State of Cal. v. Concerned Citizens of South Central Los Angeles CA2/7 ( 2013 )

Filed 3/4/13 State of Cal. v. Concerned Citizens of South Central Los Angeles CA2/7
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California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
STATE OF CALIFORNIA, B237865
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. BC426044)
v.
CONCERNED CITIZENS OF SOUTH
CENTRAL LOS ANGELES,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of Los Angeles County,
Alan Rosenfield, Judge. Reversed.
Klapach & Klapach and Joseph S. Klapach for Defendant and Appellant.
Kamala D. Harris, Attorney General, Alicia Fowler, Acting Chief Assistant
Attorney General, Steven M. Gevercer, Senior Assistant Attorney General, Joel A. Davis
and Paul C. Epstein, Deputy Attorneys General, for Plaintiff and Respondent State of
California, acting by and through the Department of Parks and Recreation.
_____________________________
INTRODUCTION
This is an appeal following the trial court‟s grant of a summary judgment motion.
We reverse.
FACTUAL AND PROCEDURAL SUMMARY
The Operative Pleadings
The State’s Complaint for Rescission
In November 2009, the State of California, acting by and through the California
Department of Parks and Recreation (the State), filed a complaint for rescission of written
contract against Concerned Citizens of South Central Los Angeles (Concerned Citizens).1
According to the complaint, on July 6, 2001, the State entered into a written grant
contract with Concerned Citizens (attached as an exhibit), under the terms of which the
State awarded a legislatively specified State General Fund Grant to Concerned Citizens in
the sum of $985,000. The State further alleged the grant contract required Concerned
Citizens to use the grant money for acquisition of real property for, and development of,
the Antes Columbus Youth Center Project (Youth Center) in South Central Los Angeles.
According to the State‟s allegations, Concerned Citizens acquired a parcel of real
property in Los Angeles for the Youth Center for which it paid $252,494.23. The State
reimbursed Concerned Citizens for this amount under the terms of the grant contract.
Concerned Citizens had also received a grant from the United States Department of
Housing and Urban Development (the HUD grant), administered by the City of Los
Angeles, with which it purchased other property for the Youth Center. Beyond
acquisition of the subject parcel, Concerned Citizens failed to perform under the terms of
the grant contract by failing to construct the Youth Center. On or about March 20, 2008,
the Los Angeles Unified School District commenced an eminent domain action (L.A.
1 The State abandoned its second cause of action for breach of contract and
withdrew the claim it is entitled to the condemnation deposit under Public Resources
Code section 5096.343.
2
Sup. Ct., Case No. BC 386959) to acquire real property for construction of a school,
including the subject parcel as well as parcels of property Concerned Citizens had
purchased with the HUD grant. Both Concerned Citizens and the City of Los Angeles
were named as defendants in the eminent domain action.
The State further alleged it had performed all required acts or was excused from
performing acts not performed. As a result of the filing of the eminent domain action, the
State alleged, it is impossible for the Youth Center to be built and there is a failure of
consideration for the grant money awarded Concerned Citizens under the contract, and
permitting the grant to stand would prejudice the public interest. The State sought to
rescind the grant contract and sought restitution from Concerned Citizens, alleging the
State had received nothing of value from Concerned Citizens under the terms of the grant
contract.
On April 7, 2009, Judge Bendix in Department 18 determined the sum of
$5,433,322.54 was the total just compensation to be paid for the property taken by
eminent domain. At or about the time the eminent domain action was filed, Concerned
Citizens filed suit against the City of Los Angeles with respect to the HUD grant (the
Concerned Citizens action, L.A. Sup. Ct., Case No. BC389760). The City of Los
Angeles cross-complained against Concerned Citizens for rescission, breach of contract,
breach of promissory note, accounting and declaratory relief, alleging Concerned Citizens
had failed to build a Youth Center on the property purchased with the HUD grant and
instead left the property “in a blighted state as a bare dirt lot and then used the property
for commercial activities” while its market value increased, “intend[ing] to „flip‟ the
Property to the Los Angeles Unified School District (LAUSD)” which has identified the
property as the site for a new elementary school. LAUSD has instituted eminent domain
proceedings and has deposited $7,370,000 with the Clerk of the Court as the property‟s
probable fair market value.
Finally, the State alleged, the Concerned Citizens action had been temporarily
assigned to Retired Judge Coleman Swart who conducted a bench trial in the action and
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determined that Concerned Citizens had no right to the eminent domain deposit as an
owner of property taken by LAUSD, but later determined (on October 29, 2009) that
Concerned Citizens was entitled to be reimbursed out of the eminent domain deposit in
the amount of $538,329.32 for expenses incurred in preparing to develop the Youth
Center. “This money is expected to remain on deposit for the next 20 to 30 days. The
State intends to seek a writ of attachment to this money. The State is informed and
believes, and thereon alleges, that [Concerned Citizens] is judgment-proof. Therefore,
attachment of this money may be the only opportunity for the State to insure there will be
assets available to pay any judgment it receives in this action.”
The Grant Contract
The “short-form” “Grant Contract” between the State and “Grantee” Concerned
Citizens comprises four pages. On the first page, the “Project Title” is identified as
“Antes Columbus Club Youth,” with “Funds available from July 01, 2000 thru [sic] June
30, 2005.” “Under the terms and conditions of this agreement, the applicant agrees to
complete the project as described in the project description, and the State . . . agrees to
fund the project up to the total grant amount indicated” not to exceed $985,000. The
complete “Project Description” is “Antes Columbus Club Youth.” “The General
Provisions attached are made a part of and incorporated into the Contract.”
