County of Solano v. Vallejo Redevelopment

• Decision Date: 28 October 1999
• Court: California Court of Appeals Court of Appeals
• Parties: (Cal.App. 1 Dist. 1999) COUNTY OF SOLANO et al., Plaintiffs and Respondents, v. VALLEJO REDEVELOPMENT AGENCY et al., Defendants and Appellants. A082666 <A HREF="#fr1-*" name="fn1-*">* Filed

Page 41

90 Cal.Rptr.2d 41 (Cal.App. 1 Dist. 1999)

COUNTY OF SOLANO et al., Plaintiffs and Respondents, v. VALLEJO REDEVELOPMENT AGENCY et al.,Defendants and Appellants.

A082666

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION THREE CERTIFIED FOR PARTIAL PUBLICATION^*

Filed 10/28/99

(Solano County Super. Ct. No. L004732) Richard W. Kessell

Counsel for Defendants and Appellants: McDonough, Holland & Allen

Iris P. Young G. Richard Brown John M. Powers, City Attorney City of Vallejo

Counsel for Plaintiffs and Respondents: Hyde, Miller, Owen & Trost Nancy C. MillerWilliam L. Owen Matthew D. Ruyak County of Solano Dennis Bunting, County Counsel Vicki Sieber-Benson, Assistant County Counsel Stuart M. Flashman

Walker, J.

I INTRODUCTION

The Vallejo Redevelopment Agency (Agency), a separate legal entity from the City of Vallejo (Vallejo), agreed to pay Solano County $3.2 million for capital improvements in Homeacres, an unincorporated neighborhood and blighted area of Solano County. The Agency instead used the money earmarked for capital improvements to pay off bonds that financed the construction of an elementary school in a new development within the City of Vallejo. Solano County and the Homeacres Improvement Association (Association), a nonprofit corporation representing the interests of about 50 out of the approximately 3,000 people living in Homeacres, alleged causes of action against Vallejo and the Agency for breach of contract, breach of a "duty of fair representation," misappropriation of funds, and unjust enrichment. The trial court held that the Agency was liable to Solano County because the Agency committed an anticipatory breach of contract, and that Vallejo was liable based on unjust enrichment. The court also found that the Agency breached a "duty of fair representation" to the residents of Homeacres. The court held for the Agency and Vallejo on the misappropriation claim. The court awarded Solano County damages in the amount of $3.2 million, and awarded attorney fees to the Association and Solano County, and expert witness fees to Solano County.

The Agency contends on appeal that it did not breach its contract with Solano County because the county failed to fulfill certain conditions precedent and failed to prove that they were able to perform under the contract. In the published portion of this opinion, we hold that the Agency's anticipatory breach excuses any unfulfilled conditions under the contract, and sufficient evidence establishes Solano County's ability to perform. Vallejo contends that the court's determination that it was unjustly enriched was error because it received no benefit from the Agency's actions. We disagree with this contention in the second part of our published opinion. Appellants also contend that the trial court's award of attorney fees to the Association was error because the court found that the Association lacked standing to obtain a judgment. In the unpublished part of this opinion, we agree with appellants on this issue and reject appellants' sundry other contentions.

II BACKGROUND

A.California Redevelopment Law

Redevelopment in California is a statutorily regulated process by which a city can eliminate "blighting" conditions within a project area. (Health & Saf. Code, 33020, 33021, 33030, 33035-33037¹; Redevelopment Agency v. City of Berkeley (1978) 80 Cal.App.3d 158, 168 [Redevelopment Agency].) Every city is authorized to establish a redevelopment agency by ordinance. ( 33101, 34115.) A redevelopment agency is a public body, corporate and politic, which may sue, be sued, and make contracts. ( 33100, 33122, 33125; see Kehoe v. City of Berkeley (1977) 67 Cal.App.3d 666, 673.) In general, a redevelopment agency is a separate legal entity from the city that established it, and the city is not liable for the debts of the agency. (Pacific States Enterprises, Inc. v. City of Coachella (1993) 13 Cal.App.4th 1414, 1424-1425.)

The city that creates a redevelopment agency must approve a redevelopment plan for a blighted area, and adopt the plan by ordinance. ( 33365.) The redevelopment agency, however, has the authority to implement the plan, and may only conduct its redevelopment activities within the boundaries of the planned project, with limited exceptions. ( 33021, 33030, 33035-33037, 33360-33375; see Redevelopment Agency, supra, 80 Cal.App.3d at pp. 168-170.) If the redevelopment agency of a city proposes to redevelop territory outside a city, the county board of supervisors must approve the redevelopment plan by ordinance and may delegate the redevelopment of the unincorporated area to the city. (See 33213.)

