City of Hollister v. Monterey Insurance (165 Cal. App. 4th 455, 2008)

Opinion

RUSHING, P. J.

An old municipal building at the Hollister airport caught fire. The City of Hollister (City) sought to recover the building’s “functional replacement value” under an insurance policy issued by Monterey Insurance Company (MIC). The policy provided that if City wished to recover such benefits, it must enter into a contract to repair or replace the building within 180 days after the fire. Throughout this period, however, MIC refused to confirm that it would honor such a claim, raised spurious grounds for its denial, delayed in communicating basic determinations affecting coverage, refused to disclose its best estimate of the functional replacement value, permitted City to labor under misapprehensions concerning its rights under the policy, and ignored communications from City seeking clarification of these and other matters. As the time to enter into a contract neared expiration, City brought this action to declare that MIC was estopped to assert the contracting provision in light of its own failure to cooperate in City’s performance of the condition. The trial court found for City, and MIC appealed. To avoid a suggestion of mootness, we will modify the judgment to reflect the trial court’s manifest intentions. Finding no reversible error, we will affirm the judgment as so modified.

Background

A. Events Before Suit

The Hollister Municipal Airport traces its origins to 1912, when an aviator took off from a pasture three miles north of the city. (2 Shettle, United States Naval Air Stations of World War II (1997) p. 91.) The site served as a crop duster’s base until 1942, when the United States Navy made it an auxiliary air station. (Ibid.) In 1947 the United States deeded it to City. (Ibid.) Along with the grant went a number of wood-framed buildings constructed by the Navy. These included “Building 25,” which the navy had apparently used as a post office, theater, and welfare office. The building was shaped somewhat like an E, with three wings extending northeast from a transverse element. The center wing, which is variously described in the record as an auditorium, theater, or gym, was longer and higher than the end wings. The record contains various estimates of the building’s overall size, typically falling in the range of 18,000 to 19,000 square feet.

Prior to the events giving rise to this action, Building 25 was occupied by at least three paying tenants. City was in the process of evicting a fourth tenant for nonpayment of rent. Another tenant was apparently in the process of taking up occupancy. The building was apparently also used for meetings of an airmen’s association, a community club, and an Alcoholics Anonymous chapter.

The building was insured against fire under a commercial lines policy issued by MIC. The policy included a “Functional Building Valuation” endorsement, which obligated MIC to pay the cost to repair or replace the building, but only if, within 180 days after the loss, City “contracted] for repair or replacement of the loss or damage to restore the building ... for the same occupancy and use . . . .” If City failed to satisfy this condition, it could only recover Building 25’s “market value.” The market value of Building 25 was never established, but was apparently estimated at around $150,000. The cost to construct a functionally equivalent building apparently remains a subject of sharp dispute; the record contains estimates ranging from $950,000 to $2.6 million.

In late 2001, about a year before the fire in Building 25, MIC’s risk assessment department inspected the airport buildings and prepared what was referred to at trial as an “underwriting request” or “underwriting recommendation.” It reported the presence of “peeling exterior paint” on an unspecified number of airport buildings and recommended that “all unwanted and damaged paint should be removed and buildings be repainted.” MIC sent a copy of the recommendation to City, and on March 7, 2002, City’s then director of management services, Clayton Lee, returned a copy of the recommendation to MIC with a handwritten notation stating, “The City of Hollister is currently completing [a] . . . Master Plan for the renovation & rehabilitation of all facilities at the Hollister Municipal Airport. It is undetermined at this time whether or not the aforementioned facilities will be demolished or not. A determination is anticipated by the end of the spring. At this time, if the buildings will remain in use, the painting will be completed.” The buildings were never repainted, but neither did City reach any decision to discontinue their use, let alone demolish them. Nonetheless, MIC renewed the policy effective July 1, 2002, increasing the number of buildings insured and the limit of liability for functional replacement coverage.

On Saturday, November 23, 2002, a fire occurred in Building 25, damaging a portion of it. The cause was ultimately determined to have been accidental. City reported the fire to its insurance broker on Monday, November 25. The broker immediately notified MIC. MIC retained independent adjuster Roger Anderson, who wrote to city management services director Lee that “this claim was received November 25, 2002 . .. .” Anderson visited the fire scene, and on November 27 gave two senior MIC adjusters his opinion that Building 25 was a total loss. They told him that given the size of the loss “and what was involved,” they would “have their own large loss adjuster take care of’ the claim. Shortly after this conversation, Anderson asked Lee to “provide some documentation on the leases or loss of income issue . . . .” Lee provided that information within a few days of the request, and Anderson forwarded it to MIC.

On December 2, 2002, senior MIC adjuster Harve John Hagerty II assigned the claim to general adjuster Jack Boczar. In testimony, Boczar agreed that a general adjuster’s job is “to review coverage and determine damage and attempt to settle insurance claims . . . .” Boczar visited Building 25 with an engineer, Charles Swensen, on December 3, 2002. While there, according to Boczar, they were approached by a man who introduced himself as a demolition contractor. He expressed the desire “to present the winning bid to demolish the building,” and said that “he had been working on a presentation like that prior to the loss.” According to Boczar, the contractor said that the building had been “scheduled to be demolished” before the fire and that “the only reason it hadn’t [already] been demolished . . . was that the city didn’t have the funds to do so.” Boczar testified that further details were provided by a janitor, who said that the building had been scheduled for demolition, that “the former airport manager had an airport master plan that called for dealing with the buildings at the airport,” that about four years before the fire “some engineers looked at the building and set up some requirements for repairs to be effected at the building,” that the repairs “were never effected,” and that about two years later “another set of engineers or city engineer looked at the building and determined that since the original repairs had not been effected . . . , that the building was now not economically repairable and was going to be . . . was being considered for demolition in the airport master plan.” Boczar attributed similar information to other unidentified persons at the scene. He testified that a group of people working on planes in a hangar “said the same thing that everybody else told me, that the building was an eye sore [sic\, and that it was scheduled to be demolished.” “Everybody that I spoke to at the loss location told me the same story, that it was common knowledge that this building was going to be demolished. Everyone I spoke to.” These conversations were not recorded in his notes, he said, “because it was common knowledge. Everybody told me the same thing.”

