Opinion
B225649
11-08-2011
D & H VENTURES, INC., et al., Plaintiffs and Appellants, v. EXXON MOBIL CORPORATION, Defendant and Respondent.
Bleau Fox, Thomas P. Bleau and Gennady L. Lebedev, for Plaintiffs and Appellants. Sheppard, Mullin, Richter & Hampton, Jeffrey J. Parker and Whitney Jones Roy, for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. YC058592)
APPEAL from a judgment of the Superior Court of Los Angeles County. Andrew C. Kauffman, Judge. Affirmed.
Bleau Fox, Thomas P. Bleau and Gennady L. Lebedev, for Plaintiffs and Appellants.
Sheppard, Mullin, Richter & Hampton, Jeffrey J. Parker and Whitney Jones Roy, for Defendant and Respondent.
Following a series of rulings, the trial court entered judgment in favor of defendant and respondent Exxon Mobil Corporation (Exxon) on the complaint brought by plaintiffs and appellants D&H Ventures, Inc. (D&H) and Fry's Petroleum, Inc. (Fry's) (sometimes collectively appellants). D&H purchased a gasoline service station site from Exxon, and Fry's later purchased the station from D&H. Appellants contended that Exxon breached the sales agreement and acted tortiously in failing to remediate contamination at the site after receiving notice of the problem from governmental authorities 10 years after the original sale. On summary judgment, the trial court ruled that the agreement did not obligate Exxon to remediate the contamination given the undisputed evidence that it satisfied its remediation obligations specified by the agreement. On demurrers, the trial court ruled that neither D&H nor Fry's could bring other claims premised on the failure to remediate.
We affirm. The trial court properly granted summary judgment on D&H's breach of contract claim, as the undisputed evidence showed that Exxon did not breach the agreement by failing to resume remediation activities years after the sale. Moreover, the statute of limitations barred any breach of contract claim premised on Exxon's inadequate remediation at the time of sale. The trial court also properly sustained a series of demurrers on the remaining claims, as a release contained in the agreement barred those claims and a limiting provision in the agreement barred Fry's from bringing a breach of contract claim. Finally, the trial court properly exercised its discretion in denying leave to amend, as the amended claims relied on the same factual basis as those already adjudicated and appellants offered no valid reason for their delay in seeking amendment.
FACTUAL AND PROCEDURAL BACKGROUND
The Property.
In January 1989, Hossain Meftagh entered into a franchise agreement with Exxon to operate and maintain a gasoline service station located at 15606 South Inglewood Avenue in Lawndale (Property). The franchise agreement provided that Exxon maintained ownership of the station on the Property, while Meftagh was responsible for its day-to-day operations.
As early as 1991, Exxon began remediating the contamination on the Property. In mid-1993 and early 1994, environmental consultants prepared soils and groundwater assessments for the Property, and Exxon included the results of those assessments in a February 1994 summary report to the Los Angeles County Department of Public Works (LACDPW). The summary report served as the empirical basis for the "Baseline Condition" of the Property.
Sale of the Property.
In July 1995, Exxon entered into a written sales agreement (Agreement) for the sale of the Property to D&H, a California corporation owned by Meftagh and Ahmad Pashmforoush. Pursuant to the Agreement, the Property was conveyed to D&H via a grant deed (Grant Deed) recorded on August 11, 1995.
All copies of the Agreement that appear in the record are unsigned and contain a folded tab that omits a portion of section 10, paragraph E(vi). As neither the parties nor the trial court were concerned about these omissions, we, too, will overlook them.
The Agreement.
The Agreement provided that the sale was "as-is." Section 6, paragraph B of the Agreement acknowledged that D&H had the opportunity to personally and independently inspect the Property, "including the environmental condition of the PREMISES," and that Exxon made no representations or warranties about the condition of the Property except what was set forth in the Agreement. D&H agreed that the Property "is to be sold to and accepted by PURCHASER 'AS IS' AND 'WHERE IS,' WITH ALL FAULTS, IF ANY, INCLUDING, WITHOUT LIMITATION, THE ENVIRONMENTAL CONDITION OF THE PREMISES AND WITHOUT ANY WARRANTY WHATSOEVER, EXPRESS OR IMPLIED (except as expressly set forth in this CONTRACT)." In Section 9 of the Agreement, D&H further acknowledged that the Property "has been used as an automobile service station for the storage, sale, transfer, and distribution of products, including, without limitation, motor vehicle fuel, petroleum products or derivatives which may contain hydrocarbons, used oil, and other substances. PURCHASER acknowledges that some products may have been spilled, leaked, or otherwise discharged onto or into the PREMISES causing contamination to the soil or groundwater on or under the PREMISES."
Section 7 of the Agreement specified that the sale encompassed the land and improvements, but did not include "existing underground storage tanks, lines, waste oil tanks and fuel oil tanks" or signs and other items depicting Exxon's trademark. Rather, as provided in Section 8, those items were to be removed by Exxon, who had the "full and unencumbered right to enter upon the PREMISES" to remove both unsold tanks and lines within 30 days after closing and unsold underground monitoring wells and remediation piping and equipment within 90 days after closing.
Section 10 of the Agreement outlined the parties' assessment and remediation rights and obligations. Paragraph A obligated Exxon to conduct an environmental site assessment prior to closing "to determine the presence of petroleum hydrocarbons in the soil, water, or groundwater on and under the PREMISES" and to provide the results to D&H before closing. Paragraph A further provided: "If the ASSESSMENT reveals the presence of reportable petroleum hydrocarbons (as defined by applicable laws or regulations), SELLER will conduct such additional testing, studies, and investigations ('ADDITIONAL ASSESSMENTS'), before or after closing, as SELLER reasonably deems necessary and will provide a copy of the reports setting forth the results of the ADDITIONAL ASSESSMENTS to PURCHASER." In the event the initial assessment, any additional assessment or D&H's own assessment was unacceptable to D&H, it had the right to terminate the Agreement prior to closing.
