Court Opinion

ID: 2652833
Source: CourtListenerOpinion
Date Created: 2014-02-10 21:27:00.237453+00
Date Added: 2024-06-11T09:10:58.001453
License: Public Domain

Filed 2/10/14

                                   CERTIFIED FOR PUBLICATION
                   IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                              SECOND APPELLATE DISTRICT
                                      DIVISION SIX

ERIC TUTHILL et al.,                                               2d Civil No. B239668
                                                                (Super. Ct. No. CIV226198)
     Plaintiffs and Appellants,
                                                                     (Ventura County)
v.
THE CITY OF SAN BUENAVENTURA et al.,
     Defendants and Appellants.
VICKI YOUNKER,
     Plaintiff and Respondent,
                                                                (Super. Ct. No. CIV227377)
v.                                                                  (Ventura County)
THE CITY OF SAN BUENAVENTURA et al.,
     Defendants and Appellants.
JASON GRANT et al.,
                                                                (Super. Ct. No. CIV226183)
     Plaintiffs,
                                                                     (Ventura County)
v.
THE CITY OF SAN BUENAVENTURA et al.,
     Defendants.

                   Equity, although designed to promote justice, cannot be used to nullify a
contrary statute. Applying equitable principles, the trial court awarded damages and
private attorney general fees to plaintiffs Eric and Karrie Tuthill and Vicki Younker
against defendants City of San Buenaventura and its housing authority (collectively, "the
City") based on the City's failure to disclose affordable housing restrictions that applied
to plaintiffs' townhomes. The judgment abrogated the statutory scheme of public entity
immunity embodied in Government Code section 815 et seq. and must be reversed.1 The
Tuthills' appeal, which seeks additional damages, is moot.
                   1
                       All statutory references are to the Government Code unless otherwise
stated.
                        FACTS AND PROCEDURAL HISTORY2
                             The Affordable Housing Program
              The City's development and maintenance of an Affordable Housing
Program ("AHP") is the backdrop of the litigation. In 1979, the California Legislature,
having determined that a critical need for affordable housing exists in California, enacted
statutes that offered incentives for cities to provide affordable housing for low- and
moderate- income households. Those statutes are codified in the Density Bonus Law
(§§ 65580 et seq.) In 1981, the City adopted the AHP, which provided incentives for
private developers to produce more affordable housing.
              In 1988, the City amended the AHP. The Amended AHP states its
purposes: "to assist in providing ownership and rental housing for low and moderate
income households and to ensure that such housing remains in the affordable market."
The Amended AHP offered developers even stronger incentives to develop affordable
housing. It also imposed threshold requirements for developers who wanted to take
advantage of those incentives. The most significant of these were the requirements that
developers impose price restrictions on affordable housing units and restrictions on resale
prices, the latter to prevent owners from selling the units for more than a predetermined
price. The Amended AHP required the City to "[s]et and periodically update the
requirements and qualifications for eligible households" and to "[r]eview records
submitted by developer and applicant households to identify eligible households."
              In 1992, the City entered into a development agreement with now-defunct
Bulmer Development Corporation ("Bulmer") to develop a 57-unit townhome complex
called Seneca Highlands. The Development Agreement includes a Declaration of
Covenants, Conditions and Restrictions (CCRs) that provide the affordability restrictions
for the units.3 The central purpose of the Development Agreement was the provision of

              2
               Virtually all of the facts were undisputed and, with the documentary
evidence, were received by stipulation of the parties.
              3
           The CCRs were later amended. The Development Agreement and the
Amended CCRs are together referred to hereinafter as "the Development Agreement."