Some of the General Provisions are as follows: “The term „Project‟ as used herein
means the Project described on Page 1 of the Contract.” “Grantee shall complete the
Project in accordance with the time of Project Performance set forth on page 1, and under
the terms and conditions of this contract.” “Grantee shall use any moneys [sic] advanced
by the State under the terms of this Contract solely for the Project herein described.”
Under the heading “Project Termination,” the contract specifies: “1. Grantee may
unilaterally rescind this Contract at any time prior to the commencement of the Project.
After Project commencement this Contract may be rescinded, modified or amended by
mutual agreement in writing. [¶] 2. Failure by the Grantee to comply with the terms of
this Contract may be cause for suspension of all obligations of the State hereunder. [¶]
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3. Failure by the Grantee to comply with the terms of this Contract shall not be cause for
the suspension of all obligations of the State hereunder if in the judgment of the State
such failure was due to no fault of the Grantee. In such case, any amount required to
settle at minimum cost any irrevocable obligations properly incurred shall be eligible for
reimbursement under this Contract. [¶] 4. Because the benefit to be derived by the State,
from the full compliance by the Grantee with the terms of the Contract, is the
preservation, protection and net increase in the quantity and quality of parks, public
recreation facilities and/or historical resources available to the people of the State of
California and because such benefit exceeds to an immeasurable and unascertainable
extent the amount of money furnished by the State by way of grant moneys under the
provisions of this agreement, the Grantee agrees that payment by the Grantee to the State
of an amount equal to the amount of the grant moneys [sic] disbursed under the Contract
by the State would be inadequate compensation to the State for any breach by the Grantee
of this Contract. The Grantee further agrees therefore, that the applicable remedy in the
event of breach by the Grantee of this Contract shall be the specific performance of this
Contract, unless otherwise agreed to by the State. [¶] 5. Grantee and State agree that if
the Project includes development, final payment may not be made until the Project
conforms substantially to this Contract.”
Concerned Citizens’ Answer
Concerned Citizens filed its answer (in April 2010), asserting affirmative defenses
including the statute of limitations, waiver and laches.
The Stipulation
In anticipation of the filing of “planned cross-motions for summary judgment,” the
parties filed a joint stipulation to shorten the time period for hearing and notice of the
cross-motions under Code of Civil Procedure section 437c. According to one of the
recitals in the joint stipulation, “this case raises a straightforward legal issue as to whether
[the State] or [Concerned Citizens] is entitled to roughly $210,000 in condemnation
proceeds;” and “the parties agree that there are no material issues of fact [no disputed
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issues of material fact, sic] in this case, and that this Court will be able to resolve the
instant lawsuit (one way or the other) as a matter of law in connection with the parties‟
planned cross-motions for summary judgment.”
The State’s Motion for Summary Judgment (or Summary Adjudication)2
Argument
In its moving papers, the State argued “[the State] can rescind the grant contract
because it became impossible to perform after LAUSD condemned the subject property,”
and the State “is entitled to the [condemnation] deposit as restitution.”
Undisputed Facts
Noreen McClendon is the vice president of Concerned Citizens. On or about July
6, 2001, the State entered into a written grant contract with Concerned Citizens under the
terms of which the State agreed to grant Concerned Citizens up to $985,000 for the
purpose of acquiring property for, and developing the Antes Columbus Youth Center in
South Central Los Angeles. Concerned Citizens used a portion of the grant to purchase
one parcel of real property for the Youth Center for $252,494.23. On or about March 10,
2008, LAUSD filed a condemnation action to acquire property for construction of a
school. The condemnation action involved many parcels including the subject property.
As a result of the condemnation action, it became impossible for Concerned
Citizens to complete its performance under the grant contract. When the condemnation
action was filed, LAUSD deposited over $7 million for the property being acquired. The
sum remaining on deposit includes $210,150 representing the amount deposited by
LAUSD for the subject property. Concerned Citizens applied to withdraw the deposit,
the State objected to the application to withdraw, and the application to withdraw the
2 The State‟s motion was identified as a “motion for summary judgment or
summary adjudication” (and its complaint contained both rescission and breach of
contract causes of action). However, the State‟s argument and separate statement were
addressed to its first cause of action only, the State abandoned its second cause of action
for breach of contract, and the trial court ultimately granted summary adjudication of this
cause of action in Concerned Citizens‟ favor.
6
deposit was denied without prejudice (with directions to Concerned Citizen to refile
before a different trial court judge (Hon. Helen Bendix)).3 The State then filed its action
for rescission (and breach of contract).
The State also asserted as an undisputed fact that “[a]t the time the condemnation
action was filed, [Concerned Citizens] had not completed its performance under the terms
of the grant contract: the subject property had been purchased, but the Youth Center had
not been built, other than installation of an interim soccer field.” Concerned Citizen
disputed this fact “to the extent [the State] purports to characterize the grant contract,
which speaks for itself. At the time the condemnation action was filed, the grant contract
had been completed, an accounting provided, and the grant closed. . . . Concerned
Citizens does not dispute that, at the time the condemnation action was filed, the Antes
Columbus Youth Center Project had not been completed.”
Concerned Citizens’ Motion for Summary Judgment (or Adjudication) and
Opposition to the State’s Motion for Summary Judgment
Argument
The State‟s rescission claim is barred because (1) it impermissibly seeks to
partially rescind the grant contract, (2) it is barred by the four-year statute of limitations
because the State failed to file this action within four years of the date set forth in the
contract for its completion (June 30, 2005), (3) the State has waived its right to seek
rescission and is barred by the doctrine of laches because it chose not to serve its
complaint until nearly five years after the contract provided for its completion, nearly two
years after a related condemnation action was commenced relating to the property and
nearly a year after the Superior Court entered a judgment barring the State‟s claim in the
related condemnation action, (4) the condemnation proceedings terminated any
3 The State also asserted it had moved to intervene in the condemnation action, but
Concerned Citizens disputed this statement; to the contrary, Concerned Citizens stated,
the State moved to intervene in a separate contract action between the City of Los
Angeles and Concerned Citizens.
