Office Digital Solutaions Plus v. LA Unif. School Dist. CA2/2 ( 2014 )

Filed 6/25/14 Office Digital Solutaions Plus v. LA Unif. School Dist. CA2/2
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
OFFICE DIGITAL SOLUTIONS PLUS, B247339
INC.,
(Los Angeles County
Plaintiff and Appellant, Super. Ct. No. BC481157)
v.
LOS ANGELES UNIFIED SCHOOL
DISTRICT et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Los Angeles County.
Rita Miller, Judge. Affirmed.
Rutan & Tucker, Steven A. Nichols, Gerard M. Mooney, Eliot M. Houman for
Plaintiff and Appellant.
Los Angeles Unified School District Office of the General Counsel, David
Holmquist, Gregory L. McNair, Sung Yon Lee for Defendants and Respondents.
___________________________________________________
Office Digital Solutions Plus, Inc. (ODSP) delivered new photocopy machines to a
public school. Quickly realizing that (1) ODSP is not authorized to supply new copiers
and (2) procurement procedures imposed by state law were ignored, the school district
advised ODSP to “pick up your copiers from the school.” ODSP refused to retrieve its
property, then sued for damages on multiple theories, including inverse condemnation.
The trial court granted summary judgment for the school district. We affirm.
FACTS
In June 2011, a school principal in the Los Angeles Unified School District
(LAUSD), Martin Sandoval, sought urgently needed photocopy machines for Miramonte
Elementary School. At Sandoval’s request, ODSP presented a proposal to supply
copiers. Sandoval declared that ODSP owner Greg Prescott said that the company “could
provide equipment, and that they were approved LAUSD vendors.” Prescott denied that
Sandoval asked whether ODSP was an approved LAUSD vendor.
Prescott met with Miramonte’s Title I Coordinator, Guadalupe Castillo, who
assured him that “she was responsible for getting the funding” for the copiers, and had
funding approval. He added, “I felt confident that they had budget approval. She made
[it] perfectly clear that she had money and she was responsible. That was all taken care
of, didn’t have to worry about it.” Castillo told Prescott that the school was in a hurry to
get the copiers. Castillo declared that she asked if ODSP was an approved vendor, and
Prescott answered “yes.” Prescott denied that any personnel at Miramonte asked if
ODSP was an approved equipment vendor.
LAUSD maintains a list of approved vendors. ODSP was a vendor authorized to
provide “maintenance services” for copiers over five years old.1 When Principal
Sandoval called ODSP to obtain a proposal, he failed to see “the fine print” stating that
ODSP is “only a vendor for services, not for leases and purchases of the copy machines.”
1 Purchasing services manager Jorge Ballardo testified that LAUSD’s master
contract with ODSP for maintenance services expired on June 30, 2011, before the new
copiers were delivered.
2
ODSP’s proposal did not show that it is an approved lease/purchase provider. Sandoval
felt that ODSP offered a good price of $27,500 per year for three years.
ODSP’s Prescott testified that his company likes to get “an authorize[d] signature
on the lease documentation which we bring once it’s delivered. We like to do it after the
fact . . . rather than before in case something changes.” Castillo took delivery of ODSP’s
machines on July 12 and 19, 2011. When the last delivery was made, ODSP sales
representative Tyler Garcia asked Castillo to have Principal Sandoval sign a document.
Sandoval was in a meeting and did not read what he was signing. Sandoval was unaware
that it was a lease prepared by ODSP: he thought it was from the LAUSD procurement
department.
According to Jorge Ballardo, only LAUSD procurement department employees
have authority to enter this type of lease agreement. Companies that already do business
with LAUSD are aware of this, and other companies “should know how to do business
with us.” Nevertheless, Sandoval represented to Prescott that he and Castillo were
authorized to lease equipment for LAUSD. The ODSP lease signed by Sandoval contains
preprinted statements that any documents delivered in connection with the lease “have
been duly authorized by you in accordance with all applicable laws, rules, ordinances and
regulations”; that the signators “have the authority” to sign and “are acting with the full
authorization of your governing body”; and that “you have complied fully with all
applicable law governing open meetings, public bidding and appropriations required in
connection with this Agreement.”
