Pacific States Enterprises, Inc. v. City of Coachella (13 Cal. App. 4th 1414, 1993)

Opinion

TIMLIN J.

The plaintiff in this matter, Pacific States Enterprises, Inc. (Pacific), appeals from the dismissal of its first amended complaint as against two defendants pursuant to section 581, subdivision (f)(1) and (2) of the Code of Civil Procedure after their demurrers to the first amended complaint were sustained. On appeal, Pacific contends that: (1) With regard to the defendant City of Coachella (City)—(a) the trial court erred in sustaining the City’s demurrer to the first amended complaint and (b) even if the trial court was correct in sustaining the City’s demurrer to the first amended complaint, the trial court erred in sustaining that demurrer without leave to amend; and (2) with regard to the individual defendant, Les Nelson (Nelson)—the trial court erred in sustaining the demurrer to the first amended complaint.

We shall conclude that the trial court’s rulings were legally correct and, consequently, we shall affirm the dismissals entered below.

Statement of Factual and Procedural Background

As pled in Pacific’s first amended complaint, the general gist of the facts underlying the within action are as follows:

(1) Pacific and the City entered into an oral agreement pursuant to which the City would make available to Pacific a roughly 19-acre parcel and Pacific (having obtained development approvals from the City) would develop an “auto center and mall” on the parcel and would be given, as its own, a portion of the parcel;

(2) In reliance on various promises, representations, commitments and warranties made by the City through its employees to Pacific with regard to their oral agreement, Pacific expended large sums of money to carry out the preliminary stages of its obligations under the agreement, including the preparation of studies and plans regarding the proposed development; and

(3) The City, without notice or good cause, refused to deal with Pacific in good faith or to meet the terms of its obligations under the agreement in any fashion—all to Pacific’s loss and damage.

Pursuant to the Government Tort Claims Act, Pacific filed a claim against the City for its alleged losses (in excess of $5 million) resulting from the City’s failure to fully perform under the terms of the alleged oral contract. The City denied the claim, and Pacific filed its first complaint. This initial pleading contained three causes of action—breach of contract, breach of the implied covenant of good faith and fair dealing, and fraud and deceit. The complaint named three defendants—the City, Otis Clasby (a former City manager of the City who was involved, at least as a correspondent, in the City’s dealings with Pacific) and Nelson (who replaced Clasby as the City manager while the City-Pacific dealings were still ongoing). This original complaint did not specify which of the causes of action were pled against which of the defendants.

The City and Nelson demurred to Pacific’s first complaint: As to the first cause of action (breach of contract), the trial court sustained the demurrers on the ground that the oral contract, as therein alleged, was apparently violative of the statute of frauds; as to the second cause of action (breach of covenant of good faith and fair dealing), the trial court sustained the demurrers on the ground that no valid cause of action could sound on the asserted theory in the absence of a valid contract; and as to the third cause of action (fraud and deceit), the trial court overruled the demurrers, which demurrers had been based on the ground that the complaint failed to sufficiently plead the particulars of the alleged fraud/deceit.

Pacific thereafter filed a first amended complaint. The amended complaint differed from the original complaint in at least three material respects: (1) The amended complaint affirmatively alleged certain “factors” (part performance, estoppel/detrimental reliance, and unjust enrichment) which purportedly “lifted” the alleged oral contract “out from under” the statute of frauds; (2) the amended complaint attached and incorporated copies of five different documents (exhibits “A” through “E”) which, according to the amended complaint, “clearly evidence[d] the existence and material terms of the oral agreement between plaintiff and Defendant City of Coachella”; and (3) the first and second causes of action of the first amended complaint (hereinafter referred to collectively as “the contract related causes of action”) were asserted only against the City and “Does 1 through 20” (and not against the individually named defendants), while the third cause of action (fraud and deceit) was asserted against all of the defendants.

