City of Stockton v. Superior Court

• Decision Date: 03 December 2007
• Docket Number: No. S139237.,S139237.
• Citation: 171 P.3d 20,42 Cal.4th 730,68 Cal.Rptr.3d 295
• Court: California Supreme Court
• Parties: CITY OF STOCKTON et al., Petitioners, v. The SUPERIOR COURT of Sacramento County, Respondent; Civic Partners Stockton, LLC, Real Party in Interest.

68 Cal.Rptr.3d 295

42 Cal.4th 730

171 P.3d 20

CITY OF STOCKTON et al., Petitioners, v.The SUPERIOR COURT of Sacramento County, RespondentCivic Partners Stockton, LLC, Real Party in Interest.

No. S139237.

Supreme Court of California.

December 3, 2007.

Wulfsberg Reese Colvig & Firstman, Charles W. Reese, Timothy A. Colvig, Mark A. Stump, Jeffrey R. Ward; Goldfarb & Lipman, Lee C. Rosenthal, Oakland; Richard E. Nosky, Jr., City Attorney, and Michael T. Rishwain, Assistant City Attorney, for Petitioners.

Orbach, Huff & Suarez, David M. Huff, Los Angeles, and Ryan W. Baldino for Los Angeles Unified School District as Amicus Curiae on behalf of Petitioners.

Jennifer B. Henning for California State Association of Counties and League of California Cities as Amici Curiae on behalf of Petitioners.

No appearance for Respondent.

Law Offices of Malcolm A. Misuraca and Malcolm A. Misuraca, Coral Gables, for Real Party in Interest.

Downey Brand, Melissa A. Thorme and Gregory T. Broderick, Sacramento, for Fallbrook Public Utility District as Amicus Curiae on behalf of Real Party In Interest.

CORRIGAN, J.

Government Code section 905 requires that "all claims for money or damages against local public entities" be presented to the responsible public entity before a lawsuit is filed.¹Failure to present a timely claim bars suit against the entity.(§ 945.4.)Here we hold that these requirements apply to breach of contract claims.We also adopt the practice of referring to the claims statutes as the "Government Claims Act," to avoid the confusion engendered by the informal short title "Tort Claims Act."

In this suit against a city and its redevelopment agency, the trial court overruled defendants' demurrer, deciding that the claim requirements did not apply to plaintiffs contract causes of action.The Court of Appeal issued a writ of mandate directing that the trial court sustain the demurrer.We affirm the Court of Appeal's judgment, with modifications.

I.BACKGROUND²

PlaintiffCivic Partners Stockton, LLC(Civic) alleged that it executed two redevelopment contracts in May 2000 with defendantRedevelopment Agency of the City of Stockton(the Agency).One contract involved rehabilitation of the Hotel Stockton; the other was for construction of an adjacent cinema.In May 2001, defendantCity of Stockton(the City) leased the upper floors of the hotel from Civic for office space.

Three months later, however, the City repudiated the lease.Mark Lewis, the City manager and executive director of the Agency, demanded that Civic find another use for the upper floors of the hotel.Civic had been depending on the lease to support its financing for the hotel project.The financing for the cinema depended on a viable hotel operation.Lewis proposed senior housing as an alternative for the upper floors.That change required redesigning the hotel's interior and altering the financial arrangements to include federal and state income tax credits.By the end of 2001 Civic had completed new plans for the hotel, as well as tax and financial analyses and other work needed to apply for the tax credits.This work cost Civic several hundred thousand dollars.

In January 2002, Lewis informed Civic that the Agency wanted Cyrus Youssefi and his company, CFY Development, to take over the upper floors, the senior housing plan, and the tax credit application.Civic began discussions with Agency personnel about how to protect Civic from the losses resulting from the breaches of the hotel and lease agreements.The Agency agreed to preserve Civic's rights in the rest of the hotel and reimburse it for its investment and overhead expenses.

Civic agreed to give the Agency a set of its plans for the hotel.In a letter agreement dated February 19, 2002, Steve Pinkerton, the Agency's Director of Housing and Redevelopment, accepted Civic's conditions that the plans would remain Civic's property, and could only be used by the Agency or others "subject to an agreement between the Agency and Civic [ ] regarding the future renovation of the Hotel (including reimbursement of costs to date), as well as a cooperative agreement" regarding other components of the project including the cinema.At some point in February, Pinkerton also agreed to pay the balance due on Civic's contract with its architect.