Paragraph B further explained the use of the assessment and additional assessments by Exxon would be "to prepare and file reports, where applicable, with the appropriate GOVERNMENTAL AUTHORITIES (as defined below). Such written reports shall delineate the amount and location of any hydrocarbons identified in the soil and/or groundwater." Paragraph B described the relationship between the assessments and additional assessments, and the Baseline Condition: "As used in this CONTRACT, the term 'BASELINE CONDITION' shall mean the level of hydrocarbons established in the written reports setting forth the results of the ASSESSMENT or ADDITIONAL ASSESSMENTS, as applicable, which reports are summarized in Exhibit 'H' attached hereto, as such levels are reduced by SELLER's remediation activities, if any, performed pursuant to this CONTRACT. If further testing or remediation is required by any governmental authority having jurisdiction over the environmental condition of the PREMISES ('GOVERNMENTAL AUTHORITY'), the BASELINE CONDITION shall be modified as reasonably indicated by the results of any such tests conducted after initial remediation."
Paragraph C provided that Exxon made no representation or warranty regarding any aspect of any report delivered to D&H and included Exxon's advisement to D&H "to conduct its own investigation to determine the accuracy of the environmental information delivered to PURCHASER and the condition of the PREMISES." The balance of paragraph C described D&H's ability to "conduct such further reasonable environmental testing and investigation," the scope of and payment for such further testing, and D&H's obligation to indemnify Exxon against any loss or damage arising from such testing.
Paragraph D set forth Exxon's remediation obligations, providing in its entirety: "SELLER will undertake such remediation of the BASELINE CONDITION as SELLER reasonably deems necessary or appropriate to comply with applicable laws, regulations, or government orders (collectively, 'LEGAL REQUIREMENTS') in order to comply with the requirements of any applicable GOVERNMENTAL AUTHORITY. SELLER shall have no obligation for remediation or investigation beyond that which is required by applicable LEGAL REQUIREMENTS. SELLER will prepare and deliver to PURCHASER a remedial action plan for the PREMISES if SELLER reasonably determines that such a plan is necessary or advisable to comply with applicable LEGAL REQUIREMENTS. Such activities may occur before or after closing."
Paragraph E contained multiple provisions that applied if Exxon undertook remediation of the Baseline Condition. Paragraph E(i) gave Exxon the exclusive right to "negotiate with any third party or GOVERNMENTAL AUTHORITY regarding testing and/or remediation efforts for any investigation or remedial work performed by SELLER pursuant to this CONTRACT or which a third party or GOVERNMENTAL AUTHORITY may require." It precluded D&H from meeting with any governmental authority about the Property prior to closing, but permitted such meetings to discuss Exxon's remediation efforts after closing with notice to Exxon.
Paragraph E(ii) required D&H to give Exxon access to the Property for the purpose of conducting investigation or remediation activities. Correspondingly, paragraph E(iii) directed Exxon to undertake its remediation activities so as not to unreasonably disrupt D&H's use of the Property. Paragraph E(iv) required Exxon to restore the Property to its preexisting condition upon completion of investigation or remediation.
Paragraph E(v) set forth the duration of Exxon's remediation obligations, providing: "If SELLER undertakes any remediation, SELLER will continue its remediation until: [¶] (a) SELLER has submitted a written request for closure and received written notice from the appropriate GOVERNMENTAL AUTHORITY that either no further remediation and monitoring of the BASELINE CONDITION is required, or an approved remediation plan of the BASELINE CONDITION has been implemented to completion (including all required monitoring); or [¶] (b) Provided SELLER has submitted a written request for closure to the appropriate GOVERNMENTAL AUTHORITY, in the absence of receipt of the written notice referenced in (a) above within a reasonable period of time, SELLER determines that the soil and/or groundwater has been remediated to the levels required by the applicable GOVERNMENTAL AUTHORITIES." Exxon was further required to provide written notice to D&H that remediation had been completed.
Paragraph E(vi) of the Agreement provided that Exxon was not responsible for investigation or remediation related to hydrocarbons or other contaminants deposited on or into the Property after October 31, 1993, or "for any increase in the levels of hydrocarbons or other contamination above the BASELINE CONDITION except as provided in this CONTRACT." The same paragraph further provided that D&H was responsible "for investigation and/or remediation of any hydrocarbons or other materials, compounds, or substances deposited on or into the PREMISES or migrating onto or into the PREMISES after October 31, 1993, or for any increase in the level of hydrocarbons once remediation, if any, has begun, except as provided in this CONTRACT." In the event of additional contamination occurring during remediation, the Agreement permitted Exxon either to continue remediation with a fractional reimbursement from D&H or to suspend remediation until D&H completed remediation of any additional contamination.
Paragraph E(vii) directed D&H not to interfere with Exxon's remediation equipment and paragraph E(viii) prohibited D&H from removing any soil on the Property prior to closing. In paragraph E(ix), D&H assigned to Exxon any right to payment or reimbursement it might have from a third party or governmental authority in connection with remediation of the Baseline Condition. Finally, paragraph E(x) required Exxon and D&H, upon request, to provide the other with copies of any communication to or from a governmental authority regarding the environmental condition or remediation of the Property, but only "[u]ntil the time that SELLER gives notice that its remediation has been completed[.]"
Paragraph H stated that except as expressly provided in the Agreement, Exxon's remediation responsibilities inured only to the benefit of D&H and its lender, and did not extend to subsequent purchasers or assignees. Paragraph I provided that all provisions in Section 10 survived closing and delivery of the Grant Deed. It added that provisions substantially similar to Section 10 were to be incorporated into the Grant Deed and be deemed covenants running with the land.
Section 19 contained a general release under Civil Code section 1542, which provided that D&H, for itself, its representatives, successors and assigns "does hereby release, hold harmless, and forever discharge SELLER . . . from any and all claims, demands, liabilities (including fines and civil penalties) or causes of action at law or in equity . . . for injury (including death), destruction, loss or damage of any kind or character to the person or property of PURCHASER and its employees, agents, servants, and representatives, arising out of or in relation to the PREMISES, including, but not limited to, any improvements or equipment on, in, or under the PREMISES, or any spills, leaks, or other discharges onto or into the PREMISES which may have resulted in the presence of any surface or subsurface material, compound, or other substance." But the release did not "include obligations of SELLER, if any, under this CONTRACT to remediate the BASELINE CONDITION or SELLER's indemnification obligations under this CONTRACT."
