Court Opinion

ID: 9728225
Source: CourtListenerOpinion
Date Created: 2023-08-26 14:02:34.548273+00
Date Added: 2024-06-11T18:25:46.962720
License: Public Domain

ALLPORT, J. — I dissent.1
Defendant Department of Water and Power of the City of Los Angeles, a department of the City of Los Angeles, a municipal corporation (DWP), entered into a written contract (and addendum) (contract 709) with Shea-Kaiser-Lockheed-Healy, a joint venture composed of four corporations — J.F. Shea Company, Inc., Kaiser Industries Corporation, Lockheed Shipbuilding and Construction Company and S.A. Healy Company (SKLH) — on December 19, 1968, under which DWP agreed to purchase and SKLH agreed to sell certain described aggregate (sand, three-fourths inch, one and one-half inch, three inch, *692natural material) “for concrete and other uses for the Castiac Power Project ordered by the Department during the period beginning with the date of award of contract and ending July 1, 1972” (contractual period) at a price of $1.90 per ton with a “0.10 per ton discount for payment within 30 days.”2
During the summer of 1971 a dispute arose between DWP and SKLH over the quantity of aggregate which DWP could order under contract 709. Mr. Shank, representing SKLH, wrote DWP stating that he had talked to a lawyer and he was repudiating the contract insofar as quantities in excess of 604,000 tons might be ordered. Shank stated that quantities in excess of 604,000 tons would be delivered if extra compensation were paid. SKLH delivered 604,000 tons by August 1971. DWP replied that such repudiation was a breach of contract and that it would call for bids on a new contract. DWP did advertise for new bids. The parties held several conferences and before DWP could accept any new bids, SKLH wrote a letter to DWP in which it agreed to continue deliveries of aggregate in excess of 604,000 tons “under protest” without waiver of rights, if DWP would consider in good faith SKLH’s claim for extra compensation because of extra costs. DWP replied by letter that it would consider claims for extra compensation when supporting data was submitted.
DWP fell behind in its work schedule and by December of 1971 it became apparent that it would not be able to complete the project by July 1, 1972. It decided to stockpile the amount of aggregate which it would require to complete the project after July 1, 1972. SKLH put in evidence an interdepartmental memo from the files of DWP which explained that the reason for this decision was because if DWP did not order aggregate under contract 709 during the contractual period prior to July 1, 1972, and purchased aggregate after July 1, 1972, under a new contract it would probably be required to pay a price substantially in excess of $1.90 per ton because the “current estimated prices for concrete aggregate are $4.50. Under existing contract 709, the price of aggregate is $1.90 per ton for a gross savings to the Department of $2.60 per ton. The existing aggregate contract 709 permits the Department to stockpile aggregate on the project site.”
*693Thereafter, commencing in January 1972 DWP ordered under contract 709 and primarily stockpiled the maximum daily quantity of aggregate allowed under contract 709 which totaled approximately 190,000 tons. Of this quantity DWP allegedly ordered a disproportionately high percentage of three-fourths inch aggregate which the trial court found to be 30,647 tons of three-fourths inch aggregate more than authorized by the contract.
SKLH filed an action against DWP seeking damages for breach of contract. The first cause of action alleged that under the contract SKLH was required to deliver only 604,000 tons of aggregate, whereas DWP demanded and received 796,742 tons of aggregate which caused damage to SKLH in the sum of $267,911. In a second cause of action SKLH alleged that DWP ordered a disproportionate quantity of sand and three-quarter inch aggregate which caused additional damage in the sum of $149,292.
On the first and second causes of action the court found that DWP demanded that SKLH deliver 795,957 tons of aggregate, whereas the contract, as interpreted by the court, only required SKLH to deliver 604,000 tons of aggregate with the result that SKLH “produced and delivered under protest to [DWP] 191,957 tons of material over and above that required by the contract.” The court found that said 191,957 tons of aggregate had a fair market value of $2.90 per ton, of which sum DWP paid only $1.80 per ton, causing damages to SKLH in the sum of $211,152. The court further found that DWP demanded “an unreasonably disproportionate quantity of % inch nominal size aggregate in relation to the other sizes demanded,” which caused damage to SKLH in the additional sum of $ 14,000. Judgment was rendered in favor of SKLH in the total sum of $225,152 with prejudgment interest at 7 percent from February 2, 1973.
Although DWP presents several claims of error, I regard one claim of error as dispositive of this appeal. DWP contends that a chartered city is not liable in quasi contract or implied contract for materials delivered, because such a city can purchase only under competitive bid contracts and therefore it can only be liable for goods delivered under the written “Time and Price” competitive bid contract at a price not to exceed the contract price.