Prescott believed that Principal Sandoval had “the authority, the proper signature”
to approve the lease. Although Castillo signed a document entitled “Sales Contract” on
July 5, 2011, the document was never signed by ODSP: Prescott testified that “I haven’t
signed it yet.” On July 27, 2011, Castillo wrote a letter to ODSP “to confirm our
acceptance of the Lease Terms.”
Sandoval and Castillo were notified by LAUSD that ODSP is not authorized to
provide copiers. Castillo promptly contacted ODSP, and on August 3, 2011, received an
e-mail from ODSP employee Samantha Christiansen, stating, “if the purchase of the
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machines is not approved there will be a 20% re-stocking fee of the price of each
machine delivered. In addition, we will need to retrieve the current meters on each
machine and every copy generated of each machine from the date of delivery will also be
charged at $0.0049 per copy. [¶] Please update us ASAP on this status of this purchase
approval.”
On August 5, 2011, Sandoval drafted a memorandum to request after-the-fact
approval of a lease with ODSP. However, LAUSD’s procurement policies forbid after-
the-fact purchase orders, and procurement requests for over $10,000 in supplies must be
approved by the district superintendent. State law requires school districts to
competitively bid contracts involving an expenditure of more than $78,900.2
In early August 2011, a buyer in the LAUSD procurement department, Brent Paul,
telephoned Greg Prescott to advise him that Sandoval had no authority to bind LAUSD to
the lease, and that the laws, rules and regulations governing LAUSD forbade Miramonte
from purchasing goods or services without a purchase order approved by the LAUSD
Board of Education. Paul reminded Prescott that ODSP was not authorized to lease
copiers to LAUSD. He instructed Prescott to pick up the copiers from the school.
Prescott replied that Sandoval held a position of authority at Miramonte and represented
to ODSP that he had the authority to bind LAUSD to the lease. School staff had used the
copiers and diminished their value. Prescott told Brent, “No way I’m going to pick them
up. . . . You’ve accepted them. I wasn’t going to touch them.”
It is undisputed that on August 9, 2011, Brent Paul sent ODSP an e-mail stating
(1) ODSP’s master contract with LAUSD “only covers maintenance services on existing
copiers more than 5 years old”; (2) ODSP could not deliver goods until it received a
signed purchase order; (3) district employees cannot sign ODSP’s contract documents;
(4) ODSP should “pick-up your copiers from the school”; (5) LAUSD is not obligated to
2 The cost of ODSP’s lease was $82,500.
4
pay vendors until a purchase order is issued; and (6) LAUSD will not sign off on a
purchase order because ODSP is only authorized to service old copiers.
ODSP co-owner Jeff Eschelman testified that his company did not retrieve the
copiers after receiving the e-mail because he believed that Guadalupe Castillo and
Principal Sandoval were working to get the matter resolved so that ODSP could get paid.
Castillo discouraged him from picking up the machines. Eschelman was expecting to
receive the entire contract amount of $82,500. In their conversations, Castillo never
mentioned that the purchase order was rejected. In a similar vein, Prescott declared that
Principal Sandoval assured him at the end of August 2011 that Sandoval was working to
resolve the leasing issue and asked for more time. Sandoval did not ask Prescott to
retrieve the copiers from the school.
The LAUSD Board of Education did not approve or ratify a contract or purchase
order authorizing ODSP to supply copier machines to Miramonte Elementary School.
ODSP’s Prescott testified that LAUSD purchasing manager Jorge Ballardo (or another)
may have mentioned—or they may have discussed—“that schools are not authorized to
sign contracts on behalf of the school district.” Prescott felt that “It wouldn’t matter
either way.”
Principal Sandoval stated that he telephoned Prescott in mid-August 2011, asking
him to pick up the copiers, but “he refused,” even though Sandoval offered to pay for the
school’s use of the machines. Prescott denies receiving this call from Sandoval.
Sandoval telephoned ODSP in mid-October 2011 to explain that the company “should
not have delivered copiers without an approved purchase order.” Sandoval and Castillo
denied telling anyone at ODSP that Sandoval had authority to sign contracts on behalf of
LAUSD. ODSP co-owner Eschelman testified that Principal Sandoval never spoke to
him about his authority to sign contracts.
