H & M Associates v. City of El Centro

• Decision Date: 20 August 1980
• Court: California Court of Appeals Court of Appeals
• Parties: H & M ASSOCIATES, Plaintiff and Appellant, v. The CITY OF EL CENTRO et al., Defendants and Respondents. Civ. 18746.

Page 392

167 Cal.Rptr. 392

109 Cal.App.3d 399

H & M ASSOCIATES, Plaintiff and Appellant, v. The CITY OF EL CENTRO et al., Defendants and Respondents.

Civ. 18746.

Court of Appeal, Fourth District, Division 1, California.

Aug. 20, 1980.

Hearing denied October 29, 1980.

John O. Meyers, El Centro, Louis G. Fazzi, Claremont, for plaintiff and appellant.

Dotson & Stamper and David R. Dotson, El Centro, for defendants and respondents.

WIENER, Associate Justice.

Plaintiff H & M Associates appeals the judgment of dismissal entered after defendants', City of El Centro and the members of the El Centro City Council, demurrer to its second amended complaint (complaint) was sustained without leave to amend. As we will explain, plaintiff, a limited partnership, has alleged facts sufficient to state causes of action for intentional interference with contractual relationships, invasion of privacy and conspiracy against the City of El Centro (City). We reverse the judgment.

Factual and Procedural Background

H & M Associates, a limited partnership, owns and operates H & M Apartments, a 306-unit apartment complex in El Centro, California. The property was encumbered, before September 21, 1975, with deeds of trust securing notes in favor of defendants Coachella Valley Savings and Loan Association, U.S. Life Savings and Loan, and Kaibab Industries, Inc. requiring payments in monthly installments. During that period of time, each defendant knew that plaintiff had made, and there was pending for approval, a written application with the Federal Housing Authority to refinance the mortgages on the property. Defendants also knew that plaintiff had written contractual relationships with its tenants.

Water service to the apartment complex was furnished before September 16, 1975, by the City through eight separate water meters, each of which had a different account number. On September 16, 1975, the City, through its agents, terminated the water service to the apartment complex without notifying plaintiff of its intent to do so, without providing plaintiff with either a hearing or an opportunity to pay the delinquent amount due and after plaintiff had tendered payment on seven of the eight accounts. The city manager, by telephone, then notified the mortgagees the FHA, the local newspaper, and several other governmental agencies, that the water service had been terminated by the City and would not be reinstated. Defendants acted with the intent to interfere and disrupt the contractual relationships to cause plaintiff the loss of tenants thereby preventing it from making the monthly payments due on the mortgages. Defendants' actions were based on their hope to buy the property on behalf of the City at a bargain price at the foreclosure sale. As a result of defendants' action, the plaintiff lost numerous tenants and became unable to pay the mortgage payments. The mortgages were foreclosed, the premises sold, and plaintiff lost the property.

The defendants demurred specially as well as generally to plaintiff's complaint. The court sustained defendants' demurrer without leave to amend in general terms contrary to Code of Civil Procedure section 472d. Regardless of this error, the court's ruling will be upheld if any of the grounds stated in the demurrer is well taken. (E. L. White, Inc. v. City of Huntington Beach (1978) 21 Cal.3d 497, 504, fn. 2, 146 Cal.Rptr. 614, 579 P.2d 505; Wheeler v. County of San Bernardino (1978) 76 Cal.App.3d 841, 846, fn. 3, 143 Cal.Rptr. 295.)

Plaintiff's First Cause of Action States Facts Sufficient To Constitute A Cause of Action For Intentional Interference With Contractual Relationships

"An action (in tort) will lie for the intentional interference by a third person with a contractual relationship either by unlawful means or by means otherwise lawful when there is a lack of sufficient justification. (Citations.)" (Herron v. State Farm Mutual Ins. Co. (1961) 56 Cal.2d 202, 205, 14 Cal.Rptr. 294, 296, 363 P.2d 310, 312; see also Imperial Ice Co. v. Rossier (1941) 18 Cal.2d 33, 35, 112 P.2d 631.) The tort is "a (specie) of the broader tort of interference with prospective economic advantage" involving similarity in elementary makeup and conduct while differing only in the existence of a legally binding contract. (Buckaloo v. Johnson (1975) 14 Cal.3d 815, 823, 122 Cal.Rptr. 745, 749, 537 P.2d 865, 869.) "To recover for inducing breach of contract, a plaintiff must establish (1) the existence of a valid contract; (2) the defendant had knowledge of the contract and intended to induce its breach; (3) the contract was in fact breached by the third party; (4) the breach was proximately caused by defendant's unjustified and wrongful conduct; and (5) that the foregoing resulted in damage to plaintiff. (Abrams & Fox, Inc. v. Briney (1974) 39 Cal.App.3d 604, 607-608, 114 Cal.Rptr. 328; see also Rest., 2d Torts, §§ 766, 766B.)" (Richardson v. La Rancherita (1979) 98 Cal.App.3d 73, 80, 159 Cal.Rptr. 285, 288.) Privilege or justification for the interference is an affirmative defense, not an element of plaintiff's cause of action, and thus may not be considered in support of the trial court's action in sustaining a demurrer unless apparent upon the face of the complaint. (Buckaloo v. Johnson, supra, 14 Cal.3d 815, 827-828, 122 Cal.Rptr. 745, 537 P.2d 865; Herron v. State Farm Mutual Ins. Co., supra, 56 Cal.2d 202, 207, 14 Cal.Rptr. 294, 363 P.2d 310; Richardson v. La Rancherita, supra, 98 Cal.App.3d at p. 80, 159 Cal.Rptr. 285; Lowell v. Mother's Cake & Cookie Co. (1978) 79 Cal.App.3d 13, 19, 144 Cal.Rptr. 664; A. F. Arnold & Co. v. Pacific Professional Ins., Inc. (1972) 27 Cal.App.3d 710, 714-715, 104 Cal.Rptr. 96.)

