Posted by: Patricia Salkin | January 21, 2011

CA Dist. Court Concludes Town Must Pay-Up after Repudiating Development Agreement

The defendant, the Town of Mammoth Lakes, appealed the outcome of a jury trial in the Superior Court of Mono County, which ordered damages totaling over thirty two million dollars to the plaintiff, Mammoth Lakes Land Acquisition, in an anticipatory repudiation of contract action (development agreement). The Town seeks reversal on numerous grounds, including that the plaintiff failed to show repudiation of the agreement.  The California Court of Appeals for the Third District found the Town’s claims lacked merit and affirmed.

The Town asserted that reversal is appropriate regarding the alleged breach, or repudiation of the agreement, for four reasons. The Town contended the plaintiff failed to establish the breach was attributable to the Town, the evidence was too speculative, the option to later purchase the leased land was a unilateral contract not yet ripe for breach, and that the Town had retracted any repudiation. The court found these arguments to be without merit.

First, the court found that the plaintiff sufficiently showed breach through the conduct of town officials acting within their authority. The jury found, and the court agreed, that the Town expressly repudiated the contract through their unwillingness to go forward with the agreement, as expressed in correspondence stating that the development would not proceed. The Town argued that these acts should not be attributable to the Town since they were not voted on by the town council, however the court disagreed.

The court then stated that evidence was not too speculative to show breach. The court found the official actions established repudiation, as statements of town officials informed the plaintiff that resolution of  FAA objections was required before the Town would continue with the development agreement. However, this requirement was not a condition of performance contained in the agreement, thus it was not a valid reason to halt compliance. This finding was supported by the fact that the FAA regulations the Town relied on did not apply in this case and that the actions of the town officials show the Town did not intend to be bound by the agreement.

The court also found that the option to purchase the land leased in the agreement did not render the breach unripe, as it was the development agreement that was breached, not the option to purchase. The court found this was a weak attempt to re-characterize the breach as a breach of the purchase option, not the development agreement

Lastly, the court found that the Town did not establish that they retracted any repudiation, as their actions clearly established they were not willing to continue with the development agreement. The Town provided an e-mail correspondence they felt retracted the repudiation, as the e-mail professed a willingness to work with the plaintiff on FAA compliance issues. However, it is not a clear retraction and did not offer to continue to development without FAA compliance. This would have been necessary because the compliance condition was not part of the agreement.                                                                                             

Mammoth Lakes Land Acquisition v. Town of Mammoth Lakes, 2010 WL 5403136 (Cal. Ct. App, 3rd Dist. 12/30/2010)

The opinion can be accessed at:

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