Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County No. 05CC01853 Franz E. Miller, Judge.
Law Office of Kathryn M. Davis and Kathryn M. Davis; Yocca Law Firm and Mark W. Yocca, for Defendant, Cross-complainant, and Appellant.
Grant, Genovese & Baratta, David C. Grant and Cindy M. Chon, for Plaintiff, Cross-defendant, and Respondent.
OPINION
IKOLA, J.
Defendant Microsemi Real Estate, Inc., appeals from a judgment for plaintiff Malcolm Carter Enterprises on plaintiff’s complaint and defendant’s cross-complaint for declaratory relief. Defendant had leased a parcel of real estate from plaintiff, with a 30-year purchase option. The option agreement provided the option would expire 90 days after plaintiff obtained a letter from the appropriate governmental agency stating that no further action was needed to remediate environmental conditions “on the Property as set forth in” the agreement and lease. After a bench trial, the court found plaintiff had triggered the expiration period by obtaining such a letter.
Defendant contends the court deprived it of its right to a jury trial. Defendant also claims the court ignored extrinsic evidence showing the parties had intended that the expiration period would be triggered by a “No Action Letter” clearing the property of all environmental conditions.
We affirm. Defendant was not entitled to a jury trial on the declaratory relief claims. In these claims, the parties sought only an equitable declaration construing the option agreement, not damages for breach of contract. No jury was needed to hear these claims. Nor was a jury required to consider conflicting extrinsic evidence. Defendant’s extrinsic evidence was inadmissible because it was offered to support an interpretation to which the option agreement was not reasonably susceptible. This was a legal question for the court to decide. And the court correctly found the option agreement provided its expiration would be triggered by plaintiff’s letter.
FACTS
The Option Agreement
In 1996, plaintiff leased to defendant a two-acre parcel of real property in Santa Ana (parcel 17). Parcel 17 had been subdivided from a 6.9 acre parcel located at 3131 West Segerstrom Avenue, also known as the RBC property. Parcel 17 shared the 3131 West Segerstrom Avenue address until 1999, when it became known as 3101 West Segerstrom Avenue. Thus the lease, until later amended, described parcel 17 as 3131 West Segerstrom Avenue. Along with the lease, the parties entered into a written agreement giving defendant an option to purchase parcel 17 during the lease term.
But the option agreement provided the option would terminate “ninety (90) days after [plaintiff] obtains a ‘No Action Letter’ (as defined below)....” The agreement briefly described that letter: “[plaintiff] shall obtain a ‘no further action’ or other similar letter from the appropriate governmental agency (‘No Action Letter’) upon [plaintiff’s] completion of the remediation of the environmental conditions on the Property as set forth in this Agreement or in the Lease.”
Nowhere are any “environmental conditions on the Property” “set forth in this Agreement or in the Lease.” The agreement does not define “environmental conditions, ” attach an exhibit listing any environmental conditions, or contain a section entitled “Environmental Conditions.”
The option agreement does refer — repeatedly — to an environmental report. It includes the following sections.
“4.2. Environmental Report.
Prior to the execution of this Agreement, [defendant] has received that certain environmental report dated as of December 13, 1996, concerning the environmental condition of the Property (‘Environmental Report’) issued by GeoRemediation, Inc. The Environmental Report shall be prepared at [plaintiff’s] sole cost and expense. [Defendant] hereby acknowledges and agrees that [plaintiff] has made no representations with respect to the accuracy or completeness of the contents of the Environmental Report. [Plaintiff] has assumed the duty and obligation at its sole cost and expense to remediate the conditions revealed by the Environmental Report.”
“6.1. As Is Sale.
[Defendant] hereby acknowledges, represents, warrants and agrees that: [¶] a. The Real Property shall be purchased in its existing condition, ‘AS IS, WHERE IS, AND WITH ALL FAULTS’ with respect to any facts, circumstances, conditions and defects (excluding the remediation of the environmental conditions on the Property set forth in or resulting from conditions described in the Environmental Report; [¶]... [¶] e. By reason of all the forgoing, upon its purchase of the Property [defendant] shall assume the full risk of any loss or damage occasioned by any fact, circumstance, condition or defect pertaining to the ownership, operation, use and maintenance of the Real Property (upon the completion of the remediation of the conditions set forth in the Environmental Report) and, accordingly, [plaintiff] shall have no liability for any patent or latent defects in the Real Property.”
“6.3. Toxic Wastes and Hazardous Materials.