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contractual or statutory right, interest or lien the State held in the property, (5) the
doctrines of res judicata and collateral estoppel are raised by the court‟s April 2009
judgment in the related condemnation action and (6) the State cannot rescind a completed
contract.
Undisputed Facts
In 2000, the State Legislature passed SB 1681, which included a general fund
grant in the amount of $985,000 to Concerned Citizens for the use of the Antes Columbus
Youth Project. The grant was implemented by means of a short-form contract, dated July
5, 2001. The contract provides for Concerned Citizens to receive $985,000 for use on the
Antes Columbus Project. In August 2003, Concerned Citizens purchased a 4670 square
foot lot to be used for the Antes Columbus Youth Football Club Project using
$252,494.23 in funds received from the State‟s general fund grant. The complaint seeks
a declaration that the “grant contract has been rescinded” and an order that the State is
entitled to “(1) the portion of the grant money used by [Concerned Citizens] to purchase
the subject parcel; (2) the current fair market value of the subject parcel; or (3) the
amount of just compensation paid by LAUSD for the taking of the subject parcel,
whichever is greater.”
Page 2 of the contract specifies: “Grantee shall complete the Project in
accordance with the time of Project Performance set forth on page 1.” Page 1 of the
contract provides that the funds would be available for use from July 1, 2001 thr[ough]
June 30, 2005.” The complaint was filed on November 16, 2009.
Concerned Citizens did not complete the Project by June 30, 2005. The contract
provides that “the applicant agrees to complete the project” described as the “Antes
Columbus Youth” Project.
On March 10, 2008, LAUSD filed an action to condemn the property owned by
Concerned Citizens. (The State qualified this fact with the statement that the property
had been purchased by Concerned Citizens with money from the State grant.) The State
was aware of the condemnation action and related contract action between Concerned
Citizens and the City of Los Angeles since at least October 2008.
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On April 7, 2009, the Hon. Helen Bendix issued an interlocutory judgment in the
eminent domain action which states: “Plaintiff filed a request for dismissal of defendants
. . . All Persons Unknown Claiming any Title or Interest in or to the Property, none of
said defendants having filed Answers in this case. Said defendants were dismissed by the
court and are entitled to no compensation in this proceeding.” The State did not enter an
appearance in the condemnation action, move to intervene in the condemnation action or
assert any claim to the compensation award prior to the Court‟s April 2009 judgment.
The State did not assert a right to the condemnation proceeds until it appeared for the first
time in the condemnation action on September 10, 2009, and filed an objection to
Concerned Citizens‟ motion for a partial release of funds.
Between 2002 and 2008, Concerned Citizens spent nearly $1.4 million to develop
the Antes Columbus Project, and a substantial portion of these expenses was incurred
between July 2005 and March 2008. (In responding to Concerned Citizens‟ separate
statement, the State added that it had paid Concerned Citizens approximately $600,000
under the grant contract as reimbursement for expenses incurred and Concerned Citizens
was paid $406,237.03 from the amount on deposit in the condemnation action as
reimbursement for expenses.) After March 2008, Concerned Citizens continued to incur
substantial expenses relating to the project and related litigation as set forth in
McLendon‟s declaration. (The State responded that this fact was irrelevant because after
March 2008, Concerned Citizens knew it was impossible to complete the Youth Center,
and if it continued to incur expenses, it was at its own risk; litigation expenses are
irrelevant.) The State did not assert that the grant contract should be rescinded until it
filed its complaint on November 16, 2009.
Concerned Citizens returned roughly $300,000 of the grant funds and spent the
rest on the Project. After conducting an audit, the State approved expenditures by
Concerned Citizens and closed the grant. As a result of the eminent domain action, it
became impossible for Concerned Citizens to complete the project.
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Noreen McClendon’s Declaration
In her declaration filed in support of Concerned Citizens‟ opposition to the State‟s
summary judgment motion (as well as Concerned Citizens‟ own summary judgment
motion), McClendon (Concerned Citizen‟s Executive Director) testified as follows:
Concerned Citizens is a nonprofit organization formed in 1985, and its role in the
community is to provide housing and other services to economically disadvantaged
people in South Central Los Angeles. McClendon supervised the Antes Columbus Club
Youth Project. Concerned Citizens obtained grants from a number of different sources to
help fund the Project. One source was a general fund grant from the State in the amount
of $985,000, obtained at the request of then-State Assemblyman Roderick Wright by way
of SB 1681.
Concerned Citizens investigated potential sites for the Project and ultimately
identified a blighted three-acre lot at Slauson and Main. The property had been used as a
fueling station, a lumberyard and a lamp store. It contained dilapidated buildings and
underground storage tanks, had considerable environmental contamination and was being
used as an illegal garbage dump. In August 2003, Concerned Citizens used about
$210,000 in grant funds from the State to purchase a 4670 square foot lot for the Project;
the remainder of the property to be used for the Project was purchased using a $2.1
million loan from the City of Los Angeles, funded by a HUD Community Block Grant.
After a routine audit in 2004, the State approved the expenditure of over $600,000
in grant funds, including the amount used to purchase a portion of the property for the
Project, and Concerned Citizens returned the remaining $300,000. The State then
informed Concerned Citizens the grant was “closed.” Thus, as of 2004, Concerned
Citizens had paid out the State grant funds to third parties for various expenditures
relating to the Project which the State had approved before closing out the grant as
evidenced by correspondence attached as exhibits to her declaration.
