Opinion
Plaintiffs appeal from summary judgment in favor of defendants on plaintiffs’ complaint for $200 million damages alleging various contract and tort theories.
1
The underlying dispute arises out of a concession agreement with the City of Los Angeles for operation of an equestrian facility on City-owned land in Griffith Park. In 1988, plaintiffs lost their interest in the concession agreement after LAEC, ECA, and Polo
Factual and Procedural Background
The following facts are gleaned from those parts of City’s separate statement of undisputed facts which are undisputed by plaintiffs, and from evidence submitted by plaintiffs in opposition to the motion for summary judgment; our summary of the facts after plaintiff corporations filed for protection under chapter 11 of the bankruptcy laws in 1984 is obtained primarily from plaintiff corporations’ second amended joint and consolidated plan of reorganization and joint disclosure statement filed with the bankruptcy court.
In 1976, City and Better Built Enterprises entered into concession agreement No. 183 for the development and operation of the Los Angeles Equestrian Center, located on 72 acres of land owned by City in Griffith Park. Under the agreement, the concessionaire was granted the exclusive right to maintain and operate the boarding facilities for horses for a term of 25 years; the concessionaire agreed to pay rental of 4 percent of gross receipts from boarding, 4 percent of gross receipts from rentals, and 4 percent of gross receipts from retail sales, with a minimum annual rental of $12,000 in the event the above payments total less than $12,000. The concessionaire agreed to undertake certain improvements, including a horse boarding facility for 200 box stalls and 4 riding rings. Upon termination of the agreement, all permanent improvements were to become the property of City.
The agreement required City approval prior to performing certain activities, including erecting improvements, transferring title to permanent improvements, subleasing or assigning any interest, and changing the hours of operations and prices charged to the public.
The agreement also provided that at the conclusion of the fifth year under the agreement, and every five years thereafter, “City will perform a detailed analysis of the performance and financial status of the concession. If it appears at that time that any of the terms of the Agreement require change due to changing economic conditions, etc., City will meet with concessionaire to renegotiate rental or other provisions of the Agreement. If both parties agree to change any of the conditions of the Agreement, an amendment will be prepared for approval by City, the City Attorney . . . and the City Council.”
Construction on the equestrian center, including boarding and training facilities, show grounds, indoor arena, and commercial buildings, began in late 1981 and was completed in mid-1982, with the hope that the Center would host part of the equestrian events at the 1984 Olympic Games held in Los Angeles. In addition to the costs of expedited construction, plaintiffs invested heavily in the start-up costs of presenting major show jumping events to qualify the facility for the 1984 Olympics; in 1982, EGA and LAEC negotiated a $10 million loan with Gibraltar Savings to consolidate construction loans and to obtain financing to complete improvements already in progress at the Center. Gibraltar allegedly withheld $2 million until the completion of certain improvements and attainment of a certain occupancy level and net operating income; not all of the planned improvements were able to be completed, resulting in significant operating losses. In addition, the failure to participate in any of the equestrian Olympic activities contributed to the Center’s problems.
In a second amendment to the concession agreement, dated June 2, 1983, City consented “to the estate created by the Concession Agreement being
In January 1984, Garcia requested, and the City granted, permission for the Center to sell 300 stalls and lease them back, as part of a program to refinance the horse stalls; however, the Center was required to keep 275 stalls available for rental by the public. Apparently no stalls were sold under this plan. By the fall of 1984, the corporate plaintiffs were seriously in default with respect to the Gibraltar loan and were encountering difficulty in covering the regular expenses of operation of the Center.
In September 1984, the corporate plaintiffs filed voluntary petitions under chapter 11 of the Bankruptcy Code. Reports prepared by a public accounting firm in 1985 and 1986 on the financial and operational management of the Center recommended that the Center reduce the rental rate paid to the City, provide additional revenue-producing facilities, and add a freeway access off-ramp for direct access to the Center.
After filing the bankruptcy petitions, the Center remained operational; LAEC paid only the minimum rent to City of $2,500 per month. By 1988, LAEC owed the City about $650,000 in prepetition and postpetition rent.
