Filed 6/30/14 Bishop Arbors, LLC v. Meadowcreek Mutual Water Co. CA4/2

                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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           IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                   FOURTH APPELLATE DISTRICT

                                                 DIVISION TWO



BISHOP ARBORS LLC,

         Plaintiff and Appellant,                                        E056232

v.                                                                       (Super.Ct.No. SICVCV0744181)

MEADOWCREEK MUTUAL WATER                                                 OPINION
COMPANY, INC. et al.,

         Defendants and Respondents.


         APPEAL from the Superior Court of Inyo County. David L. Devore (Judge of the

Alpine Super. Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.)

and William D. Palmer (Judge of the Kern Super. Ct. assigned by the Chief Justice

pursuant to art. VI, § 6 of the Cal. Const.) Affirmed.

         Law Office of Michael Berger, Michael Berger and Robert S. Hanna for Plaintiff

and Appellant.

         David S. Baumwohl; Jacobson, Hansen, Najarian & McQuillan, Leith B. Hansen;

Georgeson, Belardinelli, and Noyes, C. Russell Georgeson and Christopher B. Noyes for

Defendants and Respondents.
                                                             1
                                             I

                                    INTRODUCTION

       This case arises from defendant Meadowcreek Mutual Water Co. (MMWC)

refusing to provide plaintiff Bishop Arbors LLC (Arbors) with water services, which

Arbors needed to develop its property. Arbors originally filed a complaint against

MMWC for breach of contract, based on five letters written in 2002 and 2005. Arbors

amended the complaint to allege MMWC’s claims were instead based on two 1997

annexation agreements (1997 Agreements) entered into between MMWC and previous

owners of Arbors’s property. The fifth amended complaint became the operative

complaint.

       Arbors appeals from summary judgment and an order sustaining a demurrer to the

fourth cause of action of the fifth amended complaint, in favor of defendants MMWC and

MMWC board of directors members, Andrew Holmes and James Orr (referred to

collectively as defendants). The trial court determined that Arbors had no enforceable

rights to water under the 1997 Agreements.

       Arbors contends the trial court erred in finding there was no express assignment of

the 1997 Agreements to subsequent property owners and Arbors could not enforce the

1997 Agreements because they were never recorded. Arbors also argues the trial court

erred in concluding the 1997 Agreements were terminated as a matter of law and because

there was a change in the intended development of Arbors’s property. Arbors further

asserts that the trial court erred in summarily adjudicating that Arbors failed to perform

the conditions precedent, necessary for issuance of water shares under the 1997

                                             2
Agreements, and in denying Arbors’s cross-motion for summary adjudication. As to

defendants’ demurrer, Arbors argues the trial court erred in sustaining without leave to

amend defendants’ demurrer to the fourth cause of action for tortious interference with

contract.

       After fully reviewing the record on appeal, we conclude Arbors has failed to raise

any material triable issues of fact and the trial court appropriately granted summary

judgment. The trial court also correctly sustained defendants’ demurrer to the fourth

cause of action without leave to amend. We affirm the judgment.

                                              II

                     FACTS AND PROCEDURAL BACKGROUND

       The material facts are essentially undisputed. It is how they are construed as a

matter of law that is at issue. The pertinent facts are as follows.

       MMWC is a mutual water company formed for the sole purpose of delivering

water at cost to residential property owners of the Meadowcreek subdivisions and

neighboring commercial properties, contained within the express service area of MMWC.

MMWC, on occasion, expanded the areas it served by entering into annexation

agreements with property owners outside MMWC’s express service area.

       Generally, each parcel within MMWC’s service area has one share of water stock

appurtenant to each parcel, entitling property owners to receive water service from

MMWC. MMWC permitted owners of larger parcels intended to be subdivided, to

receive multiple shares, with one share provided for each anticipated lot or interest in the

property. Shares of MMWC water stock confer water rights which run with the

                                              3
appurtenant property located within the designated MMWC service area and annexed

parcels adjacent to and near the Meadowcreek subdivisions.

The 1997 Annexation Agreements

       In 1997, MMWC’s attorney, David Baumwohl, drafted two annexation

agreements (the 1997 Agreements), which were essentially identical, with the exception

the agreements referred to different, adjacent, undeveloped parcels. One of the parcels

was owned by Peter Geris and his wife, Karen Geris, (Geris) and the other parcel was

owned by Kenneth Sample doing business as Inyo Crude, Inc. and Kenneth Sample’s

wife, Carole Sample (Sample).1 Arbors’s property is comprised of these two parcels (the

Property).

       In the process of drafting and executing the 1997 Agreements, MMWC obtained a

California Department of Corporations (DOC) permit for issuance of two shares of water

stock for the Property (one share per parcel). The two water shares were needed for

building a public storage facility, gas station, car wash, and mini mart, which Geris and

Sample (Geris/Sample) jointly planned to build on the Property. The Department of

Corporations (DOC) permit, dated December 30, 1996, allowing MMWC to issue two

water shares, was valid for one year.

       On January 2, 1997, Geris/Sample executed the 1997 Agreements. By letter dated

May 22, 1997, MMWC’s attorney, Baumwohl, retained Inyo-Mono Title Co. (IMT) to

assist Geris/Sample in carrying out the provisions of the 1997 Agreements. Attached to

       1 On May 8, 2002, Inyo Crude, Inc. conveyed the property to Kenneth Sample and
his wife, Carole Sample.

                                             4
Baumwohl’s letter requesting IMT to open escrow, were the two original 1997

Agreements signed by Geris and Sample. Baumwohl instructed IMT that, after

Geris/Sample complied with all of the terms and conditions under the 1997 Agreements,

IMT was authorized to record the 1997 Agreements.

       Baumwohl listed in his May letter the conditions Geris/Sample were required to

perform before IMT could record the 1997 Agreements. Those conditions included: (1)

the MMWC board of directors (Board) approving and ratifying the 1997 Agreements; (2)

MMWC obtaining the necessary DOC permits to issue two new water shares to

Geris/Sample, which would be deposited with IMT and delivered by IMT to

Geris/Sample simultaneously with recording; (3) before closing, Geris/Sample depositing

with IMT payment of IMT’s fees and MMWC’s costs incurred in connection with the

annexation; (4) issuance of a title insurance policy insuring the utility easements granted

by Geris/Sample to MMWC; and (5) Geris/Sample complying with the conditions stated

in paragraph 3 of the 1997 Agreements, with compliance confirmed in writing by

MMWC, before the 1997 Agreements were recorded. IMT was to record the easements

simultaneously with recording the 1997 Agreements.

