City of Imperial Beach v. Bailey

Opinion

HENDERSON, J.

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The City of Imperial Beach (City) filed a complaint for declaratory relief requesting a determination whether the city council (Council) could renew or extend a contract it had with Gary and Hazel Bailey doing business as Imperial Beach Concession (Concession). The court granted City’s motion for summary judgment and ruled City could not contract with Concession.

[194]

Factual Background

In June 1963, City entered into a contract with Eva Herron for the construction and operation of a concession stand on the municipal pier for the purpose of selling bait, fishing tackle and refreshments. The term of the contract was for ten years with options for renewal by Concession for two additional terms of five years each. In July 1973, the Council amended the contract to approve Gary and Hazel Bailey as the operators of Concession pursuant to an assignment to them by Herron. The amendment also provided: “On the fifteenth anniversary of the agreement (June 26, 1978) ownership of the building shall pass to the City. Operator agrees to execute all documents necessary to transfer the ownership of the building to the City. At the end of said fifteen year period City may reasonably adjust the rate of payment to be paid by Operator to City to reflect the fact that City owns the building.”

In November 1977, Hazel Bailey was elected to fill the unexpired term of a member of the Council. In March 1978 Hazel was reelected for a full four-year term. On March 31, 1978, Concession gave proper notice under the contract of its intent to exercise the option to renew. City refused to renew the contract relying on the provisions of Government Code section 1090 which provides in part: “[CJity officers or employees shall not be financially interested in any contract made by them in their official capacity, or by any body or board of which they are members.”

When Concession continued to make demand that City negotiate a rate of payment and present an agreement renewing the contract, City filed its suit for declaratory relief.

Concession alleges the court in granting the summary judgment incorrectly concluded: (1) The exercise of the option would constitute the “making” of a contract in violation of Government Code section 1090; and (2) adjustment of the rate to be paid by Concession requires a “negotiation” prohibited by Government Code section 1090.