Thursday, February 2, 2006
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S.C. to Rule on Application of Claims Act to Contract Cases
By KENNETH OFGANG, Staff Writer/Appellate Courts
The California Supreme Court yesterday agreed to decide whether, and to what extent, the Government Claims Act’s claims-presentation requirement applies to claims based on breach of contract.
Justices, at their weekly conference in San Francisco, voted 6-0 to grant review in +City of Stockton v. Superior Court (Civic Partners Stockton, LLC)+, C048162, in which the Court of Appeal held that the plaintiff’s claim was barred for failure to present a claim within a year of the alleged breach.
Justice Ming Chin, who recently underwent surgery, was absent and did not vote. He is also expected to miss the court’s oral argument session in two weeks.
The Stockton case grew out of the city’s repudiation of a lease with Civic Partners for space in the historic Hotel Stockton. The city’s redevelopment agency bought the 1910 structure six years ago, after it had been allowed to deteriorate for nearly two decades.
The agency then contracted with Civic Partners to rehabilitate the hotel. It also contracted with the firm to develop a nearby cinema.
Lease Repudiation Claim
The city leased 65,000 square feet on the upper floors of the hotel in 2001, which was to be used as office space. Three months later, the developer alleged, the city repudiated the lease and insisted that the upper floors be converted to senior citizen housing as a condition of the city’s further participation in the project.
Civic Partners alleges that it told the city that the change would delay the overall development of the hotel and hinder or delay the availability of tax credits, but that it agreed to the city’s terms in order to mitigate the damages resulting from the breach of the lease. After expending hundreds of thousand of dollars to complete the work, however, Civic Partners was removed in favor of CFY Development, Inc. and the building was rededicated as a mixed-use development last year.
Civic Partners, meanwhile, sued the city, the redevelopment agency, CFY, and others for breach of contract and interference with contract; the city and redevelopment agency cross-complained for breach of contract.
City’s Demurrer
The public entities demurred on several grounds, including the ground—asserted for the first time in response to an amended complaint—that a claim had not been presented as required by the Government Claims Act. Sacramento Superior Court Judge Jeffrey L. Gunther—the suit was moved to the “neutral” county because Civic Partners is headquartered in Orange County—overruled the demurrers on the ground that the claims presentation requirement does not apply to claims for breach of contract.
The Third District disagreed and ruled that the demurrers should have been sustained.
Justice Harry Hull, in an opinion filed Oct. 4 and certified for publication Oct. 28, cited several cases holding that claims for breach of express contract are subject to the claims act. In addition, he wrote, “[l]egislative history suggests an intent to apply the claim presentation requirement of the Government Claims Act to all types of claims for money damages.”
The justice also rejected contentions that the plaintiff had a claim for breach of an implied contract, to which it argued the claims act does not apply; that failure to raise the claims act defense in the initial demurrers constituted waiver; that the plaintiffs’ pre-suit written communications with the city and redevelopment agency constituted substantial compliance with the claims requirement; and that the public entities’ filing of a cross-complaint waived reliance on the Government Claims Act.
Copyright 2006, Metropolitan News Company