Boczar further testified that while at the scene he encountered the tenant who had been in the process of eviction at the time of the fire. As he recalled the conversation at trial, the tenant told him he was being evicted, but did not tell him the reason.

On December 4, 2002, Boczar wrote a note to his file describing his visit to the site and related developments. He made no mention of the tenant’s being evicted. He did write, however, that during his “investigation” he had “found that this structure had been slated for demolition for the past two to three years,” that the airport manager “had been obtaining bids to effect the demolition for the past two years,” and that “[t]he demolition was not completed prior to his retirement due to the lack of city funds.” He also noted the presence in the file of the underwriting recommendation in which Clayton Lee had alluded to the possibility of demolishing some of the airport buildings; Boczar described this as a “note in our underwriting file . . . that discusses the knowledge of the possible demolition of the building.” He further opined that a “functional replacement” for Building 25 would consist of a metal building including a gym with fir flooring. He wrote that he had asked Swensen to “obtain pricing” for a structure of 19,084 square feet in this configuration.

Also on December 4, 2002, Boczar met with City’s deputy director of public works, Lawrence Jackson. According to Boczar, he told Jackson “what [he] had learned about Building 25 from people at the loss site,” presumably meaning about plans for demolition, and Jackson did not “indicate disagreement” with these reports. Boczar testified that Jackson also told him there was a moratorium on new sewer and water hookups in Hollister, but that since Building 25 had an existing hookup, a new building could be constructed there. They did not discuss the possibility of repairing the building but instead discussed its demolition at MIC’s expense. After the meeting Boczar wrote, in a second note to the file, “At present it appears that this loss will be concluded on a fair market basis plus the cost of demolition and debris removal.”

A week later City’s insurance broker, Deanna Darling, sent a fax to Dallas Harrison, of MIC’s home office, indicating that that “there seems to be some confusion on how this claim is being handled.” The fax was apparently triggered by a discussion of building values at the time management services director Lee turned over copies of leases to outside adjuster Anderson. At that time Anderson evidently mentioned the figure of $150,000. In her fax, Darling wrote, “[A] gentleman from ASU . . . has mentioned to the insured that they will replace the building for $150,000. This is a huge problem . .. .”

Senior adjustor Hagerty told Boczar to respond to Darling’s fax. Boczar called Darling’s assistant and, according to his report to the file, “informed her that I was the adjuster of record and that no determination had been made as to what was owed to this insured for this loss. I informed her that we were aware that there was functional replacement coverage on the building however I had not yet determined if it was applicable. No decision had been made as to how this claim was to be handled at present. If we found that we owed functional replacement we would of course pay it. I informed her that I had a question as to what we owed for a building that was determined to not be economically repairable and quotes being obtained for its demolition. What loss did the insured in fact sustain?” (Italics added.) Under cross-examination, Boczar added that he told Darling’s assistant, “if they wanted to make a claim, they could,” that “claim” meant “enter into a contract,” and that “if they did enter into a contract, [MIC] would have their attorneys decide whether or not there was coverage . . . .”

As indicated above, Boczar had already been considering what would constitute a functional replacement building and what it would cost to construct it. On December 12, 2002, he wrote to the file that engineer Swensen had just given him “initial figures for a functional replacement building,” which were “now co[m]ing in at $1.1 to $1.2 million,” but without a fir-floored gymnasium. Boczar told Swensen to try to get these figures lower, since Boczar believed the replacement figure should “come in at just under $1 Mil.” Swensen’s estimates were never communicated to City.

Some time in December 2002, MIC began preparing a letter to, as Boczar testified, “spell out the coverage under the policy and . . . inform [City] of the conditions for functional building valuation endorsement and provide them with a copy of that endorsement as it appeared it hadn’t been provided to them in the renewal policy.” Although the letter ultimately went out over Boczar’s signature, it was largely if not entirely drafted by MIC’s attorney, Patrick Bailey, and reviewed by Hagerty. The letter did not go out until January 8. It opened with the statement that MIC was “continuing its investigation of the claim presented by the City of Hollister” for damage to Building 25. It then continued, “During the last renewal process, we were informed that the building was to be demolished. Please provide me with any documents that discuss any demolition plans or concern the scheduling of any demolition activities. ...[][] It is our understanding that at the time of the fire, the City of Hollister was in the process of moving existing tenants out of the building so that the demolition of the building could proceed. ...[*][] We are investigating the cause and origin of this fire and will share the results of that investigation with you once it is completed.” The letter requested that City provide copies of “correspondence . . . concerning the need for [tenants] to vacate the building,” and “plans, proposals, or contracts for the replacement of the building, if any, which would have been considered and/or implemented by the City of Hollister had the building been demolished prior to the fire.” It also asked City to “identify tenants who occupied the building at the time of the fire” and provide “information . . . concerning when they planned to vacate the premises.”

After noting the existence of coverage under the functional building valuation endorsement, the letter drew attention to the 180-day time limitation. This was followed by a reservation of rights: “By investigating the fire and the claim submitted by the City of Hollister, Monterey Insurance Company does not waive any right or defense under the policy or the law. All such rights and defenses are reserved without limitation.”

Upon receiving the January 8 letter, Lee asked Jackson if there was information of the type requested in the letter, and if so to “get it for [him].” In response, Jackson sent Lee an e-mail message concerning information about any plans that might have existed to demolish Building 25. Beyond the bare fact of this communication, little about it was allowed into evidence.

On January 27, 2003, Boczar met with Jackson and Lee for about one and a half hours in Lee’s office. Lee and Boczar gave widely divergent accounts of this meeting. According to Lee, Boczar seemed “pretty aggressive” in the meeting, insinuating that Lee and Jackson were “trying to make statements that were not accurate.” He insisted “that people were being moved out of the building so the city could demolish the building.” Jackson and Lee “told him that was inaccurate,” and that a tenant had been under process of eviction for nonpayment of rent. They also told him there were no documents of the type described in his letter of January 8. Boczar appeared to express disbelief. He accused them of having knowledge contrary to what they were saying, and expressed the desire to take their recorded statements.