Sections 19 and 20 further obligated D&H to defend, indemnify and hold Exxon harmless from and against any claim, cause of action or liability, in law or equity, brought by a third party, including a governmental entity, arising out of contamination on the Property occurring after October 31, 1993, unless caused solely by Exxon's negligence. Exxon, on the other hand, agreed to indemnify D&H until October 31, 2003 from any and all claims by third parties "resulting from any leak, spill or other discharge of hydrocarbons occurring from SELLER's use, operation or remediation of the PREMISES, both prior to closing and up until the completion of SELLER's remediation. Provided, however, SELLER shall have no responsibility for environmental contamination occurring after closing, except to the extent that such environmental contamination results from the remediation activities or negligence of" Exxon.
The Agreement further provided that the foregoing provisions survived the closing of the transaction.
Grant Deed.
As required by the Agreement, the Grant Deed incorporated and restated many of the Agreement's terms and conditions. Specifically, the Grant Deed restated Section 9; Section 10, paragraph A, paragraph D, paragraph E(i), paragraph E(ii), paragraph E(vi), paragraph E(x) and paragraph H; and Section 19.
As it also appeared to be of no consequence to the parties or the trial court that the copies of the Grant Deed in the record are neither signed nor recorded, we will not reach any conclusion on the basis of those omissions.
Conduct After Sale.
In May 1997, Exxon supervised the removal of three underground storage tanks on the Property, and in July 1997 its environmental consultants prepared a report documenting the removal and submitted the report to the Los Angeles Regional Water Quality Control Board (Regional Water Board). Thereafter, the environmental consultants prepared a site closure request application on Exxon's behalf and submitted it to the Regional Water Board in August 1997. The LACDPW immediately notified Exxon that it had met the applicable closure requirements. The Regional Water Board initially notified Exxon that it had not met that entity's closure requirements; subsequently, on October 15, 1997 the Regional Water Board issued a "no further action letter" signifying regulatory closure of the site. Exxon thereafter completed its work on the Property in early 1998 by having its environmental consultants remove product piping from the Property, prepare a report documenting the removal and issue a final report concerning Exxon's investigative and remediation activities on the Property.
D&H sold the Property to Fry's in October 2006. In November 2006, the Regional Water Board contacted D&H to inform it that it had detected groundwater contamination at a former service station site near the Property (Mobile site) and determined that groundwater flow from the Property may have contributed to the contamination. It wrote that it was "re-opening the case for further investigation" and directed D&H to submit a work plan for groundwater investigation of the Property. Subsequently, in April 2007 the Regional Water Board wrote to both D&H and Exxon, directing them to work together to conduct assessment and remediation at the Property. Specifically, the Regional Water Board instructed that "[a] minimum of three groundwater monitoring wells must be installed onsite to determine the direction of groundwater flow and groundwater quality. Based on the results of these new wells, additional monitoring wells may be required to further access the groundwater contamination."
Exxon refused D&H's request to resume its assessment and remedial activities at the Property.
Pleadings, Summary Judgment and Dismissal.
On November 26, 2008, appellants filed their original complaint against Exxon, alleging causes of action for breach of contract, nuisance, trespass, negligence, equitable indemnity and declaratory relief. Generally, they alleged that Exxon had discharged or released, or permitted the discharge or release, of hazardous substances into the soil and groundwater of the Property. They alleged that such contamination constituted a nuisance and trespass, and resulted from the failure to use due care. D&H only alleged that Exxon breached the Agreement by "(1) failing to remove any tanks or lines in compliance with all 'legal requirements' applicable to such tank removal; (2) failing to conduct additional environmental site assessments; (3) failing to modify the 'baseline condition' as required by any 'governmental authority'; and (4) failing to undertake remediation of the 'baseline condition' in compliance with 'legal requirements' and 'governmental authority.'" Appellants sought damages and declaratory and injunctive relief.
Exxon demurred to all claims except breach of contract alleged by D&H. Among several arguments, it asserted that the claims were released and/or barred by the applicable limitations periods. It also asserted that Fry's lacked capacity to prosecute the action as a suspended corporation. Following a March 25, 2009 hearing, the trial court abated the action as to Fry's in view of its corporate suspension. The trial court also sustained Exxon's demurrer without leave to amend, ruling that the release contained in Section 19 of the Agreement barred D&H's non-contract claims. Thereafter, Exxon answered the remaining cause of action for breach of contract.
In October 2009, Exxon moved for summary judgment on the grounds that the undisputed evidence showed it did not breach the Agreement and the breach of contract claim was barred by the statute of limitations. In support of the motion, Exxon submitted the declaration of project manager Andrew Gray, discovery responses, excerpts of Meftagh's deposition, copies of the Agreement and Grant Deed, environmental assessments, and environmental reports and other correspondence leading to regulatory closure.
After lifting the abatement order as to Fry's, and while the summary judgment motion was pending, the trial court sustained Exxon's demurrer to Fry's claims with leave to amend to allege breach of contract. In January 2010, D&H and Fry's filed a combined first amended complaint, which added Fry's to the breach of contract cause of action and added a new claim for fraud. The trial court struck the fraud claim to the extent it was alleged by D&H, because D&H had not sought leave of court for the amendment.
D&H thereafter opposed the summary judgment motion. It argued that Exxon breached the Agreement by failing to resume its assessment and remediation activities after the Regional Water Board in 2006 reopened its investigation of the Property for fuel hydrocarbon contamination. In support of its opposition, D&H submitted the declaration of environmental consultant Ami Adini, who opined that the 1997 case closure was premature, in that substantial contamination remained on the Property at the time of closure, eventually leaching into the groundwater and migrating to the adjacent Mobile site. It also submitted evidence of the Regional Water Board's reopening the environmental case at the Property and excerpts of Gray's deposition.