                                             2
affordable housing: Fifty of the units are designated as "moderate income" and seven as
"low-income."
              The Development Agreement provides that (1) only qualified buyers (those
with incomes in a specified range) can buy any of the 57 units; and (2) no unit can be
sold at a price above certain set limits. Through the Development Agreement the City
delegated to Bulmer the discretion to make eligibility determinations, which is customary
in the affordable housing industry, and to inform the City of those designations. The
Development Agreement also required the City to issue a Certificate of Compliance,
certifying that the prospective purchase complies with the Development Agreement. The
parties agree that Bulmer misinformed the City about buyer qualifications in several
cases, resulting in the City's improper issuance of Certificates of Compliance and the sale
of restricted properties to buyers who were not qualified for AHP units because their
income levels exceeded AHP qualifying income levels.
              Plaintiffs purchased two of the seven "low income" Seneca Highlands
townhomes in 2001. Because of the misunderstanding, they paid more than the restricted
prices. Later that year, plaintiffs and other homeowners in Seneca Highlands discovered
that Bulmer's sales agents had not disclosed that the townhomes were affordable housing
units with price restrictions.
              Plaintiffs sued the City and Bulmer in 2004.4 The causes of action directed
against the City in each complaint were declaratory relief, negligence and negligence
per se/violation of statutory duty. In their declaratory relief cause of action, plaintiffs
sought a declaration that the AHP's restrictions did not apply to their units and were not
enforceable, or, if the court enforced the restrictions, monetary damages. The negligence
cause of action was dismissed at trial. In their negligence per se/violation of statutory
duty cause of action, plaintiffs alleged the City breached its "affirmative obligation"
under California's affordable housing statute, section 65580 et seq., "to enforce the

              4
                 Bulmer did not appear and is in default as against plaintiffs. Bulmer is not
a party to this appeal.

                                               3
[AHP], or to ensure its enforcement." Specifically, plaintiffs alleged the City did not tell
them that the AHP's "low income" restrictions applied to their units and that Bulmer sold
the units to them at higher prices than the low income level. As a result, plaintiffs
overpaid for their properties. Plaintiffs also requested private attorney general fees under
Code of Civil Procedure section 1021.5.
               The parties stipulated to the appointment of a temporary judge. The City
moved for judgment on the pleadings based on the City's public entity immunity. The trial
court denied the motion. Following a bench trial, the trial court issued its Statement of
Decision. Stating that "equitable principles" controlled because of the declaratory relief
cause of action, the court found, among other things, that "based upon the paramount
importance of affordable housing programs," plaintiffs' units would retain their lower
income designations. The court found, however, that its determination resulted in damages
to plaintiffs, who had overpaid for their properties. The court ordered further proceedings
to determine the amount of plaintiffs' damages.
               In the damages phase of the trial, the court found both Bulmer and the City
liable to plaintiffs for damages, explaining that, "while Bulmer is undoubtedly responsible
for many of the errors, . . . [t]he City is also complicit . . . because it did not comply with
some of the responsibilities imposed upon it under the provisions of its enabling ordinance,
did not meet the contractual responsibilities imposed upon it under the Development
Agreement with Bulmer, [and] failed to properly administer its own program or to provide
appropriate safeguards which were required for the services which it delegated . . . ."
Specifically, the trial court found that both the City and Bulmer allowed plaintiffs to
purchase units even though their incomes exceeded the cap for low income units; they
allowed plaintiffs' townhomes to be designated as low income units, but sold them for
higher prices; and they permitted the execution of purchase agreements that did not
identify the units as restricted.
               The trial court found that the City "failed to provide any reasonable or
appropriate safeguard to ensure that harm would not result" from the City's delegation of
duties under the Development Agreement to Bulmer. The trial court concluded that "[i]f

                                               4
the City is not held accountable for this, the purpose and policy behind affordable housing
is thwarted. The City has not and cannot state how the mandated responsibility of
providing affordable housing to the class of individuals for whom the project has been
created is met when the sales are conducted in a manner which is violative of its own
guidelines." The court calculated the Tuthills' total damages as $100,146 and Younker's as
$145,850 and found that the City and Bulmer were jointly and severally liable.
                           Private Attorney General Attorney Fees
              The court issued separate findings on the issue of attorneys' fees. The court
set a lodestar rate of $325 per hour and awarded private attorney general fees of $330,720.
The court entered separate judgments for the Tuthills and for Younker on January 20,
2012. This timely appeal followed.
                                         DISCUSSION
                                    Public Entity Immunity
              "Except as otherwise provided by statute . . . [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." (§ 815, subd. (a).) Section 815 "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." (Cochran v. Herzog
Engraving Co. (1984) 155 Cal. App. 3d 405, 409.) Absent some constitutional requirement,
"public entities may be liable only if a statute declares them to be liable." (Ibid.)
              There are statutory exceptions to the immunity rule. At issue here is the
"mandatory legal duty" exception found in section 815.6. Section 815.6 provides that:
"Where a public entity is under a mandatory duty imposed by an enactment that is
designed to protect against the risk of a particular kind of injury, the public entity is liable
for an injury of that kind proximately caused by its failure to discharge the duty unless the
public entity establishes that it exercised reasonable diligence to discharge the duty."
              Before addressing the mandatory legal duty exception, we examine the trial
court's decision that "equitable principles" governed its findings at trial.