Lee further testified that once Boczar clarified the functional replacement provisions, which Lee had not initially understood, Lee and Jackson “made it very clear . . . that the city wanted to [move] forward with a functional replacement of the building.” When Lee expressed the desire to pursue that approach rather than fair market value, Boczar replied, “I will fight that one.” Lee took this to mean that Boczar “was going to recommend to his higher ups that they deny the claim.” According to Lee, the meeting also included discussion of the 180-day time limit. Lee and Jackson asked Boczar about “the potential of an extension because I think Mr. Jackson was concerned about the 180 day period of time.” He believed that Boczar replied that “they wouldn’t extend.”

At some point during the meeting Boczar and Jackson traded estimates of the likely functional replacement cost. “Mr. Boczar was talking about somewhere I believe less than a hundred dollars a square foot. I think it was 65 to 75 dollars a square foot.[] And . . . Mr. Jackson off the top of his head was at a much higher rate. I think it was two hundred dollars a square foot.” There was also “a discussion about lawyers getting involved.” Boczar indicated that he was willing to pay $100,000 to $150,000 “for the fair market value,” but did not propose any number for functional replacement “because he told us he was going to fight it.”

Boczar testified that Lee and Jackson explained their failure to provide requested documents not by saying that such documents did not exist, but that they “didn’t have the time to get them.” He did not form the impression that “there were no documents.” Although he testified that he did not find the meeting “antagonistic,” he acknowledged asking to take Lee’s recorded statement. This conformed to his written report of the meeting, in which he wrote, “I informed Mr. Lee that I was prepared to take his recorded statement on the spot to obtain any information that he had in reference to demolition plans or thoughts.” Although Boczar professed not to have sensed disagreement by Lee and Jackson with the rumors of planned demolition he had heard, he explained his references to a recorded statement by testifying that “Mr. Lee had stated that no final determination, no determination had been made by the city if the building was going to be demolished.”

In Boczar’s written report on the meeting, he acknowledged that he told Lee and Jackson he would “resist” a functional replacement claim “on a building that was being considered for demolition . . . .” He added, however, that “they certainly had the right to present a claim for replacement.” He also wrote, “Mr. Jackson stated that the remaining 120 days did not give the city enough time to do anything other than a turn key [sic] bid proposal for the replacement of the building. This would allow for design and construction in one bid. They could do it if necessary but would rather not if possible, [f] We discussed the time limit and I informed them why we could not waive policy conditions for them as that would place us in a position to waive them for others in the future. ...[][] They asked that I give them two weeks to meet with the city counsel [szc] and see if they can get approval to negotiate a settlement. They gave no indication if the city counsel [szc] would grant such approval, [f] We now await their response. Should we not reach a settlement agreement, I will contact architects, construction consultants, and contractors to submit reasonable bids for a functional replacement building. []I] Per our discussion we may even retain an architect to comprise specifications for a functional replacement building and submit to the city to assist the insured.”

Boczar’s superior, Hagerty, testified that when he saw the sentence in Boczar’s report about resisting a claim if demolition had been under consideration, he “called up [Boczar] and instructed him that in the event we find that demolition was being considered but not actually on a calendar for demolition that—and the insured actually presented its claim under the terms of the building valuation endorsement for functional replacement cost, that we would be obligated to pay that claim.” Boczar testified that Hagerty told him “we should refrain from resisting a claim for functional replacement cost at that point.” Hagerty nonetheless believed that issues remained, in particular the “serious variance” between the parties’ views “on the amount of the claim.” He indicated to Boczar that he should “focus [on] dealing with the apparent gulf between our initial read on what the functional replacement value might be and what the city was telling us it. . . would likely present in the way of a functional building value, replacement cost claim.” Apart from Hagerty’s testimony, there was no evidence that MIC abandoned the demolition defense at that time, or indeed ever did so—let alone communicated that abandonment to City.

At Hagerty’s instruction, Boczar engaged an architect to prepare plans for a replacement building. City was not informed of this engagement. On the contrary, Boczar instructed the architect “that [he] did not want her to be nosing around the building or asking any questions if she went out to the location . . . .” Asked at his deposition to explain this instruction, he testified, “I didn’t want to give the city the impression that at this point I was . . . going to accept a functional replacement cost claim. I was still of the impression and like I am that they weren’t entitled to a functional replacement cost claim. But I wanted to be prepared should they submit one.” (Italics added.)

As a result of the January 27 meeting, and on that or the next day, Lee and Jackson met with interim city manager Ed Kreins and the city attorney. Lee told Kreins “that I had a very unsettling feeling about the way the meeting went. I felt that we were going to get . . . the short end of the stick on this thing. I did not like the aggressive nature and some of the misinformation that Mr. Boczar was asserting in our conversation and the letter previously, [f] I provided, I believe, a copy of the letter to the city manager . . . .”

Up to this point City had not engaged counsel, but shortly thereafter it retained Attorney Vincent Hurley to represent its interests. Inferentially, City officials also communicated their concerns to City’s broker, Deanna Darling, who on January 29 sent a fax to MIC stating that she and “[t]he insured” were “very unhappy with the way this claim is being handled,” and requesting immediate action “to get some closure, settlement, and organization process with this claim. [][] We would like to ask that Jack Boczar be taken off this claim immediately and a claims supervisor be appointed. Mr. Boczar has been very unprofessional with the handling of this claim and you may feel free to contact me to clarify and expand on that statement. [][] Second we need to get back to the facts of this claim. There has been way too much ‘should have been’ and ‘what ifs’ been [sic] brought up. The fact of this claim is the insured has a policy written with a limit of $1,052,480 [ffc] with functional replacement cost for this 19084-sq ft. building. This is where the insurance needs to start kicking in. This is where [MIC] needs to begin this claim and do everything possible to replace this building per the policy limits and coverages, [f] The insured is now greatly worried and concerned about the 180-day clause, so much that they are now bringing in their city attorney. HQ Please process this request immediately, contact the insured, and start the process of helping the insured replace this building as soon as possible.”

