Harshbarger v. City of Colton

• Decision Date: 28 January 1988
• Docket Number: No. E003517,E003517
• Citation: 243 Cal.Rptr. 463,197 Cal.App.3d 1335
• Court: California Court of Appeals Court of Appeals
• Parties: George T. HARSHBARGER et al., Plaintiffs and Appellants, v. CITY OF COLTON, Defendant and Respondent.

Page 463

243 Cal.Rptr. 463

197 Cal.App.3d 1335

George T. HARSHBARGER et al., Plaintiffs and Appellants, v. CITY OF COLTON, Defendant and Respondent.

No. E003517.

Court of Appeal, Fourth District, Division 2, California.

Jan. 28, 1988.

Reid & Hellyer and Alexandra S. Ward, Riverside, for plaintiffs and appellants.

Wilson, Borror, Dunn & Scott and Thomas M. Davis, San Bernardino, for defendant and respondent.

OPINION

HEWS, Associate Justice.

This is an appeal from an order of dismissal entered in favor of defendant City of Colton ("Colton") and against plaintiffs Gregory T. Harshbarger and Ellen Takahashi-Harshbarger ("the Harshbargers") following the trial court's granting of Colton's demurrers without leave to amend.

The issues on appeal are:

1) Does governmental immunity bar the Harshbargers from bringing suit against Colton for intentional misrepresentation or fraudulent suppression of fact by city employees?

2) Does governmental immunity apply to bar the Harshbargers' complaint against Colton where the complaint seeks damages based on fraudulent inspection of private property by city employees?

3) May the Harshbargers state a claim against Colton for negligent hiring of employees based on fraudulent inspection of private property by city employees?

4) Did the trial court abuse its discretion in denying the Harshbargers leave to amend their complaint?

FACTS

According to the allegations of the complaint "which we must assume to be true for purposes of ruling on a demurrer" (Ramos v. County of Madera (1971) 4 Cal.3d 685, 688, 94 Cal.Rptr. 421, 484 P.2d 93):

The Harshbargers contracted with a general contractor for construction of a single family residence ("the residence") to be built on their property in Colton. Construction on the residence began in April of 1984 and stopped sometime in July or August of 1985. During the time the Harshbargers' residence was under contruction, Dale Young ("Young") and Robert M. Holt ("Holt") were employed by Colton as building inspectors, whose duties were to inspect all construction to ensure compliance with applicable building codes.

Young and Holt periodically inspected the residence to ensure that at each stage of construction it complied with applicable codes. As a result of their inspections, Young and Holt were aware the construction did not meet various code standards. However, after each of their inspections, Young and Holt signed the "job card" maintained in connection with the construction of the residence, the signing of which constituted their acknowledgement that construction at that stage complied with applicable codes and permitted the next stage of construction to begin. Neither Young nor Holt disclosed to the Harshbargers that construction on the residence was defective.

The general contractor stopped work on the residence in late July or early August of 1985. In August of 1985, the Harshbargers received a letter from Colton stating that the residence did not comply with the variety of applicable codes. As a result of the defects in construction, the Harshbargers paid approximately $295,000 for reconstruction of their residence to bring it up to code standards.

The Harshbargers subsequently brought suit against Young, Holt, and Colton for intentional misrepresentation and suppression of fact, and against Colton for negligent hiring. Colton demurred to all causes of action on the ground that the complaint failed to state a cause of action against it. It argued that a public entity is immune from liability for injuries caused by intentional misrepresentations of employees of the public entity, for suppression of fact, or by reason of making an inadequate or negligent inspection of private property for the purpose of determining whether it complies with or violates any enactment. The trial court sustained the demurrers without leave to amend and dismissed the Harshbargers' complaint against Colton.

I Intentional Misrepresentation

The Harshbargers contend that Colton is not immune from liability for intentional misrepresentation by Colton city employees during inspection of construction on the Harshbargers' residence.

In California, all government tort liability must be based on statute. "Government Code section 815, ¹ enacted in 1963, abolished all common law or judicially declared forms of liability for public entities, except for such liability as may be required by the federal or state Constitution. Thus, in the absence of some constitutional requirement, public entities may be liable only if a statute declares them to be liable." (Cochran v. Herzog Engraving Co. (1984) 155 Cal.App.3d 405, 409, 205 Cal.Rptr. 1, original emphasis.) Section 815, subdivision (a) specifically provides that "[a] public entity is not liable for an injury, whether such injury arises out of an act or omission of the public entity or a public employee or any other person." Additionally, section 815, subdivision (b) states "[t]he liability of a public entity established by this part ... is subject to any immunity of the public entity provided by statute. ..." As the legislative comment to section 815 notes, the immunity provisions "[u]nder subdivision (b) of [section 815] ... will as a general rule prevail over all sections imposing liability." (Cal.Law Revision Com. com., Deerings Ann.Gov.Code (1982 ed.) § 815, p. 135.) "In short, sovereign immunity is the rule in California; governmental liability is limited to exceptions specifically set forth by statute." ( Cochran v. Herzog Engraving Co., supra, 155 Cal.App.3d at p. 409, 205 Cal.Rptr. 1.)