                                               5
                  The Trial Court's Application of "Equitable Principles"
              As noted above, the City moved for judgment on the pleadings, asserting its
immunity under section 815. The trial court denied the motion and proceeded to try the
case by applying "equitable principles." The court "balanced the equities" between
plaintiffs and the City in favor of the City by declining to remove the affordable housing
designations from plaintiffs' units because doing so would offend the strong public policy
favoring the provision of affordable housing. The court found, however, that plaintiffs
were entitled to compensation based on the City's failure to protect plaintiffs, who were
ineligible buyers, from purchasing AHP restricted properties. The trial court erred in
substituting equitable principles for the analysis required by section 815.
              Equitable doctrines "are designed to promote justice and to give effect to the
lawful obligations of a party against whom complaint is made for refusing to perform some
duty imposed upon him." (Lass v. Eliassen (1928) 94 Cal. App. 175, 179.) The trial court
believed that the City's failure to notify purchasers of the restrictions on the purchase and
sale of properties in the AHP called for such a remedy. Equity, however, may not be used
to find liability where the result would nullify a contrary statute. "[A] court of equity will
never lend its aid to accomplish by indirect means what the law or its clearly defined
policy forbids to be done directly." (Jackson and Thomas v. Torrence (1890) 83 Cal. 521,
537.)
              In Timberline, Inc. v. Jaisinghani (1997) 54 Cal. App. 4th 1361, 1368, the
plaintiff, a corporation, obtained a money judgment against the defendant. Before the
judgment was paid, the Secretary of State suspended the plaintiff corporation for failure to
pay franchise taxes. On the plaintiff's motion, the trial court renewed the judgment. The
nonpaying defendant moved to vacate the renewal of the judgment based on the
corporation's suspended status. Ultimately, the trial court renewed the judgment. The
Court of Appeal reversed, explaining that Revenue & Taxation Code section 23301
deprives a suspended corporation of "the benefits of California laws and the assistance of
the California judicial system." (Timberline, supra, at p. 1368.) The Court of Appeal
expressly rebuffed the suspended corporation's resort to equity: "While we may

                                              6
disapprove of [defendant's nonpayment of the judgment], we are not free to interject
equitable doctrines into what is otherwise a comprehensive statutory scheme specifying the
requirements and power of California corporations." (Id., at fn. 5.)
              The California Tort Claims Act likewise creates a comprehensive statutory
scheme regarding governmental liability and immunity. (Farmers Ins. Group v. County of
Santa Clara (1995) 11 Ca1.4th 992, 1001.) This scheme precludes a finding of liability
against public entities without express statutory authorization. No statute permits a finding
of liability based on "equitable principles." This case "is not one . . . for the application of
equitable doctrines but rather one for the construction of an act of the legislature." (Lass v.
Eliassen, supra, 94 Cal.App. at p. 179.) While we might agree with the trial court that the
City's oversight of the AHP was inadequate, the court was not free to graft an equitable
exception onto the Tort Claims Act.
              We therefore turn to the "mandatory legal duty" exception to public entity
immunity.
                           The "Mandatory Legal Duty" Exception
              To qualify for the exception, a plaintiff must establish (1) the existence of an
enactment that imposes a mandatory, not discretionary, duty on the public entity and
(2) that the enactment is intended to protect against the particular kind of injury the
plaintiff suffered. (Haggis v. Superior Court (2000) 22 Cal. 4th 490, 498-499.) "Whether
an enactment creates a mandatory duty is a question of law." (Id., at p. 499.)
              1. Enactment imposing a mandatory duty.
              Section 815.6 "requires that the enactment at issue be obligatory, rather than
merely discretionary or permissive, in its direction to the public entity; it must require,
rather than merely authorize or permit, that a particular action be taken or not taken.
[Citation.]" (Haggis v. Superior Court, supra, 22 Cal.4th at p. 498.) Because the trial
court based its damages award on "equitable principles," it did not inquire into the
existence of a "mandatory legal duty imposed by an enactment." Plaintiffs suggest three
possible sources of such a mandatory duty: Section 65580 et seq., the Amended AHP and
the Development Agreement. None of those sources meets the statutory standards.