Beginning in May 2002, Concerned Citizens started providing youth soccer
services on the Slauson and Main property. Concerned Citizens removed concrete,
cleared debris and graded the site. Then it imported tons of clay and built a soccer field
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to provide youth soccer services while the Project was in development. It also fenced and
installed lighting on the property so it could be used at night. (It also obtained “porta-
potties.”) Between May 2002 and June 2008, the soccer facilities on Slauson and Main
were used each week by more than 1800 youth playing in the North Central American
Youth Soccer League and Los Angeles Soccer League as well as several adult leagues.
The North Central American Youth Soccer League, composed entirely of boys and girls
from the South Central Los Angeles community, used the property for practices and
games seven days a week. The Los Angeles Soccer League (and several adult leagues)
used the property for practices and games five nights a week. Concerned Citizens did not
charge these soccer leagues for use of the soccer facilities.
Originally, McClendon said, the Project was to consist of a synthetic soccer field
with field lighting, landscaping, fencing, soccer goals and a limited amount of on-site
parking. However, Concerned Citizens soon realized the need for a soccer field in South
Central Los Angeles was so great the field would attract people throughout the region—
meaning the parking plans were insufficient and the nearby residential neighborhood
would be adversely affected. Therefore, Concerned Citizens reassessed and reconceived
the Project to include the installation of a soccer field built on top of a 200 plus
subterranean parking structure, a community center and a park.
According to McClendon‟s declaration, during the fall of 2001, Concerned
Citizens and City officials, including Councilwoman-elect Jan Perry and Chief
Legislative Analyst Ron Deaton, discussed a plan for the City to provide $5 to $6 million
in Special Parking Revenue Funds for the parking structure, and both Perry and Deaton
promised to identify funds to support the Project. Deaton directed Concerned Citizens to
have its architect work with various City departments to design the structure to conform
to City requirements. Four to five months into this process, however, Concerned Citizens
learned it would be years before the City funds would be available for the Project. In the
meantime, Concerned Citizens was required to install parking meters, set up a parking
meter zone and conduct a traffic study. These events caused a lengthy delay, exacerbated
by a hiring freeze reducing available manpower at the City.
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Because of the delay, Perry directed Concerned Citizens not to wait for the Special
Parking Revenue Funds and to build the soccer field without subterranean parking.
McClendon described various increases in costs from the architectural and engineering
redesign now required (such as a more elaborate base, drainage and irrigation systems)
which caused a $500,000 budget deficit and two-year delay. Nearly four years after
Concerned Citizens acquired the property, in December 2005, the City Council approved
the use of Special Parking Revenue Funds for the Project, but City departments refused to
enter into agreements necessary for the release of the funds. Concerned Citizens was
forced to pursue alternative arrangements for completing the Project, including potential
partnerships with Green Dot and LAUSD.
Between 2002 and 2008, Concerned Citizens spent nearly $1.4 million to develop
the Antes Columbus Youth Project, including $448, 966.59 on site improvements
(environmental remediation relating to asbestos, lead and contaminated soil; grading and
filling the land; removing dilapidated buildings and underground tanks and trash and
vegetation removal). Concerned Citizens spent another $175,917.86 on additions to the
property, including installation of the clay soccer field, landscaping, toilets, dumpsters,
fencing and field lighting. The organization spent $684,648.85 for Project planning and
development, including architectural design and redesign, engineering services,
environmental assessment, geotechnical investigations and related expenditures. Capital
expenditures, such as property taxes and insurance, totaled $89,362.73. A substantial
portion of these expenses were incurred between July 2005 and March 2008.
In the spring of 2008, McClendon learned LAUSD intended to condemn the
property Concerned Citizens had acquired for the Project. In March, LAUSD initiated its
condemnation action against Concerned Citizens as owner, the City of Los Angeles as
trustee and “All Persons Unknown Claiming An Interest In The Property to Be
Condemned Herein” (BC386959). During this time, Concerned Citizens explored
various alternatives with LAUSD with regard to completing the Project or varying it to
provide similar services at the proposed school location.
12
In April 2009, the trial court issued an interlocutory judgment in the eminent
domain action and fixed total compensation for the property at $5,587,500, noting a
pending contract action between Concerned Citizens and the City (preserving these
parties‟ rights to proceeds) as well as a tax lien on the property to be paid out of proceeds
but expressly barring any claim to condemnation proceeds by anyone else. In September,
Concerned Citizens filed its first application in the condemnation action, asserting its
right to a release of funds relating to property that was not part of the Project at issue in
the separate contract action between Concerned Citizens and the City. A week later—a
full six months after the April 2009 judgment, the State appeared for the first time in the
condemnation action, asserting a right to funds used to purchase property for the Project
under the grant contract. The State then moved to intervene in the contract action
between Concerned Citizens and the City, but the State‟s motion was denied. The trial
court in the condemnation proceeding (Hon. Coleman Swart) also denied without
prejudice Concerned Citizens‟ application for release of funds and transferred the action
to the Honorable Helen Bendix.
In March 2010, the State served Concerned Citizens with its complaint for
rescission.
According to McClendon, over the past few months (prior to her March 2011
declaration), Concerned Citizens has been working with its elected State representatives
to make arrangements to apply any proceeds from the eminent domain action to related
projects within the community. As evidenced by attached exhibits, McClendon said,
Former State Assemblyman Roderick Wright who requested the original grant in 2000
and current Assemblywoman Isadora Hall have both written letters expressing their
“strong desire that the resources from the LAUSD eminent domain action remain with
and be available to Concerned Citizens to serve the community the funds were originally
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intended to serve.”4 According to their letters, in approving the original $985,000 State
grant, the Legislature “intended for these funds to be put to use by Concerned Citizens in
the community that it serves”—South Central Los Angeles.