A. Section 818.8 Immunity and Doctrine of Respondeat Superior

The Harshbargers argue that under the doctrine of respondeat superior a public entity is liable for wrongful acts of its employees, whether those acts are negligent or intentional, where as here the employees are "guilty of actual fraud, corruption or actual malice." (§ 822.2.) They cite sections 815.2 and 822.2 in support of their argument.

Pursuant to section 815.2, ² public entities are liable for injuries caused by their employees in the scope of their employment, if the act or omission of the employee would, apart from section 815.2 give rise to a cause of action against the employee. Section 822.2 ³ provides that a public employee is not liable for injury caused by his misrepresentation "unless he is guilty of actual fraud, corruption or actual malice."

Thus, the Harshbargers argue, pursuant to these two code sections, Colton is liable for the fraudulent or intentional misrepresentations of Young and Holt that the residence met code standards when in fact they knew it did not.

However, "[i]t is apparent that section 822.2 applies only to a public employee, not to a public entity such as the respondent city." (Universal By-Products, Inc. v. City of Modesto (1974) 43 Cal.App.3d 145, 154, 117 Cal.Rptr. 525.) According to the legislative comment, section 818.8 ⁴ specifically provides public entities with "absolute immunity from liability for negligent or intentional misrepresentation[s]" of its employees. (Cal.Law Revision Com. com., Deerings Ann. Gov. Code (1982 ed.) § 818.8, p. 174.) The comment to section 818.8 distinguishes section 818.8 (immunity of public entities for misrepresentations of employees) from section 822.2 (immunity of employees of public entities for misrepresentations), noting that "[a] similar immunity is provided public employees by Section 822.2 except that an employee may be held liable if he is guilty of actual fraud, corruption or actual malice." (Ibid.)

"[S]ection 815, subdivision (b) states that statutory liabilities are subordinated to statutory immunities. Thus, the immunity provisions to section 818.8 would prevail over the general statement of liability in section 815.2." ( Universal By-Products, Inc. v. City of Modesto, supra, 43 Cal.App.3d at p. 154, 117 Cal.Rptr. 525.) A public employee may be liable for actual fraud, but the public entity is wholly immune. (Ibid.)

B. Section 818.8 Immunity for Commercial Relationship or Transaction

The Harshbargers next cite Johnson v. State of California (1968) 69 Cal.2d 782, 73 Cal.Rptr. 240, 447 P.2d 352 in support of their argument that section 818.8 immunizes a public entity from liability for misrepresentation only if the injury suffered due to the misrepresentation resulted from a commercial relationship or transaction between the plaintiff and the public entity, and thus does not provide immunity here. ⁵

In response Colton cites Grenell v. City of Hermosa Beach (1980) 103 Cal.App.3d 864, 163 Cal.Rptr. 315 in support of its argument that under Johnson the facts of the present case fall within the immunity provided by section 818.8. We agree with Colton.

In Johnson the California Supreme Court ruled that a public entity may be liable for placing a Youth Authority parolee with known violent propensities in a foster home without warning the foster mother of the youth's dangerous propensities. In dicta, the court discussed the public entities' immunity for misrepresentation provided by section 818.8. The court stated that " 'misrepresentation,' as a tort distinct from the general milieu of negligent and intentional wrongs, applies to interferences with financial or commercial interest. The Legislature designed section 818.8 to exempt the governmental entity from this type of liability." ( Johnson v. State of California, supra, 69 Cal.2d at p. 800, 73 Cal.Rptr. 240, 447 P.2d 352.)

In reaching this conclusion, the Johnson court relied on the case of United States v. Neustadt (1961) 366 U.S. 696, 81 S.Ct. 1294, 6 L.Ed.2d 614. The issue in Neustadt was whether the United States was liable where the Federal Housing Administration had furnished a statement reporting results of an inaccurate inspection appraisal on residential property and as a result the purchaser was induced to pay a purchase price in excess of fair market value. "The high court held in Neustadt that the...