                                               7
a. Section 65580.
              Section 65580 "requires the cooperation of all levels of government" to
provide affordable housing for low- and moderate-income households. Plaintiffs contend
that section 65580 obligated the City "to enforce the [AHP], or to ensure its enforcement."
As the trial court recognized, however, section 65580 constitutes a "general statement of
public policy, not a directive to any agency . . . on how to implement that policy."
(Building Industry Assoc. v. Marin Mun. Water Dist. (1991) 235 Cal. App. 3d 1641, 1650.)
A "general statement of public policy" cannot serve as the basis for a mandatory duty
under section 815.6. (In re Groundwater Cases (2007) 154 Cal. App. 4th 659, 691-692;
Guzman v. County of Monterey (2009) 46 Cal. 4th 887, 900, fn. 8.) Section 65580,
therefore, imposed no mandatory duty on the City to protect plaintiffs, who were ineligible
to purchase designated affordable housing, from purchasing restricted properties.
              Plaintiffs' brief suggests, without analysis, that section 65580 impliedly
mandates the City to manage its AHP in such a manner that plaintiffs would not be
harmed. The law instructs otherwise: "To construe a statute as imposing a mandatory
duty on a public entity, 'the mandatory nature of the duty must be phrased in explicit and
forceful language.' [Citation.]" (In re Groundwater Cases, supra, 154 Cal.App.4th at p.
689.) The Supreme Court has rejected attempts by plaintiffs to find a mandatory duty
based on an "implied duty" read into a statute. (See Guzman v. County of Monterey, supra,
46 Cal.4th at pp. 902-911 [finding no liability under the Safe Drinking Water Act based on
an implied duty to notify customers, where the only directive imposed by the statute was a
duty to review a water system's monitoring reports].) Section 65580 only directs public
entities to cooperate in the provision of affordable housing and to address regional housing
needs. It does not impose on the City a mandatory duty to protect ineligible buyers from
buying restricted properties, and such a duty cannot be reasonably inferred.
b. The Amended AHP.
              The Amended AHP requires the City to "[s]et and periodically update the
requirements and qualifications for eligible households" and to "[r]eview records
submitted by developer and applicant households to identify eligible households."

                                             8
Plaintiffs contend that these directives create a mandatory legal duty that abrogates public
entity immunity. Neither of these requirements, however, imposes an affirmative
obligation to prevent sales to ineligible households, to notify the developer or the potential
purchaser about his or her eligibility status, or to take any other actions beyond those
explicitly stated.
               The duty to set and periodically update requirements and qualifications is
akin to the requirement that the state reassess "the risks and needs" of a parolee within a
set period after his release from prison, which did not trigger any specific requirement
of administrative action. (Brenneman v. State of California (1989) 208 Cal. App. 3d 812,
817-818.) Likewise, a duty to review records to identify eligible households is equivalent
to the duty to "investigate," which "may not reasonably be read as imposing a mandatory
duty" to take action. (State of California v. Superior Court (1984) 150 Cal. App. 3d 848,
858; see also MacDonald v. State of California (1991) 230 Cal. App. 3d 319, 331 ["[a]
mandatory duty to investigate [under Health & Saf. Code, § 1597.55] is not the same as a
mandatory duty to take action"].) In the absence of a specific and explicit mandate
requiring the City to take some affirmative action upon its "[r]eview [of] records submitted
by developer and applicant households to identify eligible households," there is no
mandatory duty to take any further or preventative actions. Accordingly, the Amended
AHP cannot form the predicate mandatory duty for liability under section 815.6.
c. The Development Agreement.
               Plaintiffs also cite the Development Agreement as a source of "a mandatory
duty imposed by an enactment." This contention is meritless for two reasons. First, the
term "enactment" refers to "a constitutional provision, statute, charter provision, ordinance
or regulation." (§ 810.6.) The Development Agreement is a contract between the City and
Bulmer. A "contract cannot give rise to 'a mandatory duty imposed by an enactment.'"
(Lawson v. Superior Court (2010) 180 Cal. App. 4th 1372, 1395, fn. 22.) Recognizing this,
plaintiffs argue that Ordinance No. 92-17, by which the City authorized the Development
Agreement, "elevates" that contractual agreement "to the status of an 'enactment'" for
purposes of section 815.6. Plaintiffs cite no authority for this proposition and we reject it.