On January 30, MIC wrote to Darling, with copies to Lee and Jackson, asserting that “questions” remained concerning “the viability of claims for fire loss to a building that was being vacated for planned demolition before the fire . . . ,” The letter alluded to additional unresolved questions, including but “not limited to,” unspecified “policy administration issues,” City’s ability and willingness to “perfect a claim for loss at Functional Replacement Cost in accordance with policy conditions,” and “the true amount of loss under the valuation options provided for under the Functional Building Valuation Endorsement.” Alluding to the November 2001 underwriting recommendation, the letter continued, “As you are aware, Monterey Insurance Company was informed by Mr. Lee in writing on March 7, 2002, regarding the City’s plans to demolish the building involved in the fire.” It then stated that “investigation and adjustment is [sic] proceeding subject to reservation of rights. Upon completion, a determination will be made regarding the obligations of Monterey Insurance Company for the City of Hollister’s November 23, 2002 loss. ... [f] No decision as to the settlement of this claim will be made until a formal claim is presented to the Monterey Insurance Company by the insured. At this time, nothing precludes the City of Hollister from presenting a functional replacement cost claim pursuant to paragraph 1 of the Functional Building Valuation Endorsement. Likewise, nothing precludes the insured from making a claim for ‘market value’ or otherwise under paragraph 2 of the endorsement.”

The letter concluded with the statements, “Please contact me [i.e., Boczar] after Monday, February 3, 2003 if you wish to discuss this matter, as I am currently in process of a physical office move until that time. If you need assistance in the interim, feel free to contact John Hagerty, telephone number [omitted], at Monterey Insurance Company’s Home Office in Monterey.”

Underlying the reference to an “office move” was the fact that Boczar was himself moving from Visalia to Sacramento. Hagerty testified that Boczar was a “resident general adjuster,” meaning that “he worked out of his residence. He goes out and gets a post mail box to be a mail drop to sign for him and accept things and keep it for him. [f] In this instance, you know, Mr. Boczar after relocating would terminate the old post mailbox with a forwarding order and then start up his new post mailbox.” Apparently Boczar did not arrange for forwarding of his mail until February 28, when it was suggested to him by City’s attorney, Hurley.

Lee received his copy of the January 30 letter on February 3, 2003—the date Boczar was supposedly reachable again—and turned it over to the city attorney. The letter made its way to outside Attorney Hurley, who wrote a reply dated February 10 to Boczar at his Visalia address. After noting that he represented City on the claim, and that all further correspondence should be directed to him, Hurley wrote, “1. You assert that the building was scheduled to be, or that the City had plans to, demolish the building. That is not true. There are no documents responsive to your request, [f] 2. You assert in your letter that the City was moving tenants out of the building in order to demolish the building. That is not true. There are no documents responsive to your request, [f] 3. You assert that the City of Hollister had plans to replace the building before it burned in November 2002. That is not true. There are no documents responsive to your demand.” In response to the January 30 letter, he wrote that MIC was “required to keep the insured fully informed and to complete your investigation and adjustment in a timely manner.” He then requested responses to 10 numbered points and issues, including identification of all outstanding issues concerning coverage, enumeration of all “ ‘policy administration issues’ ” and a statement of “your valuation and/or position on the true amount of the loss under the valuation options provided for under the Functional Building Evaluation Endorsement that your refer to in your letter to Ms. Darling.”

Hurley further wrote, “The City would like to contract to replace its building. However, it cannot enter into a contract to replace its building because the insurance company is delaying and not cooperating. By your letter, you acknowledge that, in over 70 days since the claim was submitted, you have only been to the site twice and have only contacted City officials two times. You have done nothing to assure that the insurance company is going to honor the claim by its insured.” He further asserted that the functional replacement endorsement entitled City “to replace the damaged building on the same site,” but permitted MIC to “insist that the building be replaced with a less costly building .... What would you like? You have given no advice to the City on this subject. What is your idea about a less costly building that is functionally equivalent to the damaged building?” He went on to assert, “It is beyond argument that the cost to replace the building with a less costly building that is functionally equivalent will exceed the limits of the policy.[] Therefore, it is the duty of Monterey Insurance Company to confirm that it will pay the limits of the policy, or tell the City what estimate you have received for replacing the building .... We cannot even demand an appraisal until we know there is a dispute.”

Hurley concluded by asking MIC to “respond in writing to each of the points set forth above and notify us of the date that you intend to conclude your investigation and adjustment of this claim .... Finally, please tell me in writing your position as to whether or not the building is [a] total loss and replacement cost exceeds the policy limits under the functional building valuation. Because this claim has been delayed for over 70 (seventy) days now, I hope that you will respond to this letter in writing within the next 7 (seven) days.”

MIC failed to respond to this letter until April 30, 2003, more than 11 weeks after it was written. On February 28, Boczar telephoned Lee, who referred him to Hurley. Boczar sent Hurley an e-mail stating in part, “Mr. Lee informed m[e] that you have sent me a letter to my Visalia P. O. Box, but I have not received any correspondence from you to date. I have moved recently to the Sacramento area . . . .” After supplying new contact information he wrote, “I travel frequently so at times I maybe [.sic] difficult to contact. The cell number is usually the best. [][] I look forward to hearing from you; hopefully, we can attempt to bring this matter to a conclusion.” Hurley faxed Boczar a copy of the February 10 letter, to which Boczar replied by e-mail, acknowledging the requested seven-day limit for a response but saying, “Unfortunately I am in the process of leaving for a meeting in the [B]ay [A]rea now; and am not able to give it the proper attention. ... HQ ... HD I’m sorry for any delay this may have caused and will do all i[n] my power to respond to your letter as quickly as possible.”

In fact Boczar needed time not to give the letter his own attention but to send it to MIC’s coverage counsel to, as Boczar testified, “draft up a response.” Hagerty appeared to testify that Attorney Bailey sent Boczar a draft reply on March 13, two weeks after Boczar received Hurley’s faxed letter of February 10. Nothing happened until March 18, when Hurley wrote to Boczar noting the lapse of 35 days since his February 10 letter and demanding a written response within five days. He sent a second, seemingly identical letter on March 21, 2003. On that same day he sent a third followup letter, writing, “It will be impossible to enter into ... a contract [for a replacement building] by May 22, 2003, given that there has not been a determination by the insurance company on coverage, and given the implications of your letters that the insurance company does not believe that the City suffered a loss, and does not believe that the City has a functional building. [1] We cannot enter into contracts with the uncertainty created by the lack of adjustment of this loss to date. [][] I again request that you respond to my letter of February 10, 2003. I also request that the insurance company enter into an agreement with the City of Hollister to extend the 180-day time limit for entering into a contract for repair or replacement of the loss.”