School staff at Miramonte used the ODSP copiers for approximately three months,
until machines arrived from an approved vendor. LAUSD procurement buyer Brent Paul
had told Principal Sandoval to continue using the ODSP machines, then pay ODSP a
restocking fee and for usage of the machines. Sandoval’s supervisor was aware that
5
Miramonte was continuing to use the ODSP copiers. Purchasing manager Ballardo
(Brent Paul’s supervisor) testified that it was improper for the school to continue using
the ODSP copiers. LAUSD admits that it knew ODSP expected compensation for the
school’s use of ODSP’s copiers.
Miramonte staff ran over one million copies on the ODSP copiers, and obtained
from ODSP toner cartridges and other supplies for the copiers. As a result of this usage,
the copiers were worth approximately 15 percent of what ODSP paid to purchase them.
ODSP received no compensation from LAUSD for its use of the copiers, save for $83.51
for copier supplies in September 2011.
In November 2011, Miramonte stopped using the ODSP copiers, encased them in
shrink wrap and stored them in a restroom. In December 2011, Sandoval sent an e-mail
to ODSP’s co-owner Eschelman stating that “your company engaged in unacceptable and
unauthorized procedures [and] was entirely aware that your company is only a service
provider and [ ] not authorized to sell equipment to LAUSD schools. You delivered your
machines to our school without a purchase order number, which is illegal. I signed a
contract, believing that it was a form from our procurement office. You are fully aware
that Principals do not have the authority to sign contracts for copiers. Your machines are
no longer being used, as our machines have arrived.” Sandoval reminded Eschelman that
Brent Paul had previously instructed ODSP “to pick up your equipment.” He added, “I
do expect to pay a fair market price for the use of your machines.”
Despite meeting with the LAUSD procurement department and Miramonte staff in
October 2011, ODSP could not get LAUSD to compensate it for the copiers. ODSP
never retrieved its copiers from Miramonte.
PROCEDURAL HISTORY
ODSP filed a complaint in March 2012. Its amended pleading asserted causes of
action for breach of contract; goods sold and delivered; unjust enrichment; promissory
estoppel; fraud; and inverse condemnation. LAUSD answered. LAUSD sought
summary judgment, and ODSP brought a cross-motion asking the trial court to
summarily adjudicate the inverse condemnation claim.
6
Initially, the court summarily adjudicated plaintiff’s first five causes of action, and
dismissed Sandoval and Castillo as defendants. It denied the parties’ cross-motions for
summary adjudication of the inverse condemnation claim. One month later, the court
decided the inverse condemnation claim in favor of LAUSD. On May 14, 2013, the court
entered judgment in favor of LAUSD. ODSP appeals.
DISCUSSION
1. Appeal and Review
Summary judgment is granted if the papers submitted show there is no triable
issue as to any material fact and the moving party is entitled to judgment as a matter of
law. (Code Civ. Proc., § 437c, subd. (c).) A moving defendant must show the existence
of a complete defense, or that one or more elements of the plaintiff’s cause of action
cannot be proven; the burden then shifts to the plaintiff to show a triable issue of material
fact. (Id., subd. (p)(2).) A judgment entered in favor of the defendant is appealable. (Id.,
subd. (m)(1).) We review the record and the trial court’s ruling de novo. (Saelzler v.
Advanced Group 400 (2001) 25 Cal. 4th 763, 767; Carnes v. Superior Court (2005) 126
Cal. App. 4th 688, 694.) We strictly scrutinize the moving party’s papers, construing the
facts and resolving all doubts and ambiguities in the evidence in favor of the appellants.
(Innovative Business Partnerships, Inc. v. Inland Counties Regional Center, Inc. (2011)
194 Cal. App. 4th 623, 628; Sellery v. Cressey (1996) 48 Cal. App. 4th 538, 543.)
Apart from relying on Code of Civil Procedure section 437c, ODSP also sought
summary resolution of its inverse condemnation claim under Code of Civil Procedure
section 1260.040, which permits the trial court to determine by motion liability issues in
eminent domain and inverse condemnation actions. (Dina v. People ex rel. Department
of Transportation (2007) 151 Cal. App. 4th 1029, 1043.) A ruling made under the eminent
domain statute is equivalent to a nonsuit. On appeal, we accept all facts and indulge all
inferences in favor of plaintiff, disregarding conflicting evidence. (Id. at p. 1047.)