The City and Nelson demurred to the first amended complaint. As to the first cause of action, the City demurred on the ground that the alleged oral contract violated the statute of frauds and also on the ground that the amended complaint’s description of the terms of the alleged oral contract, together with the incorporated documentation, did not show the City to be a party to the contract. As to the second cause of action, the City demurred on the ground that the second cause of action was legally dependent on the first cause of action, in that there can be no tortious (or, for that matter, nontortious) breach of a contract unless there is a contract—and the first cause of action did not allege the existence of a valid contract between it and Pacific.

Finally, as to the third cause of action, the City and Nelson demurred on the grounds that they were statutorily immune from liability with respect to the alleged fraud, that plaintiff was without legal right to obtain punitive damages (which were prayed for with respect to the third cause of action) either from the City or from Nelson, and that the amended complaint disclosed that there was no contractual relationship between the City and Pacific upon which a claim for fraud could be said to rest.

Without stating the specific grounds upon which it was basing its rulings, the trial court thereafter sustained the City’s demurrers to the contract related causes of action without leave to amend, and sustained the demurrers to the third cause of action without leave to amend as to the City and with 20 days’ leave to amend as to Nelson. Pacific thereafter failed to amend its complaint within 20 days with respect to its fraud/deceit cause of action against Nelson. The City and Nelson then moved the trial court for a dismissal of the within action with prejudice: (1) Insofar as the case against the City was concerned, pursuant to section 581, subdivision (f)(1) (“The court may dismiss the complaint as to that defendant . . . after a demurrer to the complaint is sustained without leave to amend and either party moves for dismissal.”); and (2) insofar as the case against Nelson was concerned, pursuant to section 581, subdivision (f)(2) (“The court may dismiss the complaint as to that defendant . . . after a demurrer to the complaint is sustained with leave to amend, the plaintiff fails to amend it within the time allowed by the court and either party moves for dismissal.”)

The trial court granted the City’s and Nelson’s motion for dismissal with prejudice, and Pacific’s appeal from that order of dismissal ensued. (§ 581d.)

Additional facts will be referred to, as needed, in the discussion which follows.

Discussion

I.

The Standard of Review

II.

The Sustaining of the City’s Demurrer to the First and Second Causes of Action Without Leave to Amend

A. Legal Correctness of Sustaining Demurrer.

In discussing the appropriateness of the trial court’s having sustained the City’s demurrer to Pacific’s first amended complaint, it is preferable to discuss separately the City’s demurrer as it related to the contract related causes of action and the City’s demurrer as it related to the third cause of action—the fraud/deceit cause of action. This is so because the issue of the validity of the City’s demurrer to the fraud/deceit cause of action is intertwined with the issue of the validity of Nelson’s individual demurrer to the fraud/deceit cause of action—and, consequently, those two issues should be taken up together. Here, we address only the City’s demurrer as it related to the contract related causes of action.

As noted above, there were various documentary exhibits, including exhibits “A” through “E,” which were attached to, and incorporated into, Pacific’s first amended complaint. Paragraph 26 of Pacific’s first amended complaint declared: “Exhibits ‘A’ through ‘E’ hereto clearly evidence the existence and material terms of the oral agreement between plaintiff and Defendant City of Coachella. ...” A brief description of each of these five exhibits follows:

(1) Exhibit “A” was a letter to one of Pacific’s officers from the City Manager, which letter was denominated a “Letter of Intent Between Coachella Redevelopment Agency and [Pacific].” The “cc” on this letter indicated that it was being copied to “Bill Strausz, Redevelopment Attorney.” (Italics added.)

(2) Exhibit “B” was a letter to the same Pacific officer from the above named “Redevelopment Attorney.” In that letter, the following relevant statements were made: (i) “The owners of the 18.38 acre site . . . have orally agreed to sell that site to the Coachella Redevelopment Agency[;]” (ii) “That offer will be presented to the Redevelopment Agency . . . ;” (iii) At the meeting on Tuesday, the Agency will also consider the exclusive negotiating agreement which you provided . . . and (iv) “[assuming that the Redevelopment Agency will be entering into an escrow for the site . . . .” (Italics added.) A copy of the referenced “negotiating agreement” (apparently provided/drafted by Pacific’s officer) was attached to this letter. This proposed agreement clearly states that it is by and between Pacific and “z7z