Berg & Berg Enterprises v. City of San Jose CA6

Filed 12/18/15 Berg & Berg Enterprises v. City of San Jose CA6

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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

SIXTH APPELLATE DISTRICT

BERG & BERG ENTERPRISES, LLC, H040152

(Santa Clara County

Plaintiff and Appellant, Super. Ct. No. 1-07-CV091955)

v.

CITY OF SAN JOSE et al.,

Defendants and Appellants.

I. INTRODUCTION

Plaintiff Berg & Berg Enterprises, LLC (Berg & Berg) is a land developer. Berg

& Berg wanted to build a residential development on land it owned in the Evergreen area

of defendant City of San Jose (City) that was zoned campus industrial. In 2004, Berg &

Berg and several other Evergreen property owners who also wanted to build residential

developments on land that was zoned campus industrial entered into funding and

reimbursement agreements with City. The agreements provided that the participating

property owners would fund the $8,847,740 cost of amending City’s general plan and

obtaining a zoning change from campus industrial to residential uses, and City would

bring the necessary documentation before City’s Planning Commission and/or defendant

City Council for their consideration in an expeditious manner.

In 2007, the City Council voted to defer consideration of all applications to

convert campus industrial land in the Evergreen area to other uses. As a result, the

residential developments planned by Berg & Berg and the other property owners did not

take place. Berg & Berg filed a government claim against City in which it sought

restitution in the amount of $1,892,917 for monies it had paid under the funding and

reimbursement agreements. The government claim was unsuccessful and Berg & Berg

filed a petition for writ of mandate and complaint against City and the City Council.

The matter proceeded to a jury trial in which the jury found that City had not processed

Berg & Berg’s applications in an expeditious manner. Based on the jury’s findings, the

trial court ruled that the funding and reimbursement agreement had been rescinded due to

failure of consideration, awarded restitution of $6,083,173 to Berg & Berg, and entered

judgment in the amount of $6,083,173 plus prejudgment interest of $683,314.20.

On appeal, defendants City and the City Council (hereafter, collectively

defendants or City) contend that the trial court’s orders with respect to City’s demurrer,

motions in limine, motion for directed verdict, and motion for new trial should be

reversed; the jury verdicts and the damages award in the statement of decision should be

vacated; and the judgment should be reversed. For reasons that we will explain, we

determine that the trial court erred in allowing Berg & Berg to assert claims against City

on behalf of the other participating property owners who had not filed government

claims, and therefore City’s motion for new trial should have been granted.

We will therefore reverse the judgment and remand the matter with directions to

the trial court to (1) grant City’s motion for new trial; (2) conduct a new court trial

limited to the issue of determining the amount of restitution to be awarded to Berg &

Berg based on its proportionate share of the consideration paid by the participating

property owners under the 2004 and 2006 funding and reimbursement agreements; and

(3) determine the amount of prejudgment interest to be awarded.

2

Berg & Berg has filed a cross-appeal contending that the trial court erred in

granting City’s motion for summary adjudication of the cause of action for violation of

the equal protection clause. For the reasons stated below, we find no merit in Berg &

Berg’s contention and we will affirm the trial court’s order.

Having concluded that the judgment should be reversed, we further conclude that

the issues raised by the parties on appeal and cross-appeal regarding prejudgment interest

are moot.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. The Pleadings

In 2007, Berg & Berg filed its original combined petition for writ of mandate and

complaint against City and the City Council, which arose from Berg & Berg’s ownership

of a 175-acre parcel in City’s Evergreen area. After two rounds of demurrers, Berg &

Berg filed its third amended petition for writ of mandate and complaint (hereafter, the

complaint) in 2011.

According to Berg & Berg’s allegations in the complaint, its parcel was located

within an area that was subject to City’s Evergreen development policy (EDP) and was

zoned campus industrial under City’s general plan. After being approached by City in

2002, Berg & Berg began providing City with funding that would facilitate new

residential development within the EDP area.

Berg & Berg further alleged that in 2003 and 2006 the City Council approved

funding and reimbursements between City and Yerba Buena Opco, Inc. (Yerba Buena

Opco) regarding the development of property within the EDP. According to Berg &

Berg, Yerba Buena Opco “executed the Reimbursement Agreement on behalf of the

‘Participating Property Owners,’ which are defined in the Reimbursement Agreement as

‘property owners and potential developers in the Evergreen-East Hills Area.’ ”

Under the funding and reimbursement agreements, the participating property

owners, including Berg & Berg, agreed “to fund the costs of preparation of a community-

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based Smart Growth Strategy, related General Plan amendments, an updated Evergreen

Area Development Policy, and related studies, infrastructure funding mechanism, and

environmental documents, all as they pertain to the Evergreen Area (collectively

identified in the Reimbursement Agreement as ‘Strategy Documents’).” The funding and

reimbursement agreements also provided that City would process the strategy documents

“ ‘in an expeditious manner’ ” and “ ‘take all reasonable steps . . . to meet timelines for

performance’ . . . including processing the Strategy Documents for final hearing before

the City no later than December 2006.”

In 2005, Berg & Berg filed two development applications to amend City’s General

Plan and to change the zoning on its property within the EDP area to allow residential

development. In 2006, according to Berg & Berg, the City Planning Commission

recommended that the City Council adopt either the developers’ proposal of 2,000

residential units or the staff recommendation of 1,275 residential units.

During its May 15, 2007 meeting, the City Council deferred consideration of all

proposed conversions of campus industrial land until the completion of City’s general

plan update in 2008. Berg & Berg further alleged that on June 26, 2007, the City Council

directed staff to “discourage any proposed general plan amendments for residential uses”

and approved a memorandum indicating that the City Council supported preservation of

the campus industrial site for employment growth. Berg & Berg asserted that as a result

of City Council’s actions on May 15, 2007, and June 26, 2007, Berg & Berg’s “proposed

conversion of the Berg Parcel to residential uses was effectively denied by the Council,

as the Council’s unequivocal public statements and directions made clear that it would

not act on Berg’s application for years, nor would it approve Berg’s applications.”

Berg & Berg attached as an exhibit to the complaint a copy of the government

claim that it filed with City on January 3, 2008. The government claim stated that the

name of the claimant was “Carl E. Berg, on behalf of Berg & Berg Enterprises, LLC”

and the dates of the incidents or occurrences causing the claim were May 15, 2007, and

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June 26, 2007. According to Berg & Berg’s allegations in the complaint, the terms of the

funding and reimbursement agreements provided that Yerba Buena Opco “assigned to

Berg [& Berg] the right to pursue the claims made in this case.”

Regarding the circumstances of the claim, Berg & Berg stated in its government

claim that “[c]laimant is a party to a ‘Funding and Reimbursement Agreement By and

Between the City of San Jose and Certain Evergreen Property Owners Regarding the

Evergreen-East Hills Vision Strategy and Related Environmental Documents,’ last

amended on June 27, 2006 (‘Reimbursement Agreement’). Pursuant to the

Reimbursement Agreement, Claimant has paid substantial sums to the City for the

preparation of certain planning documents, including Claimant’s application for a

General Plan amendment and for rezoning to allow residential uses on Claimant’s

property. In return, the City promised to timely process the development applications

and present them to the Planning Commission or City Council no later than December

2006. The City’s representations were false, and the City has failed to perform its

obligations under the Reimbursement Agreement. Claimant seeks reimbursement of the

monies paid to the City pursuant to the Reimbursement Agreement. Claimant separately

seeks damages from the City for violation of the Equal Protection Clause and

nonmonetary relief.”

Berg & Berg described its claimed loss in its government claim as “[r]estitution in

the amount of $1,892,917 for monies paid under Reimbursement Agreement, so far as is

known at this time. Other damages to be determined.”

Based on these allegations, Berg & Berg petitioned for writs of mandate

compelling the City Council to set aside its decisions of May 15, 2007 and June 26, 2007.

The complaint included causes of action for rescission/restitution, promissory estoppel,

money had and received, specific performance, declaratory relief, violation of the equal

protection clause, and breach of contract and breach of the covenant of good faith and fair

dealing.

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Both Berg & Berg and City filed motions for summary adjudication.1 In its

September 8, 2011 order, the trial court denied Berg & Berg’s motion for summary

adjudication of the causes of action for rescission/restitution and money had and

received. The trial court granted City’s motion for summary adjudication of the causes

of action for declaratory relief and violation of the equal protection clause, and denied

summary adjudication of the remaining causes of action.

B. Pretrial Proceedings

Among other pretrial motions and proceedings, the trial court held a hearing under

Evidence Code section 4022 on the issue of whether Berg & Berg could assert a claim

against City arising from the funding and reimbursement agreements that included the

other participating property owners’ claims against City under an assignment of rights.

City argued in pretrial briefing that since the other participating property owners had not

filed a government claim and had not attempted to assign their rights to Berg & Berg

until 2010, Berg & Berg could not assert a government claim that included the

government claims of the other participating property owners.

In its May 17, 2012 written order, the trial court ruled that the government claim

filed by Carl Berg on January 3, 2008, had substantially complied with the requirements

of the Government Claims Act, which, the court determined, “was designed to allow for

the addition of later expanded claims as those became known.” The court also

1

Berg & Berg’s motion for summary adjudication was not included in the record

on appeal.

2

Evidence Code section 402 provides: “(a) When the existence of a preliminary

fact is disputed, its existence or nonexistence shall be determined as provided in this

article. [¶] (b) The court may hear and determine the question of the admissibility of

evidence out of the presence or hearing of the jury; but in a criminal action, the court

shall hear and determine the question of the admissibility of a confession or admission of

the defendant out of the presence and hearing of the jury if any party so requests. [¶]

(c) A ruling on the admissibility of evidence implies whatever finding of fact is

prerequisite thereto; a separate or formal finding is unnecessary unless required by

statute.”

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determined that “[a]t this point, the evidence shows that an assignment of rights was

made to Berg prior to his filing the claim on January 3, 2008. However, there has been

no showing that Berg knew the full extent of a potential claim based upon the assignment

at the time he filed his claim document.”

In other pretrial proceedings, the trial court decided to bifurcate the “writ issues”

due to the court’s concern that the case was approaching the Code of Civil Procedure

section 583.310 mandatory five-year deadline to bring a civil case to trial. The case

proceeded first to a jury trial on the causes of action for breach of contract, money had

and received, rescission, and promissory estoppel.

C. Trial Evidence

1. Development of the Evergreen Properties

In 2001, a real estate company, Legacy Partners Commercial, Inc. (Legacy),

through its partner entity, Yerba Buena Opco, purchased a large property in the

Evergreen area of San Jose that was zoned campus industrial. The campus industrial

zoning allowed the property to be used for offices, industrial buildings, and research and

development buildings. According to Steven Dunn, Legacy’s senior managing director

for Northern California, Legacy originally planned to build research and development

buildings for high-tech companies on its Evergreen property.