7
2. Inverse Condemnation Claim
a. Procedural Challenge
ODSP contends that the trial court erred by denying summary adjudication of the
inverse condemnation claim on April 16, 2013, then reconsidering its ruling and entering
judgment for LAUSD on May 14, 2013. In fact, the court was not reconsidering its prior
ruling under the summary judgment statute, Code of Civil Procedure section 437c; rather,
its second ruling was made under the eminent domain statute, Code of Civil Procedure
section 1260.040.
The court had already found, on April 16, that Supreme Court authority makes it
“clear that there is no cause of action for inverse condemnation presented here.”
Between the court’s initial ruling and its second ruling, both sides submitted additional
written argument. ODSP had an opportunity to be heard, and, in any event, the court
consistently decided in April and in May that this is not an inverse condemnation case.
Though ODSP assails the trial court’s change in reasoning, on appeal we review the
court’s ruling, not its rationale: its stated reasons are not binding on an appellate court.
(Capogeannis v. Superior Court (1993) 12 Cal. App. 4th 668, 681.)
b. Merits
ODSP has an interest in the personal property it delivered to Miramonte. The
school accepted ODSP’s copiers and used them extensively, without compensating
ODSP. The pleading states that the school’s use of the copiers damaged and devalued
ODSP’s property and entitles it to compensation under the state and federal constitutions.
The government may not take private property for public use without just
compensation. (U.S. Const., 5th Amend.) “Inverse condemnation” is a shorthand
description for a proceeding instituted by a landowner whose property is taken without
condemnation proceedings. (Agins v. Tiburon (1980) 447 U.S. 255, 258, fn. 2.) The
permanent physical occupation of private property constitutes a taking. (Loretto v.
Teleprompter Manhattan CATV Corp. (1982) 458 U.S. 419, 421, 427.)
When the government leaves “its position of sovereignty, and enters the domain of
commerce, it submits itself to the same laws that govern individuals there.” (Cooke et al.
8
v. United States (1875) 91 U.S. 389, 398.) “Taking claims rarely arise under government
contracts because the Government acts in its commercial or proprietary capacity in
entering contracts, rather than in its sovereign capacity. [Citation.] Accordingly,
remedies arise from the contracts themselves, rather than from the constitutional
protection of private property rights” under the Fifth Amendment. (Hughes
Communications Galaxy, Inc. v. U.S. (Fed. Cir. 2001) 271 F.3d 1060, 1070.)
The government does not engage in “a sovereign act” when it denies a vendor’s
attempt to enter a government contract. (Sun Oil Co. v. United States (Ct.Cl. 1978) 572
F.2d 786, 817.) “[T]he concept of a taking as a compensable claim theory has limited
application to the relative rights of party litigants when those rights have been voluntarily
created by contract. [Citation.] In such instances, interference with such contractual
rights generally gives rise to a breach claim not a taking claim.” (Id. at p. 818.) For
example, if the government interferes with a lease agreement, plaintiff’s right to recover,
if any, emanates from the lease, not the Fifth Amendment. (Ibid.; Allain-Lebreton Co. v.
Dept. of Army etc. (5th Cir. 1982) 670 F.2d 43, 45; Bldg. 11 Investors LLC v. City of
Seattle (W.D.Wash. 2012) 912 F. Supp. 2d 972, 981-982.)
More to the point, “a property owner who voluntarily delivers property to the
government pursuant to an agreement cannot later maintain an inverse condemnation
claim if the government refuses to pay as agreed.” (Janowsky v. United States (Cl.Ct.
1991) 23 Cl.Ct. 706, 711.) In Janowsky, a reviewing court found that Janowsky—who
was on a hit list—may not have acted voluntarily because “the facts bespeak coercion”;
namely, the FBI conditioned the safety of plaintiff’s family to his relinquishing control of
his business to the FBI. (Janowsky v. U.S. (Fed. Cir. 1998) 133 F.3d 888, 892. Accord:
Rose v. City of Coalinga (1987) 190 Cal. App. 3d 1627, 1631, 1636 [city may have
obtained by duress consent to demolish plaintiffs’ buildings days after an earthquake,
after being told “that they had no alternative”].) ODSP does not show coercion or duress
that would belie the voluntariness of its copier delivery. Following the delivery, ODSP
was repeatedly told to pick up its property, and was not forced to leave it at Miramonte
under duress.