[¶] 6.3.1.... [defendant] hereby acknowledges, represents, warrants and agrees that, except as is set forth herein or in the lease or in this Agreement concerning those conditions set forth in or resulting from conditions described in the Environmental Report that will be remediated by [plaintiff], [plaintiff] has made no representations or warranties... in connection with the condition of the soil or the existence or non-existence of any toxic wastes or Hazardous Materials on the Real Property. [¶] a. [Defendant] acknowledges and agrees that its purchase of the Real Property shall be based on its own independent investigation and inspection of the Real Property, and that [plaintiff] shall have no liability in connection with any toxic wastes or Hazardous Materials on the Real Property, even if such toxic wastes or Hazardous Materials are in existence at the time the Real Property is transferred to [defendant] if such wastes and/or materials are not disclosed in or resulting from conditions described in the Environmental Report (but excluding those conditions in existence prior to the Lease Commencement Date that will be remediated by [plaintiff]). [¶] b. In connection therewith, [defendant] hereby specifically releases [plaintiff]... from any and all claims... relating to... any toxic wastes or Hazardous Materials on the Real Property, including without limitation any residual contamination in or on the Real Property or affecting natural resources... if not disclosed in the Environmental Report (but excluding those conditions in existence prior to the Lease Commencement Date that will be remediated by [plaintiff]).”
“10.3. Knowledge of Hazardous Materials.
To the best of [plaintiff’s] knowledge:... (iii) except as set forth in the Environmental Report, there exists in, on or under the Real Property no Hazardous Materials in violation of law.”
The option agreement also provides:
“24. Entire Agreement.
Except for the Lease, this Agreement is the entire agreement of [plaintiff] and [defendant] with respect to the Real Property, containing all of the terms and conditions to which [plaintiff] and [defendant] have agreed.”
The lease is as silent as the agreement about setting forth any environmental conditions on parcel 17. It does not define “environmental conditions, ” attach an exhibit listing any environmental conditions, or contain a section entitled “Environmental Conditions.”
A lease addendum does contain a section governing indemnity obligations for hazardous substances on parcel 17. Paragraph 54 of the lease addendum provides: “[Defendant] shall have no responsibility or obligations whatsoever... under this Lease with respect to Hazardous Substances that are in, on, under or about the Premises on the Lease Commencement Date, whether such Hazardous Substances are identified in any Environmental Report, result from conditions identified in any Environmental Report, or which otherwise have pre-existed [defendant’s] occupation of the Premises. [Plaintiff] shall indemnify... [defendant]... against any and all loss... arising out of or involving any Hazardous Substances described in the preceding sentence.... [Plaintiff] shall at all times remain responsible for the ongoing remediation of Hazardous Substances located on, under, or about the Property as of the date hereof.”
The Environmental Report
As the option agreement recites, plaintiff had previously retained an environmental consultant, GeoRemediation, Inc., to determine whether “significant contamination exists” on parcel 17. The consultant prepared a report entitled, “Phase I Environmental Site Assessment of Parcel 17, Block 121, a lot subdivided from 3131 West Segerstrom Avenue, Santa Ana, Orange County, California, ” dated December 13, 1996 (the environmental report). Plaintiff disclosed the environmental report to defendant before they entered into the lease and option agreement.
The environmental report notes a site inspection and government records review disclosed “no significant” sources or indications of contamination at parcel 17. Parcel 17 had been used as a parking lot for a manufacturing plant at 3131 West Segerstrom Avenue since at least 1967, possibly as early as 1953. Before that, it had been used for agriculture since at least 1927. Parcel 17 did not and had not contained any underground storage tanks, above ground storage tanks, drums, sumps, clarifiers, pools, pits, unnaturally stressed vegetation, significantly stained soil or pavement, “significant volumes of known potentially hazardous solid waste, ” “potentially hazardous waste water, ” “significant volumes of known potentially hazardous petroleum products, ” radon exceeding action levels, PCBs, asbestos, lead, oil wells, or landfills. Pesticides, herbicides, and fertilizers may have been used on the site before 1967, but they “are not now likely to exist in concentrations considered hazardous to humans and the environment.” DDT may have been used, but any traces would be removed by grading and, “[i]n any event, it is unlikely that a government regulatory agency would require remediation activities.”
According to the report, the only significant environmental condition that might affect parcel 17 was the “soil and ground water contamination problem [that] has been associated with 3131 West Segerstrom Avenue, which borders the site on the west.” But “Targhee, Inc. (Targhee), the environmental consultant of record for the cleanup at 3131 West Segerstrom Avenue, has shown with subsurface investigations that no significant contaminants exist on Parcel 17.” Accordingly, “the soil contamination problem involving heavy metals and chlorinated solvents has been now mitigated to the satisfaction of the government regulatory agencies.”