The State’s Opposition to Concerned Citizens’ Motion for Summary Judgment (and
Reply to Concerned Citizens’ Motion)
The State argued that (1) the judgment in the condemnation action did not bar the
State‟s claim under the doctrine of res judicata because the State‟s rights under the grant
contract were not litigated in the condemnation action; (2) Concerned Citizens‟ assertion
of the statute of limitations as an affirmative defense was waived for failure to specify the
applicable code section; (3) even if the statute of limitations applies, it did not begin to
run until March 2008 when the eminent domain action was filed, making Concerned
Citizens‟ performance impossible; (4) rescission is an available remedy because the grant
contract was never completed (citing deposition testimony in which McClendon
answered that no one from the State had told her of a deadline for completion of the
Project); (5) the State was not improperly seeking partial rescission because it could not
receive full restitution; and (6) rescission was not barred by the doctrine of laches
because Concerned Citizens could not demonstrate substantial prejudice, let alone any
prejudice at all. To the contrary, the State argued, Concerned Citizens “wants to be in a
better position by keeping the money on deposit in the condemnation action.”
Concerned Citizens’ Reply
In addition to reiterating its prior arguments, Concerned Citizens said its statute of
limitation defense was properly raised, the deposition testimony the State cited regarding
McClendon‟s understanding there was no specified completion date for the Project did
not change the fact the grant contract plainly stated a completion date of June 30, 2005,
and a party cannot rescind a completed contract. McClendon also submitted another
declaration disputing the State‟s claim Concerned Citizens had been reimbursed in full
4 According to the attached documentation, LAUSD displaced the Project by
eminent domain in order to build the Juanita Tate Elementary School, named to honor
Concerned Citizens‟ founding Executive Director who died in 2004.
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for all of its expenditures and providing documentation supporting its claim that, even
after accounting for all grant funds, Concerned Citizens had paid out more than $600,000
toward the Project between 2002 and 2008 for which it had not been reimbursed and
continued to owe more than $300,000 to various vendors.
The First Hearing
At the outset of the first hearing (April 5, 2011), the trial court indicated the
intention to request further briefing to better frame the issues.5 After the State‟s counsel
indicated the State was relying on the “Civil Code sections that govern restitution, unjust
enrichment,” the trial court asked what authority supported the State‟s asserted right to
restitution where rescission could not be accomplished; the parties could not be restored
to their positions before entering into the contract, and partial rescission was what the
State wanted. In response, counsel for the State argued: “The point is the equitable
reason behind [sic] is to give back any benefits it‟s [sic] received. . . .” The trial court
asked, “Can I reach that in summary judgment? Can I reach the equitable issue in
summary judgment?” Counsel for the State responded, “I don‟t see why not because it‟s
based on undisputed facts.” For Concerned Citizens to keep the condemnation proceeds
“is unquestionably unjust enrichment.” The same would be true, he said, if the Project
was not completed for any other reason.
The trial court then asked, “What if the park had been built and then condemned?”
The State acknowledged the analysis might change under such facts, but in this case, the
Project had not been completed.6 If there had been no condemnation action, the State
said, there would be a specific performance action available “in perpetuity.” The trial
5 The trial court had researched statutory authority and case law under the Public
Resources Code as referenced in the State‟s complaint, but the State acknowledged that
further research revealed the Public Resources Code as cited in the complaint was
inapplicable; instead, the State was relying on the Civil Code.
6 According to the State, “maybe” the statute of limitations barred the breach of
contract cause of action, but not the rescission claim because impossibility did not arise
until the condemnation action.
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court said, “[R]escission is equity though, is it not?” Counsel for the State responded
that, as a matter of law, it was contrary to public policy for Concerned Citizens to keep
money that was not used for the Project for which the grant was made. Concerned
Citizens‟ counsel disagreed, stating public policy encouraged parties to engage in such
efforts for the “public good.” Concerned Citizens is a nonprofit organization working to
help the most economically deprived areas of South Central Los Angeles, he argued. It
undertook the Project, spent $1.4 million and was now out of pocket $600,000, but the
State says the public policy is “[Y]ou‟re stuck for all this money you spent in good faith”
while the condemnation proceeds should go back to the State—an extremely unjust and
unfair position.
The trial court asked the parties to file supplemental letter briefs to address the
issues raised at oral argument.
Supplemental Briefing
Concerned Citizens’ Supplemental Brief
In its first supplemental brief, Concerned Citizens argued the limitation of
remedies provision in the State-drafted grant contract restricted the trial court‟s authority
to resolve the State‟s claim and evidenced the parties‟ intention that the appropriate
remedy was specific performance. Absent this provision, the court would have two
relevant equitable powers: (1) the equitable power to rescind the contract (Civ. Code, §§
1691-1692), based on disaffirming the contract and restoring the parties to the positions
they occupied before entering into the contract—a remedy unavailable under the
circumstances of this case; and (2) the equitable remedy of restitution, a remedy available
in the event of a breach of contract, necessarily subject to Concerned Citizens‟
affirmative defenses (statute of limitations, waiver, laches, res judicata) and inappropriate
in light of the specific performance provision. Concerned Citizens argued the court could
easily effectuate the parties‟ intended remedy simply by ordering the funds to be used on
the Project at its new location.