9
In California, the Takings Clause is broader: compensation is required when
private property is taken “or damaged” for public use. (Cal. Const., art. I, § 19.) “[A]n
‘inverse condemnation’ action may be pursued when the state or other public entity
improperly has taken private property for public use without following the requisite
condemnation procedures—as when the state . . . occupies land that it has not taken by
eminent domain, or when the state takes other action that effectively circumvents the
constitutional requirement that just compensation be paid before private property is taken
for public use.” (Customer Co. v. City of Sacramento (1995) 10 Cal. 4th 368, 377.)
The words “or damaged” in the state constitution have never been interpreted to
apply to “property damage incidentally caused by the actions of public employees in the
pursuit of their public duties. On the contrary, such property damage, like any personal
injury caused by the same type of public employee activity, has—throughout the entire
history of section 19—been recoverable, if at all, under general tort principles.”
(Customer Co. v. City of Sacramento, supra, 10 Cal.4th at p. 378.) Adding the word
“damaged” to the state’s taking clause “was not intended to expand the scope of the
constitutional compensation provision beyond the ambit of eminent domain and public
improvements. It appears, instead, that the words ‘or damaged’ were added to clarify that
the government was obligated to pay just compensation for property damaged in
connection with the construction of public improvements, even if the government had not
physically invaded the damaged property.” (Id. at p. 379.)
Under federal and California law, the alleged breach of a lease by a public entity
does not give rise to a takings claim. “Taking claims do not arise from a breach of
contract.” (County of Ventura v. Channel Islands Marina, Inc. (2008) 159 Cal. App. 4th
615, 618.) “To say that a breach of contract or lease implicates the Fifth Amendment to
the United States Constitution or article I, section 19 of the California Constitution,
stretches the meaning of those provisions well beyond reason.” (Id. at p. 625.)
ODSP relies on City of Needles v. Griswold (1992) 6 Cal. App. 4th 1881, in which a
city terminated a licensee’s right to operate a golf course on city-owned property. When
a restraining order gave the city the right to take “immediate exclusive control” over the
10
golf course, the city seized the licensee’s personal property—golf carts, modular
buildings, trucks, mowers, office machines—and refused to relinquish them because it
needed them to operate the golf course. (Id. at pp. 1885-1887.) The city implicitly
conceded that it seized plaintiff’s personal property for a public use, and focused on what
compensation had to be paid for the taking. The court wrote that when the city retook
possession of its golf course, its appropriation of the licensee’s personal property
amounted to a taking. (Id. at p. 1888.)
The City of Needles case is distinguishable. LAUSD did not preemptively seize
ODSP’s personal property and refuse to surrender it. Rather, ODSP delivered its copiers
to LAUSD. After LAUSD rejected ODSP’s copiers and asked ODSP to reclaim them,
ODSP declined to pick them up. Prescott admittedly told the LAUSD representative who
instructed him by telephone to pick up the copiers, “No way I’m going to pick them up.”
ODSP then ignored a written memo from LAUSD to “pick up your copiers from the
school.”
It is clear that neither the federal or state Constitution Takings Clause applies to a
vendor who voluntarily delivers personal property to the government, without a properly
authorized contract in hand prior to delivery, then refuses to retrieve its property despite
demands that it do so. ODSP insisted that LAUSD retain ODSP’s property. There was
no government “taking”; on the contrary, it was an unwarranted “receiving.” The copiers
were available for plaintiff’s repossession; they were ultimately stored in a restroom
because ODSP refused to arrange a pick-up of its own property. ODSP’s expectation that
it would be paid for LAUSD’s use of the copiers does not transform this business dispute
into an inverse condemnation case. The trial court’s dismissal of this claim was proper.
