the cost of slide repair, creek restoration work, and offsite improvements was 12.02 percent, and his 9 share of the cost of gate removal and bollard installation was 100 percent. The court established a deadline of June 30, 2007, for the completion of all Subdivision improvements as well as the creek and landslide repair, unless further extended by order of this Court upon notice and for good cause. The court also established new deadlines for conveying a conservation easement to the Open Space District and for gate removal and bollard installation. In all other respects, the court affirmed its original judgment without modification. Morf and MCCE timely appealed from the modified judgment on December 17, 2009. On the same day that Morf and MCCE appealed the modified judgment, their counsel sent a status update letter to the trial court. In that letter, counsel argued that the filing of the notice of appeal from the modified judgment stayed proceedings to address modifying the original attorney fee award or awarding fees on appeal. After the court denied the request to suspend briefing, the parties proceeded to file briefs addressing attorney fee issues. Following a hearing, the court entered an order on April 22, 2010, awarding attorney fees. Pursuant to this court s direction on remand to consider whether the City s attorney fee award should be reduced in light of the reversal as to Morf, the trial court concluded that no apportionment or reduction in the award to be paid by MCCE was warranted. The court reasoned that [t]he contractual causes of action against MCCE involved common issues of law and fact against both [cross-]defendants which were inextricably intertwined, and could not be apportioned. Thus, the court left unchanged the original net attorney fee award of $476,713 to be paid by MCCE to the City. In its order awarding attorney fees, the court also directed the City to pay $2,000 in attorney fees on appeal to Morf as the prevailing party on the contract cause of action. Finally, the court directed MCCE to pay the City an additional $161,284.23 in attorney fees incurred in connection with appeal and post-appeal matters. MCCE and Morf timely appealed the attorney fee order. 10 DISCUSSION I. BASED ON THE RECORD BEFORE IT, THE TRIAL COURT DID NOT ERR IN ORDERING MORF TO BEAR A PROPORTIONATE SHARE OF THE COST OF SUBDIVISION IMPROVEMENTS OR IN SETTING A DATE FOR COMPLETION OF THE IMPROVEMENTS. A. Standard of Review We review an order granting injunctive relief under the deferential abuse of discretion standard. (Clear Lake Riviera Community Assn. v. Cramer (2010) 182 Cal.App.4th 459, 471.) The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. When two or more inferences can reasonably be deduced from the facts, the reviewing court has no authority to substitute its decision for that of the trial court. [Citation.] (In re Stephanie M. (1994) 7 Cal.4th 295, 318-319.) It is the appellant s burden to establish an abuse of discretion. (Blank v. Kirwan (1985) 39 Cal.3d 311, 331.) B. The Court Did Not Apply a Contractual Remedy. Morf begins his attack on the modified judgment by claiming that the trial court misconstrued or disregarded our opinion. He argues the trial court proceeded to direct him to specifically perform the terms of SIA 1 even though this court previously held that the contractual remedy of specific performance was not available. Morf s argument is specious. During the hearing addressing apportionment issues, the trial court pondered whether it should issue an order providing for specific enforcement of Morf s proportionate obligations under SIA 1. Morf seizes on this reference to specific enforcement and suggests the trial court misunderstood its task on remand. To the contrary, the modified judgment reflects that the court did not direct specific performance but instead ordered injunctive relief premised upon obligations that derive from Morf s property interest. In relevant part, the modified judgment recites that this court reversed the Judgment as to Morf to the extent that it required Morf to specifically perform the 11 contractual provisions of Subdivision Improvement Agreement 1 ( SIA 1 ), as Morf was not a party to such agreement. It held that the Trial Court may order injunctive relief against Morf to enforce such obligations of SIA 1 that are covenants running with the land, but only to the extent that these obligations are proportionate and equitable given the extent of his property interest. The trial court then modified the original judgment so that each of the covenants running with the land was adjusted to reflect Morf s proportionate and equitable share of the completion of such . . . . The modified judgment expressly acknowledges that specific performance is not an available