Unpublished Disposition, 930 F.2d 29 (9th Cir. 1989)

MEMORANDUM^** 

Appellant Public Storage appeals the district court's grant of partial summary judgment enjoining construction of a self-service public storage facility. We affirm the district court's ruling and remand for a determination of costs and attorneys' fees resulting from this appeal.

Steven K. Brown, as sole shareholder of Sparks Properties, Inc., ("Sparks"), purchased and subdivided property in the City of Fremont in order to develop Mission Falls Business Park ("Park"). A Declaration of Covenants, Conditions, and Restrictions ("CC & R's") was recorded on the property on September 6, 1984. The CC & R's established the Mission Falls Business Park Owners Association ("Association") in which each owner of a parcel of land in the Park automatically became a member.

The CC & R's also established a 3-member Architectural Control Committee ("ACC"). This committee was established to review proposed building projects; no construction was to be undertaken without the committee's approval.

In May of 1987, Sparks contracted to sell Parcel No. 6 within the Park to appellant Public Storage. On July 29, 1988, Brown, acting alone as the ACC, approved appellant's proposed self-service public storage facility. Escrow was closed on August 1.

Appellee Teachers Insurance and Annuity Association ("Teachers") and Operating Company No. 1 Limited Partnership, both owners in the Park, objected to appellant's proposed project. They raised their concerns, objecting to its incompatibility with existing development, before City of Fremont officials. On March 3, 1989, the city issued appellant a building permit.

On March 16 Teachers filed suit in the United States District Court for the Northern District of California against Public Storage claiming that the ACC approval was improperly granted. On August 29 the district court granted partial summary judgment. The judgment established the following: (1) it permanently enjoined Public Storage from any construction on Parcel No. 6 until proper review and approval of its plans was obtained by a "duly constituted" ACC; (2) it ordered the Association to promptly establish an ACC as required by the CC & R's and to ensure timely review of Public Storage's planned development; and (3), it retained jurisdiction over the case and any remaining claims.

We review a district court's grant of a motion for summary judgment de novo. Tzung v. State Farm Fire and Casualty Co., 873 F.2d 1338, 1339-40 (9th Cir. 1989). The district court's jurisdiction is based on diversity of citizenship under 28 U.S.C. § 1332, and California substantive law applies. Erie v. Tompkins, 304 U.S. 64 (1938).

Under California law the interpretation of a contract, including whether its terms are ambiguous, is a matter of law. Brobeck, Phleger & Harrison v. Telex Corp., 602 F.2d 866, 871 (9th Cir.) (citing Airborne Freight Corp. v. McPherson, 427 F.2d 1283, 1285 (9th Cir. 1970); Brant v. California Dairies, Inc., 4 Cal. 2d 128, 133 (1935)), cert. denied, 444 U.S. 981 (1979). The trial court must preliminarily consider relevant extrinsic evidence, but if in considering this evidence the court finds that the language of the contract is not "reasonably susceptible" to an alternative interpretation, then extrinsic evidence cannot be received for the purpose of varying the terms of the contract. Id. (citing Airborne Freight Corp., 427 F.2d at 1286; Pacific Gas & Electric Co. v. G.W. Thomas Drayage Co., 69 Cal. 2d 33, 37 (1968)). The case may then be disposed by summary judgment because the interpretation of an unambiguous contract is a matter of law. Id. (citations omitted).

"We seek to interpret the contract in a manner that makes the contract internally consistent." Id. at 872. Article V of the applicable CC & R's, titled "Architectural Control Committee," provides in relevant part:

[Sec.] 5.1 Architectural Approval. No building, fence, wall, sign or other structure, or exterior addition to or change or alteration thereof, including painting or landscaping, shall be commenced, constructed, erected, placed, altered, maintained, or permitted to remain on any of the Parcels until plans and specifications showing plot layout and all exterior elevations, with materials and colors therefor and structural design and landscaping, shall have been submitted to and approved in writing by an architectural control committee which shall be initially composed of three (3) persons appointed by [Sparks].

[Sec.] 5.2 Term of Architectural Control Committee Appointed by the Declarant. The architectural control committee appointed by [Sparks] pursuant hereto, as well as replacements appointed by [Sparks], need not be Members, and shall remain in office until such time as the happening of any of the following events:

(a) When ninety percent (90%) or more of the Parcels within the Property have been conveyed conveyed (sic) by [Sparks]; or

(b) Seven (7) years from the date hereof. From such time or event, as the case may be, the members of the architectural control committee shall be appointed by the Board and shall consit (sic) of three (3) persons who need not be Members of the Association.

Appellant argues that while the ACC was to be initially composed of 3 persons, it could have had any number of members between its creation and the time, as described in Sec. 5.2, at which Sparks left the Association. Appellant argues in the alternative that the language of the CC & R's does not require the presence of all 3 members in order for the ACC to act, hypothesizing upon a lack of action by Congress if the presence of all its members was required in order to conduct business. In light of the CC & R's, appellant's arguments lack merit.

