On July 18, 2011, the Fourth District Court of Appeal in Silverado Modjeska Recreation and Parks District v. County of Orange (2011) ___Cal.App.4th___ found that the doctrine of res judicata barred petitioners from challenging respondent county’s compliance with a prior writ compelling the county to prepare and circulate an supplemental environmental impact report (SEIR) considering the impact of the Silverado Canyon Ranch project on water quality. The court also rejected petitioners’ argument that following circulation of the draft SEIR, the county should have recirculated the SEIR with respect to a recent observation of endangered toad larvae in a creek near the project site. Lastly, the court reversed the trial court’s post-judgment order compelling payment of attorneys’ fees to the project developer, CCRC Farms, LLC, from one of the petitioners because the fee claim was based on the terms of an agreement between the developer and the petitioner and therefore should not have been resolved by way of a motion of attorneys’ fees.
The project would consist of 12 home sites, averaging 5.3 acres per lot, on 68.7 acres of privately held land within the boundaries of the Cleveland National Forest. The county circulated a draft EIR for the project in 2003 and certified a final EIR later that year. Petitioners Rural Canyons Conservation Fund and Ray Chondos (Rural Canyons) challenged the county’s certification of the EIR and approval of the project on several grounds, including alleged deficiencies in the EIR’s water quality analysis, analysis of impacts to coastal sage scrub and analysis of the project’s impact on the federally endangered arroyo toad.
The trial court granted Rural Canyons’ petition with respect to claims that the EIR failed to adopt mitigation measures for the loss of coastal sage scrub and its failure to properly evaluate and mitigate the impact of the project on water quality. The trial court rejected Rural Canyons’ remaining claims, including the claim that the EIR did not properly evaluate the project’s impact on arroyo toad. In light of its determination, the trial court issued a writ of mandate in 2004 commanding the county to study the baseline water quality conditions in the project area and to prepare and circulate a supplemental EIR disclosing and evaluating the baseline water data. None of the parties challenged the trial court’s 2003 judgment.
In 2005, the county circulated a draft SEIR that incorporated the water quality study and addressed the project’s impacts on water quality, as directed by the writ. During the public comment period on the draft SEIR, a zoologist with the Department of Defense, Robert Haase, discovered arroyo toad larvae in a creek approximately 330 feet from the project site. He thereafter confirmed two more sightings of the toad in the project’s general vicinity.
Rural Canyons alerted the county to the arroyo toad sightings and requested the county to circulate a revised SEIR to address the impacts of the project on arroyo toad and its habitat. In response, the developer retained a biologist to survey the site and its vicinity. The biologist did not find evidence of arroyo toad.
In support of their request for recirculation, project opponents presented a letter from a United States Fish and Wildlife Service (USFWS) biologist who was concerned that, notwithstanding the surveys prepared by the developer’s biologist, there was a high likelihood the arroyo toad was present on or near the project site. The principal biologist retained by the developer strongly disagreed with the USFWS biologist as to the significance of Haase’s observations of toad larvae near the site and the probability that arroyo toads were present on the site and presented evidence supporting his conclusions. The county certified the Final SEIR in 2007, without recirculating a new draft based on Haase’s observations of the toads.
In November 2007, Rural Canyons filed a new action in Orange County Superior Court challenging the validity of the SEIR. Silverado Modjeska Recreation and Parks District (District) joined Rural Canyons as a petitioner in the 2007 action, which was assigned to the judge who was still presiding over the 2003 action. Shortly after Rural Canyons and the District initiated their 2007 action, the developer moved to discharge the trial court’s earlier writ in the 2003 action, which the trial court granted. The trial court also granted Rural Canyons and the District’s motion to transfer their 2007 action to the San Diego County Superior Court.
The 2007 petition alleged two causes of action: (1) that the SEIR did not comply with the writ issued in the 2003 action; and (2) that the discovery of the arroyo toad constituted significant new information and that the county’s failure to circulate a revised SEIR to address the discovery of the toad violated CEQA. After the 2007 action was transferred to the San Diego County Superior Court, the trial court sustained the developer’s demurrer as to the first cause of action and overruled the demurrer as to the second. Although not expressly stated by the trial court, the court of appeal surmised that the trial court had overruled the demurrer on the first cause of action because it was barred by the doctrine of res judicata, or claim preclusion. As to the second cause of action, the trial court noted that the 2007 action made allegations about the impact of new arroyo toad observations that were not litigated in the 2003 proceeding. The parties subsequently briefed the arroyo toad issue and the trial court ultimately denied the petition.
On appeal, the court first rejected Rural Canyons’ contention that the trial court erred in demurring with respect to Rural Canyons’ water quality cause of action because that claim was barred under the doctrine of res judicata. The court explained that res judicata precludes relitigation of an action that was previously adjudicated in another proceeding between the same parties or parties in privity with them. Two proceedings are the “same cause of action” where they are based on the same “primary right.” Here, the Court of Appeal explained, res judicata barred the 2007 petition’s first cause of action because that cause of action was based on the same primary right that the court in the 2003 action adjudicated in granting the county’s motion to discharge the writ, namely, the right to ensure the county’s compliance with CEQA with respect to the water quality analysis.