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In exercising its considerable discretion, Concerned Citizens urged the trial court
to consider the profoundly unfair result if the State were to receive the condemnation
proceeds while Concerned Citizens, which had devoted seven years and spent $1.4
million (recovering only $400,000 of this amount and still in considerable debt), was
penalized for the unexpected condemnation action—contrary to the public policies of
finality in condemnation proceedings and of encouraging nonprofit organizations like
Concerned Citizens to undertake projects for “the preservation, protection and net
increase in the quantity and quality of parks [and] public recreation facilities . . . available
to the People of the State of California.” At the very least, Concerned Citizens argued,
there are triable issues of material fact as to the respective benefits conveyed by the
parties; to the extent the State had any right to restitution of benefits conferred,
Concerned Citizens had an offsetting right to recover benefits it had conferred, as
evidenced by McClendon‟s declaration as well as the declaration of Mark Williams, a
member of Concerned Citizens‟ Board of Directors and Project Director of the Antes
Columbus Youth Project.
Williams’s Declaration
According to Williams, after the 2008 condemnation of the original Slauson and
Main property, Concerned Citizens relocated the project to Carver Middle School—
approximately three miles from the original site. The new site was secured by a Joint
Use Agreement between LAUSD and Concerned Citizens and provided LAUSD students
with use of the improvements during school hours while Concerned Citizens had use of
the improvements after school and on weekends for 20 years. (A copy of the agreement
was attached as an exhibit to Williams‟s declaration.) Concerned Citizens would provide
a free after school program for community children for the next 10 years. The first phase
of the Project‟s scope includes an 87,500 square foot synthetic surface soccer field,
restrooms, field lighting, fencing, landscaping, an electronic video scoreboard, a 750
spectator seat grandstand, six basketball courts and 150 parking spaces. The second
phase would include a 6,000 square foot pocket park, 25 parking spaces and a 25,000
17
square foot field house with a commercially equipped kitchen, digital video/audio
production facilities, locker rooms, restrooms, 100 spectator seats, aquatic training
equipment, administrative space and a caretaker‟s residence. Williams said the structure
was in the design phase (as evidenced by a copy of the attached design plans) and would
require another 18 months for completion. Concerned Citizens planned to use the
condemnation proceeds to purchase the grandstand and video scoreboard in the first
construction phase.
The State’s Supplemental Brief
In its supplemental brief, the State argued (1) it had properly sought restitution
within its rescission cause of action; (2) Concerned Citizens was not entitled to the
condemnation deposit as reimbursement for other expenses allegedly incurred in
connection with the Project because those expenses were not incurred in reliance on the
grant contract and the State was not contractually obligated to pay those expenses; (3)
public policy required returning the condemnation deposit to the State because payment
to Concerned Citizens would constitute a gift of public funds in violation of the
California Constitution and (4) if the grant contract is rescinded and the condemnation
deposit paid to the State, Concerned Citizens will be restored to its pre-contract position.
The Second Hearing
According to the reporter‟s transcript of the May 2011 hearing, the trial court
again expressed concern whether the case could be resolved on summary judgment as it
appeared the issue turned on the “exercise of [the court‟s] equitable discretion.”
Concerned Citizens argued the Project had simply relocated to a new site at the Culver
Middle School where construction was ongoing. The State responded that the grant
money was “given only to purchase property or use in another manner for this Project”
and “this current project is not identical” so the State was entitled to get the money back.
The State maintained there were no triable issues of material fact. Concerned Citizens
argued the State‟s rescission claim was infirm as a matter of law but to the extent the
court would exercise its equitable discretion, factual findings were required and summary
18
judgment was precluded. After hearing argument, the trial court indicated “it may be
that I would have to conduct a trial in order weigh evidence and exercise my discretion
based on inferences that can be drawn from the evidence.” The trial court then provided
the parties two weeks to submit additional supplemental briefs “on whether [the trial
court] can reach the issues of the court‟s exercise of discretion in equity without
conducting a trial, or can [the court] determine [such issues on] summary judgment.”
According to the case summary, both parties filed (second) supplemental briefs in
mid-June but the State‟s brief is not included in the record on appeal. In its second
supplemental brief, Concerned Citizens argued the trial court could not resolve disputed
material issues of fact on summary judgment—“even if the claims involved are equitable
in nature and will ultimately be resolved in a bench trial.”
The Trial Court’s Decision
With respect to the State‟s rescission cause of action, noting the “purpose of
rescission is to restore the parties to the position they would have been in had they not
entered into the contract” (Akin v. Certain Underwriters at Lloyd’s London (2006) 140
Cal. App. 4th 291, 298), the trial court determined the “claim for rescission fails. [The
State] is seeking partial rescission of the contract” but had “not submitted a persuasive
argument as to why partial rescission should be granted.” However, because “the first
cause of action also pleaded an unjust enrichment theory, the Court need not rescind the
contract in order to grant [the State] relief under the first cause of action” and found the
“facts alleged support a claim for unjust enrichment.” Quoting Hernandez v. Lopez
(2009) 180 Cal. App. 4th 932, 939, the trial court stated: “„The phrase “Unjust
Enrichment” does not describe a theory of recovery, but an effect: the result of a failure
to make restitution under circumstances where it is equitable to do so.”‟” Further, the
trial court determined Concerned Citizens could not argue it did not have sufficient notice
of the restitution claim, finding the State‟s motion argued the State was “entitled to the
deposit as restitution.” (See Juge v. County of Sacramento (1993) 12 Cal. App. 4th 59,
69.) The trial court found that Concerned Citizens did not provide a public service for
19
the $210,000 and it would be unjustly enriched by payment of the funds. The trial court
further noted a triable issue “could” exist as to whether the State had waited too long to
assert its right to the condemnation proceeds but Concerned Citizens had not shown
prejudice. (Civ. Code, § 1693, emphasis added [rescission “shall not be denied because
of delay in giving notice of rescission unless such delay has been substantially
prejudicial to the other party”].) The trial court granted the State‟s motion for summary
adjudication of its first cause of action for rescission.7
The trial court found Concerned Citizens‟ motion involved the same issues as the
State‟s motion, and without further discussion, denied Concerned Citizens‟ motion for
summary adjudication of the State‟s cause of action for rescission, and awarded the State
the “amount of money representing the eminent domain proceeds for the property in
question.”