       Paragraph 3 of the 1997 Agreements contained the following conditions precedent

to receiving water: (1) Geris/Sample recording a Notice of Completion of all delivery

and water storage systems by Geris/Sample; (2) MMWC’s approving of all items on the

Property for water distribution, supply, and delivery, (3) Geris/Sample paying MMWC

all fees, costs, expenses, and reimbursements incurred in connection with the 1997

Agreements; and (4) Geris/Sample granting MMWC the required utility easements.

                                             5
       In October 1997, IMT notified Baumwohl that IMT had not heard from

Geris/Sample. Baumwohl contacted Peter Geris, who informed him that Geris/Sample

was not going forward with the original project but was working on plans to develop a

hotel on the Property. Baumwohl then notified IMT of these circumstances and informed

IMT that, if the hotel project went forward, the 1997 Agreements would be modified,

primarily due to the increased need for water. Baumwohl further advised that “the

parties” had instructed that the matter be placed on hold “until we see what Peter Geris is

going to do with his property.” Geris testified at his deposition that he and Sample

changed their plan for developing the Property, from building a gas station, storage

facility, and mini-mart, to building a 40- and 61-unit hotel. However, Geris/Sample

ultimately decided not to proceed with the hotel project because they could not find a

hotel company willing to join in the project. Sample testified at his deposition that the

terms of the 1997 Agreements were never carried out because the Property was sold.

       The DOC permits for issuance of two MMWC water shares expired in December

1997, with no new shares of MMWC issued, and the 1997 Agreements were never

recorded. Due to a lack of activity, IMT discarded its escrow file for the Property

annexation, along with the two original 1997 Agreements.

New Residential Project Plan and Attempt to Annex Property

       Almost five years later, in August 2002, Peter Geris approached MMWC to

request water shares and a Will Serve Letter for water service for a new project plan to

develop the Property. The new project was for a 22-unit residential development

requiring 23 shares of water for 23 lots, which included one lot for the common area. In

                                             6
August 2002, Peter Geris sent Jim Orr, president of MMWC, a letter stating he was

applying for a zone change for the Property and therefore needed to designate who would

provide water for the Property. Peter Geris requested to meet with the MMWC Board to

discuss “the possibility of annexation” for purposes of obtaining water from MMWC.

Although he preferred to obtain water from MMWC, as a backup plan, Peter Geris was

considering developing his own water well system. Peter Geris wanted MMWC to

provide the county planning department with a Will Serve Letter by November 2002,

confirming that MMWC would provide water service for the Property. Peter Geris

testified during his deposition that he wrote the August 2002 letter because he wanted

MMWC to give him a concrete water connection fee amount for his project. Otherwise

he was going to build his own well.

       In December 2002, the MMWC Board met and approved providing water service

for Geris/Sample’s 22-unit condominium project, with a connection fee of $115,000. By

letter dated December 6, 2002, James Orr, president of MMWC, notified the county

planning department and Geris/Sample that the MMWC Board had recently agreed to

provide water service for Geris/Sample’s proposed 22-unit residential project on the

Property, conditioned upon Geris/Sample submitting engineering plans to MMWC,

MMWC approving the plans, and the recording of the final map for the Property, Tract

Map No. 238.

Arbors’s Purchase of the Property

       In September 2004, Geris/Sample sold their property to Arbors. Blaine Hansen

(Hansen) testified at his deposition that he formed Arbors, a limited liability company,

                                             7
and purchased the Property for the sole purpose of continuing with the development of

the 22-unit residential project. Hansen Construction Company, Inc. (Hansen

Construction) is the sole member of Arbors, and Hansen is the sole owner and principal

of Hansen Construction.

        At the time of purchase of the property, Hansen was aware that Geris/Sample had

entered into agreements with MMWC for water for the Property. However, Hansen was

unaware of the 1997 Agreements. Hansen testified that he did not see the 1997

Agreements until during Peter Geris’s deposition in March 2008, after the instant

complaint was filed in July 2007. He never saw the original 1997 Agreements, only

copies. Sample testified he never discussed the 1997 Agreements with anyone at Arbors

or provided anyone at Arbors with a copy of the 1997 Agreements when the Property was

sold.

        In November 2004, Hansen met with MMWC’s Board members for the purpose of

determining the connection fee. The Board indicated that MMWC would provide water

service and issue 23 water shares, conditional upon Arbors paying a $115,000 connection

fee, MMWC’s approval of the project’s water improvement plans, MMWC’s approval of

completion of the improvements by MMWC’s engineer, and recording and approval of

the final tract map 238 by the county. By letter dated January 26, 2005, from James Orr

of MMWC to Hansen, MMWC confirmed that it would issue 23 shares of water stock,

subject to the enumerated conditions precedent.

        The MMWC Board met in February 2005, discussed providing water for the

Arbors residential project, and sent Hansen a letter in March 2005, clarifying the January

                                            8
26, 2005 letter and additional factors. Specifically, the letter stated that the connection

fee was $115,000, it was to be paid before recordation of the final tract map, and Hansen

was to file the map within two years (by March 2, 2007). If this did not occur, MMWC

would reevaluate its agreement and understanding. In September 2005, Hansen paid the

$115,000 connection fee.

       In November 2005, MMWC sent property management company, VierraMoore,

Inc. (VierraMoore), a Will Serve Letter, stating that water would be provided to 22 lots

on the Property and that Arbors had paid a $115,000 connection fee. A final tract map

was recorded with the Inyo County Recorder in April 2006.

