Schonfeld v. City of Vallejo

• Decision Date: 04 August 1975
• Citation: 50 Cal.App.3d 401,123 Cal.Rptr. 669
• Court: California Court of Appeals Court of Appeals
• Parties: Sidney SCHONFELD, Plaintiff and Appellant, v. CITY OF VALLEJO et al., Defendants and Respondents. Civ. 34518.

Page 669

123 Cal.Rptr. 669

50 Cal.App.3d 401

Sidney SCHONFELD, Plaintiff and Appellant, v. CITY OF VALLEJO et al., Defendants and Respondents.

Civ. 34518.

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

Aug. 4, 1975.

Rehearing Denied Sept. 3, 1975.

Hearing Denied Oct. 1, 1975.

Howard B. Crittenden, Jr., San Francisco, for plaintiff and appellant.

Richard J. Lucas, W. Reece Bader, John H. McGuckin, Jr., Orrick, Herrington, Rowley & Sutcliffe, San Francisco, for defendants and respondents.

TAYLOR, Presiding Justice.

Plaintiff, Sidney Schonfeld, appeals from a judgment of nonsuit as to his causes of action for fraud and misrepresentation against respondent, Ficklin, the former city manager of the respondent, City of Vallejo, and from a judgment of dismissal, sustaining without leave to amend the city's demurrer to his causes of action for fraud, misrepresentation and breach of contract. Both appeals raise questions of first impression as to the interpretation and scope of the fraud and misrepresentation exceptions of Government Code sections 818.8 and 822.2. The appeal from the nonsuit also raises the question of whether, disregarding all conflicts in the evidence and giving Schonfeld's evidence all the value to which it was legally entitled, he presented any sufficient substantial evidence to support a verdict in his favor. In addition, Schonfeld asserts that the entry of the judgment of dismissal in favor of the city on his first two causes of action violated the one-judgment rule, as his fourth cause of action against the city is still pending. For the reasons set forth below, we have concluded that there is no merit to any of his contentions and that the judgment of nonsuit, as well as the judgment of dismissal, must be affirmed.

So far as here pertinent, Schonfeld's amended complaint against the city and the city manager alleged the following underlying facts: In 1960, pursuant to the development of its waterfront property bordering on Mare Island Straits, the city obtained additional land contiguous to city-owned property from the United States through the Department of the Interior, and applied for state assistance to finance the construction of the Vallejo Municipal Marina (hereafter the marina). On June 14, 1962, a loan agreement was executed between the city and state in the principal amount of $1,200,000 for marina construction. Between 1962 and 1965, the city prepared the marina site, including a harbor and attendant berthing facilities, and constructed three on-shore facilities: a harbormaster building, a boat repair facility, and a boat storage building. The long-range plans called for the additional construction by private developers of on-shore facilities.

On August 27, 1964, the city leased the marina premises to Vallejo Marina, Inc. (hereafter VMI), for a period of 55 years at an annual rental of $60,400. Under the lease, VMI was obligated to operate the marina and construct the additional facilities under a site development schedule, subleasing these facilities as it and the city deemed desirable. In mid-1965, a supplemental lease was executed, adding additional land to the area leased by VMI; Schonfeld, a private developer, became involved in the marina in late 1965, and subsequently withdrew from the project.

Schonfeld's amended complaint set forth the following pertinent causes ¹ of action: The first, against the city and the city manager, alleged that in December 1965, each made false and fraudulent oral representations to Schonfeld to induce him to pay the $60,400 rental then due under the VMI lease and to induce him to acquire certain unspecified rights in the leasehold. ² In reliance on these representations, Schonfeld paid the city $60,400 in January 1966 and took an assignment from VMI of and undivided one-half interest in the demised premises as security.

The second cause of action against the city alone alleged that: 1) Schonfeld was a third party beneficiary of the lease between the city and VMI, and therefore entitled to sue for the city's breach of its warranties of title and quiet improvement, as well as its covenant to provide certain improvements; and 2) Schonfeld, as an assignee of a one-half interest in the leasehold for security, and as a mortgagee of the lease, was entitled to sue for fraudulent misrepresentation and for breach of various express and implied covenants.

The fourth cause of action sought declaratory relief against the city on the theory that the assignment of the one-half interest in the leasehold that Schonfeld received from VMI was a valid mortgage and not an invalid assignment prohibited by the terms of the lease. This cause of action is still pending.