Legacy stopped the process of developing its Evergreen property for research and

development buildings after the “Dot Com implosion” occurred in 2001 and the demand

for research and development buildings disappeared. At that time, Legacy decided that it

would develop the property for residential uses. After Dunn obtained support from the

community and from Laurel Prevetti of City’s planning staff for the concept of

converting Legacy’s Evergreen property to residential uses, Legacy submitted an

application for a general plan amendment. A general plan amendment was required to

change the zoning from campus industrial to residential.

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In 2002, Dunn met with the City Council member for the Evergreen area, David

Cortese, regarding Legacy’s application for a general plan amendment. According to

Dunn, Cortese wanted Legacy to work with the other owners of Evergreen campus

industrial property, including Arcadia, KB Homes, Berg & Berg, IDS, and Evergreen

Community College, to submit an application for a general plan amendment as a group.

After several meetings, the property owners reached a consensus that they would

participate together in seeking a general plan amendment.

In late 2002, Prevetti contacted Dunn to inform him that the participating property

owners would have to fund the City’s cost of amending the general plan and changing the

zoning designation to allow residential uses of their Evergreen properties. In 2003, the

participating property owners began hiring third-party consultants to do traffic studies

and intersection engineering. Dunn explained that the participating property owners

entered into a funding and reimbursement agreement with City because it was

unprecedented for a group of property owners to act together. The participating property

owners also wanted to ensure that their applications were expeditiously processed, by

which they meant faster than normal. Before entering into a funding and reimbursement

agreement with City, the participating property owners entered into a cooperation

agreement between themselves.

2. The 2004 Funding and Reimbursement Agreement

The funding and reimbursement agreement dated February 11, 2004, (the 2004

funding and reimbursement agreement) was made between City and “YERBA BUENA

OPCO, INC.,[3] a California corporation (‘PARTICIPATING PROPERTY OWNERS’).”

The participating property owners were identified in the agreement as “property owners

and potential developers in the EVERGREEN AREA,” who “support the preparation of a

3

Dunn testified that “Yerba Buena Opco, Inc. was a mistake, so this document

really should read Yerba Buena Opco, LLC. It was a mistake that wasn’t caught and

should have been.”

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community-based STRATEGY, related General Plan Amendments, an updated

DEVELOPMENT POLICY, and related studies and environmental and other documents

for the EVERGREEN AREA so that appropriate development within the EVERGREEN

AREA may proceed and occur in a manner consistent with CITY’S General Plan . . . .”

Dunn testified that the participating property owners included KB Homes, Legacy, Berg

& Berg, Arcadia, and Evergreen Community College.4

The 2004 funding and reimbursement agreement stated that the agreement’s

purpose was “to provide a means for PARTICIPATING PROPERTY OWNERS to

fund the costs of preparation of a community-based STRATEGY, related General Plan

amendments, an updated DEVELOPMENT POLICY, and related studies, infrastructure

funding mechanisms, and environmental and other documents analyzing the

environmental impacts of the STRATEGY, all as they pertain to the EVERGREEN

AREA (all such documents hereinafter are collectively referred to as the ‘STRATEGY

DOCUMENTS’).”

The parties’ obligations under the 2004 funding and reimbursement agreement

were specified in the agreement, including the participating property owners’ obligation

to fund the total estimated cost for the preparation of the strategy documents in the

amount of $8,847,740. Berg & Berg’s share of that amount was 23.5 percent, according

to the testimony of Carl Berg, the managing partner of Berg & Berg.

For its part, City was obligated, “[a]s consideration for PARTICIPATING

PROPERTY OWNERS’ agreement to fund the preparation of the STRATEGY

DOCUMENTS, . . . to process the STRATEGY DOCUMENTS in an expeditious

manner and, upon their completion, to bring the STRATEGY DOCUMENTS before

CITY’s Planning Commission and/or City Council for their consideration, as appropriate,

all to the extent that adequate funding has been provided to CITY to cover the actual

4

Evergreen Community College is not a party to the instant action.

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costs incurred by CITY (including consultant costs) to perform and complete such work

and tasks.” (Italics added.)

The provision for an expedited process was very important to Berg because

“timing is everything.” Dunn believed that an expedited process would take 12 to

18 months, instead of the usual 24 months. Prevetti, who at the time of trial was City’s

assistant director of planning, was the lead staff person in City’s planning department for

the participating property owners’ proposed Evergreen project. Prevetti’s understanding

was that the phrase “expeditious manner” in the 2004 funding and reimbursement

agreement meant that “we would be taking reasonable means to complete our work.”

The 2004 funding and reimbursement agreement further provided that the term of

the agreement was February 11, 2004 to June 30, 2005, with a possible six-month

extension.

3. The 2006 Funding and Reimbursement Agreement

The participating property owners believed that under the 2004 funding and

reimbursement agreement they had contracted for the strategy documents to come before

City’s Planning Commission and then the City Council for a yes or no decision on the

proposed zoning change for their Evergreen properties by June 30, 2005, which was the

date the agreement terminated. However, by June 2005 the strategy documents were

only partially completed.

City exercised its contractual right to extend the term of the 2004 funding and

reimbursement agreement by six months. After the extension period expired, City staff

continued to work on the Evergreen project. On June 27, 2006, the participating property

owners entered into a second funding and reimbursement agreement (the 2006 funding

and reimbursement agreement). Under the 2006 funding and reimbursement agreement,

the participating property owners agreed that they would fund the remaining cost to

prepare the strategy documents in the amount of $2,328,358. City again agreed “to

process the STRATEGY DOCUMENTS in an expeditious manner and, upon their

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completion, to bring the STRATEGY DOCUMENTS before CITY’S Planning

Commission and/or City Council for their consideration,” providing that adequate

funding had been provided to complete the work. (Italics added.)

The 2006 funding and reimbursement agreement stated that the term of the

agreement was June 27, 2006 to December 31, 2006. There was no provision for an

extension.

4. City Council’s Actions

In the fall of 2006 City’s planning department supported the conversion of the

participating property owners’ Evergreen properties from campus industrial to residential.

When the strategy documents were brought before the Planning Commission, the

Commission voted in November 2006 to recommend to the City Council “either planned

use or reconciled alternative.”

During the City Council meeting held on December 12, 2006, the City Council

upheld the environmental impact report and deferred a vote on the other strategy

documents. The vote on the strategy documents was again deferred during the City

Council’s May 15, 2007 meeting. Berg believed that the City Council’s deferrals had

effectively killed “the deal.” Berg filed a government claim against City on January 3,

2008, which stated that the name of the claimant was “Carl E. Berg, on behalf of Berg &

Berg Enterprises, LLC” and sought “[r]estitution in the amount of $1,892,917 for monies

paid under Reimbursement Agreement, so far as is known at this time. Other damages to

be determined.”

In December 2010 the City Council denied all general plan amendments because

City was in the middle of a comprehensive general plan update and the City Council had

concluded that the Evergreen sites were not needed for housing. At the time of trial, the

zoning designation for the participating property owners’ Evergreen properties remained

campus industrial.

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According to Prevetti, the City’s cost for the staff time involved in processing the

participating property owners’ attempt to obtain an amendment of the general plan for

their Evergreen properties was over $2.1 million. City ultimately reimbursed more than

$619,000 in unused funds to the participating property owners.

D. Special Verdicts

At the close of evidence, City made a motion for a directed verdict on grounds

that included, among other things, City’s contention that Berg & Berg could assert only

its own government claim against City because there was “no evidence that any of the

actual or purported members of Yerba Buena Opco, LLC filed a timely claim against

the City, nor have they made any effort to comply with, or seek relief from, the Tort

Claims Act.” The trial court denied the motion for a directed verdict, stating: “The

issue was thoroughly examined at the time of the second amended complaint. The

Court found the defendant met the substantial compliance required by Government Code

Section 910.10 (B) and 915 (D). In short, the claim provided enough information to

make an adequate investigation of the merits. I think that’s essentially what the law

requires.”

The jury returned special verdicts on May 31, 2012. The special verdict forms

asked the jurors to make findings on the causes of action for breach of contract, money

had and received, rescission/restitution, and promissory estoppel. Among other findings,

the jurors found that City had not expeditiously processed the participating property

owners’ strategy documents and the amount of money that City should pay to Berg was

$6,083,173 on all causes of action.

The jurors were also asked to make findings regarding assignment. The jurors

found that Yerba Buena Opco had intended to transfer 100 percent of “its interest in the

contract” to Berg & Berg.

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Following the jury verdicts, a stipulation and order was filed on June 14, 2013,

that dismissed with prejudice the first and second causes of action for writs of mandamus

in the third amended petition and complaint.

E. Statement of Decision and Judgment

The trial court issued a statement of decision on July 15, 2013, on the issue of

whether “the plaintiffs” were entitled to the equitable remedy of rescission under Civil

Code section 1689. Relying on the decision in Hoopes v. Dolan (2008) 168 Cal.App.4th

146 (Hoopes), the trial court determined where, as here, the legal issues were decided

first, the court could not grant equitable relief that was inconsistent with the jury’s

verdicts.

The trial court therefore began its decision on the equitable issues by reviewing

the jury verdicts. The court noted that “[t]he jury returned verdicts in favor of Berg &

Berg and against the City of San Jose on the breach of contract theory, the money had

and received theory, the rescission theory, and also on the promissory estoppel theory.

The jury also found that Yerba Buena Opco, LLC had assigned 100% of its rights to Berg

& Berg. [¶] The jury awarded $6,083,173 to the plaintiffs for damages relating to breach

of contract, money had and received, and rescission.” (Fn. omitted.)

The trial court then stated that its decision was guided by the jury’s factual

findings, as follows. “The heart of the rescission claim by Berg & Berg is that the City of

San Jose promised ‘expeditious processing.’ The expeditious processing was the

consideration for the developer’s willingness to put up $8.8 million, significantly more

than the $300,000 to $400,000 in filing fees which the project would normally have

cost. . . . They were willing to put up $8.8 million to get this project to the City Council

before its composition changed, betting that the then Council would go along with their

plan and they would have a successful development. From the developer’s point of view,

there was time urgency. [¶] Unfortunately, from Laurel Prevetti’s point of view, as the

Assistant Planning Director and person in charge of this project, ‘expeditious’ only meant

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reasonable. In short, the developers were paying $8.8 million for speed, and the City

planners were working at what they viewed as a ‘reasonable’ tempo.”

Based on its review of the special verdicts, the trial court determined that “the jury

found that there was a failure of consideration in that the City did not deliver what the

developers were paying for, i.e., an expeditious process. The Court is satisfied that the

evidence supports Civil Code § 1689(b)(2), (3) and (4)[5] grounds for rescission.” The

trial court also determined that the appropriate remedy was a money judgment. Based on

these determinations, the trial court found “that the plaintiffs are entitled to rescission and

to recover judgment against the City of San Jose in the amount of $6,083,173.00.”