       In June 2006, MMWC sent a letter to the DOC, inquiring as to how to apply for

DOC approval of the 23 water shares for the Arbors project. Meanwhile, in 2006,

Hansen, through his attorneys, wanted to expedite annexation of the Property for

purposes of obtaining water for the project. By letter dated November 27, 2006,

Baumwohl told Hansen’s attorney, H.L. Koelewyn, that the MMWC Board had agreed to

work with Koelewyn in completing the requirements necessary to annex the Property and

obtain DOC permits for water shares. Baumwohl noted that Geris/Sample had previously

entered into agreements to annex the Property and obtain two shares for their planned

project. Baumwohl explained in the letter that Geris/Sample abandoned their project and

effort to obtain two water shares, resulting in the DOC permits for two water shares

expiring.

       Baumwohl further stated in his letter that he understood that Arbors wanted the

Department of Real Estate (DRE) to issue a White Report, which required Arbors to enter

                                              9
into an annexation agreement with the MMWC. Baumwohl enumerated the terms and

conditions that would be included in such an agreement. The annexation agreement

would be drafted after negotiating the terms of the agreement with Koelewyn and after

Arbors provided a deposit to cover the anticipated expenses.

       Rather than complying with Baumwohl’s instructions, Koelewyn suggested

circumventing the requirements outlined in Baumwohl’s letter by MMWC providing (1)

a Certificate of the State Director of Health Services and (2) a signed statement by an

engineer or from a public agency confirming the Property water supply and distribution

system had been examined and tested. These items were required for the DRE to issue a

White Report. Baumwohl responded that he had requested and would provide the two

items Koelewyn requested, but noted Arbors had failed to provide the items he had

requested. Baumwohl noted that Arbors was requesting 23 water shares and this required

a DOC permit. Application for the permit required Arbors to comply with the items

enumerated in Baumwohl’s November 2006 letter.

       In January 2007, Koelewyn told Baumwohl, he had still not received the requested

health certificate or engineering report. Koelewyn further stated that Arbors had paid the

$115,000 connection fee and constructed a water system, as required. Therefore Arbors

was entitled to 23 water shares, as promised. The only remaining condition was

MMWC’s approval of the utility easement, which was in MMWC’s possession.

Koelewyn claimed MMWC was delaying signing the easements in an attempt to delay

recording the map, which, in turn, prevented issuance of the water stock. Koelewyn

concluded in his letter that Arbors had fully performed its part of the bargain and

                                            10
therefore MMWC was required to issue the promised water shares. Delay in doing so

was jeopardizing Arbors’s financing.

      In response, Baumwohl provided Koelewyn with the requested health certificate

and engineering report. Baumwohl explained that MMWC could not issue the water

stock until it obtained permits from the DOC. This required Arbors to comply with

various requirements, previously enumerated, which Arbors had not addressed.

Koelewyn claimed Arbors had complied with all required terms and conditions and,

contrary to Baumwohl’s assertion, Arbors was not required to pay for fees and costs

involved in obtaining the DOC permits. Koelewyn added that Arbors would “execute an

annexation agreement if the terms are reasonable.”

      By letter dated January 19, 2007, Baumwohl responded that it appeared that

Arbors believed MMWC’s January 26, 2005 letter constituted an agreement to supply

Arbors with 23 water shares. Baumwohl stated that there was only a “tentative

agreement,” in which there was an understanding that, (1) if Arbors paid the $115,000

connection fee, MMWC would provide water service, (2) the understanding was subject

to compliance with the law and satisfaction of all applicable conditions precedent before

water shares would be issued and water service provided, and (3) the parties must reach

agreement on completing the required tasks and satisfying the conditions precedent.

Baumwohl noted that Koelewyn had enclosed with his previous correspondence a copy

of a letter from MMWC to Geris/Sample, dated December 6, 2002. Baumwohl asked

why the letter was relevant, noting that Geris/Sample had entered into the 1997

Agreements for two water shares but the 1997 Agreements were never recorded or

                                            11
carried out. Baumwohl said that it was MMWC’s understanding Geris/Sample

abandoned their project in late 1997.

       Baumwohl further stated in his letter: “We have no information regarding any

further developments between Geris/Sample and the Water Company from late 1997

until the December 6, 2002 letter. It appears by way of that letter that Geris/Sample were

starting the process for a new project indentified as Tentative Tract Map No. 238. In

connection therewith, they were seeking a commitment from the Water Company to

supply water. [¶] Nothing happened for almost two years, and the Water Company sent

a letter to Geris referencing the Arbors project, dated October 29, 2004.” Arbors became

involved in the project thereafter.

       Baumwohl notes in his lengthy, detailed letter that there was no express agreement

between Arbors and MMWC concerning the nature, extent, and scope of initial and

ongoing obligations of Arbors and MMWC. He concludes that “There must be an

express agreement between the parties dealing with the necessary issues . . . . [T]his is

why we have proposed the comprehensive Annexation Agreement.” Baumwohl

explained that MMWC would have to amend its Articles of Incorporation to provide for

the 23 shares, and this required shareholder approval. Before this could occur, the parties

were required to enter into an annexation agreement. Then MMWC could apply for

permits for issuance of water shares from the DOC.

       According to Baumwohl, MMWC was willing to assist Arbors in annexing its

property for water service. Any existing agreement between the parties was tentative and

required shareholder approval. MMWC was willing to share the necessary administrative

                                            12
costs with Arbors. In the alternative, MMWC was willing to rescind the tentative

agreement and return the connection fee funds to Arbors or mediate the matter with a

professional mediator. Baumwohl thanked Arbors for its willingness to enter into an

annexation agreement, which Baumwohl would begin drafting immediately, with

Koelewyn’s input.

      Koelewyn responded that, “With regard to the annexation, my client has no

objection to an annexation with reasonable provisions presumably as set forth in the

Amendment to the CC&R’s.” In February 2007, Baumwohl informed Koelewyn that

MMWC had authorized going forward with drafting an annexation agreement.

Baumwohl reiterated that the parties currently only had a “tentative agreement.”

Baumwohl also stated that, although it was previously believed MMWC shareholder

approval was required for issuance of the 23 water shares, Baumwohl discovered this was

not necessary.