Still nothing was forthcoming from MIC. Indeed, the last three letters went unseen for some two weeks because Boczar, to whom they were sent with return receipts requested, did not pick them up at the post office until April 8, 2003. Then, he testified, he “lost” them. On April 29, Hurley called Hagerty’s supervisor, who promised that Hagerty would call him back, which Hagerty did. As a result of this conversation, Hurley faxed copies of his three March letters to Boczar, who faxed them to MIC’s attorney.

On April 30, Boczar finally faxed Hurley a reply to his February 10 letter. This communication was sent over Boczar’s signature, but like its predecessors it was written by Hagerty, by Attorney Bailey, or both. It blamed all difficulties in the matter on City’s failure to “determinen what claim it wishes to present and provide[] the necessary information required for us to evaluate that claim.” It asserted that neither Boczar “nor anyone else connected with the Monterey Insurance Company has done anything to delay the investigation and adjustment of this claim.” In response to Hurley’s numbered questions, it stated that the “policy administration issues” alluded to by Hagerty in Boczar’s ghostwritten letter of January 30 consisted of “the confirmation of how the building was insured and for what amount.” It then continued, “Those issues have now been resolved as far as I am concerned. The building was insured on a blanket basis, with several other buildings located at the airport, under the functional replacement-cost basis with a policy limit of $7,258,900.00.”

In the letter MIC explicitly refused to state a “position concerning the amount of loss under any of the valuation methods presented in the policy.” It alluded to Boczar’s supposed statement to Lee and Jackson that he “thought the cost of an 18,000 square foot metal building erected on a concrete slab might cost |>zc] between $950,000 and $1,100,000.” However, it stated that Boczar would not determine MIC’s actual position “until I have reviewed the claim presented by the City of Hollister.” Implicitly disclaiming any responsibility to provide figures, the letter stated, “The City . . . can do whatever it wants concerning the replacement of the building, subject to the requirement that the building be restored or replaced for the same occupancy and use. The policy sets forth theoretical amounts that might be owed should the City elect to replace the building. ... It is for the City ... to decide whether to repair or replace the building, and how much to spend to do the work. The policy merely describes how the amount owed might be measured and calculated.” The letter acknowledged that City had “provided notice of the loss and its intent to present a claim for that loss, as required by the policy,” but continued, “As noted above, [City] has not complied with the policy requirements concerning the presentation of its actual claim.”

On the same day—April 30, 2003—Boczar sent Hurley a fax, at Hagerty’s instruction, “[Responding to your letter of March 21, 2003, requesting that Monterey Insurance Company consider an extension of the 180-day time period . . . .” It stated, in pertinent part, “The Monterey Insurance Company is not obligated to extend the 180-day period set forth in the policy, but can agree to do so. In an abundance of good faith, and without prejudice to or waiver of any policy defenses or provisions, Monterey Insurance Company will agree to a ONE-TIME extension of SIXTY DAYS (60 days) beyond the 180 days provided for in the policy for the insured to comply with the terms of this endorsement, [f] This extension will extend the date for the insured to contract for repair or replacement of the building in question for the same occupancy and use to July, 22, 2003.”

On an unspecified date in May 2003, city officials held a meeting to discuss how to “quickly get into a contract for the replacement of that building.” On May 12, Hurley wrote to Boczar taking issue with some of the statements in the April 30 letter, particularly its denial that MIC had delayed handling of the claim. He alluded to the statement in Boczar’s January 30 letter that “investigation and adjustment [are] proceeding” when in fact MIC appeared to be conducting no investigation, but at best waiting for City to refute assertions originating from unidentified sources. He also wrote that MIC’s “accusation of dishonesty two months after the fire and after no investigation has caused a delay of over three months while waiting for the decision you said you were going to reach after your investigation and adjustment were completed.” He wrote that City would “proceed with preparing a claim,” but considered MIC’s conduct “to be the sole and only factor in delaying the processing of this claim.”

Upon receipt this letter was forwarded to Attorney Bailey, who prepared a response that was ultimately sent on July 2. Before that, however, Hurley sent another letter to Boczar, dated June 13, 2003. In it, he stated that City had “retained engineering consultants and architects to prepare the preliminary plans for developing specifications for a functional replacement of the destroyed building,” but that these consultants had told City that “even on the fastest of fast tracks, specifications and architectural drawings cannot be completed by July.” Even if the plans could be completed, he continued, “the design review, airport commission review, and architectural review cannot be completed by July.” Indeed, he wrote, “Even if the City had started this process on the day after the fire, they could not have completed the process.” “[T]he reason for the delay to this point,” he wrote, “has been solely the responsibility of [MIC], who went off on a tangent claiming that the City officials were dishonest, the City intended to demolish the building, and they had ‘witnesses’ who could testify the City intended to demolish the building.” He then “propose[d] that the functional replacement cost ‘time limit’ to enter a contract be extended for one year so that the City can enter into a contract to reconstruct the building with a functional replacement,” adding, “If the insurance company will not agree to an extension, then we must go to court to seek declaratory relief.” The letter concluded, “[T]he City proposes to extend the time limit for entering into a contract to July 21, 2004. Please provide notice within seven (7) days of the date of this letter if [MIC] will agree to the extension of time. If it will not agree, then we will go forward with legal action based on the facts of this claim and the legal issues specified above.”

Upon receiving this letter, Boczar sent it to MIC’s attorney. On July 2, Attorney Bailey wrote to City on behalf of MIC refusing to extend the contract time limit.