(Fn. omitted.)

In a footnote, the trial court addressed City’s request that Berg & Berg’s recovery

be capped at $1,892,917 since that was the amount that Berg & Berg had claimed as its

loss in its government claim. Since Government Code section 910, subdivision (f)6

provides that where a government claim that exceeds $10,000 no dollar amount shall be

included in the claim, the trial court rejected City’s request on the ground that Berg &

Berg’s inclusion of $1,892,917 in its government claim “was surplusage, and that cannot

serve as a cap.”

5

Civil Code section 1689, subdivision (b) provides in part: “A party to a contract

may rescind the contract in the following cases: [¶] (1) If the consent of the party

rescinding, or of any party jointly contracting with him, was given by mistake, or

obtained through duress, menace, fraud, or undue influence, exercised by or with the

connivance of the party as to whom he rescinds, or of any other party to the contract

jointly interested with such party. [¶] (2) If the consideration for the obligation of the

rescinding party fails, in whole or in part, through the fault of the party as to whom he

rescinds. [¶] (3) If the consideration for the obligation of the rescinding party becomes

entirely void from any cause. [¶] (4) If the consideration for the obligation of the

rescinding party, before it is rendered to him, fails in a material respect from any cause.”

6

All statutory references hereafter are to the Government Code unless otherwise

indicated.

14

On July 16, 2013, a judgment on jury verdict was entered that provided that Berg

& Berg would recover “damages on the verdict in the sum of $6,083,173” and

“prejudgment interest at the rate of 10% from the date of verdict in the amount of

$683,314.20.”

F. Motions for New Trial

Berg & Berg moved for a new trial on the award of prejudgment interest, arguing

that prejudgment interest should have been calculated from an accrual date of August 13,

2007, not the date of the jury verdict, and therefore it was entitled to prejudgment interest

of $2,918,251.60. The trial court was not persuaded that the amount on which

prejudgment interest could be awarded was certain as of August 13, 2007, and denied the

motion during posttrial proceedings on September 6, 2013.

City filed a motion for new trial “as to the issue of Carl Berg’s alleged standing to

assert the rights of Yerba Buena Opco and/or its individual members or, in the

alternative, to amend its judgment to recognize only the claim of Carl Berg.” City argued

that a new trial was warranted under Code of Civil Procedure section 657 because the

trial court had made an error in law in determining that Berg & Berg could assert the

claims of other participating property owners under the doctrine of substantial

compliance. City relied on a recent California Supreme Court decision, DiCampli-Mintz

v. County of Santa Clara (2012) 55 Cal.4th 983 (Dicampli-Mintz) for the proposition that

substantial compliance did not excuse strict compliance with the statutory government

claims filing requirements. Since none of the other participating property owners had

ever filed a government claim, City contended that “they had nothing to assign to Berg &

Berg,” which could only recover its proportionate share of the funds provided to City

under the 2004 and 2006 funding and reimbursement agreements. The trial court

determined that the decision in DiCampli-Mintz was inapplicable and denied the motion

during posttrial proceedings on September 6, 2013.

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III. CITY’S APPEAL

City filed a timely notice of appeal from the judgment. On appeal, City contends

that the trial court’s orders with respect to City’s demurrer, motions in limine, motion for

directed verdict, and motion for new trial should be reversed; the jury verdicts and the

damages award in the statement of decision should be vacated; and the judgment should

be reversed.

According to City, reversal is required due to several trial court errors, including

(1) allowing Berg & Berg to assert claims against City on behalf of the other participating

property owners who had not filed government claims; (2) allowing Berg & Berg to

litigate the causes of action for money had and received and rescission/restitution

although City had immunity from those causes of action under section 815,

subdivision (a); (3) allowing damages to be awarded against City although Berg & Berg

had waived damages in the 2004 and 2006 funding and reimbursement agreements;

(4) making inconsistent rulings as to whether the cause of action for rescission/restitution

was legal or equitable; and (5) awarding prejudgment interest at the rate of 10 percent

instead of 7 percent.

We will begin our discussion with the issue of whether the causes of action for

money had and received and rescission/restitution are barred by government immunity

under section 815.

A. Money Had and Received and Rescission/Restitution

City contends that the causes of action for money had and received (common

count) and rescission/restitution are barred under section 815 because a quasi-contract

claim cannot be asserted against a public entity. City also contends that it may raise this

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issue for the first time on appeal because a government immunity defense may be raised

at any time.7

Berg & Berg responds that City is not immune because Berg & Berg’s claims are

based on contract. In addition, Berg & Berg points out that City did not argue below that

it is immune from the contract claims.

We agree with City that it may raise the issue of government immunity for the first

time on appeal since “governmental immunity from liability is a jurisdictional matter that

can be raised for the first time on appellate review. [Citation.]” (Inland Empire Health

Plan v. Superior Court (2003) 108 Cal.App.4th 588, 592.) However, we agree with Berg

& Berg that section 815 does not immunize City from claims based on contract.

“The California Tort Claims Act[8] sets forth the statutory scheme relating to

contract and tort liabilities of public entities.” (Janis v. California State Lottery Com.

(1998) 68 Cal.App.4th 824, 830 (Janis).) Tort liability is generally governed by section

815, subdivision (a), which provides in part: “Except as otherwise provided by statute:

[¶] A public entity is not liable for an injury, whether such injury arises out of an act or

omission of the public entity or a public employee or any other person.” Thus, under

section 815, subdivision (a), “there is no common law tort liability for public entities in

California; instead, such liability must be based on statute.” (Guzman v. County of

Monterey (2009) 46 Cal.4th 887, 897.)

Contract liability is generally governed by section 814, which provides: “Nothing

in this part affects liability based on contract or the right to obtain relief other than money

7

We observe that City has not raised any issue with respect to the special verdict

findings that City was liable under theories of breach of contract and promissory

estoppel.

8

The California Supreme Court has adopted the practice of “referring to the

claims statutes as the ‘Government Claims Act,’ to avoid the confusion engendered by

the informal short title ‘Tort Claims Act.’ ” (City of Stockton v. Superior Court (2007)

42 Cal.4th 730, 734.) We will follow the practice of our Supreme Court.

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or damages against a public entity or public employee.” The California Supreme Court

has instructed that “[s]ection 814 simply reaffirms the longstanding rule that

governmental immunity does not encompass contractual liability. [Citation.]” (City of

Stockton v. Superior Court (2007) 42 Cal.4th 730, 741, fn. omitted.)

Thus, “the immunity provisions of the [Government Claims] Act are only

concerned with shielding public entities from having to pay money damages for torts.

[Citation.] Section 814 explicitly provides that liability based on contract or the right to

obtain relief other than money damages is unaffected by the Act.” (City of Dinuba v.

County of Tulare (2007) 41 Cal.4th 859, 867.)

We are not convinced by City’s argument that it has immunity under section 815

because Berg & Berg made quasi-contract claims for money had and received and

rescission/restitution that cannot be asserted against a public entity. This court has stated

that “rescission stands as a contract remedy. [Citations.]” (People ex. rel. Kennedy v.

Beaumont Investment, Ltd. (2003) 111 Cal.App.4th 102, 133 (Beaumont).) Moreover, the

California Supreme Court has instructed that “ ‘[r]escission upon failure of consideration

includes cases where there is a breach [of contract] (so that rescission is a mode of

obtaining restitutionary damages as an alternative to compensatory damages) . . .’ ”

(Runyan v. Pacific Air Industries, Inc. (1970) 2 Cal.3d 304, 317, fn. 16 (Runyan).) Thus,

“[i]n an appropriate contract action, rescission may be followed by restitution. (Civ.

Code, § 1692 . . . .)”9 (Beaumont, supra, at p. 133.)

The decision in Arthur L. Sachs, Inc. v. City of Oceanside (1984) 151 Cal.App.3d

315 (Sachs), is instructive regarding government immunity for claims of rescission and

9

Civil Code section 1692 provides in part: “When a contract has been rescinded

in whole or in part, any party to the contract may seek relief based upon such rescission

by (a) bringing an action to recover any money or thing owing to him by any other party

to the contract as a consequence of such rescission or for any other relief to which he may

be entitled under the circumstances or (b) asserting such rescission by way of defense or

cross-complaint.”

18

restitution. In that case, the plaintiff filed a complaint seeking rescission of a real estate

purchase agreement with the Oceanside Unified School District on the basis of fraud.

(Id. at p. 319.) The Sachs court rejected the school district’s contention that it was

immune from liability for the alleged fraud, noting that the complaint’s prayer sought

rescission and restitution. (Id. at pp. 322-323.) The court determined that “[t]hese

pleadings, on their face, present a cause of action based on contract” and pursuant to

section 814 the school district was not immune. (Sachs, supra, at p. 323.)

Berg & Berg’s cause of action for rescission/restitution is similarly based on

contract, since Berg & Berg asserted in the complaint that the 2004 and 2006 funding and

reimbursement agreements must be rescinded due to mistake and failure of consideration,

and sought restitution of the funds paid pursuant to the agreements in “an amount up to

$8 million.” Therefore, Berg’s cause of action for rescission/restitution is not barred by

the government immunity provided by section 815.

City relies on the decision in Janis, supra, 68 Cal.App.4th 824 for a contrary

result, but that decision does not support City’s argument that Berg & Berg’s claims are

based on quasi-contract. In Janis, the appellate court stated: “Whether a governmental

tort immunity applies does not depend on the form of the pleading, or relief sought.

Instead, we examine the nature of the right sued upon; if based on a breach of promise it

is contractual; if based on a noncontractual duty it is tortious. [Citation.]” (Id. at p. 830.)

The claim in Janis involved the plaintiff’s allegation that the California State

Lottery had misled Keno players regarding the legality of the Keno game. (Janis, supra,

68 Cal.App.4th at p. 830.) The Janis court ruled that the plaintiff had made a fraud

claim, not a breach of contract claim, and therefore the California State Lottery was

immune from liability. (Id. at pp. 830-831.) The decision in Janis is therefore

distinguishable from the present case, in which it is clear that Berg & Berg’s claims are

based on the alleged breach of two contracts with City: the 2004 and 2006 funding and

reimbursement agreements.

19

City’s reliance on the decision in Katsura v. City of San Benaventura (2007)

155 Cal.App.4th 104 (Katsura) is also unhelpful. In Katsura, the plaintiff sought

payment for work as an engineering consultant that was not authorized by his contract

with the defendant city. (Id. at pp. 106-107.) The Katsura court ruled that the plaintiff

could not obtain recovery under a quasi-contract theory because a city is not liable for

agreements that do not comply with the applicable municipal code provisions. (Id. at

pp. 109-110.) In contrast, in the present case there was no showing that the 2004 and

2006 funding agreements constituted quasi-contracts because the agreements did not

comply with the applicable municipal code provisions.