      In March 2007, Baumwohl provided Koelewyn with a draft annexation agreement

for review. In April, Baumwohl sent Koelewyn a letter stating he had not received any

response from Koelewyn regarding the draft annexation agreement. Baumwohl said he

had heard that Hansen had said there was “no way” he was going to sign the agreement

and, if the water stock was not delivered, he would sue. Baumwohl advised Koelewyn

that Arbors was legally required to enter into a written agreement containing the material

terms and provisions set forth in the proposed annexation agreement before MMWC

could apply for DOC permits and issue water stock. Since Hansen was not willing to

cooperate and execute an annexation agreement, Baumwohl concluded there was nothing

                                            13
MMWC could do to assist Arbors with its project. MMWC therefore refunded the

$115,000 connection fee. Baumwohl stated there currently was no enforceable

agreement to issue water shares. Nevertheless, MMWC was willing to resume the

process of providing Arbors with water service, but not unless the parties entered into an

annexation agreement.

       In May 2007, Koelewyn sent property management company, VierraMoore, a

letter advising that the following letters constituted an agreement between MMWC and

Arbors, requiring MMWC to issue stock and provide water:

1.     Letter dated December 6, 2002, from MMWC to Inyo County Planning

       Department, stating that the MMWC board had agreed to provide water service for

       the 22-unit project, subject to various conditions precedent.

2.     Letter dated December 6, 2002, from MMWC, notifying Geris/Sample that the

       connection fee would be $115,000 for the 22-unit project.

3.     Letter dated January 26, 2005, from MMWC to Hansen, in which MMWC

       confirmed that it would issue 23 shares of water stock, subject to certain

       conditions precedent.

4.     Letter dated July 21, 2005, from MMWC to Inyo County Planning Department,

       stating that Hansen was required to pay MMWC a $115,000 connection fee prior

       to recordation of final tract map No. 238.

5.     Letter dated December 2, 2005, from Hansen to MMWC, stating that Hansen had

       paid the $115,000 connection fee.

6.     Letter dated December 13, 2005, from MMWC to Hansen, acknowledging

                                            14
      receipt of payment of the $115,000 connection fee.

      In May 2007, Koelewyn also sent Baumwohl a letter stating that he had been out

of the country and Hansen had not refused to sign the annexation agreement. Rather,

Hansen wanted the annexation agreement to comport with the terms stated in the letters

from MMWC to Hansen, Geris, and the county planning and water departments.

Koelewyn asserted that Arbors had fully complied with the agreed upon terms and

MMWC had failed to perform as promised. Arbors had no intention of allowing MMWC

to rescind its agreement. Koelewyn provided Baumwohl with a revised annexation

agreement. Thereafter, the parties attempted to negotiate the terms of the annexation

agreement, to no avail.

      In June 2007, Baumwohl sent Koelewyn a letter declaring that the parties had

reached an impasse because Arbors did not want to include in the annexation agreement a

General Release and Waiver of Claims provision. As a consequence, Hansen could not

get a White Report,2 which required establishing water service for the Property. In turn,

Hansen could not build homes on the Property, which led to foreclosure in April 2010.

Original Complaint

      On July 16, 2007, Arbors filed a verified complaint against MMWC, alleging

causes of action for (1) specific performance, (2) damages based on breach of contract,


      2  A White Report, also known as a White Paper, is a Final Subdivision Public
Report issued by the Real Estate Commissioner. (Sumner Hill Homeowners’ Assn., Inc.
v. Rio Mesa Holdings, LLC (2012) 205 Cal.App.4th 999, 1006; Sequoia Park Associates
v. County of Sonoma (2009) 176 Cal.App.4th 1270, 1292; ABI, Inc. v. City of Los
Angeles (1984) 153 Cal.App.3d 669, 675-676; Bus. & Prof. Code, § 11018.2.)

                                            15
and (3) injunctive relief. Arbors’s original verified complaint alleged that Geris entered

into an annexation agreement for water with MMWC in 1997, but Peter Geris changed

the development project. Geris and MMWC entered into a letter agreement dated

December 6, 2002 (attached to the complaint), in which Geris was to pay a $115,000

connection fee and MMWC agreed to annex the Property, provide water, and issue 23

shares of stock. In late 2004, Arbors purchased the Property. Before purchasing the

Property, Arbors confirmed with MMWC that MMWC would provide water service to

the Property, conditioned upon payment of a $115,000 connection fee. Arbors entered

into an agreement with MMWC that MMWC would provide water to the Property, annex

the Property for water service, and issue 23 shares of stock to Arbors, conditioned upon

Arbors fulfilling various conditions precedent. The agreement was evidenced by letters

dated January 26, 2005, and March 2, 2005, from MMWC to Hansen. Arbors complied

with the conditions precedent. MMWC allegedly breached the agreement by failing to do

what was necessary for issuance of the water shares and annexation of the Property for

water service.

First Amended Complaint

       In October 2008, the trial court granted Arbors leave to amend the complaint.

Hansen Construction was added as a coplaintiff and MMWC Board members, James Orr

and Andrew Holmes, were added as defendants. The amended complaint was founded

entirely on the 1997 Agreements, as opposed to the alleged letter agreements relied on in

the original complaint.



                                            16
       After several demurrers and motions to strike, the fifth amended complaint (FAC)

became the operative complaint.

Demurrer to Fifth Amended Complaint and Summary Judgment

       The fifth amended complaint against MMWC, Orr, and Holmes, alleged the

following causes of action: (1) breach of contract, (2) breach of fiduciary duty of director

toward subscriber, (3) fraud in performance of annexation agreement, (4) tortious

interference with contractual relations, and (5) breach of the covenant of good faith and

fair dealing. Arbors alleged that in 2002, the owners of the Property changed the

proposed development plan for the Property. MMWC approved the change in 2002 and

determined that 23 water shares would be required. The 1997 Agreements were intended

to inure to the benefit of successor owners of the Property, such as Arbors.