3. ODSP’s Remaining Claims
a. Law Governing Public Contracts
California law governing public contracts has been in effect for over 150 years. A
vendor who negotiates with a public agency is presumed to know the laws governing the
agency’s ability to contract. A contract that violates “stringent but wise” public contract
laws cannot be the ground of any claim. The vendor acts at his peril if the contract turns
11
out to be in excess of the agency’s power. He cannot recover any payment on the void
contract. Though it seems a hardship to deny the vendor all compensation, he must
ensure that the laws governing public contracts are complied with: failure to comply
makes the vendor “a mere volunteer [who] suffers only what he ought to have
anticipated. If [a] statute forbids the contract which he has made, he knows it, or ought to
know it, before he places his money or services at hazard.” (Zottman v. San Francisco
(1862) 20 Cal. 96, 104-106; Miller v. McKinnon (1942) 20 Cal. 2d 83, 89; Amelco
Electric v. City of Thousand Oaks (2002) 27 Cal. 4th 228, 234-235.)
b. Breach of Contract
Public schools are agencies “created by statute and invested only with the powers
expressly conferred by the Legislature.” (Paterson v. Board of Trustees (1958) 157
Cal. App. 2d 811, 818 (Paterson).) A school district may act only through a board of
elected officials. If a school board has not approved or ratified a contract, it cannot be
enforced. (Santa Monica Unified Sch. Dist. v. Persh (1970) 5 Cal. App. 3d 945, 952;
Osborne v. Huntington Beach etc. School Dist. (1970) 5 Cal. App. 3d 510, 514.) While
the power to contract may be delegated to a district superintendent, “no contract made
pursuant to the delegation and authorization shall be valid or constitute an enforceable
obligation against the district unless and until the same shall have been approved or
ratified by the governing board, the approval or ratification to be evidenced by a motion
of the board duly passed and adopted.” (Ed. Code, § 17604, italics added.) Following
the general rule for public contracts, “‘persons dealing with a school district are
chargeable with notice of limitations on its power to contract.’” (El Camino Community
College Dist. v. Superior Court (1985) 173 Cal. App. 3d 606, 613.)
Public contracts are subject to the competitive bidding statutes. (Pub. Contract
Code, § 20111.) Specifically, photocopy machine suppliers are subject to public bidding
requirements. (Konica Business Machines U.S.A., Inc. v. Regents of University of
California (1988) 206 Cal. App. 3d 449, 453-457.) Although a school board may delegate
authority to purchase supplies and equipment, “[n]o rule shall authorize any officer or
employee to make purchases involving an expenditure by the district in excess of the
12
amount specified by Section 20111 of the Public Contract Code.” (Ed. Code, § 17605,
italics added.)
In 2011, when the ODSP lease was signed, competitive bidding pursuant to Public
Contract Code section 20111 was required for school district contracts in excess of
$78,900.3 The ODSP contract is for $82,500. Competitive bidding was required by law,
and the Education Code did not permit LAUSD to authorize any employee to make the
expenditure required by the ODSP contract. A photocopier vendor who fails to engage in
the public bidding process cannot successfully claim that “it will be economically
devastated should the contract be voided because it has incurred substantial expense in
purchasing the copiers it has provided” to a public school. (Konica Business Machines
U.S.A., Inc. v. Regents of University of California, supra, 206 Cal.App.3d at p. 458.)
“[F]ailure to publicly bid contracts when required by statute renders them void so that the
public entity may not reimburse a contracting party for service or materials the agency
has been provided.” (Ibid.)
Void contracts that exceed the powers of a school district cannot be ratified by
promises from the school board to pay the vendor. (Paterson, supra, 157 Cal.App.2d at
p. 820.) No evidence was presented that LAUSD solicited competitive bids from the
public. No evidence was presented that the school board approved or ratified the ODSP
contract, by a motion of the board duly passed and adopted. (Ed. Code, § 17604.) On the
contrary, the LAUSD executive officer declared that no new copier contract from ODSP
was ever approved by the school board. While ODSP argues that LAUSD never asserted
contractual invalidity as a defense, the district’s answer to the complaint states, “An
unauthorized contract with a public agency is void” and cites the Supreme Court’s public
bidding opinions in Amelco Electric v. City of Thousand Oaks and Zottman v. San
Francisco.