As to the common count for money had and received, our Supreme Court has

explained that “ ‘[t]he common count is a general pleading which seeks recovery of

money without specifying the nature of the claim.’ ” (Title Ins. Co. v. State Bd. of

Equalization (1992) 4 Cal.4th 715, 731.) “ ‘If money alone has been transferred by the

rescinding party, upon the rescission the law implies a promise to return it, which

becomes the basis for a common-law action of money had and received. [Citations.]’ ”

(Philpott v. Superior Court (1934) 1 Cal.2d 512, 524-525 (Philpott); see also Rutherford

Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 230 [action on express

contract for money had and received].) Since in the present case the common count for

money had and received is based on contract, as is the cause of action for

rescission/restitution, the common count for money had and received is not barred by the

governmental tort immunity provided by section 815.

B. Damages Waiver

Having determined that government tort immunity provided by section 815 did not

bar Berg & Berg’s causes of action for rescission/restitution and money had and received,

we next consider City’s contention that the trial court improperly awarded damages

despite Berg & Berg’s waiver of damages in the 2004 and 2006 funding and

reimbursement agreements.

20

Regarding damages, section 12.A of the 2004 funding and reimbursement

agreement provides in part that “in no event shall CITY be liable in damages for any

breach or violation of this AGREEMENT. Nothing in this SECTION shall preclude

PARTICIPATING PROPERTY OWNERS from enforcing their rights to any sums

CITY is obligated to return to PARTICIPATING PROPERTY OWNERS under this

AGREEMENT.” The damages clause in section 12.A of the 2006 funding and

reimbursement agreement is identical to the damages clause in the 2004 funding and

reimbursement.

According to City, the trial court’s September 8, 2011 order granting City’s

motion for summary adjudication of the cause of action for declaratory relief determined

that “ ‘[s]ection 12.A is a proper contractual waiver.’ ” The order states: “The seventh

cause of action for declaratory relief seeks a declaration that section 12.A of the

Reimbursement Agreements is illegal and unenforceable under Civil Code section 1668

as an unlawful exculpatory clause. . . . Defendants satisfy their burden of establishing no

triable issue, as: (1) [Civil Code] section 1668[10] does not apply to section 12.A of the

Reimbursement Agreement; and (2) section 12.A is a proper contractual waiver.

[Citation.]” City therefore contends that the trial court erred by “permitt[ing] the jury to

determine monetary damages as to each of the four causes of action: breach of contract,

money had and received, rescission/restitution, and promissory estoppel.”

Berg & Berg responds that it sought restitution of the funds that the participating

property owners had paid City pursuant the 2004 and 2006 funding and reimbursement

agreements, not damages, and therefore the damages waiver in section 12 of the

agreements is inapplicable and restitution was properly awarded by the jury.

10

Civil Code section 1668 provides: “All contracts which have for their object,

directly or indirectly, to exempt anyone from responsibility for his own fraud, or willful

injury to the person or property of another, or violation of law, whether willful or

negligent, are against the policy of the law.”

21

Additionally, Berg & Berg argues that the remedy of restitution is different than an award

of money damages.

The general rule is that “[w]ith respect to claims for breach of contract, limitation

of liability clauses are enforceable unless they are unconscionable, that is, the improper

result of unequal bargaining power or contrary to public policy. [Citation.]” (Food

Safety Net Services v. Eco Safe Systems USA, Inc. (2012) 209 Cal.App.4th 1118, 1126.)

Here, the damages waiver in section 12.A of the 2004 and 2006 funding and

reimbursement agreements expressly provides that the waiver limits City’s liability for

damages arising from breach of contract, not rescission, since it states: “in no event shall

CITY be liable in damages for any breach or violation of this AGREEMENT.”

An award of compensatory damages for breach of contract is a different remedy

than restitution of consideration. Civil Code section 1692 provides that where a contract

has been rescinded, restitution may include recovery of the consideration paid by the

plaintiff: “The aggrieved party shall be awarded complete relief, including restitution of

benefits, if any, conferred by him as a result of the transaction and any consequential

damages to which he is entitled; but such relief shall not include duplicate or inconsistent

items of recovery.” Thus, “[r]escission is intended to restore the parties as nearly as

possible to their former positions and ‘ “to bring about substantial justice by adjusting the

equities between the parties” despite the fact that “the status quo cannot be exactly

reproduced.” ’ [Citations.]” (Sharabianlou v. Karp (2010) 181 Cal.App.4th 1133, 1144.)

In other words, as our Supreme Court has stated: “The award given in an action

for damages compensates the party not in default for the loss of his [or her]

‘expectational interest’—the benefit of his [or her] bargain which full performance would

have brought. [Citation.] Relief given in rescission cases—restitution and in some cases

consequential damages—puts the rescinding party in the status quo ante, returning him

[or her] to his [or her] economic position before he [or she] entered the contract.”

(Runyan, supra, 2 Cal.3d at p. 316, fn. 15.)

22

In the present case, the trial court’s statement of decision indicates that the court

entered judgment in the amount of $683,314.20 based upon the court’s ruling that the

plaintiffs were entitled to restitution of consideration as a remedy for rescission of the

funding and reimbursement agreements. The court stated in its statement of decision:

“The Court believes the jury found that there was a failure of consideration in that the

City did not deliver what the developers were paying for, i.e., an expeditious process.

The Court is satisfied that the evidence supports Civil Code § 1689(b)(2), (3) and (4)

grounds for rescission. [¶] Although rescission is an equitable remedy, and the Court

may fashion a judgment that meets equitable requirements, up to this point, the Court has

received no evidence or argument which would suggest that anything other than a money

judgment is sought or appropriate. . . . [¶] . . . [¶] The Court finds that the plaintiffs are

entitled to rescission and to recover judgment against the City of San Jose in the amount

of $6,083,173.00.” (Fns. omitted.)

In addition, the record reflects that the amount of $6,083,173 was awarded as

restitution by the trial court based upon the jury’s findings on the cause of action for

rescission/restitution. In special verdict form No. 3 on rescission/restitution, the jurors

answered the following questions:

“1. Did Yerba Buena Opco and Defendant the City of San Jose (‘Defendant’)

enter into Funding Agreements? [Yes]

“If your answer to question 1 is yes, then answer question 2. [¶] . . . [¶]

“2. Did Yerba Buena Opco pay money in reliance upon the Funding Agreements?

“[Yes]

“If your answer to question 2 is yes, then answer question 3. [¶] . . . [¶]

“3. Did Yerba Buena Opco waive its right to have the City of San Jose

expeditiously process the Funding Agreement documents?

“[No]

23

“If your answer to any part of question 3 is yes, then answer question 4.

[¶] . . . [¶]

“4. What amount should be returned to Berg? $[6,083.173.00].” (Italics added.)

The trial court therefore entered judgment in the amount of $6,083,173 as

restitution of consideration, based upon the jury’s finding that $6,083,173 should be

returned to the participating property owners from the funds that they had paid City as

consideration for the 2004 and 2006 funding and reimbursement agreements. We

therefore determine that the damages waiver in section 12.A of the 2004 and 2006

funding and reimbursement agreements did not bar Berg & Berg from recovering the

consideration it had paid City as a restitutionary remedy for rescission of the agreements.

C. Inconsistent Rulings

City contends that the trial court erred by making inconsistent rulings as to

whether the cause of action for rescission/restitution was legal or equitable. According to

City, “[i]f the restitution cause of action were in equity, the Court should not have

allowed the jury to determine the claim. If it was at law, the plaintiff waived the right to

damages . . . .”

Berg & Berg rejects City’s contention, asserting that “the [rescission] issue was

properly submitted to the jury as a question grounded in law and the jury awarded Berg

restitution. At City’s request, the court then reconsidered the rescission claim as an

equitable one and, guided by principles of deference, reached the same conclusion as the

jury.” Berg & Berg further argues that City has failed to show prejudice from the

allegedly inconsistent rulings.

Regarding the right to a jury trial, the California Supreme Court has stated: “The

right to a jury trial is guaranteed by our Constitution. (Cal. Const., art. I, § 16.) . . . As a

general proposition, ‘[T]he jury trial is a matter of right in a civil action at law, but not in

equity.’ [Citations.] [¶] . . . ‘ “If the action has to deal with ordinary common-law

rights cognizable in courts of law, it is to that extent an action at law. In determining

24

whether the action was one triable by a jury at common law, the court is not bound by the

form of the action but rather by the nature of the rights involved and the facts of the

particular case—the gist of the action. A jury trial must be granted where the gist of the

action is legal, where the action is in reality cognizable at law.” ’ [Citation.] On the

other hand, if the action is essentially one in equity and the relief sought ‘depends upon

the application of equitable doctrines,’ the parties are not entitled to a jury trial.

[Citations.]” (C & K Engineering Contractors v. Amber Steel Co. (1978) 23 Cal.3d 1, 8-

9.)

Appellate courts have variously held that a cause of action for rescission is legal or

equitable. Some courts have simply stated that an action for rescission is equitable. (See,

e.g., Nelson v. Pearson Ford Co. (2010) 186 Cal.App.4th 983, 1018; Padula v. Superior

Court (1965) 235 Cal.App.2d 567, 570.) In Nmsbpcsldhb v. County of Fresno (2007)

152 Cal.App.4th 954, the court more specifically determined that a rescission action that

seeks recovery of something other than the consideration paid is an equitable action and

in such cases the plaintiff is not entitled to a jury. (Id. at pp. 956, 963.)

However, our Supreme Court noted in Runyan that the Law Revision Commission

had reported, with respect to the addition of section 1692 to the Civil Code in 1961, that

under the new law “ ‘all such actions will be to enforce a rescission, the right of the

parties to a jury and the court in which the action must be brought will be determined by

the nature of the substantive relief requested and not by the form of the complaint. For

example, if a bare money judgment is sought, a justice court will have jurisdiction in

appropriate cases, and the plaintiff may not convert the action into an equity action and

thus deprive the justice court of jurisdiction merely by a prayer for rescission.’ ”

(Runyan, supra, 2 Cal.3d at p. 313; see also Paularena v. Superior Court (1965) 231

Cal.App.2d 906, 914 [where gist of action for rescission of a contract is the recovery of a

money judgment, the action is legal and the plaintiffs are entitled to a jury trial];

Lectrodryer v. SeoulBank (2000) 77 Cal.App.4th 723, 728 [same].)

25

However, we need not decide whether the trial court erred in determining that

Berg & Berg was entitled to a jury trial on the cause of action for rescission of the 2004

and 2006 funding and reimbursement agreements, since we agree with Berg & Berg that

City has not made the requisite showing of prejudice.

“The erroneous grant of a jury trial or the improper submission of an issue to the

jury is nothing more than a nonconstitutional procedural error.” (Beasley v. Wells Fargo

Bank (1991) 235 Cal.App.3d 1383, 1396.) A judgment cannot be set aside for a

procedural error “unless the error resulted in a miscarriage of justice.” (Cassim v.

