Opinion
NOT TO BE PUBLISHED
Mendocino County Super. Ct. No. SCUK CVG 09 53746
Jones, P.J.
Poway Royal Mobilehome Owners Assn. v. City of Poway (2007) 149 Cal.App.4th 1460, 1471 (Poway), held that a plaintiff suing a public entity for promissory estoppel must plead “exceptional circumstances” to withstand demurrer. (Id. at p. 1471.) As the Poway court explained, “‘an estoppel will not be applied against the government if to do so would effectively nullify “a strong rule of policy, adopted for the benefit of the public....”’ [Citations.] ‘“The courts of this state have been careful to apply the rules of estoppel against a public agency only in those special cases where the interests of justice clearly require it.”’ [Citation.] The ‘“facts upon which such an estoppel must rest go beyond the ordinary principles of estoppel and each case must be examined carefully and rigidly to be sure that a precedent is not established through which, by favoritism or otherwise, the public interest may be mulcted or public policy defeated.”’ [Citation.]” (Ibid.)
The School House at Brutocao (plaintiff) sued the County of Mendocino (County) and the Mendocino County Promotional Alliance (MCPA, collectively defendants) for promissory estoppel. The first amended complaint alleged defendants breached an oral agreement to lease plaintiff’s property for a welcome center to promote tourism in the County. The County demurred, contending, among other things, that the complaint failed to allege the “exceptional circumstances” required to apply the promissory estoppel doctrine against a public entity. Relying on Poway, supra, 149 Cal.App.4th at page 1471, the trial court sustained the County’s demurrer to the first amended complaint without leave to amend, concluding it “fail[ed] to state a cause of action [for promissory estoppel] against the County as a matter of law because the exceptional circumstances test of Poway is not met.”
We affirm. We conclude plaintiff has not alleged the existence of exceptional circumstances necessary to justify application of the promissory estoppel doctrine against the County and leave to amend would not cure the defect. (Poway, supra, 149 Cal.App.4th at p. 1471.)
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff made the following allegations in its first amended complaint which we assume are true for the purposes of reviewing the order sustaining the County’s demurrer. (See Poway, supra, 149 Cal.App.4th at p. 1466, fn. 1.)
Plaintiff owns real property in Hopland consisting of a winery, gift center, and an “office plaza building.” At some point between April 2007 and August 2008, defendants wanted to establish a welcome center “to attract visitors and to promote tourism” in the County. The County “duly appointed MCPA as its exclusive agent with express authority... to promote tourism” in the County and authorized MCPA to “organize, promote[, ] and staff” a welcome center. The County “directed, funded, oversaw, and evaluated” the work of MCPA and “expressly or ostensibly authorized MCPA to act on the County’s behalf in order to use [p]laintiff’s property” for the welcome center.
Defendants contacted plaintiff about locating the welcome center on plaintiff’s property and promised defendants “would enter into a five year written lease of [p]laintiff’s property consisting of 2500 square fee[t] of space at a rental rate of $1.25 per square foot per month” if plaintiff made its property “suitable” for a welcome center by remodeling the office plaza building and shutting down the business it was currently running in the building. “Defendants admitted in writing that they were going to occupy the premises.”
Because the County “directed, funded and oversaw the activities of... MCPA, ” plaintiff reasonably believed defendants intended to make binding promises to induce plaintiff’s reliance. Plaintiff relied on defendants’ promises and spent “substantial sums of money” remodeling its office building and making its property suitable for a welcome center. In August 2008, however, plaintiff discovered defendants did not intend to lease plaintiff’s property.
In March 2009, plaintiff filed a notice of claim pursuant to the Government Claims Act seeking damages of $1,000,000. The notice of claim alleged plaintiff entered into an oral agreement “wherein MCPA was going to lease” plaintiff’s property for a welcome center. At MCPA’s request, plaintiff improved its property, but later discovered MCPA did not intend to lease the property. The County rejected the claim. The County also rejected plaintiff’s supplemental notice of claim, which contained similar allegations.
Government Code section 810 et seq. Unless otherwise noted, all further references are to the Government Code.
In April 2009, plaintiff filed a lawsuit alleging a single cause of action for promissory estoppel against both defendants. The complaint alleged plaintiff sustained “losses and damages” by relying on defendants’ promises regarding the welcome center; the complaint also alleged “injustice will result if [p]laintiff is not compensated for the losses that it sustained in reliance on the promises and representations that were made.” The court sustained the County’s demurrer to the complaint with leave to amend.