Even so, the California Regional Water Quality Control Board, Santa Ana Region (the Board or RWQCB) “continues to express some concern for a residual plume of contaminated ground water extending beneath the site from 3131 West Segerstrom Avenue and possibly approaching the flood control channel bordering the site on the east.” Accordingly, while “[t]he [Board] is not requiring additional ground water mitigation at this time, ” “the ground water beneath the site is still being monitored by Targhee under the direction of the [Board]” “in order to acquire closure for the contamination problem.” And so the Board’s “closure is pending on the results of additional investigative activities by the environmental consultant, Targhee, Inc., mitigating the neighboring contamination problem.”
The environmental report stressed “[t]he site, currently identified as Parcel 17, formerly a part of 3131 West Segerstrom Avenue, should be considered a distinct entity and not the source of the 3131 West Segerstrom Avenue contamination.”
The Board Letter
In July 2003, the Board issued a letter to the environmental consultant for the owners of 3131 West Segerstrom Avenue (the Board letter). The letter was entitled, “NO FURTHER ACTION AT RBC TRANSPORT DYNAMICS CORPORATION, 3131 WEST SEGERSTROM AVENUE, SANTA ANA, CA 92704.”
The Board letter chronicled the 1989 discovery of “[s]ubsurface soil contamination” at 3131 West Segerstrom Avenue, primarily “petroleum hydrocarbons and volatile organic compounds (VOCs)” due to “leakage and overflow from a clarifier and its associated surface drain” at the manufacturing plant.
The contamination at 3131 West Segerstrom Avenue was successfully remediated, according to the letter. “The clarifier, drain structure, and the associated concrete areas, plus approximately 1, 200 cubic yards of soil were evacuated at this site.” “All soil above the water table that contained concentrations of total petroleum hydrocarbons greater than 1, 000 parts per million (ppm) was removed. Approximately 450 tons of crushed rock was placed at the bottom of the excavation, and the rest of the excavation was backfilled with clean soil.” Groundwater monitoring wells were installed. Later, “Board staff approved a groundwater remediation system composed of extraction and injection wells.” The Board shut down the wells in 1995, “as the remediation seemed to have reached a point of diminishing returns.”
The letter noted the allaying of the Board’s concerns over the migration of groundwater contamination east, toward parcel 17. “Low concentrations of VOCs have been detected in groundwater from the on-site wells for the past five years.” Recent samples from the flood control channel showed no signs of contamination. “A total of three surface water samples were collected from the Greenville Banning Channel: one sample upstream of the RBC site, one adjacent to, and one downstream of the RBC site. VOCs were not detected in any of these samples.”
The letter concluded 3131 West Segerstrom Avenue posed no significant environmental threat and required no further remediation or monitoring. “On the condition that the information provided to us was accurate and representative of existing conditions at the site, no further action is necessary for soil or groundwater investigation, cleanup or monitoring at RBC Transport Dynamics Corporation, 3131 West Segerstrom Avenue, Santa Ana, CA.”
Plaintiff’s environmental consultant obtained a copy of the Board letter in July 2004, a year after it was issued. Plaintiff submitted the letter to defendant three days later. Plaintiff informed defendant that the letter triggered the 90-day expiration period. Defendant waited more than 90 days to disagree.
The Declaratory Relief Action
Plaintiff filed a complaint in January 2005, asserting one cause of action for declaratory relief against defendant. Plaintiff sought a declaration that “(a) The [Board] letter... constitutes a ‘No Action Letter’ as defined by Section 6.1(c) of the Option Agreement; [¶] (b) Section 2.2. of the Option Agreement was triggered by Plaintiff’s delivery of the [Board] letter to Defendant on July 16, 2004; [¶] (c) The Option Agreement terminated by its terms on October 14, 2004; and [¶] (d) Defendant has no rights whatsoever to purchase the Subject Property.”
Defendant filed a cross-complaint, asserting one cause of action for declaratory relief against plaintiff. Defendant sought a declaration that “a. The Board Letter does not constitute a ‘No Action Letter’ as defined by Section 6.1.c of the Option Agreement. [¶] b. [Plaintiff] failed to notify [defendant] or provide [defendant] with the Board Letter as required by the Option Agreement. [¶] c. The Option Agreement remains in effect.”