                                              9
Nothing in Ordinance No. 92-17 imposes any obligation on the City; it simply authorizes
the City Manager to execute the Development Agreement. Any obligations imposed by
the Development Agreement are contractual duties, regardless of whether the City
approved that obligation by ordinance. As the City observes, finding "a mandatory duty
imposed by an enactment" in the City's contractual obligations – even a contractual
obligation incorporated by reference into an ordinance – would have the absurd result of
making a public entity liable in tort for its contractual obligations. Because the
Development Agreement is not "a constitutional provision, statute, charter provision,
ordinance or regulation," it does not amount to an "enactment" that gives rise to a
mandatory duty under section 815.6.
              Second, even if we were to consider the Development Agreement an
"enactment" by virtue of its adoption by ordinance, it does not establish a mandatory duty
on the part of the City to protect ineligible buyers from purchasing AHP restricted
properties. Neither of the provisions of the Development Agreement on which plaintiffs
rely, sections 5.5 and 15, creates such an obligation.
              Section 5.5 of the Development Agreement states that the City will review
and approve the developer's marketing program. Section 15 provides that the City will
review the Development Agreement at least once a year, and that the developer will
demonstrate its good faith compliance with the Development Agreement. To the extent
these provisions impose obligations on the City, as opposed to Bulmer, they do not
mandate affirmative action by the City. They only require review of documents. As
explained more fully above, a duty to review does not encompass the broader duty to take
action based on the review. (MacDonald v. State of California, supra, 230 Cal.App.3d at
p. 331.)
              2. Protection Against the Kind of Injury Suffered by Plaintiffs
              Section 815.6 also requires that ''the mandatory duty be 'designed' to protect
against the particular kind of injury the plaintiff suffered." (Haggis v. Superior Court,
supra, 22 Cal.4th at p. 499.) The injury must be "'one of the consequences which the
[enacting body] sought to prevent through imposing the alleged mandatory duty.'" (Ibid.)

                                             10
"That the enactment 'confers some benefit' on the class to which plaintiff belongs is not
enough; if the benefit is 'incidental' to the enactment's protective purpose, the enactment
cannot serve as a predicate for liability under section 815.6. [Citation.]" (Ibid.) In
Haggis, the enactment held to constitute a mandatory duty was a municipal code section
that required, among other things, that when a property was found unstable because of
landslide, subsidence, or inundation, the defendant public entity was obligated to file with
the County Recorder a certificate of substandard condition. (Id., at p. 501.) The subject
property was found to be unstable but the public entity failed to file such a certificate. A
subsequent purchaser suffered damage to the property arising out of the unstable condition
and sued the public entity for failure to file the certificate. The plaintiff alleged he would
not have bought the property had the certificate been filed as required. (Id., at p. 502.)
               The plaintiff in Haggis contended that the purpose of the recordation
requirement was to put future purchasers on notice of the instability. (Haggis v. Superior
Court, supra, 22 Cal.4th at pp. 502-503.) The Supreme Court disagreed, explaining that,
while the recordation requirement may have warned potential purchasers of the property's
unstable condition, "that effect is aptly described as 'incidental' . . . to the ordinance's
enforcement goal." (Ibid.) In other words, because the enactment was not designed to
protect future purchasers from economic loss, the plaintiff in Haggis was unable to
circumvent section 815.
               Plaintiffs fail to demonstrate that any of the provisions they rely on – section
65580 et seq., the Amended AHP, or the Development Agreement, was intended to protect
ineligible purchasers from economic losses. The intended beneficiaries of all these
provisions are "low and moderate income households" who seek to benefit from the AHP.
At best, plaintiffs were "incidental" beneficiaries of the enforcement goals of section
65580, the amended AHP and the Development Agreement.
                                         Duty to Warn
               Plaintiffs contend that the "duty to warn" required the City to advise them
that the properties they sought to purchase were subject to AHP restrictions, in reliance on
Johnson v. State of California (1968) 69 Cal. 2d 782, and Tarasoff v. Regents of the