In the first amended complaint, plaintiff alleged the County appointed MCPA as the County’s “exclusive agent with express authority... to promote tourism and to market the scenic, recreational, and culture [sic] advantages of [the] County.” The operative complaint also alleged this “appointment was made pursuant to a duly enacted resolution adopted by the Board of Directors of [the] County.” Plaintiff further alleged the County authorized MCPA to act on the County’s behalf to use plaintiff’s property as a welcome center and that defendants “contacted [p]laintiff about using [p]laintiff’s property as a... welcome center.” Finally, the first amended complaint alleged plaintiff “expended substantial sums of money in reliance upon [d]efendants’ promises and representations” and that plaintiff sustained unspecified “losses and damages” when defendants decided not to lease plaintiff’s property.
The County demurred to the first amended complaint. It argued the first amended complaint failed to state a cause of action for promissory estoppel. Relying on Poway, supra, 149 Cal.App.4th at page 1473, the County contended that applying the promissory estoppel doctrine would violate the public policy behind section 25350.51, which the County claimed was designed to “ensure that costly decisions are not hastily made by County employees alone on an ad hoc basis, to create a broad base of authority by requiring contract approval by a number of different individuals, giving the County adequate time to review contracts and approve them.” (Fn. omitted.) The County also argued it was immune from liability pursuant to section 818.8, which provides immunity for injuries caused by misrepresentations made by the employees of public entities.
MCPA answered the operative complaint and is not a party to this appeal.
Section 25350.51 provides in relevant part that the board of supervisors “may... delegate to the purchasing agent or other appropriate county official, subject to any rules and regulations as it may impose, the following authority:... [t]o lease real property for use by the county or to obtain the use of real property for the county by license for a term not to exceed five years and for a rental not to exceed seven thousand five hundred dollars ($7,500) per month.” (§ 25350.51, subd. (a)(1).)
In opposition, plaintiff argued “[t]he use of promissory estoppel against public entities is well established in California.” Plaintiff claimed Poway was distinguishable because defendants made “specific promise[s]” that the County would lease plaintiff’s property if plaintiff “made substantial improvements.” Plaintiff, however, did not aver the existence of “exceptional circumstances” required to apply the promissory estoppel doctrine. Finally, plaintiff sought leave to amend but did not attach a proposed second amended complaint.
After hearing argument, the court sustained the County’s demurrer to the amended complaint without leave to amend on the grounds that the amended complaint did not allege the “exceptional circumstances” required by Poway. The court explained: “Poway states that it is well established that an estoppel will not be applied against the government if to do so would effectively nullify a strong rule of policy adopted for the benefit of the public....” The court determined that sections 23004 and 25350.51 limit the authority of the board of supervisors and County purchasing agent to enter lease agreements and the “public policies embraced in the applicable statutes would be contravened if a contract could be formed by estoppel under these circumstances....” The court also determined “the County could not be held liable for the negligent or even intentional misrepresentation of an agent or employee under... [section] 818.8.”
The court took judicial notice of plaintiff’s notice of claim and supplemental notice of claim, the County’s denials, and County “Policy # 1, ” (County Policy No. 1) the County’s written policy regarding purchasing, leasing and contracting. The court declined to take judicial notice of an August 2008 agreement between the County and MCPA which provided, among other things, that MCPA: (1) was an independent contractor, not the agent or employee of the County; and (2) the County was not liable for any acts or omissions by MCPA or for any obligations or liabilities incurred by MCPA. The court entered judgment for the County and plaintiff timely appealed.
In its order sustaining the demurrer without leave to amend, the court stated it need not rule on the County’s request for judicial notice of the agreement between MCPA and the County “to reach this result.” The court noted that the agreement covered the period from September 1, 2008 to June 30, 2009, and plaintiff claimed the actions giving rise to the claim occurred August 1, 2008. According to the court, “[t]he fact that the contract disclaims any agency relation between the County and the MCPA for a period which began after the events alleged to create liability is not, strictly speaking[, ] material to the allegations of [p]laintiff’s complaint.” The County concedes the court denied its request to take judicial notice of the agreement.
DISCUSSION
Standard of Review
“A demurrer tests the legal sufficiency of the complaint....” (Hernandez v. City of Pomona (1996) 49 Cal.App.4th 1492, 1497.) “A trial court may properly sustain a general demurrer to a complaint without leave to amend when the matter presented can be determined as a matter of law.” (Seymour v. State of California (1984) 156 Cal.App.3d 200, 205.) “In reviewing the propriety of the sustaining of a demurrer, the ‘court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. [Citations.]... The judgment must be affirmed “if any one of the several grounds of demurrer is well taken. [Citations.]” [Citation.] However, it is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. [Citation.] And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.’ [Citations.] ‘While the decision to sustain or overrule a demurrer is a legal ruling subject to de novo review on appeal, the granting of leave to amend involves an exercise of the trial court’s discretion.’ [Citation.]” (Poway, supra, 149 Cal.App.4th at p. 1470.)