Defendant obtained summary judgment. The court found the Board letter was not a No Action Letter triggering the expiration period because the letter was stale, did not identify parcel 17, and did not mention the environmental report.
We reversed and remanded. (Malcolm Carter Enterprises v. Microsemi Real Estate, Inc. (Sep. 26, 2007, G037155) [nonpub. opn.] (Malcolm I).) We held defendant failed to show its interpretations of the option agreement and Board letter were correct as a matter of law. We further held defendant failed to show the option agreement was reasonably susceptible of the interpretation for which defendant offered extrinsic evidence, or that plaintiff had not and could not offer conflicting extrinsic evidence. More specifically, we held defendant failed to show no triable issues existed as to whether: (1) plaintiff obtained the Board letter “from” the Board by using its environmental consultant to secure a copy; (2) plaintiff provided the Board letter to defendant within a reasonable time of its issuance; (3) the option agreement required the no action letter to specifically identify parcel 17; and (4) the option agreement required the no action letter to address all environmental conditions affecting parcel 17, not just those mentioned in the environmental report.
The parties appeared for trial. The court granted a motion in limine to vacate the jury trial and reset the matter for a bench trial. It found “what’s been pled, what’s been asked for, I think it’s completely equitable in nature.”
At the bench trial, defendant offered extrinsic evidence to show the parties intended the option expiration period would be triggered by a No Action Letter addressing all environmental conditions on parcel 17, not just those mentioned in the environmental report. Defendant’s evidence tended to show the following facts. Plaintiff knew defendant wanted to structure the deal as a lease with a purchase option because it did not want to own parcel 17 while it was affected by any environmental conditions. Plaintiff had actual and imputed knowledge about environmental conditions on parcel 17 besides the plume of groundwater contamination mentioned in the environmental report. These conditions on parcel 17 included past storage of volatile chemicals and hazardous materials, an old spray booth area, past pesticide use, stained pavement, and possible groundwater contamination from other properties. Defendant had rejected a prior draft of the option agreement that provided the option expiration period would commence when plaintiff obtained a No Action Letter upon “remediation of the environmental conditions of the Property as set forth in the Environmental Report.” Defendant instead insisted on the final language, which provided for the option expiration period to commence when plaintiff obtained a No Action Letter upon “remediation of the environmental conditions of the Property as set forth in this Agreement or in the Lease.”
Defendant also offered evidence the Board letter did not show no further remediation was required on parcel 17. Defendant’s evidence tended to show no one had disclosed the other environmental conditions — e.g., the chemical storage and spray booth area — to the Board. A Board representative testified the Board letter did not cover possible contamination from these conditions; plaintiff’s expert agreed. Defendant’s expert opined these conditions were an independent source of groundwater contamination on parcel 17. The expert also opined the Board letter did not provide closure for the environmental conditions set forth in the environmental report, such as the past agricultural use of parcel 17, the stained pavement, the material storage, and the temporary structures.
Plaintiff offered contradicting evidence. Plaintiff’s evidence tended to show it had no actual or imputed knowledge of any environmental conditions on parcel 17 that required remediation or that defendant wanted remediated, except the groundwater contamination mentioned in the environmental report. Its evidence also tended to show the Board was informed of the chemical storage and spray booth area before it issued the Board letter.
The court entered judgment for plaintiff on the declaratory relief causes of action. It found defendant provided documents pertaining to the past chemical storage and spraying on parcel 17 (the “Harding documents” and “Targhee documents”) to plaintiff’s agent during negotiations — but plaintiff’s agent was not “intimately aware of their contents.” Defendant did not “otherwise convey[] to [the agent] more than a general concern about environmental problems on the property. Thus, the court cannot find [defendant] identified to [the agent] specific environmental problems that required remediation.”
The court further found: “the reasonable interpretation of these agreements requires only that a ‘No Action Letter’ be obtained from the ‘appropriate governmental agency’ — here, the Board — upon completion of the remediation of the conditions identified in the Environmental Report. The Court cannot find language in any of the contract documents wherein [plaintiff] agreed to remediate all inchoate environmental conditions. Nothing in the Option Agreement or Lease sets forth any actual hazardous substances or environmental conditions other than those identified in the... Report. Given [defendant’s] knowledge of the Harding and Targhee documents, the court concludes [defendant] did not claim any of the potential problems mentioned in those documents required remediation.” It continued: “If, in fact, [defendant] desired what would be tantamount to a complete guaranty of no adverse environmental impacts on the Property from any source whether identified or not, the Court believes there would be some sort of demonstrable evidence to that effect. The court finds no support for such an interpretation based upon a reading of the terms of the Lease and Option Agreement either with or without the parol evidence.”