Allstate Ins. Co. (2004) 33 Cal.4th 780, 801 (Cassim).) A miscarriage of justice occurs

when the error was prejudicial, meaning that “ ‘it is reasonably probable that a result

more favorable to the appealing party would have been reached in the absence of the

error.’ [Citation.]” (Id. at p. 800.)

City therefore had the burden of showing that the trial court’s submission of the

rescission cause of action to the jury was prejudicial because City would have received a

more favorable verdict from the trial court on the rescission cause of action. (Cassim,

supra, 33 Cal.4th at p. 802.) City has not attempted to meet this burden. In any event,

we see no potential prejudice to City as result of the procedure followed by the trial court.

The decision in Hoopes, supra, 168 Cal.App.4th 146 is instructive on this point.

In Hoopes, the plaintiff brought an action against his landlord and another tenant

regarding parking rights. (Id. at p. 150.) The defendants brought a motion to bifurcate

the trial and hold a court trial first on the defendants’ equitable estoppel defense. The

trial court denied the motion and held a jury trial first on the legal claims of breach of

contract, trespass and fraud. After the jury found in the plaintiff’s favor, the trial court

entered judgment for the defendants on their equitable estoppel defense, which the court

determined by rejecting the jury’s findings of fact and making its own evaluation of the

evidence. (Id. at p. 150.)

26

The plaintiff in Hoopes appealed and appellate court determined that “jury trial on

the breach of contract and other claims was a matter of right and the issues of act were

properly submitted to the jury [Citation.]” (Hoopes, supra, 168 Cal.App.4th at p. 160.)

However, the appellate court also determined that the trial court “erred in disregarding

the jury’s verdict when fashioning equitable relief.” (Id. at p. 159.) The appellate court

explained that when “ ‘the legal issues are tried first, the judge cannot ignore the jury’s

verdict and grant equitable relief inconsistent with the jury’s findings.’ ” (Ibid.)

In this case, as in Hoopes, the trial court properly submitted issues of fact to the

jury on the breach of contract cause of action. (Hoopes, supra, 168 Cal.App.4th 160; see

Raedeke v. Gibraltar Sav. & Loan Assn. (1974) 10 Cal.3d 665, 671 [breach of contract is

an action at law in which a right to jury trial ordinarily exists].) Issues of fact were also

properly submitted to the jury on the common count for money had and received. (See

Philpott, supra, 1 Cal.2d at pp. 524-525 [common count for money had and received is

an action at law].)

In the special verdict on breach of contract, the jury found that City had failed

“to do something the contract required it to do.” In the special verdict on money had and

received, the jury found that City had received money “that was intended to be used for

the benefit of the Participating Property Owners” and had not “returned the money paid

by the Participating Property Owners and not used for their benefit.” The jurors also

found in their special verdict on money had and received that the amount of money owed

to Berg & Berg was $6,083,173.

The trial court, having determined that rescission was an action in equity, did not

err in considering itself bound by the jury’s findings on the two legal causes of action.

(See Hoopes, supra, 168 Cal.App.4th at p. 159.) The trial court then determined that the

equitable remedy for rescission was a money judgment in the amount of $6,083,173,

which was the amount that the jury had found in its special verdict should be returned to

Berg & Berg.

27

In light of the trial court’s appropriate submission of the legal causes of action for

breach of contract and money had and received to the jury, the binding effect of the jury’s

factual findings (Hoopes, supra, 168 Cal.App.4th at pp. 159-160), and the trial court’s

rulings in conformity with the jury’s findings, we do not believe that City can show that it

would have received a more favorable verdict on the rescission cause of action absent the

jury’s findings on rescission. We therefore find no merit in City’s contention that the

trial court committed reversible error by making inconsistent rulings as to whether the

cause of action for rescission/restitution was equitable or legal.

We next consider the issue of whether the trial court erred in denying City’s

motion for new trial.

D. City’s Motion for New Trial

City filed a motion for new trial “as to the issue of Carl Berg’s alleged standing

to assert the rights of Yerba Buena Opco and/or its individual members or, in the

alternative, to amend its judgment to recognize only the claim of Carl Berg.” City argued

that a new trial was warranted under Code of Civil Procedure section 657 because the

trial court had made an error in law in determining that Berg & Berg could assert the

claims of other participating property owners under the doctrine of substantial

compliance.

City relied on a recent California Supreme Court decision, DiCampli-Mintz, supra,

55 Cal.4th 983 for the proposition that substantial compliance did not excuse strict

compliance with the statutory government claims filing requirements. Since none of the

other participating property owners had ever filed a government claim, City contended

that “they had nothing to assign to Berg & Berg,” which could only recover its

proportionate share of the funds provided to City under the 2004 and 2006 funding and

reimbursement agreements.

The trial court determined that the decision in DiCampli-Mintz was inapplicable

and denied the motion during posttrial proceedings on September 6, 2013. In so ruling,

28

the trial court stated: “I’ll deny your motion for new trial. I’m denying it primarily

because I think your best argument is the new case [DiCampli-Mintz], but it seemed to

me the new case focused only on that one Government Code provision, [section] 915.

And while the language certainly can be interpreted to suggest that the Supreme Court

is . . . going to take a more strict approach to government tort claims, I don’t see that

clearly stated. I think there is an implication there that at least I need the Supreme Court

to be more explicit and say this is where we’re going generally.”

1. The Parties’ Contentions

On appeal, City argues that the trial court erred in denying City’s motion for new

trial because under DiCampli-Mintz strict compliance with the government claims

statutes is required, including the requirement that all claimants be identified. Since

neither Yerba Buena Opco nor any other participating property owner filed a government

claim, City maintains that this action is limited to Berg & Berg’s own claim and, contrary

to the trial court’s rulings, the doctrine of substantial compliance does not apply and Berg

& Berg’s claim cannot be expanded to include the claims of the other owners.

City emphasizes that the evidence shows that in January 3, 2008, Carl Berg

presented a government claim on behalf of Berg & Berg only, and there was no attempt

to assign the other property owners’ claims to Berg & Berg until two years later, in 2010.

City also contends that the trial court’s error of law in allowing Berg & Berg to assert the

claims of other participating property owners was prejudicial, because otherwise the

plaintiff’s trial evidence on liability would have been limited to Carl Berg’s testimony

and the verdict could not have exceeded the amount that Berg & Berg paid to City, which

was $1,892,000.

Berg & Berg responds that the trial court properly rejected City’s argument on five

different occasions, including the order denying City’s motion for new trial, because Berg

& Berg was entitled to pursue its own claim plus the claims that had been assigned to it

pursuant to section 14 of the 2004 and 2006 funding and reimbursement agreements.

29

According to Berg & Berg, the contents of its claim substantially complied with

section 91011 and thereby provided City with sufficient information to investigate the

claim and discover that Berg & Berg was acting in a representative capacity as the

assignee to recover all of the money paid to City pursuant to the funding and

reimbursement agreements. Berg & Berg further argues that since substantial evidence

supports the jury’s findings that Yerba Buena Opco had assigned its interest to Berg &

Berg, the alleged trial court error in allowing Berg & Berg to assert the claims of Yerba

Buena Opco was not prejudicial.

We will begin our evaluation of the parties’ contentions with the applicable

standard of review.

2. Standard of Review

“The authority of a trial court in this state to grant a new trial is established and

circumscribed by statute. [Citation.] [Code of Civil Procedure] Section 657 sets out

seven grounds for such a motion: (1) ‘Irregularity in the proceedings’; (2) ‘Misconduct of

the jury’; (3) ‘Accident or surprise’; (4) ‘Newly discovered evidence’; (5) ‘Excessive or

inadequate damages’; (6) ‘Insufficiency of the evidence [. . . or the verdict . . . is against

11

Section 910 provides: “A claim shall be presented by the claimant or by a

person acting on his or her behalf and shall show all of the following: [¶] (a) The name

and post office address of the claimant. [¶] (b) The post office address to which the

person presenting the claim desires notices to be sent. [¶] (c) The date, place and other

circumstances of the occurrence or transaction which gave rise to the claim asserted. [¶]

(d) A general description of the indebtedness, obligation, injury, damage or loss incurred

so far as it may be known at the time of presentation of the claim. [¶] (e) The name or

names of the public employee or employees causing the injury, damage, or loss, if

known. [¶] (f) The amount claimed if it totals less than ten thousand dollars ($10,000) as

of the date of presentation of the claim, including the estimated amount of any

prospective injury, damage, or loss, insofar as it may be known at the time of the

presentation of the claim, together with the basis of computation of the amount claimed.

If the amount claimed exceeds ten thousand dollars ($10,000), no dollar amount shall be

included in the claim. However, it shall indicate whether the claim would be a limited

civil case.”

30

the law]’; and (7) ‘Error in law [occurring at the trial and excepted to by the party making

the application].’ ” (Oakland Raiders v. National Football League (2007) 41 Cal.4th

624, 633.)

An order denying a motion for new trial “may be reviewed on appeal from the

underlying judgment. (Code Civ. Proc., § 906; [citation].)” (Walker v. Los Angeles

County Metropolitan Transportation Authority (2005) 35 Cal.4th 15, 18.) We apply the

standard of review stated by the California Supreme Court in City of Los Angeles v.

Decker (1977) 18 Cal.3d 860: “We are mindful of the fact that a trial judge is accorded a

wide discretion in ruling on a motion for new trial and that the exercise of this discretion

is given great deference on appeal. [Citations.] However, we are also mindful of the rule

that on an appeal from the judgment it is our duty to review all rulings and proceedings

involving the merits or affecting the judgment as substantially affecting the rights of a

party (see Code Civ. Proc., § 906), including an order denying a new trial. In our review

of such order denying a new trial, as distinguished from an order granting a new trial, we

must fulfill our obligation of reviewing the entire record, including the evidence, so as to

make an independent determination as to whether the error was prejudicial. [Citations.]”

(City of Los Angeles v. Decker, supra, at pp. 871-872.)

Since City contends that the trial court should have granted its motion for new trial

due to an error of law occurring at the trial to which City objected, our review of that

legal issue is de novo. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 860

(Aguilar).) “There is no discretion to adopt a reading, or make an application, of

decisional law that is inconsistent with the law itself. [Citation.] Any such reading or

application must necessarily be deemed an abuse. [Citation.]” (Ibid.) Thus, “ ‘a

discretionary order based on an application of improper criteria or incorrect legal

assumptions is not an exercise of informed discretion and is subject to reversal.

[Citation.]’ ” (David v. Hernandez (2014) 226 Cal.App.4th 578, 592.)

31

Applying these standards of review, we will independently determine whether the

trial court made an error of law at the trial by allowing Berg & Berg to assert the claims

of other participating property owners against City arising from the 2004 and 2006

funding and reimbursement agreements, although only Berg & Berg had filed a

government claim with City, and whether the trial court therefore abused its discretion in

denying City’s motion for new trial. We will begin our independent review with a brief

overview of the government claim filing requirements.