3 The parties agree on the bid threshold. The Department of Education website
shows the bid threshold for contracts awarded by school districts in 2011:
http://www.cde.ca.gov.fg/ac/co/bidthreshold2012.asp
13
ODSP asserts that the Miramonte staff had ostensible authority to sign the copier
lease, authority it relied upon when it delivered the copiers to the school. The case law
does not support the company’s position. In the El Camino Community College Dist.
case, a school district invited bids for payroll software. The successful bidder’s proposal
was signed by two vice presidents of the school district’s board of trustees, but was not
approved or ratified by the board of trustees. (173 Cal.App.3d at pp. 610-611.) When
litigation arose, the court found that the school district could repudiate the agreement
because the vendor “had constructive, if not actual, notice of the limitations on the
officers’ authority to bind the district to the terms of the agreements,” owing to
provisions in the Education Code. (El Camino Community College Dist., at pp. 613-614.)
The reasoning in El Camino Community College Dist. applies here. Because it
was dealing with a school district, ODSP had constructive notice that a school principal
and a coordinator have no authority to bind LAUSD to a $82,500 copier lease without
public bidding and without approval from the school board. The void copier contract
cannot be ratified by promises from school employees to pay ODSP. (Paterson, supra,
157 Cal.App.2d at p. 820.)
ODSP argues that Principal Sandoval has actual authority to bind LAUSD to
contracts and purchase orders up to $25,000. ODSP reasons that its contract is
enforceable up to Sandoval’s authorized $25,000 limit. “It shall be unlawful to split or
separate into smaller work orders or projects any work, project, service, or purchase for
the purposes of evading the provisions of this article requiring contracting after
competitive bidding.” (Pub. Contract Code, §§ 20116, 20657.) We decline ODSP’s
invitation to thwart the salutary purposes of the public bidding laws by effectively
splitting the contract into three separate leases for $25,000 each, instead of a single
contract for $82,500.
14
ODSP’s reliance on Civil Code section 2333 is misplaced.4 Sandoval signed a
contract for $82,500, without authorization. There are no authorized acts to be separated
out from unauthorized acts.
There is no triable issue of fact presented on ODSP’s breach of contract claim. No
public bidding process occurred as required by the Public Contract Code, making
ODSP’s lease void and unenforceable. LAUSD did not approve or ratify the lease as
required by the Education Code. ODSP could not rely on the ostensible authority of
lower echelon school employees when the law plainly states that the school board must
approve contracts of this size. The laws are a matter of public record, and any vendor
could discover the pertinent law with minimal research. ODSP cannot blame school
administrators for the company’s own failure to research the laws before delivering
equipment to a school without school board approval.
c. Promissory Estoppel
ODSP maintains that estoppel may be applied against the government when
fairness requires it. The company contends that there are triable issues of material fact
regarding any actual limitations upon the power of Miramonte staff to contract with it;
the ostensible authority of Principal Sandoval and Coordinator Castillo; and ODSP’s
reliance upon their ostensible authority.
This Court has acknowledged that in exceptional cases, the government may be
bound by estoppel when necessary to achieve justice and right. (Paterson, supra, 157
Cal.App.2d at p. 819.) “However, as a corollary of the general rule that contracts wholly
beyond the powers of a municipality are void, [ ] estoppel to deny their invalidity may
not be invoked against a government body and, further, estoppel may not be invoked
where the procedure specified in a statute, such as the mode of contracting, is the
measure of the power to act.” (Ibid.) In Santa Monica Unified Sch. Dist. v. Persh, supra,
4 Civil Code section 2333 states that “When an agent exceeds his authority, his
principal is bound by his authorized acts so far only as they can be plainly separated from
those which are unauthorized.”
15
5 Cal.App.3d at pages 953-954, the court found that estoppel is not available to a
landowner who agreed to sell property to build a public school because the district’s
supervisor of building planning failed to obtain school board approval, though voiding
the agreement caused the landowner to “undeniably” suffer hardship because “[h]e
actually obligated himself on [ ] three promissory notes.”