DISCUSSION
Defendant Had No Right to a Jury Trial in this Declaratory Relief Action
Defendant contends the court erred by granting plaintiff’s motion in limine to reset the matter for a court trial. It contends it was entitled to a jury trial in this action.
“It is a well-established principle that ‘“[t]he jury trial is a matter of right in a civil action at law, but not in equity.” [Citations]’ [Citation.] In classifying a given action as legal or equitable, the court looks to its substance, viz., the nature of the rights at issue and the remedy sought. The label attached to a complaint or cause of action does not control. [Citations.] ‘Although... “the legal or equitable nature of a cause of action ordinarily is determined by the mode of relief to be afforded” [citation], the prayer for relief in a particular case is not conclusive [citations]....’ [Citations.] Rather, the ‘practice of the court is to examine also the allegations of the complaint in reaching its determination as to the kind of action the plaintiff is bringing.’ [Citation.] An accurate indication may often be gleaned from a combined review of the caption, prayer and allegations.” (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 845 (Benach).)
And “[i]t is well established that a true action for declaratory relief is equitable: ‘An action for declaratory relief is an equitable proceeding and the powers of a court are as broad and extensive as those exercised by such court in any ordinary proceeding in equity [citation]. It is elementary that questions relating to the formation of a contract, its validity, its construction and effect, excuses for nonperformance, and termination are proper subjects for declaratory relief [citation].’” (Caira v. Offner (2005) 126 Cal.App.4th 12, 24 (Caira).)
Here, the parties have instituted an equitable action for a declaration of contract rights. The captions of the operative pleadings are “Complaint for Declaratory Relief” and “[defendant’s] Cross-Complaint for Declaratory Relief.” In the complaint, plaintiff prays for a declaration the Board letter “constitutes a ‘No Action Letter’” that “triggered” the option expiration period, and so “[d]efendant has no rights whatsoever to purchase the Subject Property.” In the cross-complaint, defendant prays for a declaration “The Board Letter does not constitute a ‘No Action Letter, ’” and so “[t]he option agreement remains in effect.” The allegations of the pleadings bear out what is clear from the captions and prayers: the parties want the court to construe the option agreement and determine whether, after receipt of the Board letter, defendant’s option to purchase parcel 17 has expired. These are the issues of an equitable action for which defendant has no right to a jury trial. (See Caira, supra, 126 Cal.App.4th at pp. 23-24.)
To be sure, “a declaratory action to identify rights is distinct from a coercive action to enforce rights.” (Caira, supra, 126 Cal.App.4th at pp. 23-24.) “[A] party cannot, merely by labeling his action ‘declaratory, ’ circumvent the other party’s right to a jury trial where a ‘coercive’ claim sounding in law is involved.” (Id. at p. 25.) “In particular, ‘Where an action for declaratory relief is in effect used as a substitute for an action at law for breach of contract, a party is entitled to a jury trial as a matter of right.’” (Id. at pp. 25-26.) But contrary to defendant’s claim, plaintiff is not using this declaratory relief action to “insulate” itself from a breach of contract action by defendant. (Cf. Manneck v. Lawyers Title Ins. Corp. (1994) 28 Cal.App.4th 1294, 1299-1300 (Manneck) [insured has right to jury trial when insurer files declaratory relief action to preempt insured’s breach of contract action].) Defendant has not alleged plaintiff breached the option agreement. Instead, defendant itself seeks only a declaration the option has not terminated. Defendant’s argument proves too much — in theory, any declaration of rights could be used to preempt a later claim that right was breached. But it is not the law that every declaratory relief action engenders the right to a jury trial. Just the opposite.
Nor is defendant entitled to a jury trial simply because it offered extrinsic evidence that conflicted with plaintiff’s extrinsic evidence. No jury was required to resolve that conflict because, as will be shown, the option agreement was not reasonably susceptible to defendant’s interpretation. “The question whether proffered extrinsic evidence renders a contract reasonably susceptible to ambiguity is a judicial function to be decided initially by the trial court....” (Abers v. Rounsavell (2010) 189 Cal.App.4th 348, 357 (Abers).) “[T]he interpretation of a written instrument is essentially a judicial function. Where the trial court concludes, after considering extrinsic evidence, that a writing is not reasonably susceptible of a construction urged, there is no issue to be submitted to a jury.” (Manneck, supra, 28 Cal.App.4th at p. 1300.) “‘When a dispute arises over the meaning of contract language, the first question to be decided is whether the language is “reasonably susceptible” to the interpretation urged by the party. If it is not, the case is over.’” (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 393 (Dore).) Because defendant’s extrinsic evidence did not reasonably reveal the option agreement to be ambiguous (see next section), “[t]here were no issues to present to the jury” (Manneck, supra, 28 Cal.App.4th at p. 1300) and “‘the case [was] over’” (Dore, supra, 39 Cal.4th at pp. 392-393).