3. Government Claim Filing Requirements

In DiCampli-Mintz, the California Supreme Court outlined the filing requirements

set forth in the Government Claims Act: “Suits for money or damages filed against a

public entity are regulated by statutes contained in division 3.6 of the Government Code,

commonly referred to as the Government Claims Act. We have previously noted that

‘[s]ection 905 requires the presentation of “all claims for money or damages against local

public entities,” subject to exceptions not relevant here. Claims for personal injury and

property damage must be presented within six months after accrual; all other claims must

be presented within a year. (§ 911.2.) “[N]o suit for money or damages may be brought

against a public entity on a cause of action for which a claim is required to be

presented . . . until a written claim therefor has been presented to the public entity and has

been acted upon . . . or has been deemed to have been rejected . . . .” (§ 945.4.) “Thus,

under these statutes, failure to timely present a claim for money or damages to a public

entity bars a plaintiff from filing a lawsuit against that entity.” [Citation.]’ [Citation.]”

(DiCampli-Mintz, supra, 55 Cal.4th at pp. 989-990.)

The DiCampli-Mintz decision also addressed the purpose of the Government

Claims Act: “ ‘[T]he purpose of the claims statutes is not to prevent surprise, but “to

provide the public entity sufficient information to enable it to adequately investigate

claims and to settle them, if appropriate, without the expense of litigation. [Citations.] It

is well-settled that claims statutes must be satisfied even in face of the public entity’s

32

actual knowledge of the circumstances surrounding the claim.” [Citation.] The claims

statutes also “enable the public entity to engage in fiscal planning for potential liabilities

and to avoid similar liabilities in the future.” [Citations.]’ [¶] Moreover, the intent of the

Government Claims Act is ‘not to expand the rights of plaintiffs against government

entities. Rather, the intent of the act is to confine potential governmental liability to

rigidly delineated circumstances.’ [Citations.]” (DiCampli-Mintz, supra, 55 Cal.4th at

p. 991.)

4. Analysis

We first address Berg & Berg’s key contention that it had standing to seek

recovery of the funds paid by the other participating property owners under the 2004 and

2006 funding agreements as their assignee. We will then address the issue of whether the

trial court properly determined under the doctrine of substantial compliance that Berg &

Berg’s filing of its own government claim was sufficient to allow Berg & Berg to assert

the claims of other participating property owners.

Assignment

Berg & Berg contends that it was entitled to seek recovery of all of the funds paid

to City by the other participating property owners as the assignee of their rights of action

against City for reimbursement of funds paid under the 2004 and 2006 funding and

reimbursement agreements. Having carefully reviewed the trial evidence, we find no

merit in this contention since we determine that Berg & Berg did not prove that it had

been assigned the government claims of the other participating property owners against

City at the time Berg & Berg filed its government claim on January 3, 2008.

In general, “[a]n assignment carries with it all the rights of the assignor.

[Citations.] ‘The assignment merely transfers the interest of the assignor. The assignee

“stands in the shoes” of the assignor, taking his [or her] rights and remedies, subject to

any defenses which the obligor has against the assignor prior to notice of the assignment.’

[Citation.] Once a claim has been assigned, the assignee is the owner and has the right to

33

sue on it. [Citations.]” (Johnson v. County of Fresno (2003) 111 Cal.App.4th 1087,

1096, italics omitted.)

The California Supreme Court has instructed that “[t]he burden of proving an

assignment falls upon the party asserting rights thereunder [citations]. In an action by an

assignee to enforce an assigned right, the evidence must not only be sufficient to establish

the fact of assignment when that fact is in issue [citation] but the measure of sufficiency

requires that the evidence of assignment be clear and positive to protect an obligor from

any further claim by the primary obligee [citation].” (Cockerell v. Title Ins. & Trust Co.

(1954) 42 Cal.2d 284, 292 (Cockerell).)

In this case, the trial evidence relating to assignment was as follows. Section 14

of the 2004 funding and reimbursement agreement states: “A. PARTICIPATING

PROPERTY OWNERS may, with the prior written consent of CITY, assign its rights and

obligations under this AGREEMENT to another financially solvent entity that is clearly

capable of and has the desire to fulfill the obligations of PARTICIPATING PROPERTY

OWNERS under this AGREEMENT. Prior to the effective date of any such assignment,

PARTICIPATING PROPERTY OWNERS shall deliver or cause to be delivered to CITY

an agreement duly executed by the proposed assignee under which the assignee agrees to

the satisfaction of CITY to assume, be bound by and timely fulfill all of

PARTICIPATING PROPERTY OWNERS’ obligations under this AGREEMENT. [¶]

B. The above notwithstanding, CITY agrees that its consent shall not be required in the

event that this AGREEMENT is assigned to one or more of the following: [¶] Berg &

Berg Enterprises, LLC. . . ” (Italics added.)

The 2006 funding and reimbursement agreement included an assignment clause at

section 14 that was identical to the assignment clause in section 14 of the 2004 funding

and reimbursement agreement. Both section 14 assignment clauses provided only that

the participating property owners’ “may” assign their rights and obligations under the

funding and reimbursement agreements to Berg & Berg.

34

Thus, there was no language in either the 2004 or the 2006 funding and

reimbursement agreement that indicated that the participating property owners had

actually assigned any rights and obligations to Berg & Berg.

After the 2006 funding and reimbursement agreement expired, Carl Berg sent a

letter to Dunn, care of “Yerba Buena Opco, Inc.” dated August 8, 2007. Berg & Berg has

contended that the August 8, 2007 letter constitutes an assignment. We disagree.

The August 8, 2007 letter states in its entirety, “Pursuant to Section 14.B of the

Funding and Reimbursement Agreement by and between the City of San Jose and Certain

Evergreen Property Owners Regarding the Evergreen East Hills Vision Strategy and

Related Environmental Documents, dated June 27, 2006 (‘Agreement’), I request that

Yerba Buena Opco, Inc. name Berg & Berg Enterprises, LLC as one of the

‘PARTICPATING PROPERTY OWNERS’ as defined by the Agreement.” Dunn signed

the paragraph under Berg’s signature on the letter, which states: “Yerba Buena Opco,

Inc., hereby names and recognizes Berg & Berg Enterprises, LLC as a

‘PARTICIPATING PROPERTY OWNER’ as defined by the Agreement.”

Having reviewed the August 8, 2007 letter, we determine that the letter does not

contain any language indicating an effective assignment of rights. “While no particular

form of assignment is necessary, the assignment, to be effectual, must be a manifestation

to another person by the owner of the right indicating his [or her] intention to transfer,

without further action or manifestation of intention, the right to such other person, or to

a third person [citations].” (Cockerell, supra, 42 Cal.2d at p. 291.) Thus, “ ‘[i]t is

sufficient if the assignor has, in some fashion, manifested an intention to make a present

transfer of his rights to the assignee.’ [Citations.]” (Amalgamated Transit Union, Local

1756, AFL-CIO v. Superior Court (2009) 46 Cal.4th 993, 1002 (Amalgamated Transit).)

In addition, “the assignment must describe the subject matter of the assignment

with sufficient particularity to identify the rights assigned. [Citation.]” (Mission Valley

East, Inc. v. County of Kern (1981) 120 Cal.App.3d 89, 96-97; see also Cobb v.

35

San Francisco Residential Rent Stabilization & Arbitration Bd. (2002) 98 Cal.App.4th

345, 352-353 [essential that owner of right manifest an intention to transfer the right].)

Here, the August 8, 2007 letter requests only that Berg & Berg be named as a

participating property owner under the 2006 funding and reimbursement agreement, and

includes Yerba Buena Opco’s agreement to the request. Dunn signed the paragraph

under Berg’s signature on the letter, which states that Yerba Buena Opco names and

recognizes Berg & Berg as a participating property owner as defined in the funding and

reimbursement agreements. Thus, there is no language in the August 8, 2007 letter that

describes the subject matter of an assignment or manifests an intention by an owner of a

right to transfer that right to another person or entity. More specifically, there is no

language in the August 8, 2007 letter indicating that Yerba Bueno Opco or any other

participating property owner intended to transfer their rights and obligations under the

funding and reimbursement agreements, including their government claims, to Berg &

Berg. We therefore determine that the August 8, 2007 letter does not constitute an

assignment.

At oral argument, Berg & Berg argued that the assignment of the other

participating property owners’ rights and obligations under the funding and

reimbursement agreements was shown by reading the August 8, 2007 letter together with

the section 14 assignment clause. We are not convinced by this argument. Even when

the letter and the assignment clause are read together, there is no language that could be

read to manifest an intention by Yerba Buena Opco or any other participating property

owner to make a present transfer of rights under the funding and reimbursement

agreements to Berg & Berg. (See Amalgamated Transit, supra, 46 Cal.4th at p. 1002.)

Thus, we determine that in this case the evidence of assignment was not “clear

and positive,” as our Supreme Court has required for an effective assignment. (See

Cockerell, supra, 42 Cal.2d. at p. 292.) To the contrary, the evidence shows that the

other participating property owners had not assigned their government claims or any

36

other rights under the funding and reimbursement agreements to Berg & Berg at the time

Berg & Berg filed its government claim against City on January 3, 2008, seeking

“[r]estitution in the amount of $1,892,917 for monies paid under Reimbursement

Agreement, so far as is known at this time.” More than two years later, Yerba Buena

Opco and Berg & Berg executed a document entitled “SUPPLEMENTAL

ASSIGNMENT” that was dated February 2010. The record reflects that the February

2010 “supplement assignment” was the first attempt to assign the other participating

property owners’ rights to Berg & Berg.

In pertinent part, the “supplemental assignment” states: “On August 8, 2007,

Yerba Buena and Berg & Berg entered into the Letter Agreement. [¶] . . . On

August 13, 2007, Berg & Berg filed a lawsuit against the City and the San Jose City

Council . . . [¶] NOW, THEREFORE, to supplement the Letter Agreement, Yerba

Buena and Berg & Berg agree as follows: [¶] AGREEMENT [¶] 1. Pursuant to

Section 14(B) of the Funding Agreement, Yerba Buena assigns to Berg & Berg any and

all individual claims held by the Participating Property Owners (as that term is defined

in the Funding Agreement) that seek reimbursement for monies paid to the City pursuant

to the Funding Agreement.” (Italics added.)

Dunn testified that the “supplemental assignment” “was a clarifying document to a

previous assignment that rights were assigned under the Funding Agreement to Berg &

Berg.” He also testified that “the rights of all the other property owners” were assigned

to Berg & Berg. Carl Berg agreed in his testimony that Berg & Berg had been

“authorized or assigned the rights to bring this lawsuit on behalf of all the property

owners.”