       Arbors further alleged that, on January 25, 3005, MMWC confirmed that Arbors

was entitled to receive performance of the 1997 Agreements, which became effective

immediately upon execution, without recordation. MMWC was required to qualify and

issue 23 shares of water stock to Arbors, and deliver water to the Property, subject to

conditions precedent, which Arbors had performed. MMWC breached the 1997

Agreements by failing to apply for DOC stock permits, failing to provide the shares to

Arbors, repudiating the 1997 Agreements in January 2007, refusing to perform the 1997

Agreements in April 2007, and interfering with Arbors’s performance under the 1997

Agreements, including causing a delay in preparation of a required easement. Plaintiffs

further alleged that defendants breached their fiduciary duty to Arbors under the 1997

Agreements, as a subscriber of MMWC stock, and committed fraud by concealing their

                                            17
intent not to perform the 1997 Agreements and deceiving Arbors as to defendants’

nonperformance. In addition, Arbors alleged in the fourth cause of action that defendants

interfered with Arbors’s agreements with third parties to develop the Property, sell the

units, and obtain financing and insurance.

       The trial court overruled defendants’ demurrer to the FAC, with the exception of

the demurrer to the fourth cause of action for tortious interference with contractual

relations. As to that cause of action, the court sustained the demurrer without leave to

amend.3 After answering the FAC, defendants filed a motion for summary judgment or,

alternatively, summary adjudication. Arbors filed a cross-motion for summary

adjudication. The trial court granted defendants’ motion for summary judgment, denied

Arbors’s motion for summary adjudication, and entered judgment for defendants and

against Arbors. The trial court concluded it was undisputed Arbors had no claim arising

from, or standing under, the 1997 Agreements.

                                              III

                  SUMMARY JUDGMENT STANDARD OF REVIEW

       “[T]he party moving for summary judgment bears the burden of persuasion that

there is no triable issue of material fact and that he is entitled to judgment as a matter of

law.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 (Aguilar), fn.

       3 Defendants’ demurrers as to Hansen Construction’s claims ultimately were all
sustained without leave to amend, resulting in entry of a judgment of dismissal against
Hansen Construction. This court affirmed the trial court judgment against Hansen
Construction in a separate, prior appeal (Hansen Construction, Inc. v. Meadowcreek
Mutual Water Company, Inc. (Oct. 18, 2012, E053620) [nonpub. opn.].) Hansen
Construction is not a party to this appeal.

                                              18
omitted.) “Once the [movant] has met that burden, the burden shifts to the [other party]

to show that a triable issue of one or more material facts exists as to that cause of action

. . . .” (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar, at p. 850.) The party opposing

summary judgment “may not rely upon the mere allegations or denials of its pleadings,”

but rather “shall set forth the specific facts showing that a triable issue of material fact

exists . . . .” (§ 437c, subd. (p)(2).) A triable issue of material fact exists where “the

evidence would allow a reasonable trier of fact to find the underlying fact in favor of the

party opposing the motion in accordance with the applicable standard of proof.” (Ibid.)

We affirm summary judgment where it is shown that no triable issue of material fact

exists and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc.,

§ 437c, subd. (c).) Where summary judgment has been granted, we review the trial

court’s ruling de novo. (Aguilar, at p. 860.)

                                              IV

                   ENFORCEABILITY OF THE 1997 AGREEMENTS

       The pivotal issue here is whether the 1997 Agreements were abandoned or

modified before Arbors purchased the Property. We conclude Arbors has not provided

evidence refuting that the 1997 Agreements were abandoned before Arbors purchased the

Property. Arbors has thus not met its burden of establishing that a reasonable trier of fact

would find that Arbors had enforceable rights under the 1997 Agreements.

       In considering whether the 1997 Agreements were terminated or modified, we first

look to the terms of the 1997 Agreements. Paragraph 2 of the 1997 Agreements state that

“[t]he covenants, conditions, terms, and promises set forth herein are to run with the land

                                              19
of OWNER and shall be binding upon and be a benefit to all parties and all persons or

entities claiming under each of the parties until termination of any such provision in

writing by the parties or any persons or entities claiming under them.” (Italics added.)

Similarly, modification of the 1997 Agreements also was required to be in writing.

Paragraph 10.4 of the 1997 Agreements states: “Any modifications to this Agreement

shall be of no force or effect unless made in writing and signed by the party to be

charged.”

       Termination of a contract differs from modification of a contract in that, “[a]n

‘alteration’ is a modification or change in one or more respects which introduces new

elements into the details of the contract, or cancels some of them, but leaves the general

purpose and effect undisturbed. [Citations.] To ‘terminate’ a contract, on the other hand,

means to abrogate so much of it as remains unperformed, thereby doing away with the

existing agreement upon the terms and with the consequences agreed upon. [Citation.]

This distinction has been frequently applied by the California courts, and it is now well

settled that the termination or abrogation of a written contract may be achieved by an oral

agreement, whether executed or not, and that in such a case section 1698 of the Civil

Code has no application.” (Grant v. Aerodraulics Co. (1949) 91 Cal.App.2d 68, 74-75.)

Civil Code section 1698 provides that a contract in writing may be altered by a contract

in writing, or by an executed oral agreement, and not otherwise. (See also Grant, at p.

75.)

       Here, it is undisputed MMWC and Geris/Sample did not execute any written

agreement to terminate or modify the 1997 Agreements. The absence of such a written

                                            20
agreement, however, does not preclude the possibility of extinguishment of the 1997

Agreements by abandonment. Abandonment differs from the parties expressly agreeing

to terminate or modify the 1997 Agreements. “[A]bandonment requires a finding that

both parties intended to disregard the contract, and abandonment may be implied from

the acts of the parties. [Citations.]” (C. Norman Peterson Co. v. Container Corp. of

America (1985) 172 Cal.App.3d 628, 643.) “‘[A]bandonment requires a finding that both

parties intended to disregard the contract.’ ([C. Norman Peterson Co. v. Container Corp.

of America,] at p. 643; Ben-Zvi v. Edmar Co. (1995) 40 Cal.App.4th 468, 474

[‘Abandonment occurs . . . only where both contracting parties agree “that the contract is

terminated and of no further force and effect”’].)” (Amelco Electric v. City of Thousand

Oaks (2002) 27 Cal.4th 228, 236.)