While a trier of fact must resolve conflicting, admissible extrinsic evidence, it is not clear the court must empanel a jury to do so when the action is otherwise equitable. (See Benach, supra, 149 Cal.App.4th at p. 846 [affirming denial of jury trial in equitable action]; id., at p. 848 [“the court considered voluminous amounts of frequently contradictory extrinsic evidence to aid its interpretation of key contract terms”]; cf. Walton v. Walton (1995) 31 Cal.App.4th 277, 287-288 [no right to jury trial in equitable action, “even though such action implicates legal issues regarding contract formation”].)
The Court Correctly Construed the Option Agreement and Lease to Find the Board Letter Triggered the Option Expiration Period
Defendant contends the court “ignored” its extrinsic evidence and wrongly construed the relevant documents to conclude the Board letter triggered the expiration period in the option agreement.
“Our objective in construction of the language used in the contract is to determine and to effectuate the intention of the parties. [Citation.] It is the outward expression of the agreement, rather than a party’s unexpressed intention, which the court will enforce. [Citation.] [¶] It is appropriate to begin this investigation with a review of the literal terminology of the contract.” (Winet v. Price (1992) 4 Cal.App.4th 1159, 1166 (Winet).) “To avoid future disputes and to provide predictability and stability to transactions, courts attempt to interpret the parties’ intentions from the writing alone, if possible.” (Abers, supra, 189 Cal.App.4th at p. 356.) “The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity.” (Civ. Code, § 1638.)
But “because written words may have special meanings to the contracting parties that are not apparent on the face of the document itself, ” contract language may need to be understood through extrinsic evidence of the parties’ intent. (Abers, supra, 189 Cal.App.4th at p. 356.) “[P]arol evidence is properly admitted to construe a written instrument when its language is ambiguous. The test of whether parol evidence is admissible to construe an ambiguity is not whether the language appears to the court to be unambiguous, but whether the evidence presented is relevant to prove a meaning to which the language is ‘reasonably susceptible.’ [Citation.] [¶] The decision whether to admit parol evidence involves a two-step process. First, the court provisionally receives (without actually admitting) all credible evidence concerning the parties’ intentions to determine ‘ambiguity, ’ i.e., whether the language is ‘reasonably susceptible’ to the interpretation urged by a party. If in light of the extrinsic evidence the court decides the language is ‘reasonably susceptible’ to the interpretation urged, the extrinsic evidence is then admitted to aid in the second step — interpreting the contract.” (Winet, supra, 4 Cal.App.4th at p. 1165.)
Even so, “[a]n agreement is not ambiguous merely because the parties (or judges) disagree about its meaning. Taken in context, words still matter.” (Abers, supra, 189 Cal.App.4th at p. 356.) “Our task is to construe the [contracts] as they are, not as the [defendants] want them to be. ‘We do not have the power to create for the parties a contract that they did not make and cannot insert language that one party now wishes were there.’” (Id. at p. 361.) “Further, parol evidence is admissible only to prove a meaning to which the language is ‘reasonably susceptible’ [citation], not to flatly contradict the express terms of the agreement.” (Winet, supra, 4 Cal.App.4th at p. 1167 [release of unknown claims not reasonably construed as release only of known claims].) “In construing a contract, it is not a court’s prerogative to alter it, to rewrite its clear terms, or to make a new contract for the parties.” (Moss Dev. Co. v. Geary (1974) 41 Cal.App.3d 1, 9.)
On our independent review (Abers, supra, 189 Cal.App.4th at p. 357), we hold the option agreement plainly provides the expiration period is triggered by a No Action Letter obtained upon “remediation of the environmental conditions on the Property as set forth in this Agreement or in the Lease” — and only those specified environmental conditions. (Italics added.) The option agreement’s express restriction of the No Action Letter’s scope to “the environmental conditions on the Property as set forth in this Agreement or in the Lease” is not reasonably susceptible to the meaning defendant urges — remediation of all potential environmental conditions on parcel 17 of which plaintiff has actual or imputed knowledge. The phrase “as set forth in this Agreement or in the Lease” cannot reasonably be interpreted to mean “whether set forth in this Agreement or in the Lease, or not.”