                                               11
University of California (1976) 17 Cal. 3d 425. The contention is meritless because both
Johnson and Tarasoff address a public entity's vicarious liability for the negligence of its
employees under section 820.2. Neither addresses section 815 or the mandatory legal duty
exception of section 815.6, which are controlling here. Plaintiffs did not base their claims
on the City's vicarious liability for the negligent conduct of its employees; their claims are
based on the theory that the City itself was subject to a mandatory duty. As explained
above, plaintiffs do not identify any mandatory legal duty that the City violated by failing
to warn them that the properties they sought to purchase were subject to AHP restrictions.
                               Private Attorney General Fees
              The trial court ordered the City to pay plaintiffs' attorneys' fees pursuant to
the private attorney general statute, Code of Civil Procedure section 1021.5. Private
attorney general fees are available to "a successful party" in an action that has resulted in
the enforcement of an important right affecting the public interest if certain conditions are
met. The trial court's attorneys' fees award must be vacated because plaintiffs are not
successful parties. "The term 'successful party,' as ordinarily understood, means the party
to litigation that achieves its objectives." (Graham v. Daimler-Chrysler Corporation
(2004) 34 Cal. 4th 553, 571.) The City prevailed on the issue of declaratory relief at trial
in that the trial court found that plaintiffs' units would retain their lower income
designations. Because we are reversing the trial court's damage award, the City prevails
on that issue as well.
              Although a favorable final judgment is not a prerequisite for "successful
party" designation under section 1021.5 (Schmier v. Supreme Court (2002) 96
Cal. App. 4th 873, 877), the plaintiff's action must at least have been a "'catalyst
motivating defendants to provide the primary relief sought.'" (Id., at p. 878.) This
requires us to "'focus on the condition that the fee claimant sought to change.'" (Ibid.,
citing Crawford v. Board of Education (1988) 200 Cal. App. 3d 1397, 1407).
              Plaintiffs' action sought to impose on the City the obligation to disclose to
potential buyers that the units they sought to purchase were subject to "low income"
restrictions on purchase and resale prices. As we have explained, their lawsuit did not

                                              12
realize that objective. The City has not modified or agreed to modify the AHP. Nor has
plaintiffs' action resulted in new law that affects the rights of persons the AHP was
intended to benefit – low- and moderate-income households. (See Leiserson v. City of San
Diego (1988) 202 Cal. App. 3d 725 [plaintiff entitled to private attorney general fees
because his action defined the rights of the media under Pen. Code, § 409.5 even though he
did not prevail on his tort theories].) Because plaintiffs' action neither obtained the relief
they sought nor vindicated an important right, they are not entitled to attorneys' fees based
on the private attorney general doctrine.
                                       DISPOSITION
              The judgments for damages and the award of private attorney general fees
are reversed. Costs on appeal are awarded to the City.
              CERTIFIED FOR PUBLICATION.

                                            O'DONNELL, J.*

We concur:

              GILBERT, P. J.

              YEGAN, J.

              *
               (Judge of the Superior Court of Los Angeles County, assigned by the
Chief Justice pursuant to art. 6, § 6 of the Cal. Const.).

                                              13
                                   Rebecca S. Riley, Judge
                                   Steven J. Stone, Judge*
                             Superior Court County of Ventura
                            ______________________________

              Andrew J. Wolf for Plaintiffs and Appellants Tuthill and Plaintiff and
Respondent Younker.
              Anderson Kill Wood & Bender, David P. Bender, Eric R. Reed, Caroline
Hurtado Ford and Michael J. Stoner for Defendants and Appellants.

              *
                Retired Presiding Justice of the Court of Appeal, Second Appellate
District, assigned by the Chief Justice pursuant to Article I, section 6 of the California
Constitution.