When the statutory scheme requires competitive bidding, as it does here, the
strong public policies declared by the Legislature to protect the taxpayers from fraud,
corruption, careless officials, and the waste of public funds cannot be overridden by the
application of estoppel, which “would be tantamount to specific enforcement of a void
promise and contrary to both the policy and letter of the law.” (Paterson, supra, 157
Cal.App.2d at p. 820.)
As a result, “‘neither the doctrine of estoppel nor any other equitable principle
may be invoked against a governmental body where it would operate to defeat the
effective operation of a policy adopted to protect the public.’” (Kajima/Ray Wilson v.
Los Angeles County Metropolitan Transportation Authority (2000) 23 Cal. 4th 305, 316.)
Competitive bidding statutes are enacted for the benefit of taxpayers, not for the benefit
of bidders, and must be construed with sole reference to the public interest. (Id. at pp.
316-317; Amelco Electric v. City of Thousand Oaks, supra, 27 Cal.4th at p. 239.) As a
vendor to a public agency, ODSP was charged with knowledge of the agency’s
procedures and the requirement of school board contract approval. As a matter of law,
ODSP could not rely on the authority of school employees when the Education Code
limits contracting power to an elected school board. LAUSD is not estopped from
denying the validity of an invalid contract. (Stratton v. City of Long Beach (1961) 188
Cal. App. 2d 761, 773.)
d. Unjust Enrichment/Goods Sold and Delivered
Quantum meruit is an obligation created by law to address situations in which one
person is accountable to another, “‘otherwise he would unjustly benefit or the other
would unjustly suffer loss.’” (California Emergency Physicians Medical Group v.
PacifiCare of California (2003) 111 Cal. App. 4th 1127, 1136.) However, restitution
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requires “‘“‘no violation or frustration of law or opposition to public policy, either
directly or indirectly.’”’” (Ibid.; Dinosaur Development, Inc. v. White (1989) 216
Cal. App. 3d 1310, 1315.)
The analysis in the preceding sections applies equally to bar ODSP’s claims for
quantum meruit and for goods sold and delivered. Restitution would violate the express
provisions of the Education Code and contradict public policy. For example, in Reams v.
Cooley (1915) 171 Cal. 150, a school district failed to get competitive bids before making
arrangements with a contractor to perform work on a high school. (Id. at p 151.) The
Supreme Court held that the contractor did not have a valid contract and could not
recover for the work on a quantum meruit or implied liability theory. (Id. at pp. 153-
157.) The court observed that the law never implies an obligation when it expressly
forbids a party from agreeing to the obligation. (Id. at p. 156.)5 A party cannot recover
in equity that which he is barred from recovering by contract, if it would subvert the
purpose of state laws. (Castillo v. Barrera (2007) 146 Cal. App. 4th 1317, 1328.)
e. Fraud
ODSP asserts a cause of action for fraud against Principal Sandoval and Title I
Coordinator Castillo. It alleges that the two LAUSD employees entered the lease
agreement “with the intention of deceiving Plaintiff into believing they had the authority
to bind the District to such contracts.” At the time, ODSP “was ignorant of the true facts
and believed the representations” of Sandoval and Castillo. If ODSP had known the true
facts it would not have delivered the copiers to Miramonte school.
Vendors are presumed to know the Education Code and Public Contract Code
provisions that limit the actions of the agency and require school board approval of
contracts. (El Camino Community College Dist. v. Superior Court, supra, 173
Cal.App.3d at p. 613; Amelco Electric v. City of Thousand Oaks, supra, 27 Cal.4th at pp.
234-235.) ODSP has done business with LAUSD in the past, as a copier maintenance
5 The common counts are based on implied obligations. (Weitzenkorn v. Lesser
(1953) 40 Cal. 2d 778, 793-794.)
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company, so it should be familiar with the requirements for negotiating with a public
school. As a matter of law, ODSP could not reasonably rely on representations of school
employees about their ability to bind LAUSD when state law belies the alleged
representations: vendors are charged with learning state law before they negotiate with
schools. The trial court properly granted summary judgment on ODSP’s fraud claim.
DISPOSITION
The judgment is affirmed.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
BOREN, P.J.
We concur:
CHAVEZ, J.
FERNS, J.*
_______________________________________________________________
* Judge of the Los Angeles Superior Court, assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.
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