remedy. The trial court ordered injunctive relief to enforce obligations that comprise covenants running with the land. That form of relief is precisely what this court authorized. It is immaterial that the equitable relief ordered by the court may, in certain respects, parallel relief available under a contract theory. C. The Court Did Not Abuse Its Discretion in Requiring Morf, as the Owner of Lots Four through Seven, to Bear the Cost of a Proportionate Share of Subdivision Improvements. Morf argues the trial court abused its discretion in ordering injunctive relief. He contends the court should have imposed an equitable lien against his property as a more suitable option in light of the equities. As we explain, based on the record as it existed when the court entered the modified judgment, the court did not abuse its discretion in ordering Morf to bear the burden of a proportionate share of the obligations under SIA 1. In our previous opinion, we held that the trial court may order injunctive relief against Morf to enforce obligations under SIA 1 that run as covenants with the land, but only to the extent those obligations are proportionate and equitable given the extent of his property interest. We acknowledged it would not be equitable to require Morf to undertake responsibility for all of the improvements required by SIA 1, given that he did not succeed to ownership of the entire Subdivision but instead acquired four of the seven buildable lots. We identified Civil Code section 1467 as a solution to the issue of how to 12 apportion the burdens of SIA 1.4 In general, that section provides for an apportionment of benefits or burdens associated with a covenant running with the land when several different transferees succeed to different parts of an original parcel of land. (See 12 Witkin, Summary of Cal. Law (2005) Real Property § 436, p. 508.) Under Civil Code section 1467, benefits or burdens are apportioned according to relative value, or if value cannot be ascertained, then according to quantity. The trial court followed this court s direction in considering the issues on remand. The court first considered apportioning the burdens of SIA 1 according to the relative value of the lots Morf had acquired. The court was not satisfied with apportionment based upon valuation, noting that the result was inequitable in that it tended to overstate Morf s obligation to complete off-site improvements to remediate a landslide and undertake creek repair. The court instead requested that the City provide a quantitative analysis of burdens based upon the relative size of the property owned by Morf. The court ultimately adopted this quantitative approach and required Morf to bear the cost of 60.53 percent of the Subdivision improvements, 12.02 percent of the creek repair and other off-site improvements, and 100 percent of the gate removal and bollard installation. The trial court s approach was reasonable and consistent with the direction contained in this court s prior opinion. Indeed, Morf does not challenge the quantitative approach adopted by the court or suggest that a modified apportionment of burdens would have been more equitable. Instead, Morf asserts it was an abuse of discretion to require him to undertake any improvements or repairs required by SIA 1. More specifically, Morf s position is that the court should have placed an equitable lien on his property in lieu of ordering an injunction. As support for his position, he cited Oceanside Community Assn. v. Oceanside Land Co. (1983) 147 4 Civil Code section 1467 provides: Where several persons, holding by several titles, are subject to the burden or entitled to the benefit of a covenant running with the land, it must be apportioned among them according to the value of the property subject to it held by them respectively, if such value can be ascertained, and if not, then according to their respective interests in point of quantity. 13 Cal.App.3d 166 (Oceanside), disapproved on other grounds in Citizens for Covenant Compliance v. Anderson (1995) 12 Cal.4th 345, 366. In Oceanside, a developer recorded a declaration of covenants, conditions, and restrictions providing that certain property adjacent to a 932-residence development governed by a homeowners association would be used as a golf course for 99 years. (Oceanside, supra, 147 Cal.App.3d at p. 172.) The restriction requiring the land to be used as a golf course was described as a covenant running with the land. The developer s salespersons used the golf course as an inducement for prospective buyers. (Ibid.) The developer subsequently sold the golf course to a party that failed to maintain the course. Ultimately, Pine Tree Motel, Inc. (Pine Tree) purchased the golf course property at a foreclosure sale. Pine Tree did