       Here, after entering into the 1997 Agreements, Geris/Sample substantially

changed the scope of the development plan for the Property by proposing to build a 22-

unit condominium project on the Property, which required 23 water shares. The original

project required only two water shares and was a commercial development, rather than

residential. Acknowledging this significant change, MMWC and Geris/Sample began

negotiations and entered into a new tentative agreement for annexation and issuance of

water stock, instead of modifying the existing 1997 Agreements. There is no evidence of

Geris/Sample and MMWC relying on or modifying the 1997 Agreements in connection

with the 22-unit residential project.

       “‘“There can be no question that a contract can be mutually abandoned by the

parties at any stage of their performance and each of the parties released from any further

                                            21
obligation on account thereof; that it may be done by parol, and the fact of its having

been done established by evidence of the acts and declarations of the parties.”’” (Martin

v. Butter (1949) 93 Cal.App.2d 562, 566.) Arbors has not presented any evidence

refuting that the parties to the 1997 Agreements abandoned the agreements before Arbors

purchased the Property. MMWC and Geris/Sample’s acts and declarations establish that

they were not relying on the 1997 Agreements when they discussed annexation and

issuance of shares for the newly proposed development plan of building a 22-unit

residential project on the Property. “While the question of abandonment is one of

intention to be determined only upon an investigation of all the facts and circumstances,

still where there is no dispute as to the facts or the inferences to be drawn therefrom the

question becomes one of law.” (Herbert v. Graham (1925) 72 Cal.App. 314, 316;

Templar Mining Co. v. Williams (1937) 23 Cal.App.2d 45, 51.) Here, there is no dispute

as to the material facts relevant to the determination of whether Geris/Sample abandoned

the 1997 Agreements.

       Arbors argues there is a triable issue of fact as to whether the 1997 Agreements

were abandoned, because the 1997 Agreements do not include termination dates, there

are no due dates for performance or completion, and there are no “time is of the essence”

clauses. Therefore, a reasonable time for performance was permitted under the 1997

Agreements. Civil Code section 1657 provides: “If no time is specified for the

performance of an act required to be performed, a reasonable time is allowed. If the act

is in its nature capable of being done instantly – as, for example, if it consists in the

payment of money only – it must be performed immediately upon the thing to be done

                                              22
being exactly ascertained.” “What constitutes such a reasonable time ordinarily presents

a question of fact, dependent upon the circumstances of the case. [Citation.]” (Kotler v.

PacifiCare of California (2005) 126 Cal.App.4th 950, 956.)

       “[T]he standard of reasonableness applicable in this case is a conventional one,

derived from ‘the situation of the parties, the nature of the transaction, and the facts of the

particular case’ [citation].” (Kotler v. PacifiCare of California, supra, 126 Cal.App.4th

at p. 956.) Based on the terms within the four corners of the 1997 Agreements, as well as

the undisputed facts of this case and nature of the transaction to provide water for the

Property, we conclude the evidence would not allow a reasonable trier of fact to find the

1997 Agreements were performed within a reasonable time. (Aguilar, supra, 25 Cal.4th

at p. 850.) The 1997 Agreements specify that “The parties shall use due diligence and

their best efforts to annex the property of OWNER to the WATER COMPANY.”

Although not expressly stated, this suggests time was of the essence in performing the

1997 Agreements. Geris/Sample’s inactivity for approximately five years cannot be said

to constitute due diligence in carrying out the terms and conditions of the 1997

Agreements. Rather, such inactivity reflected abandonment, as concluded by IMT, the

escrow company responsible for assisting Geris/Sample with annexation of the Property

under the 1997 Agreements.

       When IMT asked Baumwohl in October 1997 what the status was on annexing the

Property, Baumwohl advised IMT that the matter was on hold because Geris/Sample was

not going forward with the original project and was considering a new project of building

a hotel on the Property. The hotel project also never went forward, because Geris could

                                              23
not find a hotel company that would join in the project. Geris/Sample’s efforts to annex

the Property under the 1997 Agreements languished for several years. Because of this

inactivity for a relatively lengthy period of time, IMT assumed Geris/Sample had

abandoned their efforts to annex the Property under the 1997 Agreements. IMT

discarded its escrow file for the Property annexation, along with the two original 1997

Agreements. The DOC permits for issuance of two MMWC shares also expired in

December 1997, with no new shares of MMWC issued, and the 1997 Agreements were

never recorded.

       It was not until about five years later, in 2002, that Geris/Sample began

negotiating a new annexation agreement for an entirely different project, which was a

residential project, rather than a commercial project, and required 23 water shares instead

of two water shares. There is no evidence indicating either MMWC or Geris/Sample

relied on the 1997 Agreements or believed the 1997 Agreements remained binding and

enforceable regarding the new project. This is apparent from evidence that, in August

2002, Peter Geris approached MMWC to request water shares and a Will Serve Letter for

water for his new project plan to build 22 residential units. Peter Geris’s letter to

MMWC, dated August 29, 2002, stated that he was applying for a required zone change

for the Property and therefore needed to designate who would provide water for the

Property. Peter Geris requested to meet with the MMWC Board to discuss “the

possibility of annexation” for purposes of obtaining water from MMWC. Peter Geris

stated that he preferred to obtain water from MMWC but, as a backup plan, was

considering developing his own water well system.

                                             24
       The August 2002 letter shows that Peter Geris did not believe the 1997

Agreements remained in effect or were still binding on the parties. Peter Geris indicated

he was not required to annex the Property under the 1997 Agreements or receive water

from MMWC. Geris/Sample were considering building their own water well in the event

the connection fee and water service charges were too high. Geris testified during his

deposition that he wrote the August 2002 letter because he wanted MMWC to give him a

concrete, reasonable connection fee amount for his project. Otherwise Geris was going

to build his own well. There is simply no evidence that the negotiations, discussions, and

agreements between MMWC and Geris/Sample commencing in 2002, regarding the new

22-unit project, were founded on the 1997 Agreements. The parties did not mention the

agreements and all communications indicated the parties intended to create a new

annexation agreement.