B. Proceedings Leading to Appeal No. H029296

On July 17, 2003, City commenced this action by filing a complaint for declaratory relief against MIC and an associated entity. It prayed for “a judicial determination of its rights and duties” under the policy “to allow Plaintiff to complete the public bidding process and execute a construction contract to build a functional replacement.” Defendant moved unsuccessfully for judgment on the pleadings, and then filed an unverified answer generally denying the allegations of the complaint and asserting eight affirmative defenses, including that City had failed to satisfy a condition precedent to MIC’s performance, and that City’s failure to contract for repair excused and waived MIC’s performance.

The trial consumed five days, after which the parties exchanged posttrial briefs. The trial court issued an intended decision concluding that MIC was estopped to rely on the 180-day time limitation, and that City was entitled to coverage under the functional replacement endorsement. This was followed by a statement of decision including the following findings: “27. [City] did not possess sufficient funds to ‘front’ the cost of replacing Airport Building no. 25 and did not enter into a contract to replace the building because it was concerned that [MIC] would deny its Functional Replacement claim based on Mr. Boczar’s statement that he would fight any such claim and [MIC’s] subsequent failure to respond to the issues raised in the February 10, 2003, March 18, 2003, and March 21, 2003, letters, [f] 28. [City] believed that [MIC] would deny its Functional Replacement claim for Airport Building no. 25. This belief was reasonable in light of Mr. Boczar’s statement that he would fight any Functional Replacement claim, [MIC’s] statements that [City] had intended to demolish Airport Building no. 25 and [MIC’s] failure to respond to [City’s] February- 10, 2003, March 18, 2003, and March 21, 2003, letters despite Mr. Boczar’s statement that the issues raised therein would be given ‘proper attention.’ [][] 29. [City] was ready and willing to enter into a contract to replace Airport Building no. 25 within the Policy’s 180 day deadline. Q] 30. [MIC’s] conduct prevented [City] from entering into a contract to replace Airport Building no. 25.” The court declared City “entitled to coverage under the Policy’s functional replacement provisions, up to the applicable limit of insurance, provided that it enters into a contract to replace Airport Building no. 25.” On the same day, the court entered a judgment decreeing, “Defendants are estopped from enforcing or otherwise relying on the 180-day provision contained in Commercial Insurance Policy no. 8-SSP-3-981989 in connection with Plaintiff’s claim concerning the Hollister Airport Building no. 25.”

MIC moved to set aside the judgment or modify it in various respects. City opposed the motion, but offered to stipulate to a modification declaring City entitled to functional replacement coverage, “ ‘provided that it enters into a contract to replace Airport Building 25 within 180 days after notice of this amended judgment.’ ” MIC accepted the offer. The court denied the motion to vacate but amended the judgment to provide, in accordance with the stipulation, “Defendants are estopped from enforcing or otherwise relying on the 180-day provision contained in Commercial Property Insurance Policy no. 8-SSP-3-981989 in connection with Plaintiff’s claim concerning the Hollister Airport Building no. 25, provided that Plaintiff City of Hollister enters into a contract to replace Airport Building no. 25 within 180 days after notice of entry of this Amended Judgment.”

MIC filed a timely notice of appeal from the amended judgment.

C. Proceedings Leading to Appeal No. H030161

On December 9, 2005, City filed a motion to stay the amended judgment pending MIC’s appeal or to confirm that the judgment was automatically stayed by the filing of the appeal. In support of the motion, City’s Attorney Hurley declared that City had, “at considerable expense,” engaged an architect who had “completed . . . plans and specifications and . . . an . . . estimate of costs for Functional Replacement of Building 25 . . . .” The plans had been approved by the city council and submitted to MIC in conformity with a request by it “that it be allowed to review the specifications and plans.” City had then submitted an architect’s statement of probable costs to MIC pursuant to a confidentiality agreement between the parties. MIC’s attorney had responded with nine objections to the proposed building and a warning that City “should be aware of potential issues with respect to the extent to which the proposed building exceeds what might be allowable under the policy, assuming eligibility for the cost of a functionally equivalent building.” In further correspondence he took the position that the amended judgment was not stayed by the appeal.

MIC opposed the stay motion, contending that (1) City was “attempt[ing] to alter the judgment,” by asking the court to “ignore or set aside the stipulation,” which City itself had proposed, amending the judgment to require a contract within 180 days after entry of judgment; (2) the amended judgment was self-executing and thus not subject to the general rule that proceedings in civil actions are stayed by an appeal (see Code Civ. Proc., § 916, subd. (a)); (3) to permit the alteration contemplated by the motion would be “completely unfair” in that it would “allow the City to frame the terms of a judgment making it easier to defend on appeal and then undertake to have the judgment expanded to give it further rights.” In reply City argued, among other things, that the order was not self-executing and that without the court’s confirmation that the judgment was stayed, “the parties will be left to fight another, new argument by the insurance company to thwart coverage.”

The court granted the motion and entered an order stating (1) “the Court finds that the provisions of California Code of Civil Procedure section 916 apply to the Judgment in this matter, and the Judgment is automatically STAYED pending the Defendants’ appeal,” and (2) “in the case of any confusion as to the applicability of California Code of Civil Procedure section 916 to this case, the Judgment is STAYED pending the appeal.” MIC filed a timely notice of appeal.

Discussion

I. Mootness; Effect of Stay Order

We must first consider a difficulty arising from the limited duration of the estoppel imposed by the amended judgment, which decreed that MIC was estopped to assert the 180-day contract condition for a period of only 180 days after notice of entry of judgment. Notice of entry of judgment was given on August 15, 2005. By the terms of the judgment, the estoppel lifted 180 days later. Meanwhile, however, MIC had cast the effect of the judgment into doubt by filing this appeal, which raised the possibility that the judgment might be reversed and any entitlement arising thereunder vitiated. This left the City in essentially the same position it occupied at the commencement of the lawsuit. On the other hand, it now appears that even if the judgment is affirmed, it may be found to have lost effect by operation of its terms. This possibility renders the present appeal arguably moot, since it is possible that neither a reversal nor an affirmance will affect the substantive rights of the parties. (See Covina Union High School v. California Interscholastic Federation (1934) 136 Cal.App. 588, 589-590 [29 P.2d 323] [appeal from decree enjoining conduct during then current football season, dismissed as moot after season ended]; Kenneally v. Knox (1960) 184 Cal.App.2d 262, 265 [7 Cal.Rptr. 370] [by time of appellate decision, challenge to order granting custody for single one-month period had “by lapse of time become moot,” such that “no justiciable controversy now exists”]; but see American Civil Liberties Union v. Board of Education (1961) 55 Cal.2d 167, 182 [10 Cal.Rptr. 647, 359 P.2d 45] [appeal from judgment confirming plaintiff’s right to use school facilities for specified period was not rendered moot by expiration of period; plaintiff continued to assert right to use facilities for current and future periods]; Lemat Corp. v. Barry (1969) 275 Cal.App.2d 671, 673, fn. 2 [80 Cal.Rptr. 240] [although permanent injunction had expired before appeal decided, “the issues here raised are of sufficient public interest and, therefore, not moot”].)