not maintain the course and the homeowners association sued. The trial court found that a mandatory injunction requiring Pine Tree to maintain the golf course would be inequitable and instead imposed an equitable lien upon the property accruing at the rate of $9,320 per month in favor of the homeowners association. (Id. at p. 173.) The appellate court concluded the covenant requiring the land to be used as a golf course was enforceable as either a covenant running with the land or as an equitable servitude. (Oceanside, supra, 147 Cal.App.3d at pp. 175-176.) The court further held it was not an abuse of discretion to enforce the covenant through an equitable lien rather than a mandatory injunction. (Id. at pp. 177-178.) The court noted that the golf course was already badly deteriorated by the time Pine Tree acquired the property, with the cost to restore the course estimated at anywhere from $200,000 to $400,000. (Id. at p. 177.) The equitable lien relieved Pine Tree of a burdensome obligation to repair property it purchased in a foreclosure sale, and at the same time afforded a remedy for the neighboring homeowners who had the right to foreclose if the land was not in the process of being renovated or operated as a golf course. (Ibid.) Contrary to Morf s contention, the holding in Oceanside did not require the trial court here to impose an equitable lien in lieu of ordering injunctive relief. The court in Oceanside relied upon the general rule that a decision to grant or deny an injunction lies 14 within the sound discretion of the trial court. (Oceanside, supra, 147 Cal.App.3d at p. 176.) The court concluded it was not an abuse of discretion to deny a mandatory injunction but also concluded there was no abuse in imposing an equitable lien. (Id. at pp. 177-178.) That conclusion turned on the specific facts of the case and is hardly appropriate every time a party seeks to enforce a covenant running with the land. In short, Oceanside does not stand for the proposition that it is an abuse of discretion to grant a mandatory injunction to enforce a covenant running with the land. The facts of this case are substantially different from those in Oceanside. Whereas it was uneconomical for Pine Tree to restore the golf course at great expense in light of its minimal investment, there is nothing to indicate that, as long as Morf held title to the four lots, it would be uneconomical for him to make the necessary improvements that will allow the lots to be developed and sold. Further, at time the court entered its modified judgment, there was no reason to believe an equitable lien would be more efficacious than an injunction. Without an injunction requiring Morf to share his proportionate share of obligations, he could simply do nothing and not make the required improvements and repairs. We cannot say it was an abuse of discretion to issue a mandatory injunction requiring Morf as the owner of lots four through seven to fulfill his proportionate share of obligations under SIA 1. Morf further contends the trial court erred in finding he was not entitled to equity because of the collusive nature of the transaction. Morf asserts there is no substantial evidence to support a finding of impropriety. It is true, as Morf points out, that the court made certain observations about the nature of the transaction. The trial court indicated it could not sympathize in the abstract too much with Mr. Morf because the court thought he was working in consort with MCCE regarding the development. The court also stated it thought the deal with Morf was collusive and part of an effort to thwart the City s intention to revert the Subdivision to acreage. Notwithstanding the court s observations about the transaction between MCCE and Morf, we disagree with Morf s contention that the modified judgment turns on a 15 finding he acted improperly. Instead, Morf s motives in the transaction are irrelevant. We authorized the trial court to apportion obligations under SIA 1 in proportion to the nature and extent of Morf s interest in the Subdivision. The trial court did so by employing an apportionment method specifically authorized by statute. The court s application of the statutory apportionment method did not hinge upon a finding of impropriety but instead rested upon quantitative comparisons of relative property ownership. Further, nowhere in the modified judgment is there any reference to Morf s motives or to the nature of the transaction. Under the circumstances, the court acted well within its discretion in ordering the relief contained in the modified judgment, irrespective of Morf s underlying motives in acquiring the property.5 Morf also argues it would be inequitable to hold him accountable for a breach of the covenant that occurred even before he