       Furthermore, Sample testified at his deposition that the terms of the 1997

Agreements were never carried out because the Property was sold. Sample also testified

he never discussed the 1997 Agreements with Arbors or provided a copy of the 1997

Agreements to Arbors when the Property was sold. Hansen acknowledged he never even

saw the 1997 Agreements until after he had filed the complaint in this case. Hansen

testified he did not see copies of the 1997 Agreements until during Geris’s deposition in

March 2008. Furthermore, Hansen never saw the original 1997 Agreements, since IMT

discarded them because of the parties’ inactivity.

       The instant lawsuit arose from a dispute between Arbors and MMWC over

whether negotiations and letter agreements relating to the 22-unit project constituted an

                                            25
enforceable agreement requiring MMWC to annex the Property and provide 23 water

shares. Hansen initially argued that the letter agreements constituted a binding agreement

to annex the Property and issue 23 water shares. MMWC argued there was no formal,

signed agreement by the parties, which was legally required in order to annex the

Property and provide water service. Eventually, Hansen agreed to consider executing an

annexation agreement but then refused to sign the proposed annexation agreement drafted

by Baumwohl, because the agreement included a General Release and Waiver of Claims

provision, which Hansen did not want included in the annexation agreement.

      When it became apparent that the parties could not resolve their differences,

Hansen brought the instant lawsuit, which was founded on MMWC’s 2002 and 2005

letters, stating that MMWC would agree to annexation and providing water service

subject to the Property owner’s compliance with various conditions precedent. It was not

until almost a year after Hansen filed this action, that Hansen viewed a copy of the 1997

Agreements, retained a new attorney, and completely changed the theory of his case, and

amended the complaint to allege that MMWC was contractually obligated to annex the

Property, issue 23 water shares, and provide water service based on the 1997

Agreements.

      Based on our review of the totality of the evidence, we conclude it is undisputed

that Geris/Sample and defendants did not diligently attempt to annex the Property under

the 1997 Agreements after Geris/Sample dropped their initial projects in 1997. Instead,

for approximately five years, Geris/Sample discontinued their efforts to annex the

Property. There is no evidence showing that, when they initiated efforts to annex the

                                            26
Property for water service in 2002, either MMWC or Geris/Sample had any intention of

relying on or modifying the 1997 Agreements in connection with the new 22-unit project.

The undisputed evidence shows that, as a matter of law, Geris/Sample and MMWC

abandoned the 1997 Agreements by nonaction and a lack of due diligence in performing

the 1997 Agreements’ terms and conditions. The evidence further demonstrates that in

2002, Geris/Sample initiated completely new negotiations for annexation and water

service for the 22-unit project, and the negotiations were not in any way founded on the

abandoned 1997 Agreements.

       Arbors argues it has standing to enforce the 1997 Agreements terms and

conditions as a successor-in-interest and assignee of Geris/Sample’s interest in the

Property. Paragraph 2 of the 1997 Agreements state that “It is the express intent of the

parties hereto that the covenants, conditions, promises, and obligations set forth herein be

made for the express benefit of the WATER COMPANY, its shareholders, and the

properties benefitted by the creation and existence of the WATER COMPANY, and with

the express intent to bind and benefit OWNER, the property of OWNER, and the

successors-in-interest, heirs, and assigns of each of the parties hereto. The covenants,

conditions, terms, and promises set forth herein are to run with the land of OWNER and

shall be binding upon and be a benefit to all parties and all persons or entities claiming

under each of the parties . . . .” (Italics added.) Paragraph 10.5 of the 1997 Agreements

states: “This Agreement shall be binding upon and inure to the benefit of the . . .

successors, and assigns of each of the parties hereto.”



                                             27
       These provisions do not provide Arbors with standing or rights under the 1997

Agreements because the 1997 Agreements were extinguished through Geris/Sample’s

abandonment of the 1997 Agreements before the Property was sold to Arbors in 2004.

Since at the time of Arbor’s purchase of the Property, Geris/Sample had no enforceable

contractual rights under the 1997 Agreements, Arbors likewise, as a matter of law,

received no contractual rights under the abandoned 1997 Agreements and was never a

party to the 1997 Agreements. Arbors thus has no standing to enforce the abandoned,

extinguished 1997 Agreements.

       All other issues raised in Arbors’s appeal, such as whether the 1997 Agreements

were unenforceable because they were not recorded, whether the covenants in the 1997

Agreements ran with the land, whether the 1997 Agreements were enforceable even

assuming the covenants did not run with the land, whether Arbors fully performed all of

the conditions precedent required under the 1997 Agreements, and whether Arbors was

required to comply with Corporations Code section 14312,4 are moot and therefore need

not be addressed in this decision because Arbors’s entire complaint is founded on the

1997 Agreements, which we conclude are unenforceable as a matter of law, since




       4  Corporations Code section 14312, subdivision (a), provides in relevant part:
“(a) Any person who intends to offer for sale or lease lots within a subdivision within this
state and to provide water for domestic use to purchasers of the lots within a subdivision
through the formation of a mutual water corporation described in Section 14311, shall
include as part of the application for a public report, as described in Section 11010 of the
Business and Professions Code, a separate document containing all of the following
information, representations, and assurances . . . .”

                                            28
Geris/Sample abandoned the agreements. Also, as a nonparty to the 1997 Agreements,

Arbors has no standing to enforce the 1997 Agreements.

       Arbors has not established any disputed material issue of fact. It is unrefuted that

Arbors cannot prevail on any of its causes of action, which are all founded on the

abandoned 1997 Agreements. The trial court therefore appropriately granted summary

judgment against Arbors.

                                             V

                 DEMURRER TO THE FOURTH CAUSE OF ACTION

       In July 2007, Arbors filed a verified complaint alleging breach of contract. The

alleged contract was memorialized in five letters attached to the complaint, which Arbors

alleged formed an agreement that MMWC would provide water services for the Property.

In October 2008, the trial court granted Arbors leave to amend the complaint. The first

amended complaint and subsequent amended complaints were founded on the 1997

Agreements, instead of the contract allegedly derived from the five letters attached to the

original complaint.

       After several additional demurrers and motions to strike, the FAC became the

operative complaint. The trial court overruled defendants’ demurrer to the FAC, with the

exception of defendants’ demurrer to the fourth cause of action for tortious interference

with contractual relations (interference with contract). As to that cause of action, the




                                             29
court sustained the demurrer without leave to amend.5 Arbors challenges the ruling in

this appeal.