Guided by the foregoing principles, we conclude the second amended complaint alleges facts sufficient to state a cause of action for intentional interference with contractual relationships, as neither justification, privilege nor immunity appears upon the face of the complaint. Plaintiff has alleged the existence of valid tenant and mortgage agreements; defendants' awareness of the agreements as well as plaintiff's pending application for refinancing with the FHA; defendants' termination of the water service to the complex and defendant city manager's notification by telephone to the mortgagees, the FHA, the local newspaper and several other governmental agencies that the water service had been terminated and would not be reinstated; defendants' intentional conduct was designed to interfere and disrupt the cited contractual relationships in order that the mortgages would be foreclosed upon with the hope of purchasing the property on behalf of the City at a bargain price; defendants' conduct caused the termination of numerous tenant contracts, subjecting plaintiff to liability under Civil Code section 789.3; and plaintiff's default upon the mortgages which were foreclosed upon and sold, stripping plaintiff of both the property and its equity in the property.

The City responds by asserting that the actions of its city manager in terminating the water service and notifying other parties were discretionary in nature for which immunity is granted to the public employee and vicariously to the public entity under Government Code sections 815.2 and 820.2. ¹ They urge the foregoing is apparent from the City's Ordinance No. 645, Article 152, which gives to the city manager wide latitude in functioning as the administrative head of the government of the City under the direction and control of the City Council.

In governmental tort cases "the rule is liability, immunity is the exception." (Muskopf v. Corning Hospital Dist. (1969) 55 Cal.2d 211, 219, 11 Cal.Rptr. 89, 94, 359 P.2d 457, 462; see Ramos v. County of Madera (1971) 4 Cal.3d 685, 692, 94 Cal.Rptr. 421, 484 P.2d 93.) Courts should only decree governmental immunity where the Legislature has clearly provided for it, as "The important societal goal of compensating injured parties for damages caused by wilful or negligent acts must prevail." (Ramos v. County of Madera, supra, 4 Cal.3d at p. 692, 94 Cal.Rptr. at p. 426, 484 P.2d at p. 98.)

Sections 815.2 and 820.2 confer immunity upon "basic policy decisions" or conduct characterized as within the "planning" rather than the "operational" level of decision-making. (Sanborn v. Chronicle Pub. Co. (1976) 18 Cal.3d 406, 415, 134 Cal.Rptr. 402, 556 P.2d 764; Tarasoff v. Regents of University of California (1976) 17 Cal.3d 425, 445, 131 Cal.Rptr. 14, 551 P.2d 334; Johnson v. State of California (1968) 69 Cal.2d 782, 793-794, 73 Cal.Rptr. 240, 447 P.2d 352; Wheeler v. County of San Bernardino, supra, 76 Cal.App.3d 841, 848, 143 Cal.Rptr. 295.) The Supreme Court in Johnson, supra, 69 Cal.2d at pp. 794-795, fn. 8, 73 Cal.Rptr. at pp. 249, 447 P.2d at pp. 361, explained:

"Immunity for 'discretionary' activities serves no purpose except to assure that courts refuse to pass judgment on policy decisions in the province of coordinate branches of government. Accordingly, to be entitled to immunity the state must make a showing that such a policy decision, consciously balancing risks and advantages, took place. The fact that an employee normally engages in 'discretionary activity' is irrelevant if, in a given case, the employee did not render a considered decision." (See also Sanborn v. Chronicle Pub. Co., supra, 18 Cal.3d at p. 415, 134 Cal.Rptr. 402, 556 P.2d 764.)

Defendants' complete reliance upon Ordinance No. 649 is misplaced. The pertinent sections of the ordinance only characterize the nature and breadth of the powers of the city manager, as the administrative head of the government. The ordinance neither refers to nor describes the alleged conduct as discretionary. Even if so labeled, it is doubtful that a decision of a city manager to terminate water service to a customer falls within the ambit of "planning" as contrasted to the operational level of decision-making. Defendants have thus failed to make the...