acquired the property.6 He relies on Civil Code section 1466, which provides: No one, merely by reason of having acquired an estate subject to a covenant running with the land, is liable for a breach of the covenant before he acquired the estate, or after he has parted with it or ceased to enjoy its benefits. Morf s reliance on Civil Code section 1466 is misplaced. The modified judgment does not seek to hold Morf liable for the consequences of a breach of SIA 1 committed before he acquired the property. Instead, the modified judgment simply holds him liable for the obligations under SIA 1 that run as covenants with the land and that are fairly and equitably apportioned to him according to his interest in the Subdivision. It is Morf s and not MCCE s breach of the covenant to undertake and complete repairs and improvements 5 Because our decision does not rest upon a determination that Morf acted improperly, we decline to take judicial notice of the opening brief in case number A116957, which Morf asks us to consider for purposes of showing that he did not seek to avoid the consequences of MCCE Development s breach of SIA 1. The subject of the judicial notice request is irrelevant to our determination. (See People v. Rowland (1992) 4 Cal.4th 238, 268, fn. 6.) 6 The City argues that Morf has waived this issue by failing to raise it until the matter was on remand following an appeal from the original trial. We will assume, without deciding, that the issue is properly before us. 16 pursuant to SIA 1 that supports his obligation to share responsibility for making those repairs and improvements as recognized in the modified judgment. Case law interpreting Civil Code section 1466 undermines rather than supports Morf s position. For example, in Mountain Home Properties v. Pine Mountain Lake Assn. (1982) 135 Cal.App.3d 959, 968 (Mountain Home Properties), the court considered whether a successor property owner was liable for the predecessor in interest s delinquent homeowners association assessments. The court concluded that Civil Code section 1466 protected the successor owner from being saddled with the debts of the former owner. (Mountain Home Properties, supra, at p. 971.) The court stated: The obvious purpose of [Civil Code] section 1466 is one of fairness to a party who acquires property. Since such a party has no connection with the property until he comes into possession, the Legislature has provided that the party should not be liable for the debts of its predecessors in interest. This purpose of fairness clearly applies in this case. [The successor in interest] purchased a large quantity of property from [the predecessor in interest]. To impose over $40,000 in unpaid assessments on [the successor] is manifestly unfair in that no benefits have accrued to respondent prior to its purchase. (Ibid., italics added.) Here, unlike in Mountain Home Properties, the modified judgment does not impose liability upon Morf for debts or other liabilities of MCCE that stem solely from MCCE s breach of SIA 1. Instead, the obligations the modified judgment imposes upon Morf are those he assumed by virtue of acquiring property burdened by the covenants contained in SIA 1. His liability to satisfy the obligations stems from his own breach of the covenants and not from a breach committed by his predecessor in interest, MCCE Development. As the owner of lots four through seven, Morf became liable for a continuing breach of the covenants to repair the Subdivision and construct improvements. Morf contends that, even if this case involves a continuing breach of a covenant to repair, the case of Farber v. Greenberg (1929) 98 Cal.App. 675, holds that subsequent owners of property escape liability for a continuing breach. We disagree. In Farber v. Greenberg, a lessee sought damages against a successor landlord after he was evicted 17 from his apartment following a declaration that the building was unfit for human habitation. (Id. at p. 677.) The lessee claimed the original lease required the landlord to make necessary repairs to ensure that the building was habitable. (Id. at p. 678.) The court agreed with the successor landlord s contention that the breach rendering the building uninhabitable occurred four years before the successor landlord acquired an interest in the property. (Id. at p. 684.) Even assuming an obligation to make the premises fit for human habitation was a covenant running with the land, the court concluded that the successor landlord was not liable for the lessee s damages because those damages were caused by the breach that occurred years before he purchased the property. (Ibid.) The outcome of Farber v. Greenberg is consistent with the approach in Mountain Home. In both cases, a party sought to impose on a successor property