In 1986, LAEC negotiated with a developer and potential funding agency to develop and operate a $15 million health center/sports club complex under a sublease and build a freeway off-ramp to be amortized out of future rents to the City. In August 1986, the board of recreation and park commissioners negotiated and conditionally approved amendments to the concession agreement to accommodate the proposed health center and freeway off-ramp. Board approval for the health center project was conditional upon LAEC’s payment to City of all postpetition rent owed by July 1987; as LAEC did not pay such rent, the approval of the amendments was null and void. Subsequently, the funding agency withdrew from the arrangement and the health center project was not presented to City for approval.
In a report to the board of referred powers by defendant James Hadaway, general manager of the department of recreation and parks, Hadaway noted that as one of LAEC’s creditors, the City has a right to vote on the plan of reorganization as to whether the City will accept or reject such payment as proposed in the plan. Hadaway’s report also stated that in connection with its reorganization plan, LAEC “has negotiated and received a conditional loan commitment of $12,300,000 from Trafalgar Capital Corporation, to be used to pay off the $9,000,000 Gibraltar debt. . . . Trafalgar’s commitment, however, is subject to a number of conditions including Board and Council approval of a 200-room equestrian lodge and conference center, horse stall condominiums, theme restaurant and covered arena, equine veterinary hospital, and certain amendments (including renegotiated rents) to the concession agreement. . . .”
As to the proposed equestrian lodge and conference center, Hadaway’s report stated that the reorganization plan “proposes the sublease of 5.0 acres of the concession premises for an equestrian lodge and conference center to be developed and operated by the Marriott Corporation. . . . LAEC has orally withdrawn its proposal for the lodge, but is still asking for approval of the conference center to be used as headquarter facilities for a press club. However no preliminary plans or written descriptions for the conference center have been submitted to the Department for evaluation. ...[$... While the lodge and conference center may be desirable to the concessionaires as an additional source of revenues and a convenience to some of the contestants and event officials, they are far from essential to the attendance and use of the equestrian center and they are questionable uses of park property. ... In order to maintain the integrity of the Center, equestrian activities and facilities must be considered first priority.”
With respect to the theme restaurant, the report noted that as a substitute for the previously approved health center, LAEC is proposing the development of a theme restaurant and entertainment facilities. The first phase would “include an approximately 70,000 square feet medieval dinner theater/arena with 1500 seats .... The second phase would include a Medieval Village with cultural and educational booths, exhibitions, etc., depicting the historical evolution of the horse from Medieval Times to the introduction and development of the horse in our own country. The entire development would require approximately 20 acres of the concession premises including the additional parking area.”
Hadaway also stated in his report that he had visited the Medieval Times restaurant and entertainment arena in Buena Park and had found it to be a high-quality and apparently successful entertainment center. “However, it is an entertainment center and not an equestrian center. . . . The public is not invited to ride and compete and actively participate in the equestrian activities.”
The report concludes that the previously negotiated amendments to the concession agreement are not applicable to the new proposals “as no consideration was given to any of the proposals currently being submitted by the concessionaires. No consideration was given to a theme restaurant, village, theme arena, condominiumization, veterinary hospital, etc. In addition, the
The report also offered several reasons why the board of referred powers should reject LAEC’s second amended joint and consolidated plan of reorganization and the projects therein: (1) “As a condition of concession agreement amendments negotiated in 1986, LAEC agreed to pay to the City all back rent by July, 1987, and pay in full all rent owed thereafter; but has not done so. Therefore, the Department is somewhat skeptical as to ability of LAEC to pay the remaining $350,000 of rent owed [which under the reorganization plan, was to be paid over a five-year period]”; (2) “As an administrative creditor, the City is legally entitled to receive all post petition rent due upon confirmation of LAEC’s plan of reorganization (approximately $560,000). The City should exercise its legal rights to require payment of the full amount while the court is in control of the disbursements”; (3) “As the caretakers of open park land and providers of recreation facilities, the Department cannot in good conscience recommend privatization of horse stalls or the removal of 20 acres of open space for the development of an entertainment center and 1000 paved parking spaces. Nor can the Department in good conscience recommend any further financial support to a company that has incurred losses of $27,000,000 over a period of eight years.”