However, it was undisputed that the other participating property owners never

filed any government claims with City arising from the 2004 and 2006 funding and

reimbursement agreements. Consistent with the purpose of government claims statutes,

the general rule is that “a claimant must file his or her own claim.” (California

37

Restaurant Management Systems v. City of San Diego (2011) 195 Cal.App.4th 1581,

1592; see also Castaneda v. Department of Corrections and Rehabilitation (2013) 212

Cal.App.4th 1051, 1062 (Castaneda) [same].) Thus, the “filing of a claim by one party

with respect to a particular prospective cause against a public entity does not serve to

relieve another prospective party from so doing. [Citations.]” (Roberts v. State of

California (1974) 39 Cal.App.3d 844, 848.) Absent a timely government claim, a

plaintiff is barred from filing a lawsuit against a public entity. (DiCampli-Mintz, supra,

55 Cal.4th at pp. 989-990.)

Since the other participating property owners never filed any government claims

against City arising from the 2004 and 2006 funding and reimbursement agreements, they

did not have any rights to government claims that could be assigned to Berg & Berg by

the 2010 “supplemental assignment.” The special verdict on assignment, in which the

jurors found that Yerba Buena Opco had transferred 100 percent of its “interest in the

contract” to Berg & Berg, does not compel a different conclusion. The special verdict

did not include a finding regarding the date of the assignment or a finding that the other

participating property owners had filed government claims that could be assigned to Berg

& Berg.

Having determined that Berg & Berg could not assert the government claims of

the other participating property owners as their assignee, we turn to the issue of

substantial compliance.

Substantial Compliance Doctrine

As we have noted, Berg & Berg filed a government claim with City on January 3,

2008. The government claim stated that the name of the claimant was “Carl E. Berg, on

behalf of Berg & Berg Enterprises, LLC” and the dates of the incident or occurrence

causing the claim were May 15, 2007, and June 26, 2007. Berg & Berg further stated in

its government claim that it was a party to the “ ‘Funding and Reimbursement

Agreement’ . . . last amended on June 27, 2006.” Its claimed loss was described as

38

“[r]estitution in the amount of $1,892,917 for monies paid under Reimbursement

Agreement, so far as is known at this time. Other damages to be determined.”

Berg & Berg contends that its government claim was in substantial compliance

with the statutory claims filing requirements, and therefore City was provided with

sufficient information to investigate the claim and discover that Berg & Berg was acting

in a representative capacity as the assignee to recover all of the money paid to City

pursuant to the 2004 and 2006 funding and reimbursement agreements. As we will

discuss, we find no merit in this contention.

“The doctrine of substantial compliance prevents the public entity from using the

claims statutes as ‘traps for the unwary’ when their underlying purposes have been met.

[Citation.] However, the substantial compliance doctrine has application only when there

is a defect in form but the statutory requirements have otherwise been met. [Citations.]

The doctrine has no application when . . . there has been a failure to comply with all of

the statutory tort claim requirements.” (Nguyen v. Los Angeles County Harbor/UCLA

Medical Center (1992) 8 Cal.App.4th 729, 732-733 (Nguyen).) In addition, “[w]here two

or more persons suffer separate and distinct injuries from the same act or omission, each

person must submit a claim, and one cannot rely on a claim presented by another.

[Citations.]” (Nelson v. County of Los Angeles (2003) 113 Cal.App.4th 783, 796-797.)

In Nguyen, the appellate court rejected the plaintiff parents’ argument that they

could rely on their daughter’s government claim. (Nguyen, supra, 8 Cal.App.4th at

p. 734.) The court determined that although the parents’ emotional distress cause of

action arose from the same transaction as their daughter’s medical malpractice cause of

action, the parents’ cause of action was properly subject to nonsuit due to their failure to

file a government claim because “the injuries allegedly suffered by the plaintiff parents

were separate and distinct from those suffered by their daughter.” (Ibid.; see also Pacific

Tel. & Tel. Co. v. County of Riverside (1980) 106 Cal.App.3d 183, 190-191 [widow

could not rely on subrogation claim filed by employer to recover workers’ compensation

39

benefits as substantial compliance with the claims filing requirement for her wrongful

death action]; Lewis v. City and County of San Francisco (1971) 21 Cal.App.3d 339, 341

[wrongful death claim filed by one heir did not excuse claims filing requirement for

another heir under doctrine of substantial compliance].)

In the present case, it is undisputed that none of the participating property owners

ever attempted to file a government claim with City arising from the 2004 and 2006

funding and reimbursement agreements. And, as we have discussed, the evidence shows

that the other participating property owners had not assigned their potential government

claims to Berg & Berg at the time Berg & Berg filed its government claim against City

on January 3, 2008. In the absence of any attempt to comply with the government claims

filing requirements, the doctrine of substantial compliance does not apply to the other

participating property owners’ potential government claims against City arising from the

2004 and 2006 funding and reimbursement agreements. (See Nguyen, supra, 8

Cal.App.4th at pp. 732-733.)

However, as also discussed in the Nguyen decision, a party need not file a separate

government claim where that party’s injuries are not separate and independent from the

injuries suffered by another party who has filed a timely government claim. (Nguyen,

supra, 8 Cal.App.4th at p. 734.) In other words, “[w]here the right of action is not

separate and independent, but rather identical and wholly derivative [citation], there is no

purpose to be served by requiring the filing of a second claim. [Citation.]” (Smith v.

Parks Manor (1987) 197 Cal.App.3d 872, 881 (Smith).)

In this case, we determine that the harm suffered by other participating property

owners—the loss of funds paid to City under the 2004 and 2006 reimbursement

agreements—was not identical to, nor wholly derivative of, Berg & Berg’s government

claim. Carl Berg testified that Berg & Berg’s proportionate share of the funds that the

participating property owners had paid City under the 2004 and 2006 funding and

reimbursement agreements was 23.5 percent. Since the other participating property

40

owners’ proportionate share of the funds paid to City was therefore 76.5 percent, their

right of action was not “equal to and limited by the right of action possessed” by Berg &

Berg. (Smith, supra, 197 Cal.App.3d at p. 881.) Consequently, the substantial

compliance doctrine does not apply to the restitution claims of the participating property

owners who failed to comply with the government claims filing statutes. (§ 910; see

Nguyen, supra, 8 Cal.App.4th at pp. 732-733.)

Berg & Berg relies on the decision in Lacy v. City of Monrovia (1974) 44

Cal.App.3d 152 (Lacy), but that decision is distinguishable. In Lacy, a father filed a

government claim arising from an incident involving police officers allegedly breaking

into the family home. (Id. at pp. 153-154.) The government claim expressly set forth the

damages that the father claimed for his wife and three of their children with their names

and the total amount claimed. (Id. at pp. 155-156.) The Lacy court found that a fourth

child’s cause of action was not barred although she was not named in her father’s

government claim, because it was clear that the father had presented a claim on behalf of

his wife and children, and the total amount of the claim was the same “whether it is all

included in the claim presented by Mr. Lacy on behalf of his wife and children or

presented separately in two claims.” (Id. at p. 156.) In contrast, in the present case Berg

& Berg’s government claim lacked any indication that the claim included restitution of

all funds paid to City by the other participating property owners in addition to Berg &

Berg’s share. (See Castaneda, supra, 212 Cal.App.4th at p. 1062.)

Another decision relied upon by Berg & Berg, White v. Moreno Valley Unified

School Dist. (1986) 181 Cal.App.3d 1024 (White) is similarly distinguishable. In White,

the appellate court concluded that the plaintiff’s government claim was sufficient to

support her action for recovery of her medical expenses, and therefore the trial court

committed prejudicial error in excluding the evidence of those medical expenses. (Id. at

p. 1034.) The court noted that the plaintiff’s government claim expressly stated that the

claim was for “[p]ersonal injuries to Claimant Yvonne White. Medical expenses incurred

41

by [her parents] Claimants Winford Bradshaw and Romona [sic] Bradshaw.” (Id. at p.

1027.) Berg & Berg’s government claim, in contrast, was silent as to the identity of any

other claimant.

Berg & Berg also argues that the decision in San Diego Unified Port Dist. v.

Superior Court (1988) 197 Cal.App.3d 843 (San Diego) supports its position. We

disagree. In San Diego, the issue was whether a workers’ compensation insurance carrier

who wanted to intervene in an injured employee’s personal injury action could rely on the

government claim filed by an injured worker in order to satisfy the government claims

filing requirement. (Id. at p. 845.) The appellate court determined that the insurance

carrier did not need to file its own government claim, because under Labor Code

section 3852 “[t]he carrier may not recover any damages in excess of those recoverable

by the employee. [Citation.]” (San Diego, supra, at p. 847.) Thus, the insurance

carrier’s claim for recovery of damages was identical to the injured employee’s damages

claim, unlike the potential claims of the other participating property owners for recovery

of funds paid to City that were not identical to Berg & Berg’s restitution claim.

For these reasons, we determine that the trial court made an error in law in ruling

that Berg & Berg could seek recovery of all funds paid to City by the other participating

property owners under the substantial compliance doctrine. Having previously

determined that Berg & Berg failed to prove that it was assigned the government claims

of the other participating property owners, we conclude that the trial court abused its

discretion in denying City’s motion for new trial.

We will therefore reverse the judgment and remand the matter with directions to

the trial court to (1) grant City’s motion for new trial; (2) conduct a new court trial

limited to the issue of the amount of restitution to be awarded to Berg & Berg based on

its proportionate share of the consideration paid by the participating property owners

under the 2004 and 2006 funding and reimbursement agreements; and (3) determine the

amount of prejudgment interest to be awarded. (See Runyan, supra, 2 Cal.3d at p. 316.)

42

Having concluded that the judgment should be reversed, we further conclude that

issue raised by City regarding prejudgment interest—whether the trial court erred in its

application of a prejudgment interest rate of 10 percent—is moot, and we express no

opinion on the issue.

IV. CROSS-APPEAL

In its cross-appeal, Berg & Berg contends that the trial court erred in granting

City’s motion for summary adjudication of the cause of action for violation of the equal

protection clause. Berg & Berg also challenges the trial court’s award of prejudgment

interest.

A. Equal Protection Claim

1. City’s Motion for Summary Adjudication

In its complaint, Berg & Berg included an equal protection cause of action based

on its allegations that defendants had approved the rezoning of several other properties to

allow residential uses during the period of 2004 through 2007, and in 2007 City Council

was also scheduled to consider the rezoning of additional properties for residential uses.

Berg & Berg asserted that “[t]he actions and inaction of Defendants in delaying the

processing of the developers’ development applications, while approving similar

applications of similarly-situated property owners within the City, were clearly arbitrary,

capricious and unreasonable, having no real or substantial relation to the public health,

safety, morals or general welfare, and deprived Berg and the developers of their civil

rights guaranteed by the Equal Protection Clause of the Fourteenth Amendment of the

United States Constitution, California Constitution . . . .”