The Court Did Not Abuse its Discretion by Sustaining the County’s Demurrer Without Leave to Amend
Plaintiff sued the County for promissory estoppel, defined as “‘[a] promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.... Promissory estoppel is ‘a doctrine which employs equitable principles to satisfy the requirement that consideration must be given in exchange for the promise sought to be enforced.”’ [Citation.]” (Poway, supra, 149 Cal.App.4th at pp. 1470-1471.) The elements of promissory estoppel are: (1) a clear promise; (2) reasonable reliance; (3) substantial detriment; and (4) damages. (Toscano v. Greene Music (2004) 124 Cal.App.4th 685, 692.)
Poway is the leading case on the application of the promissory estoppel doctrine against a public entity. There, a mobilehome park homeowners’ association sued the City of Poway for promissory estoppel based on the City’s breach of alleged promises to provide the homeowners’ association with an opportunity to purchase the mobilehome park. (Poway, supra, 149 Cal.App.4th at pp. 1465-1466.) The trial court sustained the City’s demurrer to the third amended complaint without leave to amend and the appellate court affirmed. (Id. at pp. 1465-1466.)
The Poway court stated that California courts “‘“have been careful to apply the rules of estoppel against a public agency only in those special cases where the interests of justice clearly require it. [Citation.] The ‘“facts upon which such an estoppel must rest go beyond the ordinary principles of estoppel and each case must be examined carefully and rigidly to be sure that a precedent is not established through which, by favoritism or otherwise, the public interest may be mulcted or public policy defeated.”’ [Citation.]” (Poway, supra, 149 Cal.App.4th at p. 1471.) The court held that the homeowners’ association had not alleged “exceptional circumstances” necessary to apply the promissory estoppel doctrine and “leave to amend would not cure the defect.” (Ibid.)
We reach the same result here. We conclude plaintiff has failed to allege “exceptional circumstances necessary to justify application of the promissory estoppel doctrine” against the County and “leave to amend would not cure the defect.” (Poway, supra, 149 Cal.App.4th at p. 1471.) In the operative complaint, plaintiff alleged defendants promised to lease plaintiff’s property if plaintiff remodeled the office plaza building and shut down the business it had been running in the building. Plaintiff further alleged it reasonably relied on these promises and spent a “substantial” — but unspecified — amount of money making its property suitable for the County’s needs. Spending an unspecified amount of money to upgrade one’s commercial property with no more than an expectation of a lease may or may not be a questionable business practice, but it is not an “exceptional circumstance[ ].” To withstand demurrer, plaintiff must do more than simply allege it has been damaged by relying on defendants’ oral promises: it must demonstrate this is a “special case[ ] where the interests of justice clearly require” application of the promissory estoppel doctrine. (Ibid.) Plaintiff does not and, as a result, the court properly concluded the complaint failed to state a claim for promissory estoppel as a matter of law.
Numerous cases have held “promissory estoppel may not be raised against a public entity when it would defeat the public policy of requiring adherence to statutory procedures for entering into contracts.” (Poway, supra, 149 Cal.App.4th at p. 1476; State of California v. Haslett Co. (1975) 45 Cal.App.3d 252, 257-258; Santa Monica Unified Sch. Dist. v. Persh (1970) 5 Cal.App.3d 945, 953; G.L. Mezzetta, Inc. v. City of American Canyon (2000) 78 Cal.App.4th 1087, 1093-1094.) Mindful of these cases, the County contends applying the promissory estoppel doctrine would violate section 25350.51. The County argues the oral promise at issue here contravenes section 25350.51 because that statute authorizes the board of supervisors to delegate authority to lease real property only if the term of the lease is not more than three years. The problem with this argument is the County is relying on an outdated version of section 25350.51. In 2006, the Legislature amended section 25350.51 to extend the lease term from three years to five years. (Stats. 2006, ch. 109, p. 95.) Section 25350.51 does not bar the County from forming the alleged agreement to enter into a five-year lease of plaintiff’s property.
Notably, the County does not argue the oral agreement to enter a five-year lease violates the statute of frauds. (See Civ. Code, § 1624, subd. (a)(4).)
This conclusion does not end our inquiry. The rule from Poway and the other authorities cited above is the promissory estoppel doctrine does not apply against a public entity where doing so would defeat a public interest or public policy. The rule is not limited solely to situations where applying the estoppel doctrine “would defeat the public policy of requiring adherence to statutory procedures for entering contracts.” (Poway, supra, 149 Cal.App.4th at p. 1476.)