The appellate court rejected Rural Canyons’ argument that res judicata did not bar the first cause of action because the District was not a party in the 2003 action and is not in privity with a party to the 2003 action. The court explained that “privity” refers to a relationship between parties that is “sufficiently close” as to justify the application of the doctrine of collateral estoppel, or issue preclusion. Here, both Rural Canyons and the District stated in their complaint that they brought the action on behalf of all other citizens interested in the county’s compliance with CEQA. The Court of Appeal found that Rural Canyons and the District’s pursuit of the CEQA claims on the public behalf in the 2007 action against the same parties in the 2003 action was sufficient to show a common interest in the enforcement of CEQA for the purposes of a privity determination.
The court next considered whether the county violated CEQA by failing to circulate a revised SEIR following Haase’s observation of the arroyo toad near the project site. Oddly, the Court of Appeal did not address whether res judicata barred this claim. Rather, the court focused on whether Haase’s observations constituted “significant new information” within the meaning of Public Resources Code section 21092.1 (governing recirculation of a draft EIR prior to final EIR certification) and Public Resources Code section 21166 (governing preparation of a Supplemental or Subsequent EIR after final EIR certification). The court found that for the purposes of this case, the distinction between Public Resources Code sections 21092.1 and 21166 was irrelevant to the facts of this case because both sections ask whether there is “significant new information” triggering the need for additional environmental review.
In determining whether the new observation of arroyo toads constituted “significant new information,” the court first looked at the 2003 EIR’s discussion of arroyo toads, which concluded that the project would not have a significant impact on the arroyo toad because, although the toad had been found in the vicinity, the toad had not been found on the project site and, more importantly, the project site was not suitable habitat for the arroyo toad. The court noted that the USFWS biologist and Haase stated that arroyo toads can remain buried in the soil for extended periods of time and are difficult to observe year-to-year. Thus, explained the court, under the USFWS biologist’s theory, what Haase reported was not a new condition, but the manifestation of a pre-existing circumstances. Indeed, the likelihood that toads were in fact undetected but present near the project site was the subject of comments on the 2003 draft EIR, the county’s response to those comments and Rural Canyons’ 2003 petition. Therefore, Hasse’s observations of the toads near the project site did not constitute “significant new information” requiring the county to recirculate either the 2003 EIR or the SEIR.
Lastly, the Court of Appeal considered the District’s appeal of the trial court’s determination to grant the developer’s motion for attorneys’ fees. In 2003, the District and the developer entered into a written agreement in which the developer agreed to dedicate land to the county as permanent open space. The agreement provided, among other things: “‘The sole obligation of the District under this Agreement is not to appeal and/or litigate [developer’s] plans for development of the Project Site … as currently proposed.”’ The agreement also included a provision in which the District agreed to indemnify the developer from and against all liabilities, including attorneys’ fees, connected with the breach of the agreement.
After the trial court denied the petition for writ of mandate in the 2007 action, the developer filed a motion for attorneys’ fees under Code of Civil Procedure section 1033.5 subdivision (a)(10)(A), which provides that attorneys’ fees are allowable as costs when authorized by contract. The trial court granted the motion. The Court of Appeal found that although not directly stated, the trial court implicitly determined that the District had breached the agreement by bringing the 2007 CEQA action against the developer and that the District was obligated to pay the developer’s attorneys’ fees and costs under the indemnity provision.
The Court of Appeal held that the trial court procedurally erred by adjudicating whether the District breached the agreement in the context of deciding the developer’s motion for attorney’s fees. The court explained that it is axiomatic that before a party may recover attorneys’ fees as the prevailing party in an action on a contract, that party must have in fact prevailed in an action on the contract at issue. The court explained that the underlying CEQA action was not an action on the contract and therefore the trial court erred in adjudicating the issue of the breach of the agreement as part of the developer’s motion for attorneys’ fees and in granting the motion.
The Court of Appeal also found that the developer’s argument that the District breached the agreement failed on the merits. In particular, the court explained that the agreement expressly defined a breach as “the failure to cure an alleged breach after receipt of proper notice of the alleged breach” and provided that the alleged breaching party shall have 30 days to cure the alleged breach. Here, the developer failed to give the District proper notice of breach and did not provide the District 30 days to cure the breach. Therefore, the Court of Appeal held the trial court erred in ruling the District breached the agreement and that the developer was entitled to recover attorneys’ fees under the agreement.
Justice Cynthia Aaron wrote a concurring and dissenting opinion. Citing CEQA Guidelines section 15065, subdivision (a)(1), which requires a mandatory finding of significance where a project will have “a potential impact” on endangered species, Justice Aaron refused to join the majority in concluding that the county was not required to address the potential impact on arroyo toads in a revised SEIR.