At the conclusion of a February 5, 2010 hearing, the trial court granted summary judgment. In connection with its ruling, the trial court overruled Exxon's evidentiary objections to significant portions of D&H's declarations. It reasoned that D&H's proposed interpretation of the Agreement as imposing an unending duty on Exxon to remediate was unreasonable and inconsistent with the Agreement's terms, explaining: "The contract required Exxon Mobil to engage in certain remediation activities, such activities as it felt [were] appropriate to engage in. It did engage in those—in those activities and the application was submitted to the regulatory authority. The regulatory authority issued a closure letter that, in the court's view, fully complied with the terms and conditions as set forth in the contract."
Pursuant to the parties' request, the trial court subsequently issued a minute order setting forth the undisputed facts and concluding there was no triable issue of material fact regarding Exxon's alleged breach of contract. It explained the Agreement provided that Exxon's obligation to monitor, assess or remediate the baseline condition of the Property ceased upon the Regional Water Board's site closure and found that the Agreement was not reasonably susceptible of an interpretation that imposed on Exxon a continuing duty after closure. With respect to D&H's assertion that Exxon's inadequate remediation was a breach of contract, the trial court found the claim time-barred.
On February 10, 2010, Exxon demurred to the first amended complaint—the only remaining causes of action being breach of contract and fraud alleged by Fry's. The next day, D&H filed a motion for leave to file a second amended complaint seeking to allege its own causes of action for fraud, breach of the implied covenant of good faith and fair dealing, and violation of Business and Professions Code section 17200. D&H and Fry's opposed the demurrer, while Exxon opposed the motion for leave to amend.
With respect to Fry's causes of action for breach of contract and fraud, the trial court sustained the demurrer without leave to amend, reasoning that the Agreement's language was inconsistent with Fry's interpretation and that adding a fraud cause of action exceeded the trial court's previous grant of leave to amend. Addressing the other claims raised by the proposed second amended complaint, the trial court ruled that there was no good reason for the delay in bringing the claims and, in any event, all claims related back to the alleged breach of contract—a claim which had been disposed of by summary judgment for D&H and demurrer for Fry's. Accordingly, the trial court denied leave to amend, entered an order of dismissal as to Fry's and directed Exxon to prepare a judgment. In view of the trial court's ruling, it did not address the balance of Exxon's demurrer.
Judgment was entered in April 2010 and D&H and Fry's appealed.
DISCUSSION
Appellants challenge multiple rulings, including the grant of summary judgment on D&H's breach of contract claim, the sustaining of Exxon's demurrer without leave to amend as to the second through ninth causes of action alleged by D&H in the original complaint, the sustaining of Exxon's subsequent demurrer to Fry's contract and tort claims and the denial of leave to amend to file a second amended complaint. We find no merit to any challenge.
I. The Trial Court Properly Granted Summary Judgment on D&H's Breach of Contract Claim.
The trial court granted summary judgment on D&H's first cause of action for breach of contract on the grounds that the undisputed evidence showed Exxon did not breach the Agreement and, alternatively, that the statute of limitations barred any claim Exxon breached the Agreement by conducting inadequate remediation. We review a grant of summary judgment de novo, considering "'all of the evidence set forth in the [supporting and opposition] papers, except that to which objections have been made and sustained by the court, and all [uncontradicted] inferences reasonably deducible from the evidence.'" (Artiglio v. Corning Inc. (1998) 18 Cal.4th 604, 612.) Summary judgment should be granted if "all the papers submitted show that there is no triable issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." (Code Civ. Proc., § 437c, subd. (c).)
A defendant "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." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) The moving defendant may meet this burden either by showing that one or more elements of a cause of action cannot be established or by showing that there is a complete defense thereto. (Code Civ. Proc., § 437c, subd. (o)(2); Aguilar v. Atlantic Richfield Co., supra, at p. 850.) A moving defendant is not required to "conclusively negate an element of the plaintiff's cause of action. . . . All that the defendant need do is to 'show[ ] that one or more elements of the cause of action . . . cannot be established' by the plaintiff. [Citation.]" (Aguilar v. Atlantic Richfield Co., supra, at p. 853, fn. omitted.) Once the moving defendant's burden is met, the "burden shifts to the plaintiff . . . to show that a triable issue of one or more material facts exists . . . ." (Code Civ. Proc., § 437c, subd (p)(2).) In opposing the motion, "[t]he plaintiff . . . may not rely upon the mere allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists . . . ." (Ibid.)
A. The Undisputed Evidence Showed that Exxon Did Not Breach the Agreement by Failing to Resume Remediation Activities.
The parties offered no extrinsic evidence concerning the meaning of the Agreement and conceded that there was no factual dispute concerning the Agreement's language. Rather, Exxon maintained that the Agreement must be construed to provide that its duty to remediate any contamination ended when it received the Regional Water Board's closure letter, while D&H contended that the Agreement provided for a continuing duty to resume assessment and remediation activities when directed to do so by a governmental authority. Where the evidence is undisputed and the parties draw conflicting inferences from the language of a contract, we independently interpret the contractual language and draw our own reasonable inferences. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865-866 & fn. 2; City of El Cajon v. El Cajon Police Officers' Assn. (1996) 49 Cal.App.4th 64, 71 (City of El Cajon).) Our goal is to effectuate the mutual intention of the parties as it existed at the time of contracting insofar as it is ascertainable and lawful. (Civ. Code, § 1636; City of El Cajon, supra, at p. 71.)
The trial court adopted the interpretation of the Agreement urged by Exxon, ruling that Exxon's refusal to conduct further assessment or remediation of the Property was not a breach of the Agreement. It ruled that "[s]ection 10E (v) (a) of said agreement specifically provides that remediation is deemed complete and moving party has no further obligation to monitor, assess or remediate the 'baseline condition' following receipt of the Regional Board's site closure letter, other than under certain circumstances not here pertinent." Viewing the Agreement as a whole, the trial court further concluded that it was not susceptible of any other reasonable interpretation.