Section 25350.51 does authorize a board of supervisors, “by ordinance or resolution, [to] delegate to the purchasing agent or other appropriate county official, subject to any rules and regulations as it may impose, the... authority... [t]o lease real property for use by the county....” Here, the County did adopt County Policy No. 1, which outlines the procedures the County must follow before committing public assets to lease property. Applying the promissory estoppel doctrine in the circumstances alleged contravenes County Policy No. 1 and the policy behind it. Pursuant to County Policy No. 1, the County’s buildings and grounds manager and County safety officer must inspect and approve the property before the County can enter into a lease. County Policy No. 1 also requires the purchasing agent or designee to negotiate the lease and using the County’s standard lease agreement format, submit the lease to County counsel and risk management for review, as well as to the “requesting Department Head for recommendation.” The lease must be in writing and signed by the purchasing agent, designee, or the board of supervisors. Applying the promissory estoppel doctrine against the County would allow plaintiff to circumvent County Policy No. 1 and would expose public assets to claims based on no more than a vaguely articulated promise.
County Policy No. 1 provides that the County’s purchasing agent or designee is authorized to “negotiate and execute all rentals of real property, which the County may require on behalf of the County. The purchasing agent’s authority to enter into leases is limited, however, by... section 25350.51.”
Plaintiff relies on a trio of cases to support its argument that it alleged a valid cause of action for promissory estoppel against the County. (US Ecology, Inc. v. State of California (2001) 92 Cal.App.4th 113, 135 (US Ecology); Kajima/Ray Wilson v. Los Angeles County Metropolitan Transportation Authority (2000) 23 Cal.4th 305 (Kajima); Swinerton & Walberg Co., v. City of Inglewood-L.A. County Civic Center Authority (1974) 40 Cal.App.3d 98 (Swinerton).) All of these cases are distinguishable.
In US Ecology, the California Department of Health Services (Department) selected U.S. Ecology (Ecology) to develop and operate a low-level radioactive waste storage facility. (US Ecology, supra, 92 Cal.App.4th at p. 119.) The two parties located a suitable disposal facility site and executed a memorandum of understanding which recorded certain “‘mutual understandings’” about the parties’ obligations concerning the facility. One of these understandings was the state’s promise to use its best efforts to acquire the disposal site from the federal government. (Id. at p. 123.) Ecology spent millions of dollars to develop the facility, but the state never acquired the site from the federal government. Ecology sued the Department for breach of contract and promissory estoppel and the trial court sustained the Department’s demurrer without leave to amend. (Id. at p. 126.)
The appellate court reversed. (US Ecology, supra, 92 Cal.App.4th at p. 137.) The US Ecology court held that the promissory estoppel doctrine applies “to claims against the government, particularly where the application of the doctrine would further public policies and prevent injustice.” (Id. at p. 131.) The court rejected the Department’s contention that applying the promissory estoppel doctrine would violate public policy because it would eliminate the state’s ability to protect its citizens. (Id. at p. 135.) As the court explained, enforcing the Department’s promises “would not necessarily violate public policy” because Ecology alleged the state failed to acquire the appropriate disposal site “solely because of political considerations rather than environmental or safety concerns.” (Ibid.) US Ecology is distinguishable for the simple reason that applying the promissory estoppel doctrine here would violate a public policy, specifically the policy of ensuring that the County complies with the appropriate procedures for leasing real property. US Ecology is distinguishable for the additional reason that in that case, the parties executed a memorandum of understanding recording the parties’ “‘mutual understandings’” prompting Ecology to spend missions of dollars to develop the waste storage facility. Here, there was no memorandum of understanding recording the parties’ mutual understandings about the lease and plaintiff did not spend millions of dollars.
Kajima and Swinerton are also in apposite. In Kajima, the California Supreme Court considered whether bid preparation costs and lost profits were recoverable under a theory of promissory estoppel, not whether the doctrine applies under the circumstances present here. (Kajima, supra, 23 Cal.4th at p. 308.) Swinerton is also distinguishable. In that case, plaintiff construction company alleged the City of Inglewood did not comply with its promise to award a public works contract to the lowest responsible bidder. (Swinerton, supra, 40 Cal.App.3d at p. 104.) The appellate court concluded that permitting the plaintiff to sue the City of Inglewood for promissory estoppel “would be in the public interest as well as that of the injured bidder because such an award would deter such misconduct by public entities in the future.” (Id. at p. 105.) Here, permitting plaintiff to sue the County would not promote a public interest.
Having reached this result, we need not address plaintiff’s argument that section 818.8 does not provide immunity “for a cause of action based upon promissory estoppels[.]”
DISPOSITION
The judgment is affirmed. The County is awarded costs on appeal.
We concur: Needham, J., Bruiniers, J.