South Bay Senior Housing Corp. v. City of Hawthorne

Opinion

VOGEL (Miriam), J.

In the published portion of this opinion, we hold that when a statute limits a general law city’s power to make a certain kind of contract to a certain prescribed method, thereby implicitly prohibiting other methods of contracting, a contract that does not conform to the prescribed method is void and the city cannot be liable on an implied contract theory for the benefits it received or the damage it caused to the other party to the void contract. In the unpublished portion of this opinion, we hold that substantial evidence supports the jury’s finding that the contract at issue was signed as required by law. We affirm the jury’s determination of liability, reverse the award of damages, and remand with directions.

Facts

South Bay Senior Housing Corporation, a developer of low-income senior citizen housing, contacted the City Manager of the City of Hawthorne to express interest in a certain City-owned parcel of land for the construction of a new senior citizen facility. When South Bay’s president (Irving Sokolsky, M.D.) was told that a deed restriction precluded a sale but that the property was available for lease, Sokolsky said he was still interested, and he was later told that a lease to South Bay for a senior citizen housing development would be favorably considered by the City. Sokolsky drafted a proposed 55-year ground lease and a development agreement, submitted them to the City, met with the City’s outside legal counsel, twice amended the documents, and ultimately signed the originals and sent them to the City Manager. At the City Council’s April 9, 1990 meeting, at which the Mayor was

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present and voted, the lease and development agreement were unanimously approved by roll call vote.

Sokolsky thereafter drafted construction plans and submitted permit applications, including one to the City’s Planning Commission for an unclassified use permit required under the Hawthorne Municipal Code for South Bay’s proposed use of the property. In May, the City’s Planning Commission unanimously approved South Bay’s application for the permit. In the fall, South Bay erected a fence around the property. At some point, however, South Bay’s previously approved permit application was referred by the City Council back to the Planning Commission for further review, and there the permit sat, while Sokolsky’s repeated requests for action were ignored. At the same time, the City acted as though it had a deal with South Bay. In mid-1991, for example, the City billed South Bay for weed abatement services for the “leased” property and accepted South Bay’s payment of the bill. Around the same time, the City Manager corresponded with a constituent who lived near South Bay’s project, advising her that South Bay was the lessee of the property and was going to build low-income senior housing on the property. But the permit was still pending before the Planning Commission, notwithstanding Sokolsky’s continuing efforts to move forward with the project—he met with the City Manager, the City Attorney and individual members of the City Council to try to find out whether there was a problem and, if there was, what he could do about it, but no action was taken. Ultimately, South Bay sued the City for anticipatory breach of contract, rescission and restitution.