*694
Discussion

DWP is a department of the City of Los Angeles, which is a chartered city. The charter has the effect of a law of the State of California. (City etc. of S. F. v. Workmen’s Comp. App. Bd. (1968) 267 Cal.App.2d 771 [73 Cal.Rptr. 429]; C. J. Kubach Co. v. McGuire (1926) 199 Cal. 215 [248 P. 676].) It has the full force and effect of a legislative enactment (Bruce v. Civil Service Board (1935) 6 Cal.App.2d 633 [45 P.2d 419]; Tilden v. Blood (1936) 14 Cal.App.2d 407 [58 P.2d 381]), and is “the supreme law of the State with respect to the government of such chartered cities.” (Adams v. Wolff (1948) 84 Cal.App.2d 435, 440 [190 P.2d 665].) The charter acts not as a grant of power but as an instrument of limitation and restriction on the exercise of power over municipal affairs. (City of Marysville v. Boyd (1960) 181 Cal.App.2d 755 [5 Cal.Rptr. 598]; City of Santa Monica v. Grubb (1966) 245 Cal.App.2d 718 [54 Cal.Rptr. 210].) Section 385 of the Charter of the City of Los Angeles requires that every contract by the city or department thereof involving an expenditure of more than $500 shall be in writing executed by designated persons.
Section 386 (b) of the charter provides that (subject to certain exceptions in subparagraph (a) which are not here applicable) “The City of Los Angeles shall not be, and is not bound by any contract involving thé expenditure of more than twenty thousand dollars ($20,000.00) unless the officer, board, or employee authorized to contract shall first have complied with the procedure for competitive bidding established by this section.” (Italics added.)
Subdivision (d) of section 386 requires every bidder to submit a certified check “for an amount not less than ten per cent of the aggregate sum of the bid” or surety bond in like amount. Various other subparagraphs of section 386 establish detailed procedures for such competitive bidding.
The law is well established that failure to comply with charter provisions' relating to the making of purchases renders such purchases void. Where the power is thus limited liability cannot arise by estoppel or ratification. (Gamewell F. A. T. Co. v. Los Angeles (1919)45 Cal.App. 149 [187 P. 163]; Reams v. Cooley (1915) 171 Cal. 150 [152 P. 293]; Fountain v. City of Sacramento (1905) 1 Cal.App. 461 [82 P. 637]; Nash. v. City of Los Angeles (1926) 78 Cal.App. 516 [248 P. 689].) The mode of entering into contracts as prescribed by the city’s charter is the measure of the *695power of the city to contract and a contract not made in conformity with the prescribed mode is void and unenforceable. (T. Kelly & Sons, Inc. v. Los Angeles (1935) 6 Cal.App.2d 539 [45 P.2d 223].) Bidders are charged with notice of the charter provisions. (Palo and Dodini v. City of Oakland (1947) 79 Cal.App.2d 739, 744 [180 P.2d 764].)
Contracts which are beyond the power of the municipality or which its officers have no authority to make ór which are not made in the manner required by its charter, are void and the city is not bound by such contracts (City of Pasadena v. Estrin (1931) 212 Cal. 231 [298 P. 14]; Dynamic Ind. Co. v. City of Long Beach (1958) 159 Cal.App.2d 294 [323 P.2d 768]), even on the theory of an implied undertaking to pay the reasonable value. (Williams Bros. & Haas v. City & Co., S. F. (1942) 53 Cal.App.2d 415 [128 P.2d 56]; City of Oakland v. Key System (1944) 64 Cal.App.2d 427 [149 P.2d 195].)
California Constitution, article XI, section 10, subdivision (a) (adopted in 1970), reads in part as follows: “A local government body may not grant extra compensation or extra allowance to a . . . contractor after service has been rendered or a contract has been entered into and performed in whole or in part, or pay a claim under an agreement made without authority of law.” (See note 84 A.L.R. 954 and cases collected wherein it is stated: “By the weight of authority, where by statute, charter, or constitutional provision, the power of a municipality, or other political subdivision, to make a contract, is limited, particularly where it is limited to a certain mode or manner of contracting, and any other manner of entering into a contract or obligation is expressly or impliedly forbidden, no implied liability arises against a municipality for benefits received under a contract entered into in violation of these mandatory provisions, for no liability can result as a matter of implication where the express provisions of the statute or Constitution negative its existence.” See also note 33 A.L.R.3d 1172, wherein it is stated: “In cases involving contracts between a municipality and a contractor or vendor which were invalid because they were let without compliance with bidding requirements of an applicable statute or charter, the courts have generally taken the view that the municipality ordinarily cannot be held liable on quasi contract, unjust enrichment, or the like.”)