City moved for summary adjudication of the equal protection cause of action on

the ground that the undisputed facts showed that the City Council’s decision to defer

conversion of land zoned campus industrial to the pending general plan update was based

on legitimate government purposes, including “the imbalance between housing and

employment” and “the long-term financial impacts to the City over the proposed

43

employment land conversions.” Berg & Berg opposed the motion, arguing that there

were triable issues of fact as to whether defendant had a rational basis for refusing to act

on Berg & Berg’s development applications while approving the conversion of other

properties from industrial to residential.

2. Trial Court Order

In its September 8, 2011 order, the trial court granted summary adjudication of the

equal protection cause of action. The court found that defendants had met their initial

burden to show that the City Council’s approval of other applications and the deferral of

Berg & Berg’s application was not wholly irrational. The court further found that Berg &

Berg had not demonstrated that triable issues of material fact existed because the

difference in defendants’ treatment of Berg & Berg was so unrelated to a legitimate

government purpose that it could only be concluded that the government’s actions were

irrational.

B. Standard of Review

The standard of review for an order granting a motion for summary judgment or

summary adjudication is de novo. (Aguilar, supra, 25 Cal.4th at p. 860.) The trial

court’s stated reasons are not binding on the reviewing court, “which reviews the trial

court’s ruling, not its rationale. [Citation.]” (Ramalingam v. Thompson (2007) 151

Cal.App.4th 491, 498.)

In performing our independent review, we apply the same three-step process as the

trial court. “Because summary judgment is defined by the material allegations in the

pleadings, we first look to the pleadings to identify the elements of the causes of action

for which relief is sought.” (Baptist v. Robinson (2006) 143 Cal.App.4th 151, 159

(Baptist).)

“We then examine the moving party’s motion, including the evidence offered in

support of the motion.” (Baptist, supra, 143 Cal.App.4th at p. 159.) A defendant moving

for summary judgment has the initial burden of showing that a cause of action lacks merit

44

because one or more elements of the cause of action cannot be established or there is a

complete defense to that cause of action. (Code Civ. Proc., § 437c, subd. (o); Aguilar,

supra, 25 Cal.4th at p. 850.)

If the defendant fails to make this initial showing, it is unnecessary to examine the

plaintiff’s opposing evidence and the motion must be denied. However, if the moving

papers make a prima facie showing that justifies a judgment in the defendant’s favor, the

burden shifts to the plaintiff to make a prima facie showing of the existence of a triable

issue of material fact. (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar, supra, 25 Cal.4th

at p. 849.)

In determining whether the parties have met their respective burdens, “the court

must ‘consider all of the evidence’ and ‘all’ of the ‘inferences’ reasonably drawn

therefrom [citations], and must view such evidence [citations] and such inferences

[citations], in the light most favorable to the opposing party.” (Aguilar, supra, 25 Cal.4th

at p. 843.) “There is a triable issue of material fact if, and only if, 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.” (Id. at p. 850, fn.

omitted.) Thus, a party “ ‘cannot avoid summary judgment by asserting facts based on

mere speculation and conjecture, but instead must produce admissible evidence raising a

triable issue of fact. [Citation.]’ [Citation.]” (Dollinger DeAnza Associates v. Chicago

Title Ins. Co. (2011) 199 Cal.App.4th 1132, 1144-1145.)

Keeping the standard of review in mind, we next consider the provisions of the

state and federal equal protection clauses.

C. Equal Protection Clause

The federal equal protection clause (U.S. Const., 14th Amend.) and the California

equal protection clause (Cal. Const., art. I, § 7, subd. (a)) both provide that all persons

similarly situated should be treated alike. (See Cleburne v. Cleburne Living Center, Inc.

(1985) 473 U.S. 432, 439.) “ ‘ “The concept of the equal protection of the laws compels

45

recognition of the proposition that persons similarly situated with respect to the legitimate

purpose of the law receive like treatment.” ’ [Citation.]” (Cooley v. Superior Court

(2002) 29 Cal.4th 228, 253.)

In Village of Willowbrook v. Olech (2000) 528 U.S. 562, the United States

Supreme Court ruled that an equal protection claim could be brought by a “ ‘class of

one,’ where the plaintiff alleges that she [or he] has been intentionally treated differently

from others similarly situated and that there is no rational basis for the difference in

treatment. [Citations.]” (Id. at p. 564.) The Supreme Court reasoned that the purpose of

the equal protection clause “ ‘ “is to secure every person within the State’s jurisdiction

against intentional and arbitrary discrimination, whether occasioned by express terms of a

statute or by its improper execution through duly constituted agents.” ’ [Citations.]”

(Ibid.)

D. Analysis

On appeal, Berg & Berg contends that the trial court erred in granting summary

adjudication of its equal protection cause of action because when the evidence is

carefully examined, it shows that City did not have a rational basis for believing that its

refusal to process Berg & Berg’s development applications would result in job creation

on Berg & Berg’s property. Alternatively, Berg & Berg contends that even assuming that

there was a rational basis for denying Berg & Berg’s development applications, there was

no rational basis for approving the applications of other developers without the

“employment triggers” required to approve Berg & Berg’s application, or for placing the

burden on Berg & Berg to provide employment lands.

City disagrees, arguing that the court must presume that the City Council’s

decisions regarding Berg & Berg’s development applications were constitutional because

the evidence showed that there were legitimate reasons for the government action, and

therefore summary adjudication of the equal protection claim should be affirmed.

46

It is well established that where, as here, the equal protection claim arises from a

public entity’s land use decisions, we apply the rational basis test. (See Las Lomas Land

Co., LLC v. City of Los Angeles (2009) 177 Cal.App.4th 837, 858-859 (Las Lomas).)

“The rational basis test is extremely deferential and does not allow inquiry into the

wisdom of government action. [Citation.] A court must reject an equal protection

challenge to government action ‘if there is any reasonably conceivable state of facts that

could provide a rational basis for the [difference in treatment]. [Citations.]’ [Citations.]

‘Where there are “plausible reasons” for [the] action, “our inquiry is at an end.”

[Citation.]’ [Citation.]” (Ibid.)

Thus, “[u]nder the rational basis test, courts must presume the constitutionality of

government action if it is plausible that there were legitimate reasons for the action. In

other words, the plaintiff must show that the difference in treatment was ‘ “so unrelated

to the achievement of any combination of legitimate purposes that we can only conclude

that the [government’s] actions were irrational.” ’ [Citation.]” (Las Lomas, supra, 177

Cal.App.4th at p. 859; see also Arcadia Development Co. v. City of Morgan Hill (2011)

197 Cal.App.4th 1526, 1534-1535; Griffith v. City of Santa Cruz (2012) 207 Cal.App.4th

982, 994.)

Here, City’s motion for summary adjudication was based on evidence showing

that it was plausible that the City Council’s deferral of Berg & Berg’s development

applications was based on legitimate reasons. City’s evidence showed that prior to the

City Council’s vote on May 15, 2007, to defer consideration of all campus industrial land

conversions “associated with the Evergreen East Hills Vision strategy to the City’s

General Plan update process,” the City Council considered the “financial impacts arising

from conversions of employment land to residential, potential City exposure to

transportation cost overruns, and the benefits of studying the employment land

conversion issue through the General Plan update.”

47

This evidence alone is sufficient to establish that it is plausible that there were

legitimate reasons for the City Council’s deferral of Berg & Berg’s applications for a

zoning change for its Evergreen campus industrial properties, and therefore the rational

basis test is satisfied as a matter of law. (See Las Lomas, supra, 177 Cal.App.4th at

pp. 858-859.) Berg & Berg’s contrary argument is not convincing, since Berg & Berg

essentially argues that there are triable issues of fact as to whether the City Council’s

decisions with regard to Berg & Berg’s applications actually had a legitimate public

purpose. Even where it is arguable that a public entity’s land use decisions were not

taken for a legitimate purpose, an equal protection claim based on those decisions will

fail. (Stubblefield Construction Co. v. City of Bernadino (1995) 32 Cal.App.4th 687,

714.) “ ‘If the legislative determination that its action will tend to serve a legitimate

public purpose “is at least debatable”, the [equal protection] challenge to that action must

fail as a matter of law.’ [Citation.]” (Ibid.)

Moreover, the decisions on which Berg & Berg relies for a contrary result are

inapplicable. In Ross v City of Yorba Linda (1991) 1 Cal.App.4th 954 (Ross), the

appellate court determined that the City of Yorba Linda had engaged in discriminatory

spot zoning of the plaintiffs’ lot. (Id. at p. 959.) The Ross court stated: “A blatant

example of discriminatory land use legislation is ‘spot zoning.’ Spot zoning is ‘[w]here a

small parcel is restricted and given less rights than the surrounding property . . . .’

[Citation.]” (Id. at p. 960.) The decision in Ross is obviously distinguishable from the

present case, which does not involve spot zoning.

In G & D Holland Construction Co. v. City of Marysville (1970) 12 Cal.App.3d

989 (G & D Holland), the petitioners sought a writ of mandate to compel issuance of a

building permit for a low-income apartment building. (Id. at p. 992.) The appellate court

ruled that “where ‘spot zoning’ or other restriction upon a particular property evinces a

discriminatory design against the property user, the courts will give weight to evidence

disclosing a purpose other than that appearing upon the face of the regulation.

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[Citations.]” (Id. at pp. 994-995.) The G & D Holland decision is therefore

distinguishable from the present case, where there is no issue of spot zoning or restriction

only upon Berg & Berg’s Evergreen property. It is undisputed that the City Council

voted to defer consideration of all applications for conversion of campus industrial land

in the Evergreen East Hills area, not just Berg & Berg’s applications, while the update of

City’s general plan was pending.

We therefore conclude that the trial court did not err in granting City’s motion for

summary adjudication of the equal protection cause of action, and we will affirm the

order.

E. Prejudgment Interest

On appeal, Berg & Berg contends that the trial court erred in awarding

prejudgment interest from the date of the verdict, May 31, 2012, instead of the date the

original complaint was filed, August 13, 2007. Berg & Berg seeks prejudgment interest

in the amount of $2,918.251.60.

Since we have concluded that the judgment must be reversed, we also conclude

that the issue of prejudgment interest raised by Berg & Berg in its cross-appeal is moot,

and we express no opinion on the issue.

V. DISPOSITION

The judgment is reversed. The matter is remanded with directions to the trial

court to (1) grant City’s motion for new trial; (2) conduct a new court trial limited to the

issue of the amount of restitution to be awarded to Berg & Berg based on its

proportionate share of the consideration paid by the participating property owners under

the 2004 and 2006 funding and reimbursement agreements; and (3) determine the amount

of prejudgment interest to be awarded. The September 8, 2011 order granting summary

adjudication of the equal protection cause of action is affirmed. The parties are to bear

their own costs on appeal.

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BAMATTRE-MANOUKIAN, J.

WE CONCUR:

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ELIA, ACTING P.J.

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MIHARA, J.