The lease addendum’s indemnity provision only bolsters this conclusion, though defendant asserts otherwise. In it, plaintiff agreed to indemnify defendant for losses involving “Hazardous Substances that are in, on, under, or about the Premises on the Lease Commencement Date, whether such Hazardous Substances are identified in any Environmental Report, result from conditions identified in any Environmental Report, or which otherwise have pre-existed [defendant’s] occupation of the Premises....” The parties thus knew how to craft contract language addressing all environmental conditions on parcel 17, whether or not identified in the environmental report. They just chose not to do so in determining what environmental conditions would have to require no further action in order to trigger the option expiration period. And contrary to defendant’s claim, no inconsistency arises by the parties’ decision to trigger the option expiration period upon remediation of only specified environmental conditions on parcel 17, while maintaining plaintiff’s indemnity obligations for other environmental conditions on the property.
When asked at oral argument to pinpoint what environmental conditions were “set forth in this Agreement or in the Lease, ” if any, defendant replied that phrase modifies “remediation, ” not “environmental conditions.” Defendant invoked the lease addendum’s indemnity provision as a place where plaintiff’s remediation obligation was “set forth... in the Lease.” But on that issue, the indemnity provision states only: “Without limiting the foregoing, [plaintiff] shall at all times remain responsible for the ongoing remediation of Hazardous Substances located on, under, or about the Property as of the date hereof.”
Defendant’s interpretation still would not allow for the admission of its extrinsic evidence. The words “remain” and “ongoing” show the indemnity provision is referring to a preexisting remediation obligation, not imposing a new duty. And the only “ongoing remediation” for which plaintiff could “remain responsible” is described in the option agreement at section 4.2: “[Plaintiff] has assumed the duty and obligation at its sole cost and expense to remediate the conditions revealed by the Environmental Report.” Similarly, section 6.1.a provides the option is for an “as is” sale, “excluding the remediation of the environmental conditions on the property set forth in or resulting from conditions described in the Environmental Report.” Thus, even if we construe the option agreement as contemplating a No Action Letter regarding plaintiff’sremediation obligations as set forth in the option agreement or lease, as defendant urges — not regarding environmental conditions set forth therein — the only such obligation is plaintiff’s duty to remediate conditions described in the environmental report. And so even under this interpretation, the court would still exclude extrinsic evidence offered to show plaintiff must remediate conditions not described in that report.
And there is an undercurrent to defendant’s position. Did this court lull defendant into a futile trial with its Malcolm I opinion, holding plaintiff raised triable issues? How can we first say issues need to be tried, and then hold inadmissible the extrinsic evidence offered at that trial?
At the start of oral argument, defendant’s counsel stated, “The message I took [from] the court’s prior opinion was, ‘What a difference extrinsic evidence can make, ’ and the court remanded this matter for trial.... My client never received that trial that this court commanded.”
There are several responses. First, we could not have precluded trial in Malcolm I. Defendant alone had moved for summary judgment. We could not have directed entry of summary judgment for plaintiff, even if we had held its interpretation was correct as a matter of law. (See, e.g., Sierra Craft, Inc. v. Magnum Enterprises, Inc. (1998) 64 Cal.App.4th 1252, 1256.) Second, in Malcolm I we flagged the issue we decide today. “Extrinsic evidence is admissible only if offered to show a meaning to which the contract language is reasonably susceptible, ” we noted. (Malcolm I, supra, G037155.) And we observed defendant was “suggest[ing] the phrase, ‘environmental conditions on the Property as set forth in this Agreement or in the Lease, ’” is reasonably susceptible to the meaning, “‘any environmental conditions on the Property whatsoever, whether set forth in this Agreement or in the Lease or not.’” (Ibid.) We did not reach the admissibility of defendant’s extrinsic evidence because the limited evidence it submitted with its summary judgment motion did not support its interpretation. (Ibid.) But neither did we indicate the option agreement was reasonably susceptible to defendant’s interpretation. Finally, it was conceivable defendant might offer different extrinsic evidence at trial. We had no reason to prejudge the matter and assume defendant could not muster extrinsic evidence supporting an interpretation to which the option agreement was reasonably susceptible. Defendant had that chance, but merely failed to do so.