After public hearing on April 13,1988, the board of referred powers voted to approve the report of the department of recreation and parks prepared by Hadaway, effectively rejecting plaintiffs’ reorganization plan. On April 15, Gibraltar foreclosed and assumed operation of the Center.
Plaintiffs filed a 10-count first amended complaint against City asserting several tort and contract causes of action. All of the claims arise out of the same foregoing facts, but plaintiffs characterize the alleged wrongs under different legal theories. Defendants answered the complaint, asserting several affirmative defenses, and moved for summary judgment or in the alternative for summary adjudication of 12 issues. A more detailed discussion of each cause of action, defenses thereto, and the grounds of the summary judgment motion will be undertaken in our discussion to follow.
In granting the motion for summary judgment, the trial court stated in pertinent part that “Whether or not a joint venture and fiduciary duty existed
Plaintiffs filed timely notice of appeal from the summary judgment. Their two principal contentions on appeal are that the trial court erred in concluding that they had no legitimate property interest in the concession agreement and that numerous disputes of fact existed as to the issue of their alleged waiver of their claims by failure to comply with the notice requirement of the concession agreement.
I
Standard of Review
Summary judgment is proper only if the affidavits in support of the moving party would be sufficient to sustain a judgment in his favor; where
An appellate court reviewing a summary judgment determines upon a de novo examination whether there was no genuine issue of material fact and whether the moving party is entitled to judgment as a matter of law.
(Sosinsky
v.
Grant
(1992)
II
First Through Fifth Causes of Action
Plaintiffs’ first cause of action is captioned “breach of implied-in-fact joint venture” and alleges that “an implied in fact joint venture relation arose between the parties by virtue of their joint undertaking to develop and operate a Los Angeles area equestrian center,” the City “providing the land for equine use and plaintiffs contributing the capital and services to build and operate the Center in conjunction with the City.” Plaintiffs allege that defendants breached the joint venture with plaintiffs “by first unequivocally authorizing plaintiffs to proceed with their horse-stall re-finance program and leading them to detrimentally rely on that approval and to increase their risks in the venture through continued operations and investments for more than four years and then reversing this authorization. As a result, the City used this reversed position as the basis for denying plaintiffs’ reorganization plan and appropriating plaintiffs’ property rights, and investment in the Center to public use without compensation therefor.”
The second cause of action, captioned “Breach of Fiduciary Duties and Special Relationship—Constructive Fraud,” alleges that defendants had a
The foregoing allegations also form the basis of the fourth cause of action captioned “contractual breach of the implied covenant of good faith and fair dealing” and the fifth cause of action captioned “estoppel,” which we interpret as asserting the theory of promissory estoppel.
Defendants’ answer with respect to the foregoing causes of action asserted the affirmative defense that the pleading failed to allege sufficient facts to constitute a cause of action. As to the first cause of action, defendants asserted that any implied contract is barred by City Charter sections 385 and 386; as to the second, third, and fourth causes of actions, defendants asserted that they did not owe plaintiffs any duty to approve the reorganization plan since no special relationship existed.
One argument advanced in defendants’ motion for summary judgment was that “Nothing in the Concession Agreement required the City to approve the plan of reorganization,” and as a matter of law “there has been no breach of the contract.” Although appellants interpret the oral statements of the trial court in granting the motion as based upon a theory sounding in lack of privity of contract or lack of standing, an issue which they address in their opening brief, it is clear to us that the trial court found no breach of contract or breach of an implied covenant because the City had no obligation to approve the reorganization plan. As we explain more fully below, we conclude that the trial court properly granted summary judgment as to the third and fourth causes of action.
Where no extrinsic evidence bears upon the interpretation of an instrument, its construction becomes a matter of law determinable in a summary judgment proceeding.
(Lombardo
v.
Santa Monica Yomg Men’s Christian Assn.