The city and city manager demurred to each cause of action generally on grounds of failure to state sufficient facts and specifically on grounds of ambiguity and uncertainty. The trial court sustained the demurrers as to the city without leave to amend on the first two causes of action, and overruled the demurrers as to the city manager on the first cause of action for fraud and misrepresentation. After a nine-day trial, the court granted a nonsuit pursuant to Code of Civil Procedure section 581c, and also ruled that Schonfeld had failed to prove that any representations by the city manager constituted common law deceit or were made 'with actual fraud, corruption or actual malice' within the meaning of Government Code section 822.2. Subsequently, on February 7, 1972, the court entered a judgment of nonsuit in favor of the city manager and a judgment of dismissal as to the two causes of action against the city.

I. THE NONSUIT

We turn first to the judgment of nonsuit in favor of the city manager on Schonfeld's first cause of action for fraud and misrepresentation.

Government Code section 822.2 provides: 'A public employee acting in the scope of his employment is not liable for an injury caused by his misrepresentation, whether or not such misrepresentation be negligent or intentional, unless he is guilty of actual fraud, corruption or actual malice.' This statute must be read together with ³ Government Code section 818.8 which provides: 'A public entity is not liable for an injury caused by misrepresentation by an employee of the public entity, whether or not such misrepresentation be negligent or intentional.'

While neither section defines 'misrepresentation,' ⁴ our Supreme Court in Johnson v. State of California, 69 Cal.2d 782, 73 Cal.Rptr. 240, 447 P.2d 352, relying on analogous provisions in the Federal Tort Claims Act (28 U.S.C., § 2680, subd. (h)), and the legislative comment, quoted below, held at page 800 that the Legislature limited the immunity of section 818.8 to exempt governmental entities from liability for interference with financial and commercial interests, ⁵ a tort distinct from the general milieu of negligent and intentional (cf. Connelly v. State of California, 3 Cal.App.3d 744, 748, 84 Cal.Rptr. 257). ⁶ The Legislature intended to insure that such acts would never become the basis for public liability (Brown v. City of Los Angeles, 267 Cal.App.2d 849, 851, 73 Cal.Rptr. 364).

Civil Code section 1571 defines two forms of fraud: actual and constructive. Actual fraud, as defined in Civil Code section 1572, is in five categories, four of which are identical to the tort of deceit (Civ.Code, § 1710). Civil Code section 1572, however, by its terms, is limited to acts committed by one party to a contract with intent to deceive another party to the contract or to induce him to enter into a contract. Pursuant to Souza & McCue Constr. Co., supra, and Government Code section 814, contractual situations are not within the immunities of sections 818.8 or 822.2. Schonfeld's action against the city manager was not based on any contractual situation or breach of duty that would give rise to an action for constructive fraud (Civ.Code, § 1573). Civil Code section 1709 defines fraudulent deceit in terms of common law fraud: 'One who willfully deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damage which he thereby suffers.'

California law generally defines four kinds of deceit: 1) intentional misrepresentation (Civ.Code, § 1710, subd. 1): 'The suggestion, as a fact, of that which is not true, by one who does not believe it to be true' (cf. Civ.Code, § 1572, subd. 1); 2) negligent misrepresentation (Civ.Code, § 1710, subd. 2): 'The assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true' (cf. Civ.Code, § 1572, subd. 2) ('not warranted by the information of the person making it'); 3) concealment. Civil Code section 1710, subdivision 3: 'The suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact' (cf. Civ.Code, §§ 1572, subd. 3, 1572, subd. 1); and 4) failure to perform a promise (Civ.Code, § 1710, subd. 4): 'A promise made without any intention of performing it.' (Cf. Civ.Code, § 1572, subd. 4.) ⁷

More recently, our Supreme Court held in Warner Constr. Corp. v. City of Los Angeles, 2 Cal.3d 285 (at 293 and 294) 85 Cal.Rptr. 444, 466 P.2d 996, that fraudulent concealment was within the immunity of Government Code section 818.8.

The city urges that 'actual fraud,' as used in Government Code section 822.2 must be construed to mean 'fraud and malice' based on personal malevolence or wrongful purpose (Grove v. Purity Stores, Ltd., 153 Cal.App.2d 234, 314 P.2d 543) and that 'actual malice' is akin to that required for defamation, malicious prosecution or exemplary damages (Albertson v. Raboff, 46 Cal.2d 375, 295 P.2d 405; Sturges v. Charles L. Harney, Inc., 165 Cal.App.2d 306, 331 P.2d 1072; Wolfsen v. Hathaway, 32 Cal.2d 632, 198 P.2d 1; Gudger v. Manton, 21 Cal.2d 537, 543, 134 P.2d 217; Washer v. Bank of America NT&SA, 21 Cal.2d 822, 136 P.2d 297). The...