In construing the Agreement, we are guided by several well-settled principles of contract interpretation. First, in giving effect to the parties' mutual intent as it existed at the time of contracting, such intent is to be inferred, if possible, solely from the written provisions of the contract. (Brinton v. Bankers Pension Services, Inc. (1999) 76 Cal.App.4th 550, 559.) Second, "[t]he whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other." (Civ. Code, § 1641.) An interpretation that renders part of the instrument surplusage should be avoided. (City of El Cajon, supra, 49 Cal.App.4th at p. 71.) Third, "[a] contract extends to only those things as to which it appears the parties intended to contract. . . . We do not have the power to create for the parties a contract which they did not make and cannot insert language which one party now wishes were there." (ML Direct, Inc v. TIG Specialty Ins. Co. (2000) 79 Cal.App.4th 137, 142.) Finally, "[a] contract must receive such an interpretation as will make it lawful, operative, definitive, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties." (Civ. Code, § 1643; see also Bill Signs Trucking, LLC v. Signs Family Limited Partnership (2007) 157 Cal.App.4th 1515, 1521 ["'Interpretation of a contract "must be fair and reasonable, not leading to absurd conclusions"'"].)
With these principles in mind, we agree that the only reasonable construction of the Agreement requires the conclusion that the Regional Water Board's initial site closure relieved Exxon from any further remediation obligation under the Agreement. As a whole, Section 10 of the Agreement identified several specific and interrelated steps that comprised the assessment and remediation process. First, Exxon was obligated to conduct an assessment and, if it deemed necessary, additional assessments to determine the presence of contamination. Section 10, paragraph A gave D&H the right to terminate the agreement in the event it deemed the assessments unacceptable. Second, the parties agreed that the results of those assessments would be provided to the relevant governmental authorities and would establish the Baseline Condition of the Property. Third, Exxon agreed to undertake remediation of the Baseline Condition as it deemed necessary or appropriate to comply with the legal requirements of any applicable governmental authority. Finally, if Exxon undertook such remediation, then the provisions of Section 10, paragraph E applied, providing that its remediation activities continued until it received a written notice of closure from the appropriate governmental authority or it determined that it had remediated the Property to the level required by that governmental authority.
Our determination is limited to Exxon's contractual obligations under the Agreement. The parties have not addressed and we express no opinion on Exxon's potential remediation obligations under applicable federal or state law.
The Agreement's specific steps reflected the parties' intent to impose on Exxon an identifiable obligation to assess and remediate contamination to a level expressly specified in the reports attached to the Agreement. The evidence was undisputed that Exxon complied with the Agreement's requirements to assess, remediate and receive site closure. To impose on Exxon an indefinite obligation to remediate contamination for an unidentified period of time would be patently inconsistent with the scheme set forth in Section 10. It would also be inconsistent with several other provisions in the Agreement that expressly restricted the scope of Exxon's obligations, including those limiting Exxon's remediation responsibilities so as not to inure to the benefit of subsequent purchasers (Section 10, paragraph H), specifying D&H's obligation to remediate additional contamination migrating onto the Property (Section 10, paragraph E(vi)) and defining the time period when the parties were required to exchange documents from governmental authorities as "[u]ntil the time that SELLER gives notice that its remediation has been completed" (Section 10, paragraph E(x)). (See, e.g., City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 473 ["Any contract must be construed as a whole, with the various individual provisions interpreted together so as to give effect to all, if reasonably possible or practicable"].)
D&H concedes that nothing in the Agreement expressly provided for the resumption of Exxon's remediation obligations after site closure by a governmental authority. Nonetheless, relying on isolated provisions of the Agreement, D&H argues that the Regional Water Board's reopening the site in 2006 triggered a contractual obligation on the part of Exxon to resume remediation. It relies on a provision in Section 10, paragraph B, which provided: "If further testing or remediation is required by any governmental authority having jurisdiction over the environmental condition of the PREMISES ('GOVERNMENTAL AUTHORITY'), the BASELINE CONDITION shall be modified as reasonably indicated by the results of any such tests conducted after initial remediation." This sentence, however, is contained in the paragraph that outlined Exxon's assessment obligations. We may not "interpret contractual language in isolation. [Citation.]" (Legacy Vulcan Corp. v. Superior Court (2010) 185 Cal.App.4th 677, 688.) Viewed in context, this provision applied to modification of the Baseline Condition at the time of initial assessment and before regulatory site closure. Likewise, the reference to activities occurring "before or after closing" in Section 10, paragraph D, addressed Exxon's remediation activities undertaken before its request for and receipt of site closure.
"A contract extends only to those things which it appears the parties intended to contract. Our function is to determine what, in terms and substance, is contained in the contract, not to insert what has been omitted." (Vons Companies, Inc. v. United States Fire Ins. Co. (2000) 78 Cal.App.4th 52, 58.) We agree with the trial court that the Agreement cannot reasonably be construed to impose a duty on Exxon to remediate contamination on the Property after it received site closure from the appropriate governmental authority. The imposition of such a duty would be contrary to the parties' intent, as reflected by language in the Agreement circumscribing Exxon's remediation obligation to provide that it will continue only until site closure or a determination by Exxon that it met the site closure requirements.
B. The Undisputed Evidence Showed the Statute of Limitations Barred Any Claim that Exxon Breached the Agreement by Failing to Remediate Appropriately at the Time of Site Closure.
Even if Exxon had no contractual obligation to remediate the Property in 2006, D&H contends there were triable issues of fact as to whether Exxon breached the Agreement in 1997 and 1998 by failing to properly remediate the contamination. Acknowledging that it did not bring any claim for breach of contract within four years of the asserted breach as required by Code of Civil Procedure section 337, it further contends there was a triable issue of fact as to whether accrual of its claim was deferred because of delayed discovery. The trial court concluded otherwise, reasoning that the undisputed evidence showed that D&H was aware of the condition of the Property, including the Baseline Condition, at the time of purchase in 1995; was aware of the application for site closure in 1997; and was aware that Exxon ceased all remediation activities in 1998. It determined that D&H's action filed in 2008 was untimely. We agree.
In an effort to establish a triable issue of fact, D&H submitted Adini's declaration in which Adini opined that Exxon's request for closure was premature, as substantial unremediated contamination remained on the Property at that time. Thus, according to D&H's own evidence, any asserted breach caused by inadequate remediation occurred in 1997. D&H argues that its claim is not time-barred, however, according to the doctrine of delayed discovery. An "exception to the general rule of accrual is the 'discovery rule,' which postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action." (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807.) D&H contends that it had no reason to discover any breach until 2006 when the Regional Water Board reopened the site.