Ordinarily, a moot appeal will be dismissed. (See 9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, § 642, p. 669.) Although the parties have not raised the question of mootness, the court may examine a suggestion of mootness on its own motion. (See, e.g., Department of California Highway Patrol v. Superior Court (2008) 158 Cal.App.4th 726, 732 [70 Cal.Rptr.3d 280]; City of Riverside v. Stansbury (2007) 155 Cal.App.4th 1582, 1587-1588 [66 Cal.Rptr.3d 862].) Moreover a suggestion of mootness is strongly implied by MIC’s arguments in its second appeal, City of Hollister v. Monterey Ins. Co. (July 29, 2008, H030161) [nonpub. opn.], where it insists that the judgment now before us was not and could not be stayed either by the taking of this appeal or by any subsequent action of the trial court. This appears to foreshadow a contention on remand that the judgment, even if affirmed, has expired by its terms. To delay consideration of this hypothesis until after a decision on the merits would entail a waste of judicial resources, since if the hypothesis is correct we need not decide the merits at all, and if it is incorrect a delayed determination will only trigger another round of litigation, perhaps followed by yet another appeal. We therefore consider sua sponte whether the appeal is in fact moot.

For several reasons, we conclude that it is not. First, if an appeal is technically moot, but “there may be a recurrence of the same controversy between the parties and the parties have fully litigated the issues,” a reviewing court may in its discretion reach the merits of the appeal. (Cucamongans United for Reasonable Expansion v. City of Rancho Cucamonga (2000) 82 Cal.App.4th 473, 480 [98 Cal.Rptr.2d 202].) Here if we affirmed the judgment on the merits, but MIC successfully argued in the trial court that it had expired by its terms, we see nothing to prevent City from seeking a second declaratory judgment on the premise that MIC’s appeal and its continuing intransigence had deprived the City of the fruits of the judgment. Indeed, City would be free on remand to seek a modification of the judgment to extend its duration. A court sitting in equity has the inherent power to modify the procedural provisions of its decrees to make them effective. (See, e.g., Barnes v. Chamberlain (1983) 147 Cal.App.3d 762, 769 [195 Cal.Rptr. 417] [trial court extended deadline for buyer to deposit purchase money under decree for specific performance of real estate sales contract; reviewing court “confirm[ed] the inherent power of a court of equity to make its judgment effective by additional orders supervising the details of the decreed performance”]; PalmCo Corp. v. Superior Court (1993) 16 Cal.App.4th 221, 225-226 [19 Cal.Rptr.2d 682] [trial court had inherent power to modify judgment to allow damages incurred due to delay occasioned by defendant’s taking of appeal from decree for specific performance; “Any other result would reward Palmeo for delaying execution of the judgment and encourage litigants in similar circumstances to present and prolong appeals as long as possible to retain the profits reaped during the delay.”].)

That the court here was sitting in equity can hardly be questioned. Proceedings for declaratory relief generally sound in equity. (See Westerholm v. 20th Century Ins. Co. (1976) 58 Cal.App.3d 628, 632, fn. 1 [130 Cal.Rptr. 164] [“An action for declaratory relief is equitable, and a court of equity will administer complete relief when it assumes jurisdiction of a controversy.”].) To the extent that such a proceeding requires the resolution of claims or defenses sounding in law rather than equity, it may be viewed as an action at law for purposes of the right to jury trial. (See Dills v. Delira Corp. (1956) 145 Cal.App.2d 124, 129-130 [302 P.2d 397]; Manneck v. Lawyers Title Ins. Corp. (1994) 28 Cal.App.4th 1294, 1299-1300 [33 Cal.Rptr.2d 771].) But the central controverted issue here was the applicability of the principles of equitable estoppel, which—as its name suggests—sounds purely in equity. (Getty v. Getty (1986) 187 Cal.App.3d 1159, 1176 [232 Cal.Rptr. 603]; Moss v. Bluemm (1964) 229 Cal.App.2d 70, 72-73 [40 Cal.Rptr. 50]; Jaffe v. Albertson Co. (1966) 243 Cal.App.2d 592, 607-608 [53 Cal.Rptr. 25]; cf. Driscoll v. City of Los Angeles (1967) 67 Cal.2d 297, 305 [61 Cal.Rptr. 661, 431 P.2d 245] [“The existence of an estoppel is generally a question of fact for the trial court whose determination is conclusive on appeal unless the opposite conclusion is the only one that can be reasonably drawn from the evidence.”]; DRG/Beverly Hills, Ltd. v. Chopstix Dim Sum Cafe & Takeout III, Ltd. (1994) 30 Cal.App.4th 54, 61 [35 Cal.Rptr.2d 515] [“The estoppel issue is a nonjury fact question to be determined by the trial court in accordance with applicable law.”].) There was thus no colorable right to a jury trial; the proceeding sounded entirely in equity.

Moreover, the court’s decree was quintessentially equitable in that it involved not merely an adjudication of legal rights but a weighing of competing considerations of fairness—the proverbial balancing of equities. The limited duration of the judgment—the very provision that MIC now seeks to exploit—reflects a paradigmatic exercise of the conscience of the chancellor based upon this discretionary balancing process. We have no doubt that the present judgment was rendered in equity, and was therefore subject to the court’s inherent supervisory power.