(1985)
The new construction and facilities proposed in the reorganization plan were found by Hadaway and the board of referred powers not to be within the scope of the previously granted concession. There is nothing in the concession agreement or its amendments obligating City to negotiate a modification of, or amendment to, the concession contract or to negotiate a new concession contract involving new and different facilities and services, such as a medieval theme restaurant and entertainment arena. The reorganization plan itself evidences an understanding by appellants that they needed to apply to the City for approval of the new plan. Accordingly, under the facts of this case, there is no dispute that whatever approvals were granted earlier could not possibly apply to the proposal set out in the reorganization plan and there was thus no “retraction” or reversal of prior approvals or negotiated amendments to the concession agreement. The City simply rejected an entirely new project set out in the reorganization plan. Thus, the refusal to approve the reorganization plan did not constitute a breach of contract.
The third cause of action also predicates breach of the concession agreement on an alleged disclosure by defendants of plaintiffs’ confidential financial information during the course of public meetings. According to the agreement, “All information obtained in connection with City’s inspections of records or audits shall be received and maintained in confidence and shall not be disclosed to anyone not directly connected with the official business of City.” The deposition testimony submitted by the plaintiffs in opposition to the motion for summary judgment reveals that plaintiffs themselves supplied the alleged confidential financial information pertaining to the reorganization plan to the City, which information was separate and apart from any disclosure statements filed in the bankruptcy court. Plaintiffs admitted in deposition testimony that the alleged confidential information was not obtained as a result of any audit or inspection of records by City. Accordingly, there is no dispute that there was no breach of contract with respect to the disclosure of alleged confidential information.
The complaint also alleges that defendants breached the contract “by precipitating and encouraging foreclosure by Gibraltar upon plaintiffs’ substantial property interests . . . .” The undisputed evidence shows that City was not involved in any negotiations or contracts with Gibraltar with respect to its right to foreclose, which was the subject of agreements between
We reach the same result as to the fourth cause of action for contractual breach of the implied covenant of good faith and fair dealing. “The implied covenant of good faith and fair dealing rests upon the existence of some specific contractual obligation. [Citation.] ‘The covenant of good faith is read into contracts in order to protect the express covenants or promises of the contract, not to protect some general public policy interest not directly tied to the contract’s purpose.’ ... ‘In essence, the covenant is implied as a
supplement
to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party’s rights to the benefits of the contract.’ . . . [f] If there exists a contractual relationship between the parties, as was the case here, the implied covenant is limited to assuring compliance with the express terms of the contract, and cannot be extended to create obligations not contemplated in the contract.”
(Racine & Laramie, Ltd.
v.
Department of Parks & Recreation
(1992)
There is no express contractual obligation in the concession agreement or amendments thereto to negotiate a modification of the type of concession granted by the contract. In rejecting the reorganization plan, the City was simply rejecting a proposed new or different type of concession than the one that had been granted previously. Pertinent here is the language in
Racine & Laramie, Ltd.:
“Absent the existence of such special circumstances or conditions, however, there is no obligation in California to bargain for a new or amended contract in good faith. None of the enumerated special circumstances existed in this case. The fact that bargaining took place over a period of many years and that the parties reached tentative agreement from time to time on some of the points at issue does not detract from this conclusion. There was in this case simply no contractual basis upon which to extract implied conditions of good faith bargaining.” (
As to the fifth cause of action for promissory estoppel, the first amended complaint alleged that plaintiffs relied upon City’s prior approvals in 1984 and continued to operate the Center from 1984 through 1988, incurring huge debts in doing so; despite these approvals, City “reversed their prior approvals and rejected the horse-stall refinance program, and in so doing the reorganization plan, while specifically aware that such actions would precipitate foreclosure and wipe out plaintiffs’ investments exceeding over $25 million.”
“Promissory estoppel is described as: “A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.” ’ ”
(Racine & Laramie, Ltd.
v.
Department of Parks & Recreation, supra,
We also note that in support of its motion for summary judgment, City cited the case of
Lundeen Coatings Corp.
v.