First, appellant's arguments are significantly weakened by the fact that the ACC has never had 3 members. Even under appellant's version, the ACC was required to have 3 members initially. A proper ACC was never formed.

Second, Article V never considers an ACC consisting of any number other than 3 members. Nor is there any language which would indicate anything but 3 members was intended. Indeed, Sec. 5.2 requires the members of the ACC--all 3 of them--to remain in office, or be replaced by Sparks, until Sparks' departure from the Association.

Last, while Congress has specifically provided for actions to be taken without the presence of every member, Article V addresses no such possibility for the ACC. This is consistent with a common concern of any 3-member panel, that approval by less than the 3 members could result in pandemonium. If one member can make decisions for a 3-member committee, then there is a strong likelihood that conflicting decisions will be issued.

In addition to examining the CC & R's, the district court was required to consider extrinsic evidence offered by appellant. Brobeck, 602 F.2d at 871. Appellant offered Browns' testimony that, as an original covenanting party he understood that he was authorized, as the subdivider, to approve plans for proposed building projects. Appellant argues that approval by the subdivider is consistent with industrywide practice.

Viewing the evidence in the light most favorable to appellant, we agree with the district court. One could only expect that the person who single-handedly approved several projects would view his actions as justified. In fact, it would be against Brown's interest to state otherwise. But the fact that the subdivider interpreted the language of the CC & R's wrongly, perhaps for the sake of simplicity, does not lead to a reasonably susceptible interpretation that the CC & R's envisioned a 1-, or 2-, member ACC.

It is somewhat ironic that, according to the language of the CC & R's, Brown could have appointed figureheads to the ACC who could rubber-stamp his pet projects. Nevertheless, the CC & R's are unambiguous and the disposition of the case by summary judgment was appropriate. See Brobeck, 602 F.2d at 875.

While we review a grant of a motion for summary judgment de novo, Tzung, 873 F.2d at 1339-40, we review a district court's finding concerning the defense of laches for an abuse of discretion. People of Village of Gambell v. Hodel, 774 F.2d 1414, 1427 (9th Cir. 1985), rev'd on other grounds sub nom. Amoco Prod. Co. v. Village of Gambell, 480 U.S. 531 (1987). Laches requires unreasonable delay plus either acquiescence in the act about which the complainant complains or prejudice to the party asserting the equitable defense resulting from the delay. Chem. Specialties Mfrs. Ass'n, Inc. v. Deukmejian, 227 Cal. App. 3d 663, ---, 278 Cal. Rptr. 128, 134 (Cal.Ct.App.1991). "Generally speaking, the existence of laches is a question of fact to be determined by the trial court in light of all of the applicable circumstances, and in the absence of manifest injustice or a lack of substantial support in the evidence its determination will be sustained." Miller v. Eisenhower Medical Center, 27 Cal. 3d 614, 624 (1980).

The 1-member ACC (Brown) approved the development plan for Public Storage on July 29, 1988. Appellee then sent representatives to the City of Fremont in order to voice their opposition to appellant's application for a development permit. In a letter dated September 22, 1988, and addressed to Associate Planner for the City of Fremont Fred Broumand, appellee's Property Manager Norma L. Hibbs expressed objection to appellant's proposed project "for aesthetic, as well as other reasons." On November 4 Hibbs wrote the Fremont City Council, stating in relevant part:

We spoke with the City several months ago when we first learned that Public Storage was interested in the site. We were told at that time that prior notice of Public Storage's intended use of the lot was not given because the zoning allowed their use and that our only recourse was to object on architectural, aesthetic or other basis (sic) covered under the I-R Restricted Industrial District....

Thereafter, on March 3, 1989, appellant's building permit was granted. On March 16, appellee filed this action.

Appellant argues that appellee unreasonably delayed in raising an objection to the ACC review process, citing Vesper v. Forest Lawn Cemetery Ass'n, 20 Cal. App. 2d 157 (1937). There a California Court of Appeals held that the complaint was barred by the defense of laches because it "was not filed until almost two years after the lease [was entered into] and more than one year after the business of a funeral director was instituted." Id. at 165.

Significantly, in the instant action appellee pursued other avenues to address difficulties with the project prior to filing a lawsuit, a commendable attempt at an alternative form of dispute resolution. In Hill v. Hattrem, 117 Cal. App. 3d 569 (1981), a California Court of Appeals stated that the defense of laches was not available despite a virtual 3-year delay. The court stated:

although plaintiff's delay may have resulted in prejudice to the defendant inasmuch as he in good faith may have expended community funds, we cannot say, as a matter of law that ... plaintiff's delay was unreasonable or inexcusable. Laches implies that the plaintiff should have done something earlier. In this case, [plaintiff] acted as quickly as she could have under the circumstances.

Id. at 573-74 n. 3. Similarly, appellee did not sit on its rights, but acted expeditiously.