As already stated, in the case at bar the trial court, interpreting contract 709 in accordance with the provisions of California Uniform Commercial Code section 2306, subdivision (1), concluded that under *696contract 709 DWP did not have the right to order more than 604,000 tons of aggregate at $1.80 a ton or more than 224,460 tons of % inch aggregate; that DWP ordered a total of 191,957 tons of aggregate more than was authorized by contract 709, of which total there were 30,647 tons more of % inch aggregate than was authorized by contract 709. In this respect the trial court was in error.
I see no escape from the conclusion that either (1) the excess aggregate was supplied under contract 709 at the contract price of $1.80 per ton which had been arrived at by competitive bidding in compliance with the city charter; or (2) the excess aggregate was not supplied under contract 709, in which event it was not supplied under a contract let by competitive bidding as required by city charter section 386. An award of money based upon the court’s calculation of the reasonable value of the excess aggregate on the theory of a quasi or an implied contract or on the theory of damages for breach of contract is in direct contravention of section 386 of the Charter of the City of Los Angeles which provides that the city shall not be bound by any contract which is not executed in accordance with charter provisions for competitive bidding and also in direct contravention of California Constitution, article XI, section 10, which prohibits DWP from granting an extra allowance to a contractor after a contract has been entered into and performed in whole or in part.
There is one further and unavoidable consideration. If DWP did not have the right under contract 709 to demand delivery of aggregate in excess of 604,000 tons (as the trial court found), then DWP did not have the power to pay for what it demanded without contractual authority. If this were true, DWP would be required to sue to recover the $1.80 per ton which it paid for the 191,957 tons of aggregate which it did not have the right to purchase or the power to pay for, since such purchase and payment for excess tonnage would be an illegal expenditure of public money and an ultra vires act. Upon the failure of DWP to collect such contractually unauthorized payment, a taxpayer could institute such an action on behalf of DWP. (Miller v. McKinnon (1942) 20 Cal.2d 83 [124 P.2d 34, 140 A.L.R. 570]; Martin v. City of Corning (1972) 25 Cal.App.3d 165 [101 Cal.Rptr. 678].) Such a result would clearly not be in the interest ofSKLH.
What I am concerned with is not a question of contract interpretation but a question of power to contract. Did the municipal officials have the *697power to demand delivery of more aggregate than was authorized by contract 709? The law is clear that where a municipality is one of the contracting parties, the mode of contracting is the measure of the power to contract. (Dynamic Ind. Co. v. City of Long Beach, supra, 159 Cal.App.2d 294.) If plaintiff’s cause of action is based on contract, express or implied, other than for the price specified in contract 709, then the contract is void under section 386, subdivision (b) of the city charter and consequently SKLH had no rights thereunder.
I would reverse the judgment as to the first and second causes of action of the complaint with instructions to enter judgment in favor of the Department of Water and Power of the City of Los Angeles.
A petition for a rehearing was denied October 27, 1977, rule 27(e), California Rules of Court. Appellant’s petition for a hearing by the Supreme Court was denied December 15, 1977. Manuel, J„ was of the opinion that the petition should be granted.

This dissenting opinion consists of a substantial portion of the original opinion prepared by Coring, J. and filed by this court May 24, 1977.

Since DWP appears to have always taken advantage of the 0.10 per ton discount, I will hereafter treat the contract as a contract to supply aggregate at $1.80 per ton.