owner the liability resulting from the predecessor s breach of a covenant. In Mountain Home, that liability consisted of debts owed by the predecessor in interest. In Farber v. Greenberg, the liability consisted of monetary damages proximately caused by the prior owner s breach. Morf is therefore incorrect in asserting that Farber v. Greenberg stands for the proposition that successor property owners are relieved of continuing obligations to repair or improve property simply because a prior owner breached that continuing obligation. As a further argument premised on Civil Code section 1466, Morf contends he is no longer the record owner of lots four through seven and therefore is relieved of any obligations arising from covenants running with the land. Morf asks us to take judicial notice of a recorded grant deed indicating that he conveyed lots four through seven to MCCE Development.7 The grant deed reflects that it was recorded on November 25, 2009, one day after entry of the modified judgment. He asserts it is inequitable to hold 7 Although we would be justified in declining to take judicial notice of a grant deed that was not before the trial court at the time it entered its modified judgment (see Scruby v. Vintage Grapevine, Inc. (1995) 37 Cal.App.4th 697, 701, fn. 1), we shall exercise our discretion to take judicial notice of the grant deed at Morf s request. (Evid. Code, § 452, subd. (h).) 18 him personally liable for a continuing breach of covenants running with the land when he no longer owns the property at issue. (See Civ. Code, § 1466; Oceanside, supra, 147 Cal.App.3d at p. 178 [covenantor is relieved from further obligation to fulfill covenants following transfer of property unless the parties intended obligation to be personal in nature].) Morf s argument is unavailing because the trial court did not have evidence of the property transfer before it at the time it entered its modified judgment. As a general matter, reviewing courts will consider only matters which were part of the record at the time the judgment was entered. [Citation.] (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444, fn. 3.) There are rare occasions when postjudgment evidence may be considered, such as when subsequent events render an appeal moot, but we will not consider postjudgment evidence going to the merits of an appeal and introduced for the purposes of attacking the trial court s judgment. (In re Josiah Z. (2005) 36 Cal.4th 664, 676.) Because the grant deed was not before the trial court at the time it entered the modified judgment, the deed is irrelevant to the question of whether the court abused its discretion when it entered the modified judgment. We do not suggest Morf s transfer of the property would be irrelevant in a future proceeding seeking to modify or vacate the injunction; we simply note that the transfer is irrelevant to this appeal because our review is limited to the record as it existed when the challenged decision was entered. Thus, our disposition does not prevent Morf from seeking to modify or vacate the injunction in the trial court based upon a claim he no longer owns the property. (Code Civ. Proc., § 533; New Tech Developments v. Bank of Nova Scotia (1987) 191 Cal.App.3d 1065, 1072 [ superior court should modify or vacate an injunction . . . if it finds a change in the facts ].) We express no view on the merits of any such request but leave these matters for full evaluation by the trial court in the first instance should proper application be made for such relief.8 8 In the event it is appropriate to vacate or modify the injunctive relief against Morf in light of facts showing he no longer owns the property, the City is not without recourse. At oral argument on appeal, the City s attorney agreed with the proposition that an 19 For the foregoing reasons, we conclude that, based on the record before it, the trial court did not abuse its discretion in ordering Morf to bear a proportionate and equitable share of the obligations under SIA 1. D. The Order Setting a Deadline for Completion of Subdivision Improvements Is Technically Moot and Not Subject to Appeal. Both MCCE and Morf challenge the portion of the modified judgment directing creek and landslide repairs to be completed by June 30, 2010. They claim the deadline is impractical, if not impossible, to meet, and they contend construction deadlines should comport with controlling statutes and standard construction practices for streambed restoration work. They advocated a completion date of October 25, 2010. The claim is technically moot because the time has already passed for completion of the creek and landslide repairs under the modified judgment. The trial court will need to revise the deadlines contained in the modified judgment following