Thus, because the option agreement is not reasonably susceptible to defendant’s interpretations, its extrinsic evidence was inadmissible. The court had no need to construe the option agreement consistent with the (inadmissible) extrinsic evidence that plaintiff may have known — directly or through an agent — about the spray booth, chemical storage, or other potential environmental conditions on parcel 17. Or that plaintiff failed to disclose these potential environmental conditions to the Board. Or that plaintiff knew defendant did not want to purchase parcel 17 until it was cleared of any environmental issues.
The court had to “provisionally receive” the extrinsic evidence, of course, which it did. (Winet, supra, 4 Cal.App.4th at p. 1165.) After having taken a “‘preliminary look’ at [the] proffered extrinsic evidence, ” the court properly disregarded it. (Abers, supra, 189 Cal.App.4th at p. 356.) Defendant’s complaint the statement of decision failed to expressly resolve conflicts in the parties’ extrinsic evidence thus falls flat. More basically, “a trial court rendering a statement of decision is required only to set out ultimate findings rather than evidentiary ones.” (Muzquiz v. City of Emeryville (2000) 79 Cal.App.4th 1106, 1125.) The statement “need not address all the legal and factual issues raised by the parties.” (Id. at pp. 1124-1125.)
Defendant acknowledged in the option agreement that plaintiff “has made no representations with respect to the accuracy or completeness of the contents of the Environmental Report.”
What the court had to consider was whether the Board letter indicated no further action was required to remediate the environmental conditions on parcel 17 “as set forth in this Agreement or in the Lease.” And the court correctly found it did. The option agreement and lease do not “set forth” any environmental conditions on parcel 17. The only environmental conditions on parcel 17 reasonably alluded to in those documents are those contained in the environmental report. And that report plainly states “no significant sources of contamination exist on [parcel 17]” and “no significant indications of contamination” were observed there. The only environmental condition on parcel 17 that potentially required any remediation, according to the environmental report, is the “residual plume of contaminated ground water extending beneath the site from 3131 West Segerstrom Avenue....” And the Board letter plainly provides, “no further action is necessary for soil or groundwater investigation, cleanup or monitoring at RBC Transport Dynamics Corporation, 3131 West Segerstrom Avenue....”
To be sure, the parties had deleted proposed contract language that would have made this more explicit. But we must assign some meaning to the phrase, “as set forth in this Agreement or the Lease, ” that makes the option agreement “operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties.” (Civ. Code, § 1643.) Neither party asks us to hold the phrase is altogether meaningless.
These documents mean what they say. The soil and groundwater contamination at 3131 West Segerstrom Avenue — which was the only environmental condition affecting parcel 17 that potentially required remediation — requires no further action. The Board letter thus triggered the option expiration period.
Defendant’s counterarguments are unavailing. Defendant notes the option agreement provides plaintiff must “obtain” the No Action Letter “upon [plaintiff’s] completion of the remediation of the environmental conditions on the Property as set forth in this Agreement or in the Lease.” But defendant fails to show the plain language of the contract or any admissible extrinsic evidence barred plaintiff from “obtaining” the letter through its environmental consultant, rather than asking the Board for it directly. Nor does any plain contract language or admissible extrinsic evidence sufficiently show plaintiff could not “obtain” the letter a year after the Board issued it. And any duty plaintiff had to “complet[e]... the remediation of the environmental conditions” was satisfied by the Board’s conclusion the plume of groundwater contamination had been remediated, monitored, and required no further action. The option agreement cannot reasonably be interpreted to require plaintiff to further remediate conditions that, as it turns out, had already been remediated or did not require remediation. “The law neither does nor requires idle acts.” (Civ. Code, § 3532.)
Lastly, defendant contends the Board letter did not provide “closure” for parcel 17. But that is not what the option agreement required, as already shown. It required only a letter providing no further action was required to remediate the environmental conditions set forth in the environmental report. If defendant wanted the option expiration period to be triggered by a letter providing no further action was required to remediate any environmental condition potentially affecting parcel 17 — that parcel 17 had “closure” — it should have contracted for that.
In sum, the court correctly found the Board letter triggered the option expiration period. Defendant concedes the period elapsed without it exercising the option. By the plain terms of the option agreement, the option has terminated. The court correctly entered judgment for plaintiff on the declaratory relief causes of action.
DISPOSITION
The judgment is affirmed. Plaintiff shall recover its costs on appeal.
WE CONCUR: O’LEARY, ACTING P. J., ARONSON, J.