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Court of Appeal:
Government Agency Can’t Slip in Attorney-Fee Provision
Gilbert Says Local Agency Formation Commission Was Required to Accept, Act on, Applications for Annexation of Land by Cities; It Can’t Condition Its Performance on Applicant Agreeing to Reimburse Litigation Expenses
By a MetNews Staff Writer
Div. Six of the Court of Appeal for this district yesterday held—in an opinion that provides a primer on contract law and contains an admonishment against judicial legislation—that a governmental entity was not entitled to attorney fees and costs as the prevailing party based on a proviso it had inserted in an application form.
At issue was the enforceability of a provision in the form that San Luis Obispo County’s local agency formation commission (“LAFCO”) devised for a city seeking permission to annex land. It says the applicant would indemnify LAFCO against certain expenses including “costs” and “attorneys’ fees” incurred in connection with the application.
Government Code §56383(a) authorizes such commissions to charge “fees.” In light of that, LAFCO contended, it was entitled to $400,000 in attorney fees and costs it sustained in successfully fighting off a court challenge to its denial of an application by the City of Pismo Beach and a developer for the annexation of a 154-acre parcel of real property.
The San Luis Obispo Superior Court granted judgment on the pleadings to the city and the developer in LAFCO’s suit to recoup the expenses. Presiding Justice Arthur Gilbert wrote yesterday’s opinion affirming that judgment.
He said that §56383 “contemplates that the fees charged thereunder will be limited to those necessary to the administrative process, not to post-decision court proceedings.”
Consideration Lacking
Declaring the indemnification provision in the application to be a nullity, Gilbert wrote:
“LAFCO contends the indemnity agreement is a valid contract provision.
“A contract requires consideration….Consideration consists of either a benefit to the promisor or a detriment to the promisee….A promise to do something the promisor is legally bound to do is not consideration….
“LAFCO has a statutory duty to accept all completed applications…and to review and approve or disapprove the application….
“LAFCO has given no consideration in exchange for the indemnity agreement.”
Liberal Construction
LAFCO pointed out that the Cortese-Knox-Hertzberg Act, creating local agency formation commissions in each of the state’s 58 counties, specifies that it “shall be liberally construed to effectuate its purposes,” and argued that, so viewing the act, the costs and attorney fees it seeks should be allowed.
Gilbert responded:
“Yes, liberal construction requires broad rather than narrow construction….But the construction may not be so broad as to ignore the express mandates of the statute. Nothing in section 56383, no matter how broadly construed, authorizes the indemnity agreement.”
In the opening paragraph of the opinion, he issued this reminder:
“Even broadly construed statutes have boundaries. It is the Legislature’s responsibility to amend statutes. Courts may not do so under the guise of implied powers.”
The jurist also set forth:
“We are constrained by Code of Civil Procedure section 1021. That section provides: ‘Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties; but parties to actions or proceedings are entitled to their costs, as hereinafter provided.’
“Here attorney fees in post-administrative actions are not ‘specifically provided for by statute. Nor is there a valid agreement for such fees. LAFCO’s remedy is with the Legislature.”
The case is San Luis Obispo Local Agency Formation Commission v. City of Pismo Beach, 2021 S.O.S. 958.
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