Concerned Citizens appeals from the judgment subsequently entered.
DISCUSSION
Standard of Review
“[T]he party moving for summary judgment bears the burden of persuasion that
there is no triable issue of material fact and that he is entitled to judgment as a matter of
law.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal. 4th 826, 850, fn. omitted.) “Once
the [movant] has met that burden, the burden shifts to the [other party] to show that a
triable issue of one or more material facts exists as to that cause of action. . . .” (Code
Civ. Proc., § 437c, subd. (p)(2); Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p.
850.) The party opposing summary judgment “may not rely upon the mere allegations or
denials of its pleadings,” but rather “shall set forth the specific facts showing that a triable
7 Finding the condemnation judgment had made Concerned Citizens‟ performance
of the grant contract impossible and noting the State had not addressed its breach of
contract cause of action in its motion, opposition, reply or supplemental briefing and
therefore had conceded the issue, the trial court granted Concerned Citizens‟ motion for
summary adjudication of the second cause of action for breach of contract (and denied
the State summary adjudication of this cause of action).
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issue of material fact exists . . . .” (Code Civ. Proc., § 437c, subd. (p)(2).) A triable issue
of material fact exists where “the evidence would allow a reasonable trier of fact to find
the underlying fact in favor of the party opposing the motion in accordance with the
applicable standard of proof.” (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p.
850.) Where summary judgment has been granted, we review the trial court‟s ruling de
novo. (Id. at p. 860.) We consider all of the evidence presented by the parties in
connection with the motion (except that which the trial court properly excluded) and all
of the uncontradicted inferences that the evidence reasonably supports. (Merrill v.
Navegar, Inc. (2001) 26 Cal. 4th 465, 476.) We affirm summary judgment where it is
shown that no triable issue of material fact exists and the moving party is entitled to
judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).).
A motion for summary judgment is properly granted only when „all the papers
submitted show that there is no triable issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.‟ (Code Civ. Proc., § 437c, subd. (c).)[]
We review a grant of summary judgment de novo and decide independently whether the
facts not subject to triable dispute warrant judgment for the moving party as a matter of
law. (Intel Corp. v. Hamidi (2003) 30 Cal. 4th 1342, 1348 [1 Cal. Rptr. 3d 32, 71 P.3d
296].)” (Chavez v. Glock, Inc. (2012) 207 Cal. App. 4th 1283, 1301, fn. omitted.) On
review of an order granting summary judgment, we view the evidence in the light most
favorable to the opposing party, liberally construing the opposing party‟s evidence and
strictly scrutinizing the moving party‟s. ( Id. at p. 1302, citing O’Riordan v. Federal
Kemper Life Assurance Co. (2005) 36 Cal. 4th 281, 284.)
Rescission, Restitution and Unjust Enrichment.
The trial court determined the State‟s rescission claim failed but concluded the
State had also pleaded an unjust enrichment theory entitling the State to the
condemnation proceeds as restitution.
“„[T]here is no cause of action in California for unjust enrichment.‟” (Durell v.
Sharp Healthcare (2010) 183 Cal. App. 4th 1350 (Durell), 1370, quoting Melchior v. New
Line Productions, Inc. (2003) 106 Cal. App. 4th 779, 793; and see McKell v. Washington
21
Mutual, Inc. (2006) 142 Cal. App. 4th 1457, 1490 [“unjust enrichment is a basis for
obtaining restitution based on quasi-contract or imposition of a constructive trust”].)
“Unjust enrichment is synonymous with restitution.” (Durell, supra, 183 Cal.App.4th at
p. 1370, citing Dinosaur Development, Inc. v. White (1989) 216 Cal. App. 3d 1310, 1314.)
“There are several potential bases for a cause of action seeking restitution. For
example, restitution may be awarded in lieu of breach of contract damages when the
parties had an express contract, but it was procured by fraud or is unenforceable or
ineffective for some reason. [Citations.] Alternatively, restitution may be awarded
where the defendant obtained a benefit from the plaintiff by fraud, duress, conversion, or
similar conduct. In such cases, the plaintiff may choose not to sue in tort, but instead to
seek restitution on a quasi-contract theory . . . . [Citations.] In such cases, where
appropriate, the law will imply a contract (or rather, a quasi-contract), without regard to
the parties‟ intent, in order to avoid unjust enrichment.” (McBride v. Boughton (2004)
123 Cal. App. 4th 379, 388, fn. omitted.)
“„Under the law of restitution, “[a]n individual is required to make restitution if he
or she is unjustly enriched at the expense of another. [Citations.] A person is enriched if
the person receives a benefit at another‟s expense. [Citation.]” [Citation.] However,
“[t]he fact that one person benefits another is not, by itself, sufficient to require
restitution. The person receiving the benefit is required to make restitution only if the
circumstances are such that, as between the two individuals, it is unjust for the person to
retain it. [Citation.]”‟ (McBride v. Boughton, supra, 123 Cal.App.4th at p. 389.) As a
matter of law, an unjust enrichment claim does not lie where the parties have an
enforceable express contract. (California Medical Assn v. Aetna U.S. Healthcare of
California, Inc. (2001) 94 Cal. App. 4th 151, 172 [114 Cal.Rptr.2d 109].)” (Durell, supra,
183 Cal.App.4th at p. 1371.) “„There is no equitable reason for invoking restitution when
the plaintiff gets the exchange which he expected.‟” (Durell, supra, 183 Cal.App.4th at
p. 1371, quoting Peterson v. Cellco Partnership (2008) 164 Cal. App. 4th 1583, 1593.)