Redevelopment agencies receive their financing from tax "increments," which are property taxes collected on property located within the redevelopment project area that exceed the property taxes received in the tax year before the year in which the redevelopment plan is adopted. (Cal. Const., art. XVI, 16; 33670.) Except in limited circumstances, a redevelopment agency can use tax increments only in the redevelopment project area from which the taxes were collected. ( 33334.2, subd. (g), 33670.) The tax increments that a redevelopment agency receives each year are deposited into a special fund to pay the principal and interest on loans or other indebtedness incurred by the agency that finance the redevelopment project. (Cal. Const., art. XVI, 16; 33670, subd. (b).)

Absent a redevelopment plan, tax increments would be allocated to other public agencies such as school districts, water districts, etc. ( 33670.) To mitigate the burden on other public agencies from the diversion of tax increments to a redevelopment plan, redevelopment agencies, prior to 1994, often agreed to "pass through" part of their tax increment revenues to the other public agencies. ( 33401, added by Stats. 1984, ch. 147, 13, p. 508 and repealed by Stats. 1993, ch. 942, 23, p. 5358.)

B.The Southeast Area Redevelopment Plan

In 1983, Vallejo proposed a redevelopment project, called the Southeast Area Redevelopment Project (Project), to Solano County that included an unincorporated residential area of the county known as Homeacres, as well as an undeveloped, newly-annexed area of Vallejo called Glen Cove. Homeacres was a blighted, older neighborhood with dilapidated housing and inadequate public infrastructure. Glen Cove, on the other hand, was primarily vacant land destined for large-scale residential development.

Vallejo wanted to generate $30 million in tax increments through the Project, a portion of which was earmarked for the construction of an elementary school ($3.7 million) and freeway interchange improvements ($1.5 million) benefiting Glen Cove. Vallejo sought permission from Solano County to include Homeacres within the Project area in order to meet the definition of "blight" under redevelopment law. (See 33320.1.) As incentive for Solano County to agree, Vallejo promised to commit $5 million to Homeacres for housing rehabilitation and capital improvements. In exchange, Vallejo wanted Solano County to pledge 20 percent of its share of future general fund tax revenues to the Agency.

In September 1983, Solano County adopted Ordinance No. 1211, in which the county approved of the Project. The approval was conditioned on an agreement for sharing tax revenues from the proposed project area between Vallejo, the Agency, and Solano County. In December 1983, Vallejo agreed to a suggestion from the Association that the Project contain provisions for creating a "neighborhood planning process" to establish priorities for spending redevelopment money, by adopting Resolution No. 83-833 N.C. Vallejo also adopted Resolution No. 83-834 N.C., which approved a report from the Solano County Fiscal Review Committee (Fiscal Committee) that contained several recommendations for relieving the fiscal burdens that Solano County and other taxing entities would suffer as a result of the Project. Resolution No. 83-834 N.C. also referred the Fiscal Committee report to Vallejo city staff to prepare an agreement "between County and City of Vallejo to incorporate the recommendations made therein."

Also in December 1983, the Vallejo City Council adopted Ordinance No. 724 N.C., which approved the final plan for the Project (Project Plan) and incorporated the Project Plan into the ordinance by reference. The Project Plan, in turn, incorporated Solano County's proposed Ordinance No. 1220, containing Solano County's requirement of an agreement between Vallejo, the Agency, and Solano County to share property tax revenues from the Project area. In January 1984, Solano County adopted Ordinance No. 1220, which finalized the county's approval of the Project Plan.

C.The Agency-Solano County Agreement

In April 1985, the Agency, whose governing board members are also members of the Vallejo city council, and Solano County agreed in a written contract that the Agency would pay $5 million in tax increments collected from the Project area to Solano County for low-income housing ($1.8 million) and capital improvements ($3.2 million) in Homeacres. The contract incorporated by reference the Fiscal Committee report and a payment schedule showing that $5 million would be set aside for "County Projects" in Homeacres. The contract and the incorporated Fiscal Committee report specified that the Project would be limited in duration to 40 years, until $30 million in tax increments had accumulated, or until the redevelopment plan improvements had been completed, whichever occurs first. The contract also contained the following conditions, which were taken verbatim from the Fiscal Committee report:

"d.That with respect to capital improvements undertaken in the unincorporated area, the following conditions apply:

"1)That the present day cost of storm drains, water lines, street overlays, curbs, gutters, and sidewalks, and reconstruction of the County portion of Benicia Road is estimated at...