Contract Claims Are Subject to Government Claims Act

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Stockton v. Superior Court (2007) 42 C.4th 730, 68 C.R.3d 295, 171 P.3d 20, resolved a split of authority in the Courts of Appeal as to whether the claims presentation requirements of the Government Claims Act apply to contract claims. Plaintiff developer filed an action against defendant city for breach of a development contract to rehabilitate and operate a hotel and to construct an adjacent cinema. Defendant demurred to plaintiff's complaint on the ground that plaintiff had failed to present a claim under the Act, but the trial judge overruled defendant's demurrer. Defendant petitioned the Court of Appeal for mandamus relief, and the Court of Appeal granted the petition and issued a writ directing the trial judge to sustain defendant's demurrer. Plaintiff then petitioned the California Supreme Court for mandamus relief. Held, opinion of the Court of Appeal affirmed with modifications by unanimous decision; the statutory claims presentation requirements apply to contract claims.

(a) Claims presentation requirements.

(1) Under Govt.C. 905, “all claims for money or damages” must be presented to the local public entity (see 3 Cal. Proc. (4th), Actions, §226 et seq.). (42 C.4th 737.) The plain meaning and legislative history of this provision and other claims presentation statutes confirm that they were intended by the Legislature to include contract claims. (42 C.4th 738.) "In view of these provisions, it is no surprise that courts have routinely applied the claim requirements to contract causes of action against local government defendants." (42 C.4th 739.), citing Loehr v. Ventura County Community College Dist. (1983) 147 C.A.3d 1071, 195 C.R. 576; Dilts v. Cantua Elementary School Dist. (1987) 189 C.A.3d 27, 234 C.R. 612, 3 Cal. Proc. (4th), Actions, §229; Alliance Financial v. San Francisco (1998) 64 C.A.4th 635, 75 C.R.2d 341, 3 Cal. Proc. (4th), Actions, Supp., §§229, 270; Baines Pickwick Ltd. v. Los Angeles (1999) 72 C.A.4th 298, 85 C.R.2d 74, 3 Cal. Proc. (4th), Actions, Supp., §229; and other cases.)

(2) Plaintiff's contrary view is based primarily on Govt.C. 814, which provides: "Nothing in this part affects liability based on contract or the right to obtain relief other than money or damages against a public entity or public employee." Some Courts of Appeal have read Govt.C. 814 to exclude contract claims from the scope of the claim requirements. (42 C.4th 740.), citing National Auto. & Cas. Ins. Co. v. Pitchess (1973) 35 C.A.3d 62, 110 C.R. 649, 3 Cal. Proc. (4th), Actions, §229; Gonzales v. California (1977) 68 C.A.3d 621, 628, 137 C.R. 681, 3 Cal. Proc. (4th), Actions, §235; and Harris v. State Personnel Bd. (1985) 170 C.A.3d 639, 216 C.R. 274, 3 Cal. Proc. (4th), Actions, §229.) Other courts have rejected that view, reasoning that Govt.C. 814 pertains only to immunity from liability, and has no effect on the claims requirements. (42 C.4th 740.), citing Loehr and Baines.) The reasoning in this second line of cases "finds ample support in the language, structure, and purpose of the statutes." (42 C.4th 740.)

(3) Plaintiff contended that its contract claims were based on the law of restitution and therefore were exempt from the claims statutes under the rule of Minsky v. Los Angeles (1974) 11 C.3d 113, 113 C.R. 102, 520 P.2d 726, 3 Cal. Proc. (4th), Actions, §235, and Holt v. Kelly (1978) 20 C.3d 560, 143 C.R. 625, 574 P.2d 441, 3 Cal. Proc. (4th), Actions, §235. (42 C.4th 742.) However, that contention is without merit. Neither of those decisions involved a government contract. Further, plaintiff's action was not based on a governmental obligation to return specific property. (42 C.4th 743.)

(b) Estoppel. Defendant's assurances during negotiations that plaintiff's interests would be protected did not estop defendant from asserting the claims filing requirements, in absence of any conduct that might have deterred plaintiff from presenting a claim after defendant allegedly failed to keep its promises. (42 C.4th 744.)

(c) Waiver. Defendant did not waive its Government Claims Act defense by failing to advise plaintiff in correspondence between the parties that the correspondence was insufficient to state a Government Claims Act claim. Nothing in the correspondence indicated that litigation might ensue if defendant did not comply with the terms under discussion. (42 C.4th 744.) Further, any delay by defendant in asserting the Government Claims Act filing requirements as a defense did not waive the defense, because the Act clearly required the filing of a claim before the initiation of an action. (42 C.4th 746.)

(d) Leave to amend. Plaintiff was entitled to leave to amend its complaint to meet defendant's Government Claims Act defense. Although plaintiff had yet to advance a successful argument against that defense, the operative complaint did not on its face foreclose any reasonable possibility of a valid amendment. (42 C.4th 747.)

Witkin References

On Government Claims Act generally, see 3 Cal. Proc. (4th), Actions, §223 et seq.

On included and excluded claims under Government Claims Act, see 3 Cal. Proc. (4th), Actions, §228 et seq.

On estoppel to assert Government Claims Act, see 3 Cal. Proc. (4th), Actions, §292 et seq.

On governmental tort liability generally, see 5 Summary (10th), Torts, §203 et seq.