As noted in Runyan v. Pacific Air Industries, Inc. (1970) 2 Cal. 3d 304, 317,
footnote omitted, a case on which the State also relies, “California decisions, in
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determining when restitutionary damages should be awarded, have differentiated between
actions for rescission based upon a ground involving some fault on the part of the
nonrescinding party, and actions based upon a ground not involving such fault. Only in
the former category have courts of equity required the nonrescinding party to pay to the
other restitutionary damages, for the obvious reason that otherwise he would be unjustly
enriched.”
Citing Civil Code sections 1598 and 1689, subdivision (b)(3), the State says it had
the right to rescind the grant contract when it became impossible to perform. According
to the State, “[T]he sole purpose of the grant contract was construction of the Youth
Center, and that became impossible when the School District condemned the subject
property.” As relevant, Civil Code section 1598 provides: “Where a contract has but a
single object and such object is . . . wholly impossible of performance . . . the entire
contract is void.” Pursuant to Civil Code section 1689, subdivision (b)(3), a contract may
be rescinded “[i]f the consideration for the obligation of the rescinding party becomes
entirely void from any cause.”
According to Concerned Citizens, the trial court erred in granting the State‟s
motion for summary judgment for numerous reasons: (1) an unjust enrichment theory is
inconsistent with the grant contract, (2) Concerned Citizens would not be unjustly
enriched if it were permitted to use the condemnation proceeds to complete the project at
its new location because the contract did not require that the project be completed at the
original location, (3) the contract contained an express provision limiting the available
remedy to specific performance, (4) any ambiguities must be construed against the State,
(5) triable issues of fact existed as to whether Concerned Citizens “unjustly retained” a
benefit at the State‟s expense, (6) the trial court failed to give Concerned Citizens a fair
opportunity to respond to the new unjust enrichment theory, (7) the State‟s claim it is
entitled to condemnation proceeds for the property is barred by the judgment in the
condemnation action, and (8) there were triable issues of material fact concerning
whether the State‟s claim was barred by the doctrines of laches and waiver.
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On this record, we conclude the trial court erred in granting summary judgment on
the State‟s rescission cause of action because there were triable issues of material fact as
to whether the consideration for the State‟s obligation became entirely void within the
meaning of subdivision (b)(3) of Civil Code section 1689 as the State contends. As
recited in the State-drafted grant contract, “the benefit to be derived by the State, from the
full compliance by [Concerned Citizens] with the terms of the Contract, is the
preservation, protection and net increase in the quantity and quality of parks, public
recreation facilities and/or historical resources available to the people of the State of
California” and “such benefit exceeds to an immeasurable and unascertainable extent the
amount of money furnished by the State by way of grant moneys under the provisions of
this agreement.” The State‟s grant contract describes the “Project” only as “Antes
Columbus Club Youth.” Not only did Concerned Citizens present evidence it had
already contributed to the contemplated increase in public recreation facilities by
operating temporary soccer fields at the original Project site, but notwithstanding the
condemnation action, Concerned Citizens presented evidence that the Project was
“ongoing” at the new site about three miles away from the original and was serving the
same South Central Los Angeles community.
State identifies no provision in the grant contract, no statute or any other authority
which would allow the State to retain control over the property in perpetuity. As the
State recognizes, it was always contemplated and understood that the Antes Columbus
Youth Project would be funded not only with State grant funds but also HUD grant and
other sources of funds. The State fails to explain how its belated assertion that the fact
Concerned Citizens would now also receive funds from and work with LAUSD would
alter the “Project” in such a way that the State is entitled to take back the grant funds.
Similarly, the State asserted at oral argument that the change of location (a distance of
about 3 miles) constitutes a modification of the grant contract that the State would have
had to approve (while conceding that such purported evidence is not in the record).
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It follows that summary judgment was not properly granted on the record
presented.8 On remand, the trial court may ascertain whether the matter may still be
resolved on summary judgment.
DISPOSITION
The judgment and order granting the State‟s motion for summary adjudication of
its rescission cause of action is reversed; the order denying Concerned Citizens‟ motion
for summary adjudication of the rescission cause of action is affirmed. The matter is
remanded for further proceedings not inconsistent with this opinion. Concerned Citizens
is entitled to its costs of appeal.
WOODS, J.
We concur:
PERLUSS, P. J. JACKSON, J.
8 Concerned Citizens also says the trial court erred in denying Concerned Citizens‟
motion for summary judgment or adjudication for “many of the same reasons” the court
erred in granting the State‟s motion. Denial of one party‟s motion for summary
adjudication does not necessarily compel a grant of the opposing party‟s “cross-motion,”
and Concerned Citizens failed to otherwise meaningfully address its own motion in its
opening brief. “A summary judgment is proper only if there is no triable issue of fact
and, as a matter of law, the moving party is entitled to judgment. (Code Civ. Proc., §
437c.) The fact that both parties moved for summary judgment does not conclusively
establish the absence of a triable issue of fact; the trial court must independently
determine the motions.” (Tahoe Reg’l Planning Agency v. King (1991) 233 Cal. App. 3d
1365, 1375, citations omitted.)
25