Claims for Equitable Relief Against Public Agencies Must Have a Constitutional or Clear Statutory Basis

In Tuthill v. City of Buenaventura (February 10, 2014, B239668 (— Cal.App.4th [14 Cal. Daily Op. Serv. 1437], Tuthill and Younker ("Plaintiffs") purchased two low income Seneca Highlands townhomes.  At the time of the purchase in 2001, the Plaintiffs were unaware that the townhomes were affordable housing units with price restrictions imposed by a development agreement between the City of San Buenaventura and its housing authority (collectively, “the City”) and the Bulmer Development Corporation (“Bulmer”).

The development agreement required the City to issue a Certificate of Compliance, certifying that prospective purchases complied with the development agreement. In error, the City  improperly issued Certificates of Compliance in several instances, and thus permitted the sale of restricted properties to buyers who did not qualify for the units because their income levels were too high. Because of the error, Plaintiffs paid more than the restricted prices for their respective properties.

The Plaintiffs sued the City and Bulmer in 2004.  The Plaintiffs brought causes of action for negligence, negligence per se, and declaratory relief.  The negligence claim was dismissed.  A default was entered against Bulmer, which was defunct at the time of the suit.  In regard to the remaining cause of action for declaratory relief, Plaintiffs argued that the price restrictions did not apply to their units and if they did apply, Plaintiff should be awarded monetary damages. Regarding the negligence per se claim, Plaintiff argued that the City breached its affirmative obligation to enforce state affordable housing statutes.

Following a bench trial, the superior court disregarded application of the California Tort Claims Act ("Act") and held that “equitable principles” governed the outcome of the case.  The superior court found that Plaintiffs were entitled to damages because the City failed to notify them of the price restrictions.  The superior court also found that Plaintiffs were entitled to attorney fees under California’s private attorney general statute (California Code of Civil Procedure section 1021.5).

The City appealed.  It argued that it was immune from liability under the Act, which provides that public entities are not liable for injury unless the state or federal Constitution or statutes provide otherwise.  (See Government Code section 814 et seq.). The Plaintiffs argued that the “mandatory legal duty” exception found in Government Code section 815.6 applied, because the City had a legal duty to provide notice of the price restrictions.

The Court of Appeal held that the superior court incorrectly applied equitable principles to make its decision.  Instead, the superior court should have applied the analysis required by the Act, which requires a statutory basis for liability.  The Court of Appeal also determined that the  “mandatory legal duty” exception did not apply in the current matter because the City had no affirmative obligation to notify Plaintiffs of the pricing restrictions and because the Plaintiffs were not part of the class of persons that the affordable housing statutes were designed to protect.

Since the Court of Appeal found that the City was immune under the Act, the award of attorneys’ fees was also vacated.

What This Means To You

This case reaffirms the primacy of the California Tort Claims Act in determining  whether public agencies are liable for claims that are not based on statute, or the state or federal Constitutions.  As such, claims for equitable relief against public agencies must have a clear Constitutional or statutory basis.


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