The delayed discovery rule typically does not apply to breach of contract actions, which ordinarily accrue at the time of breach. (3 Witkin, Cal. Procedure (5th ed. 2008) Actions, § 520, pp. 664-665, § 529, pp. 678-680.) But two cases on which D&H relies, April Enterprises, Inc. v. KTTV (1983) 147 Cal.App.3d 805 and Gryczman v. 4550 Pico Partners, Ltd. (2003) 107 Cal.App.4th 1 (Gryczman), applied the delayed discovery rule to the statute of limitations in a contract action. April Enterprises, supra, at page 827 involved the "clandestine" destruction of videotapes in the defendant's exclusive custody and control. Addressing what it characterized as "unusual facts" calling "for an exception to the general rule," the court held that "the discovery rule may be applied to breaches which can be, and are, committed in secret and, moreover, where the harm flowing from those breaches will not be reasonably discoverable by plaintiffs until a future time." (Id. at p. 832.)
In Gryczman, supra, 107 Cal.App.4th 1, the plaintiff had a contractual right of first refusal to buy certain property from the defendant on the same terms contained in any bona fide offer from a third party that the defendant was willing to accept. The defendant failed to give the contractually required notice to the plaintiff that the right of first refusal had been triggered, and the defendant sold the property to a third party. After the statute of limitations had run, the plaintiff discovered that the property had been sold and sued for breach of contract. (Id. at pp. 4-5.) Concluding that the delayed discovery rule applied, the court stated: "We find the rationale of April Enterprises applicable here. Indeed, this is an even stronger case for applying the delayed discovery rule because [the defendant] not only breached the contract 'within the privacy of its own offices' but the act which constituted the breach—failure to give notice of the option offer—was the very act which prevented plaintiff from discovering the breach." (Gryczman, supra, at p. 5.)
The undisputed facts here were not unusual. Exxon conducted none of its remediation activities in secret. To the contrary, D&H acknowledged in the Agreement that "PURCHASER has (or, prior to closing, will have) had the opportunity to independently and personally inspect the PREMISES (including the environmental condition of the PREMISES), and that PURCHASER has entered into this CONTRACT based upon this right of inspection." The Agreement expressly provided D&H with a remedy if its inspection or testing yielded an unacceptable result, providing: "If the ASSESSMENT, or the ADDITIONAL ASSESSMENTS, or the tests performed by PURCHASER, are unacceptable TO PURCHASER, PURCHASER may terminate the CONTRACT by written notice to SELLER prior to closing, in which event all earnest money shall be refunded to PURCHASER." Indeed, nothing in the Agreement prevented D&H from discovering the condition of the Property at the time of sale. Rather, D&H was encouraged to conduct its own investigation. According to Section 10, paragraph C, "SELLER hereby advises PURCHASER to conduct its own investigation to determine the accuracy of the environmental information delivered to PURCHASER and the condition of the PREMISES."
According to the excerpts of Meftagh's deposition submitted in connection with the summary judgment motion, D&H knew the Property was heavily contaminated at the time of purchase. Nonetheless, even though D&H was fully aware of its right to inspect the Property, it conducted no independent environmental investigation prior to purchase. Moreover, it did not investigate the requirements for site closure when Exxon submitted its request, nor did it object to Exxon's representation that it had satisfied all the requirements for site closure.
As explained in Fox v. Ethicon Endo-Surgery, Inc., supra, 35 Cal.4th at pages 807 to 808, "[t]he discovery rule only delays accrual until the plaintiff has, or should have, inquiry notice of the cause of action. The discovery rule does not encourage dilatory tactics because plaintiffs are charged with presumptive knowledge of an injury if they have '"'information of circumstances to put [them] on inquiry'"'or if they have '"'the opportunity to obtain knowledge from sources open to [their] investigation.'"' [Citations.]" (Fn. omitted.) "If such an investigation would have disclosed a factual basis for a cause of action, the statute of limitations begins to run on that cause of action when the investigation would have brought such information to light." (Id. at pp. 808809.) Here, by 1998 at the latest, D&H knew the Property was contaminated, knew it had a right to independently inspect the Property, had been advised by Exxon to conduct an independent investigation and yet did nothing when Exxon notified it that it intended to discontinue its monitoring and remediation activities. On the basis of this undisputed evidence, the doctrine of delayed discovery did not apply, and any claim for breach of contract accrued more than 10 years before D&H filed its action.
II. The Trial Court Properly Sustained Exxon's Demurrers Without Leave to Amend.
A. Demurrer to D&H's Remaining Claims in the Complaint.
Exxon directed its original demurrer to each cause of action alleged in the complaint by D&H except breach of contract. It argued that the general release contained in Section 19 of the Agreement barred those claims. At the same time the trial court abated the action as to Fry's because its corporate status had been suspended, the court sustained Exxon's demurrer without leave to amend as to D&H's claims.
We review de novo a trial court's sustaining of a demurrer without leave to amend, exercising our independent judgment as to whether the complaint alleges sufficient facts to state a cause of action. (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.) We give the complaint a reasonable interpretation, treating the demurrer as admitting all material facts properly pleaded, but not assuming the truth of contentions, deductions or conclusions of law. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.)
In addition to breach of contract, D&H's complaint alleged causes of action for continuing and permanent nuisance, continuing and permanent trespass, negligence and negligence per se, equitable indemnity and declaratory relief. D&H's claims were premised on Exxon's allegedly inadequate remediation of contamination on the Property. For example, in support of its cause of action for continuing nuisance, D&H alleged: "EXXON created a continuing nuisance by, among other things, permitting the Contamination to exist at the Property. EXXON has failed to initiate prompt and adequate investigation, monitoring, remediation, or abatement of the nuisance." Similarly, in support of its continuing and permanent trespass causes of action, D&H alleged: "As a result of Defendant EXXON's control, maintenance, use or occupation of the Property, hazardous substances, including the Contamination, have been discharged and/or released into the soil and groundwater underlying the Property without Plaintiffs' knowledge or consent. EXXON continues to allow the Contamination to remain in the soil and groundwater underlying the Property without Plaintiffs' consent." Again, in support of its negligence cause of action, D&H alleged that Exxon breached its duty of care by, among other things, "managing, operating, and maintaining the Property in such a way that allowed hazardous substances to be discharged and/or released into the soil and groundwater of the Property and to migrate to adjacent properties . . . ."