remand. Furthermore, we agree with the City that the timing of the performance of obligations is not subject to appeal under the conditions presented here. What MCCE and Morf seek, in effect, is a predetermination that they could not be held in contempt for failure to comply with the court s order to complete certain improvements by June 30, 2010. The issue is not yet ripe for review. The court s order specifically anticipated that the completion date could be extended by further order upon notice and for good cause. No one has sought to hold MCCE and Morf in contempt, and no attempt has yet been made to show good cause for an extension of the deadline, as far as this court is aware. Our resolution of the issue would amount to an advisory opinion on a matter that may well become moot if the trial court extends the time for performance upon a showing of good cause. We also agree with the City s observation that allowing an appeal under the circumstances presented here would give MCCE and Morf an opportunity to delay performance indefinitely. If they are allowed to appeal the deadline for performance, equitable lien against lots four through seven effective as of the date SIA 1 was recorded would adequately protect the City s interests in this matter. 20 they could appeal the judgment on that basis and wait until the appeal is resolved, at which time the trial court will issue new deadlines that, in turn, can be appealed, starting the cycle all over again. The proper avenue to challenge the deadline is a petition for writ of mandate if and when the trial court declares MCCE or Morf in contempt for failing to comply with deadlines contained in the modified judgment. (See Code Civ. Proc., § 1209, subd. (a)(5).) In any such contempt proceeding, the party alleged to have violated the modified judgment would have the right to present its inability or good faith efforts to comply with the modified judgment as defenses. (In re Moulton (1950) 100 Cal.App.2d 559, 562-563; Uhler v. Superior Court (1953) 117 Cal.App.2d 147, 154.) Until those defenses have played out in the trial court, it is premature for this court to address the matter on appeal.9 II. THE TRIAL COURT DID NOT ERR IN DECIDING ATTORNEY FEE ISSUES WHILE THE MODIFIED JUDGMENT WAS ON APPEAL. In their appeal of the attorney fee award, MCCE and Morf do not challenge the amount of the award or the trial court s decision on remand not to reduce the City s award against MCCE. Instead, their sole argument on appeal is that it was error for the trial court to consider attorney fee issues while the appeal of the modified judgment was pending. They claim that attorney fees issues are embraced within and affected by the modified judgment such that they fall within the automatic stay provisions of Code of Civil Procedure section 916. The contention is not well taken. The purpose of the automatic stay provision of [Code of Civil Procedure] section 916, subdivision (a) is to protect the appellate court s jurisdiction by preserving the status quo until the appeal is decided. The [automatic stay] prevents the trial court from rendering an appeal futile by altering the appealed judgment or order by conducting other 9 For this reason, we decline the request of Morf and MCCE to take judicial notice of a March 1999 agreement regarding proposed stream alteration and Division 19.35 of the Novato City Code of Ordinances. (See jud. notice request filed 5/5/10, Exhs. C-D)~ Consideration of these materials is unnecessary to our disposition. 21 proceedings that may affect it. [Citation.] (Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 189.) A decision to award attorney fees following a judgment does not render the appeal from such a judgment futile. Rather, an award of attorney fees as costs is a collateral matter which is embraced in the action but is not affected by the order from which an appeal is taken. [Citation.] Consequently, filing of a notice of appeal does not stay any proceedings to determine the matter of costs and does not prevent the trial court from determining a proper award of attorney fees claimed as costs. (Bankes v. Lucas (1992) 9 Cal.App.4th 365, 369.) Accordingly, the trial court properly considered attorney fee issues while the modified judgment was on appeal. DISPOSITION The November 24, 2009, order modifying the judgment and the April 22, 2010, order awarding attorney fees are affirmed except insofar as the trial court must establish new deadlines for the completion of obligations under Subdivision Improvement Agreement 1. Respondent City of Novato shall recover its costs on appeal. _________________________ McGuiness, P.J. We concur: _________________________ Pollak, J. _________________________ Jenkins, J. 22
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