Appellee repeatedly raised its objections to those agencies responsible for the oversight of property development and able to provide prompt relief. Appellee raised architectural objections, while acknowledging that it had other concerns, apparently in the belief that the city was not the proper forum for review of the ACC review process. Appellee then filed this action 13 days after the building permit was granted.

Laches "requires ... [that] every claimant ... make known [their] claims." Lundgren v. Lundgren, 245 Cal. App. 2d 582, 592 (1966). Appellee argues that it did not know that the ACC approval was conducted by only one person until after initiation of the instant action. However, assuming that it should have known, appellee's claims before the city related to aesthetic considerations of the industrial park and how the proposed building would fit within an overall design. Therefore, at least tacitly, appellee has been appealing the ACC approval from the start. Accordingly, we cannot say that the district court abused its discretion by refusing to allow appellant the defense of laches.¹ 

Because we find that appellee did not unreasonably delay in objecting to an improper ACC review, we need not reach the issue of whether appellee acquiesced in the approval process. Conti v. Bd. of Civil Serv. Comm'rs, 1 Cal. 3d 351, 359 (1969). Nevertheless, it is questionable whether Teachers' actions, or inactions, amounted to a level of acquiescence anticipated by the "wholesome" doctrine of laches. Lundgren, 245 Cal. App. 2d at 592. In Lux v. Haggin, 69 Cal. 255 (1886), the California Supreme Court summarized its findings on the issue of acquiescence as follows:

It may fairly be deduced from the authorities we have consulted that the acquiescence which will bar a complainant from the exercise in his favor of the discretionary jurisdiction by injunction must be such as proves his assent to the acts of the defendant, and to the injuries to himself which have flowed or can reasonably be anticipated to flow, from those acts.

Id. at 271 (emphasis added).

Appellant argues that appellee, since becoming an owner in the Park on August 11, 1987, failed to perform a duty, as a member of the Association, described by Sec. 2.4 of the CC & R's. That provision requires the Association to "appoint and remove members of the [ACC] as provided in Article V hereof, and to insure that there exists at all times a duly constituted and appointed [ACC]." It appears from the record that at no time has the Association, or any of its members, attempted to ensure that a proper ACC was established.

Appellee's failure, from August 11, 1987, to July 29, 1988, to ascertain whether the ACC was duly constituted and pursue the matter through the Association is conceivably no more than "a mere passive neglect." Stevenson v. Boyd, 153 Cal. 630, 636 (1908). Such neglect seems hardly sufficient to prove appellee's assent to appellant's actions, pursuing and receiving ACC approval. And while this evidence alone is not sufficient to support a defense of laches, it provides further support for the district court's ruling that the Association is to promptly ensure the creation of a duly-constituted ACC.

Appellant raises the defenses of estoppel and waiver before this court, though it did not address these issues before the court below. In Partington v. Gedan, 880 F.2d 116 (9th Cir. 1989), vacated on other grounds, 110 S. Ct. 3265, reaffirmed, 914 F.2d 1349 (1990), reversed and vacated on other grounds, 923 F.2d 686 (1991) (en banc), this court stated:

Ordinarily, we will decline to review an issue not clearly raised in the district court unless necessary to prevent manifest injustice, unless a new issue arises while the appeal is pending because of a change in the law, or unless the issue is purely one of law that is both central to the case and important to the public and the necessary facts are fully developed. Even if one of these exceptions apply, we retain discretion to decline to address the issue.

Id. at 130 (citations omitted).

Appellant attempts to equate equitable estoppel with laches, an issue raised in the court below, and it misapplies the language of the Third Circuit in Univ. of Pittsburgh v. Champion Prods., Inc., 686 F.2d 1040 (3d Cir.), cert. denied, 459 U.S. 1087 (1982). That court stated that "actual 'laches' in effect works an equitable estoppel." Id. at 1044. The Third Circuit was acknowledging that the effects of the two doctrines are similar, not claiming that they are the same defenses with different names.

Furthermore, appellant has raised no basis for an exception to apply in the instant action. Appellant is still free under the injunction to sell or lease the land and can expect that a review of any proposed construction project is to ensue shortly. Accordingly, we must reject appellant's defenses of equitable estoppel and waiver.

Because we uphold the district court's ruling, we need not address whether the ACC approval complied with the CC & R standards.

Appellee prays for costs and attorneys' fees incurred from this appeal, citing Sec. 8.4(a) of the CC & R's. That provision, titled "Right of Enforcement," states, "The Association, or any Owner, shall have the right to enforce, by any proceeding at law or equity, the provisions of this Declaration, and in such action shall be entitled to recover costs and reasonable attorneys' fees as are determined by the court." (Emphasis added).

Accordingly, we AFFIRM the district court's ruling and REMAND to the district court for a determination of the costs and attorneys' fees incurred by appellee pursuant to CC & R Sec. 8.4(a).