Section 19 of the Agreement included a general release under Civil Code section 1542, which provided that D&H, for itself, its representatives, successors and assigns "does hereby release, hold harmless, and forever discharge SELLER . . . from any and all claims, demands, liabilities (including fines and civil penalties) or causes of action at law or in equity . . . for injury (including death), destruction, loss or damage of any kind or character . . . arising out of or in relation to the PREMISES, including, but not limited to, any improvements or equipment on, in, or under the PREMISES, or any spills, leaks, or other discharges onto or into the PREMISES which may have resulted in the presence of any surface or subsurface material, compound, or other substance."
We construe a release under the same rules of interpretation applicable to other contracts. (Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 527.) An effective release "'need not achieve perfection'"; rather, it must "'be clear, unambiguous and explicit in expressing the intent of the parties'" and, "'"read as a whole, must clearly notify the prospective releasor or indemnitor of the effect of signing the agreement." [Citation.]' [Citation.]" (Paralift, Inc. v. Superior Court (1993) 23 Cal.App.4th 748, 755.) Here, the release expressly encompassed any claims or causes of action relating to spills, leaks or discharges onto the Property. D&H's second through ninth causes of action stemmed from the existence of contamination in the soil and groundwater of the Property— contamination that the complaint defined as "the discharge and/or release of hazardous substances, including petroleum hydrocarbons, total petroleum hydrocarbon, benzene, toluene, ethylbenzene, and xylenes . . . ." The broad language of the release clearly and explicitly applied to bar claims against Exxon based on the presence of contamination on the Property. (See San Diego Hospice v. County of San Diego (1995) 31 Cal.App.4th 1048, 1053-1054 [release containing waiver of protections afforded by Civ. Code, § 1542 applied to bar claims seeking costs of remediation for contamination which had not been discovered at the time the release was executed].)
We are not persuaded that the release should be given a different construction on the basis of a qualifying provision that the release did not "include obligations of SELLER, if any, under this CONTRACT to remediate the BASELINE CONDITION or SELLER's indemnification obligations under this CONTRACT." As discussed earlier, Exxon satisfied its responsibility to remediate the Baseline Condition. In any event, that was an obligation imposed by the Agreement, and thus any claim for a breach of the Agreement in that manner was not released. D&H's proposed construction of the qualifying provision as applying to claims other than breach of contract would effectively nullify the balance of the release. (See Zalkind v. Ceradyne, Inc. (2011) 194 Cal.App.4th 1010, 1027 ["To the extent practicable, the meaning of a contract must be derived from reading the whole of the contract, with individual provisions interpreted together, in order to give effect to all provisions and to avoid rendering some meaningless"].) Moreover, Exxon's unreleased indemnification obligations terminated on October 31, 2003.
Accordingly, the trial court properly sustained Exxon's demurrer without leave to amend as to D&H's second through ninth causes of action.
B. Demurrer to Fry's Claims in the First Amended Complaint.
After lifting the abatement order, the trial court ruled on Exxon's demurrer to the claims alleged by Fry's, which were identical to those alleged by D&H. At the first hearing, the trial court sustained the demurrer without leave to amend as to the second through ninth causes of action and permitted Fry's to amend its breach of contract claim. Following amendment, the trial court sustained a demurrer without leave to amend to the breach of contract claim. We find no error.
As a subsequent purchaser, Fry's was bound by the release contained in Section 19 of the Agreement. The release expressly applied to D&H's "successors and assigns" and was incorporated into the Grant Deed. "In the absence of extrinsic evidence, the scope of a release is determined by the express language of the release. [Citation.]" (Benedek v. PLC Santa Monica (2002) 104 Cal.App.4th 1351, 1357.) Fry's offered no alternative interpretation of the release that would limit its application so as not to extend to a subsequent purchaser. Further, we have already explained why the release's exclusion of Exxon's Baseline Condition remediation did not encompass any claim beyond breach of contract for the failure to remediate as specified in the Agreement. Thus, according to the plain language of the release, Fry's, as a successor, was likewise barred from bringing the second through ninth causes of action. (See Bardin v. Lockheed Aeronautical Systems Co. (1999) 70 Cal.App.4th 494, 505 [absent an express limitation, a broadly worded release covers all claims within the scope of the language].) The trial court properly sustained Exxon's first demurrer without leave to amend.
Both the Agreement and Grant Deed were attached to the first amended complaint as exhibits.
The trial court likewise properly sustained Exxon's subsequent demurrer to Fry's breach of contract claim on the ground that both the Agreement and the Grant Deed expressly prohibited Fry's from bringing a contract claim premised on Exxon's failure to remediate. Section 10, paragraph H of the Agreement provided: "Except as expressly provided otherwise in this CONTRACT, SELLER's remediation responsibilities shall inure only to the benefit of PURCHASER and LENDER (as defined in Section 20), and not to subsequent purchasers, assigns of either, successors of either, or any other person or entity (except successors or assigns of the lender financing PURCHASER's acquisition of the PREMISES if such initiating lender sells or assigns all or a portion of its interest in the mortgage)." Similarly, the Grant Deed provided: "GRANTOR'S REMEDIATION RESPONSIBILITIES SHALL INURE ONLY TO THE BENEFIT OF GRANTEE AND THE LENDING INSTITUTION HOLDING THE MORTGAGE TO FINANCE GRANTEE'S PURCHASE OF THE PROPERTY . . . AND NOT TO SUBSEQUENT PURCHASERS, ASSIGNS OF EITHER, OR SUCCESSORS OF EITHER . . . ."