The next month, Pinkerton agreed to assume a loan taken by Civic (the Paramount loan), to recognize amounts due to Civic, and to take certain steps to mitigate Civic's losses.Civic sent Pinkerton a memorandum dated March 15, 2002, outlining the terms of the agreement.Pinkerton never questioned or disavowed those terms.For a time, the Agency abided by the terms of the February and March agreements, taking steps to assume the Paramount loan, discussing reimbursements with Civic, and forwarding an agreement on property intended for the cinema project.

On March 19, 2002, without informing Civic, the Agency entered into a new hotel development agreement with a company named Hotel Stockton Investors, operated by Youssefi.This agreement conflicted with Civic's hotel agreement, which was still in effect.The Agency gave Civic's plans to Youssefi and took steps to repudiate its agreements with Civic and to oust it from the redevelopment projects.It did not reimburse Civic for its investment in the plans as required by Civic's hotel agreement.It made its own arrangements with the architect, obtaining all the plans and associated project documents.It accused Civic of breaching the hotel contract, and gave notice to terminate the agreement.Although it had approved a cinema lease between Civic and Kirkorian Premiere Theatres, the Agency approached Kirkorian in an attempt to take over Civic's position.Ultimately, the Agency executed a lease with another theater operator.

Civic did not present a claim before filing suit.Its original complaint, dated January 12, 2003, sought declaratory relief to establish its rights in the hotel plans, damages from Youssefi and his companies for interference with its contracts, and damages from the City and the Agency for breaching the hotel agreement and the mitigation agreement of February 19,

2002.The City and the Agency demurred, but did not rely on the government claim requirements.The trial court sustained the demurrer on the grounds that Civic's rights in the hotel plans were governed by federal copyright law and within the exclusive jurisdiction of the federal courts, t-hat the City was not liable on the contract claims because it was not a party to either the redevelopment contracts or the February 19 and March 15 agreements, and that the February 19 and March 15 agreements could not support a cause of action against the" Agency because the statutory requirements for public contracting were not met.

Civic's amended complaint, dated March 12, 2003, sought damages from the City for breach of the lease for the upper floors of the hotel, from the Agency for breach of the hotel and cinema agreements, from the City for interfering with the hotel and cinema agreements, and from Youssefi and his companies for interference with Civic's contracts.Civic again sought declaratory relief regarding its ownership rights in the plans.The City and the Agency demurred again, still without raising the claim requirements.

The court sustained the demurrer.It found that Civic had stated sufficient facts to support contract claims against the City for breach of the lease, and against the Agency for breach of the hotel and cinema agreements.However, Civic had failed to specify whether the contracts were oral, written, or implied; the court granted leave to amend' as to these claims.The demurrer was sustained without leave to amend as to the declaratory relief claim, on the ground that the only recoverable damages were under federal copyright law, over which the court lacked jurisdiction.

The second amended complaint, dated June 8, 2004, restated the contract and interference with contract causes of action, specifying that the contracts in question were written.The claim for declaratory relief regarding Civic's rights in the hotel plans was omitted.The City and the Agency demurred for the third time.They argued that Civic's contract claims were defective because they depended on the February 19 and March 15 agreements, which were never properly approved.They also asserted that the second amended complaint was barred because Civic had failed to comply with the government claim requirements.They noted that in State of California v. Superior Court(Bodde)(2004)32 Cal.4th 1234, 13 Cal.Rptr.3d 534, 90 P.3d 116, filed May 24, 2004, this court ruled that failure to plead compliance with the claim requirements is a ground for demurrer.(Id. at p. 1239, 13 Cal.Rptr.3d 534, 90 P.3d 116.)

The trial court overruled this demurrer.It decided that the factual allegations supported the contract claims, and that the claims statutes did not affect contractual liability.The City and the Agency then cross-complained against Civic, seeking damages for breaches of the hotel and cinema contracts and the hotel lease, misrepresentation, and failure of consideration.They also petitioned the Court of Appeal for a writ of mandate directing the trial court to sustain their demurrer.They pointed out that the claims statutes unquestionably governed Civic's tort claim for interference with contract, and contended they also applied to Civic's contract claims under the weight of the case authority.

The Court of Appeal agreed.It held that the claim presentation requirements apply to contract causes of action against government defendants, and rejected a series of arguments by Civic attempting to excuse its noncompliance.However, the court ruled that if the City and the Agency pursued their cross-complaint, Civic would be allowed to file a cross-complaint of its own asserting defensive claims.The trial court was directed to enter an order...