Further proceedings in the trial court to determine the lifespan of the present judgment would in all likelihood produce another appeal. We are loath to dismiss an appeal where the likely result would only be a further expenditure of judicial and litigant resources—including, in this case, taxpayer-funded resources—and further delay in achieving a final resolution of the underlying dispute.

The suggestion of mootness fails for a second reason. While MIC is probably correct in contending that the judgment was not .automatically stayed by its appeal, it is quite wrong in insisting that the trial court could do nothing to avert the expiration of the judgment by its terms. We agree that the judgment should be viewed as self-executing, such that it was not automatically stayed by the filing of an appeal. (See 9 Witkin, Cal. Procedure, supra, Appeal, § 282 et seq.) For these purposes the judgment may be analogized to an injunction prohibiting MIC from asserting the 180-day provision of the functional replacement endorsement. A prohibitory injunction is not stayed by an appeal. (See id., § 283.) However, it does not follow that the trial court lacked any power to stay the effect of its own judgment. MIC conspicuously omits any acknowledgment of the trial court’s statutory power to “stay enforcement of any judgment or order.” (Code Civ. Proc., § 918, subd. (a).) This power is expressly granted “whether or not a notice of appeal has been filed.” (Id., subd. (c).) Insofar as the judgment contemplated “enforcement,” the trial court had the express power to stay it.

Moreover, the court had the power to modify the order, at least so long as the modification did not threaten the subject matter of the appeal. Again, the nearest analogy is a prohibitory injunction. Where an injunction of limited duration is appealed, the trial court has power to extend the injunction pending disposition of the appeal if doing so would serve the ends of justice. (See Green Trees Enterprises, Inc. v. Palm Springs Alpine Estates, Inc. (1967) 66 Cal.2d 782, 789 [59 Cal.Rptr. 141, 427 P.2d 805]; Planned Parenthood Assn. v. Operation Rescue (1996) 50 Cal.App.4th 290, 303, fn. 8 [57 Cal.Rptr.2d 736].) Here there is little doubt that this condition was met. The effect of the stay order—at least its intended effect—was to preserve the subject matter of the litigation until the issues kept alive by MIC’s appeal could be resolved. The order thus served the same purpose as the automatic stay, which is to preserve the parties’ positions pending the outcome of the appeal. (See State I. & I. Co. v. San Francisco (1894) 101 Cal. 135, 150 [35 P. 549] [“The effect of an appeal from a judgment when the proceedings thereon are stayed, is to preserve the rights of the parties to the controversy in the same condition as they were prior to the entry of the judgment.”]; Dewey v. Supreme Court (1889) 81 Cal. 64, 68 [22 P. 333] [“During the pendency of the appeal, the court below could do no act which did not look to the holding of the subject of the litigation just as it existed when the decree was rendered.”]; Paramount Pictures Corp. v. Davis (1964) 228 Cal.App.2d 827, 835 [39 Cal.Rptr. 791], quoting Dewey v. Supreme Court, supra, 81 Cal. at p. 68 [“It is well settled that an injunction mandatory in character is automatically stayed on appeal and that a prohibitory injunction is not so stayed [citations], ‘the object of the rule in both cases being to preserve the status quo. Otherwise the result of the final adjudication might often be a barren victory.’ ”].)

MIC contends that to extend the effect of the amended judgment would “punish” or “penaliz[e]” it for filing this appeal by “rewrit[ing]” the judgment “more favorably” to City. We reject this characterization. Were MIC to prevail on the merits of the appeal, the ensuing reversal of the judgment would give it everything it is entitled to. The purpose of the trial court’s stay order was to preserve City’s substantive rights, as found and declared in the judgment, in the event the judgment is affirmed. This does not penalize MIC for bringing an appeal; it prevents MIC from gaining an unjustified advantage merely by bringing a meritless appeal.

Even assuming the trial court lacked the power to modify the amended judgment while this appeal is pending, it would be highly injudicious to dispose of this appeal on such a ground where the almost certain result would merely be to guarantee further litigation below, probably followed by another appeal raising the very issues that are now before us. A dismissal would therefore accomplish nothing but delay and waste. To avoid this, we need only exercise our own power to modify the judgment to express the trial court’s plain intention. (See Code Civ. Proc., §§ 43, 187.) We will therefore modify the amended judgment of August 9, 2005, to state that MIC is estopped from asserting the 180-day contracting condition as a ground for denying functional replacement coverage unless City fails to enter into a contract within 180 days after the judgment becomes final in the sense that it is immune from further direct appellate review. So modified, the judgment presents a live controversy which we will address on the merits.

II. Standard of Review

MIC contends that the trial court erred in ruling that, as a result of MIC’s conduct, it is estopped to raise the 180-day contracting clause as a defense to a claim for functional replacement value coverage. This challenge implicitly presents two major questions. The first is whether the facts as expressly or impliedly found by the trial court furnished a legally sufficient basis for an estoppel. This in turn involves two subsidiary inquiries: One accepts the court’s findings as sound and asks whether they are legally sufficient to sustain its ruling, i.e., whether an estoppel can lawfully arise from the facts found by the trial court. This is a question of law subject to independent appellate review. (See Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 408 [58 Cal.Rptr.3d 527].) The second subsidiary inquiry assumes that an estoppel may be imposed on the facts found, but asks whether it should be imposed in view of competing considerations of fairness and policy. This question is entrusted to the trial court’s discretion, and that court’s resolution must be viewed deferentially on appeal. (See Phillippe v. Shapell Industries (1987) 43 Cal.3d 1247, 1272 [241 Cal.Rptr. 22, 743 P.2d 1279] (dis. opn. of Kaufman, J.) [“the trier of fact exercises considerable discretion in determining whether to enforce the statute of frauds or to estop its effect in the interests of justice”]; Rouse v. Underwood (1966) 242 Cal.App.2d 316, 328 [51 Cal.Rptr. 437] [“[T]he trial court has the power to deny relief, on its own motion, where laches or estoppel is disclosed by the evidence; and whether such a situation exists is a question in the first instance for the trial court’s determination.”].) The trial court’s ruling on this point will not be disturbed unless it constitutes an abuse of discretion, i.e., “ ‘the contrary conclusion is the only one that can reasonably be drawn from th