       Arbors and Hansen Construction (plaintiffs) alleged in the fourth cause of action

for interference with contract that Arbors entered into the following agreements to further

the development and sale of units built on Arbors’s property: (1) a development loan

agreement and a line of credit agreement between Arbors and Colonial Bank; (2) a policy

of liability insurance issued to Arbors by Westchester Surplus Lines; (3) three purchase

notes; and (4) reservation agreements with prospective purchasers of the units.

Defendants allegedly knew of these third-party construction and development-related

agreements, and interfered with the contracts by committing acts in breach of fiduciary

duties and fraud in the performance of the 1997 Agreements. The complaint alleges that

“The allegations with respect to the Defendants’ conduct apply to both Plaintiffs in the

same way, and Plaintiffs ARBORS and HC properly join together as plaintiffs in this

Cause of Action.”

       Plaintiffs further alleged in the fourth cause of action that defendants’ alleged

interference with Hansen’s contracts included (1) thwarting Hansen’s development of the

Arbors project until Arbors was coerced into modifying the annexation agreements, (2)

exploiting for the benefit of Triad and Holmes Associates, an undisclosed conflict of

       5 Defendants’ demurrers to Hansen Construction’s claims ultimately were all
sustained without leave to amend, resulting in entry of a judgment of dismissal against
Hansen Construction. This court affirmed the trial court judgment against Hansen
Construction in a separate, prior appeal (Hansen Construction, Inc. v. Meadowcreek
Mutual Water Company, Inc. (Oct. 18, 2012, E053620) [nonpub. opn.]). Hansen
Construction is not a party to this appeal.

                                             30
interest of Holmes as an officer of both MMWC and Triad, (3) concealing defendants’

lack of performance of the annexation agreements, (4) concealing that MMWC lacked

the water shares needed to transfer to Arbors, (5) colluding with Triad and Holmes in

repudiating the annexation agreements, (6) delaying work required by MMWC for the

provision of water on the property, and (7) breaching the annexation agreements.

       In Hansen Construction’s separate appeal, this court affirmed the trial court’s

ruling sustaining without leave to amend defendants’ demurrer to the fourth cause of

action of the fifth amended complaint (Hansen Construction, Inc. v. Meadowcreek

Mutual Water Company, Inc. (Oct. 18, 2012, E053620) [nonpub. opn.].) This court

concluded Hansen Construction had no standing as either a party or third party

beneficiary under the 1997 Agreements to maintain causes of action for breach of

contract and fraud in the performance of contract (the first and third causes of action).

We explained in our decision that nothing in the 1997 Agreements was intended to

benefit the builder, Hansen Construction. Any benefits that Hansen Construction might

receive from developing the Property, would be incidental.

       This court also concluded in our previous decision that Hansen did not allege

sufficient facts demonstrating that defendants knew about the third-party contracts or

intentionally interfered with them. Hansen Construction argued the alleged acts of

intentional interference included defendants’ concealment and collusion between

MMWC and Triad, with Holmes exploiting his role as an officer of both Triad and

MMWC. We concluded that, as to interference with Hansen Construction’s construction-

related contracts, the complaint made conclusionary allegations that defendants

                                             31
intentionally interfered with those contracts without alleging any supporting facts.

Hansen Construction also failed to allege any facts that it suffered damages from

interference with each of the contracts. These same deficiencies in the fourth cause of

action apply equally to Arbors.

A. Standard of Review

       We review de novo the trial court’s rulings sustaining defendants’ demurrers

without leave to amend. (Schauer v. Mandarin Gems of California, Inc. (2005) 125

Cal.App.4th 949, 955.) “‘[W]e give the complaint a reasonable interpretation, and treat

the demurrer as admitting all material facts properly pleaded, but not the truth of

contentions, deductions or conclusions of law. We reverse if the plaintiff has stated a

cause of action under any legal theory. [Citation.]’” (Ibid., quoting Barnett v. Fireman’s

Fund Ins. Co. (2001) 90 Cal.App.4th 500, 507.)

B. Analysis

       Arbors briefly, in two paragraphs, argues that the trial court erred in sustaining

defendants’ demurrer to the fourth cause of action. Arbors asserts that the fourth cause of

action is proper because it is based on acts which are independent of the breach of

contract between Arbors and MMWC. The fraud claim is based on defendants’ alleged

concealment of MMWC’s failure to seek qualification of the water shares and

concealment of defendants’ intent to repudiate the 1997 Agreements. The breach of

fiduciary duty is based on defendants’ alleged collusion and exploitation of a conflict of

interest by Holmes, who was on the MMWC Board while acting as Arbors’s engineer.



                                             32
This conflict allegedly enabled the engineering company and MMWC to conceal their

wrongful conduct.

         “The elements which a plaintiff must plead to state the cause of action for

intentional interference with contractual relations are (1) a valid contract between

plaintiff and a third party; (2) defendant’s knowledge of this contract; (3) defendant’s

intentional acts designed to induce a breach or disruption of the contractual relationship;

(4) actual breach or disruption of the contractual relationship; and (5) resulting damage.

[Citations.]” (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118,

1126.)

         As we concluded in Hansen Construction’s separate appeal, plaintiffs did not

allege sufficient facts demonstrating that defendants knew about the third-party contracts

or intentionally interfered with them. As to interference with Arbors’s construction-

related contracts, Arbors has made conclusionary allegations that defendants intentionally

interfered with those contracts but has not alleged any supporting facts. Arbors also has

not alleged any facts that it suffered damages from interference with each of the

contracts. Arbors’s allegations of interference are premised on allegations incorporated

from the second and third causes of actions, but those causes of action are premised on

the 1997 Agreements, which Arbors had no standing to enforce.




                                              33
                                         VI

                                   DISPOSITION

     The judgment is affirmed. Defendants are awarded their costs on appeal.

     NOT TO BE PUBLISHED IN OFFICIAL REPORTS

                                                          CODRINGTON
                                                                               J.

We concur:


RAMIREZ
                     P. J.


MILLER
                        J.




                                        34