The plain meaning of these provisions is evident and bars Fry's from alleging a breach of contract claim premised on Exxon's failure to remediate. Directly contrary to the prohibition stated in the Agreement and Grant Deed, Fry's alleged: "Under the terms of the Agreement, as a subsequent 'owner' of the Property, FRY's PETROLEUM was an intended third party beneficiary of the Agreement, to the extent such AGREEMENT requires EXXON to 'undertake such remediation of the Baseline Condition as [EXXON] reasonably deems necessary or appropriate to comply with applicable laws, regulations or government orders and [to] remediate the Baseline Condition to satisfactory levels' as defined in and required by the Agreement, and as the current 'owner of the Property is thereby entitled to receive the benefit of such remediation which is contemplated and required to be performed by EXXON under the terms of the Agreement.'" As explained in Building Permit Consultants, Inc. v. Mazur (2004) 122 Cal.App.4th 1400, 1409, "[t]he well-pled allegations that we accept as true necessarily include the contents of any exhibits attached to the complaint. Indeed, the contents of an incorporated document (in this case, the agreement) will take precedence over and super[s]ede any inconsistent or contrary allegations set out in the pleading. In the case of such conflict, we will look solely to the attached exhibit." Because Fry's breach of contract claim sought relief for Exxon's alleged failure to remediate—a claim prohibited by the Agreement and Grant Deed attached to the first amended complaint—the trial court properly sustained Exxon's demurrer to that claim without leave to amend.
III. The Trial Court Properly Exercised Its Discretion in Denying Appellants' Motion for Leave to Amend to Allege New Causes of Action.
Appellants' final challenge is to the trial court's denial of leave to amend to file a second amended complaint alleging new causes of action. In support of the motion, counsel averred that after completion of the depositions of four Exxon employees and environmental contractors and after the completion of "certain analysis" by Adini, "it became apparent that the complaint should be amended to include a cause of action for Fraud" and "that the facts being alleged also warrant claims for breach of covenant of good faith and fair dealing, as well as injunctive relief and restitution under the Business and Professions Code section 17200." The trial court denied the motion on multiple grounds, reasoning that it had previously disallowed the addition of a fraud claim, all proposed claims were simply a restatement of those that had been barred by demurrer or summary judgment and appellants offered no good reason for their delay in bring new claims. We find no basis to disturb this ruling.
In addition to the reasons cited by the trial court, appellant's request was procedurally deficient in that counsel's declaration failed to satisfy the requirements of rule 3.1324(b) of the California Rules of Court, which requires a declaration accompanying a motion to amend pleadings before trial to specify not only the effect of the amendment and why it is necessary but also when the facts giving rise to the amended allegations were discovered and the reasons why the request was not made earlier.
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"Code of Civil Procedure section 473 states the governing rule: 'The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading or proceeding . . . .' (Id., subd. (a)(1).) 'Leave to amend a complaint is thus entrusted to the sound discretion of the trial court. ". . . The exercise of that discretion will not be disturbed on appeal absent a clear showing of abuse. More importantly, the discretion to be exercised is that of the trial court, not that of the reviewing court. Thus, even if the reviewing court might have ruled otherwise in the first instance, the trial court's order will yet not be reversed unless, as a matter of law, it is not supported by the record."' [Citations.]" (Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242, fn. omitted.)
Here, the record supported the trial court's exercise of discretion on each of the three grounds cited for denying the motion. First, at a prior hearing, the trial court expressly limited its grant of leave to amend to permit Fry's to allege a claim for breach of contract. Its ruling did not extend to the addition of a fraud claim. Nor did its ruling contemplate that D&H would allege any new claims, particularly since a summary judgment motion was at that time pending on its sole remaining claim. "[A]mendments are usually allowed after summary judgments have been filed only to repair complaints that are legally insufficient—in other words, those that would be subject to a motion for judgment on the pleadings. [Citations.] Appellants' proposed amendment would not cure a legally insufficient complaint, but rather, would state a different theory of recovery. Such an amendment is impermissible. [Citation.]" (Van v. Target Corp. (2007) 155 Cal.App.4th 1375, 1387-1388, fn. 2.) Thus, as to D&H, the fact that leave to amend was sought following a grant of summary judgment was a sufficient basis, alone, to deny the motion.
Second, the trial court reasoned that there was no basis for leave to amend because appellants' new allegations relied on the same factual bases as the claims which had been subject to judgment or dismissal. Indeed, the allegations in the proposed second amended complaint were no different than appellants' prior allegations. For example, in support of their fraud and breach of the implied covenant of good faith and fair dealing claims, appellants alleged that Exxon "deliberately, fraudulently and actively concealed the true extent of the environmental contamination at the Property and deliberately failed to assess and remediate such contamination" and conducted its site assessment so as to "avoid[] its obligations to assess and remediate all of the contamination on the Property which it was required to assess and remediate under the terms of the Agreement . . . ." "Leave to amend is properly denied when the facts are undisputed and as a substantive matter no liability exists under the plaintiff's new theory. [Citation.]" (Huff v. Wilkins (2006) 138 Cal.App.4th 732, 746.)
Finally, the trial court found no good cause for appellants' delay in seeking leave to amend. Appellants sought leave to allege their new claims more than three years after they assertedly discovered the basis of those claims and approximately one and one-half years after they filed their action. Unwarranted delay in seeking leave to amend is, in and of itself, a sufficient reason to deny a motion for leave to amend. (Roemer v. Retail Credit Co. (1975) 44 Cal.App.3d 926, 939-940; see also Record v. Reason (1999) 73 Cal.App.4th 472, 486 [unwarranted delay in seeking leave to amend shown where motion was filed three years after the plaintiff was aware of the circumstances on which he based his amended allegations]; Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 486 [proper exercise of discretion to deny leave to amend where the plaintiff offered no explanation for omitting new claims from the original complaint or bringing the request to amend nearly two years after the original complaint was filed].) Accordingly, the trial court properly exercised its discretion in denying appellants' motion for leave to file a second amended complaint.
DISPOSITION
The judgment is affirmed. Exxon is entitled to costs on appeal. NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
DOI TODD, Acting P. J.
We concur:
ASHMANN-GERST, J.
CHAVEZ, J.