Department of Water & Power
(1991)
Ill
Sixth, Seventh, and Eighth Causes of Action
The sixth cause of action for intentional interference with prospective economic advantage, the seventh cause of action for negligent interference with economic relationships and the eighth cause of action for intentional interference with business relations are all predicated on the same underlying factual background discussed above. To the extent that these claims are simply restatements of the contract claims, summary judgment was properly granted for the reasons discussed above. In other words, the conduct of City in rejecting the reorganization plan was not wrongful, under either contract or tort principles.
In the trial court and in their reply brief, respondents argue that to the extent that the sixth, seventh, and eighth causes of action are based on alleged misrepresentations by City staff which interfered with appellants’ financial interests, Government Code section 818.8 grants the City immunity for such acts. “[Misrepresentation as a tort distinct from the general milieu of negligent and intentional wrongs, applies to interferences with financial or economic interest. The Legislature designed section 818.8 to exempt the governmental entity from this type of liability. [Citation.] Immunity will prevail where the governmental misrepresentation interfered with either a commercial or a financial interest. [Citation.] This is true even if the misinformation relied upon is gratuitously disseminated or the allegations of the complaint are couched in terms of code violations by the government
Appellants fail to specifically address these causes of action in their opening or reply brief, despite the fact that respondents discuss these theories of liability in their brief. Accordingly, the summary judgment on these causes of action also can be upheld on the principle that appellants’ failure to discuss the theories on appeal constitutes an abandonment.
(Biljac Associates
v.
First Interstate Bank, supra,
IV
Ninth and Tenth Causes of Action
The trial court correctly granted summary judgment on the ninth cause of action for inverse condemnation on the ground that it was unsupported by the facts. The facts establish without dispute that appellants’ plan of reorganization contemplated new projects not encompassed within the prior concession grant. Appellants simply had no contractual or other property right to develop a medieval theme restaurant and related facilities on City park property and City did not breach any duty owed to appellants by rejecting the reorganization plan calling for such development. “In order to state a cause of action for inverse condemnation, there must be an invasion or an appropriation of some valuable property right which the landowner possesses and the invasion or appropriation must directly and specially affect the landowner to his injury.”
(Selby Realty Co.
v.
Buenaventura
(1973)
The tenth cause of action for violation of 42 United States Code, section 1983, is predicated upon the same conduct set out above, which the plaintiffs claimed deprived them of their property and contract rights in the Center and their “future benefits under the Concession Agreement and leasehold.” For the reasons set out above with respect to all of the other causes of action, we conclude that there was no such unlawful deprivation. The trial court properly granted summary judgment as to the 10th cause of action.
The judgment is affirmed. Respondents are entitled to their costs on appeal.
Johnson, J., and Woods (Fred), J., concurred.
Notes
Plaintiffs (collectively referred to herein as LAEC) are Los Angeles Equestrian Center, Inc. (LAEC), a Delaware corporation, Equestrian Centers of America, Inc. (ECA), a California corporation, Los Angeles Polo Club, Inc. (Polo Club), a California corporation, and the following entities or individuals who are shareholders or creditors of the plaintiff corporations: George T. Turpin; Polly Turpin; George C. Hixon; Estate of Hugh K. Foster by Barbara Foster, executrix; Barbara Foster; and J. Albert Garcia.
Defendants are City of Los Angeles, Department of Recreation and Parks, Board of Commissioners for the Department of Recreation and Parks, James Hadaway, individually and as general manager of the Department of Recreation and Parks, and the Board of Referred Powers. Unless otherwise specified, defendants are collectively referred to as City.
The general partner in Center was Equestrian Centers of America, Inc., a Delaware corporation; this corporation was at some time acquired by Lumberman’s Acceptance Corporation, a California corporation, and its name was changed to Equestrian Centers of America, Inc., a California corporation (EGA), which is one of the plaintiffs herein. Two wholly owned subsidiaries of EGA are plaintiffs Los Angeles Equestrian Center, Inc. (LAEC) and Los Angeles Polo Club, Inc. The parties did not dispute the fact that LAEC is the same entity as EGA with a new name. Since 1980, plaintiff J. Albert Garcia (Garcia) was president, chairman of the board and chief executive officer of EGA.