California Court of Appeal, Second District, Sixth Division
Rebecca S. Riley, Judge, Steven J. Stone, Judge,[*] Superior Court County of Ventura. (Super. Ct. Nos. CIV226198, CIV227377, CIV226183)
[Copyrighted Material Omitted]
Andrew J. Wolf for Plaintiffs and Appellants Tuthill and Plaintiff and Respondent Younker.
Anderson Kill Wood & Bender, David P. Bender, Eric R. Reed, Caroline Hurtado Ford and Michael J. Stoner, Ventura, for Defendants and Appellants.
Equity, although designed to promote justice, cannot be used to nullify a contrary statute. Applying equitable principles, the trial court awarded damages and private attorney general fees to plaintiffs Eric and Karrie Tuthill and Vicki Younker against defendants City of San Buenaventura and its housing authority (collectively, " the City" ) based on the City's
failure to disclose affordable housing restrictions that applied to plaintiffs' townhomes. The judgment abrogated the statutory scheme of public entity immunity embodied in Government Code section 815 et seq. and must be reversed. The Tuthills' appeal, which seeks additional damages, is moot.
FACTS AND PROCEDURAL HISTORY 
The Affordable Housing Program
The City's development and maintenance of an Affordable Housing Program ("AHP" ) is the backdrop of the litigation. In 1979, the California Legislature, having determined that a critical need for affordable housing exists in California, enacted statutes that offered incentives for cities to provide affordable housing for low- and moderate-income households. Those statutes are codified in the Density Bonus Law (§§ 65580 et seq.) In 1981, the City adopted the AHP, which provided incentives for private developers to produce more affordable housing.
In 1988, the City amended the AHP. The Amended AHP states its purposes: " to assist in providing ownership and rental housing for low and moderate income households and to ensure that such housing remains in the affordable market." The Amended AHP offered developers even stronger incentives to develop affordable [167 Cal.Rptr.3d 825] housing. It also imposed threshold requirements for developers who wanted to take advantage of those incentives. The most significant of these were the requirements that developers impose price restrictions on affordable housing units and restrictions on resale prices, the latter to prevent owners from selling the units for more than a predetermined price. The Amended AHP required the City to " [s]et and periodically update the requirements and qualifications for eligible households" and to " [r]eview records submitted by developer and applicant households to identify eligible households."
In 1992, the City entered into a development agreement with now-defunct Bulmer Development Corporation (" Bulmer" ) to develop a 57-unit townhome complex called Seneca Highlands. The Development Agreement includes a Declaration of Covenants, Conditions and Restrictions (CCRs) that provide the affordability restrictions for the units. The central purpose of the Development Agreement was the provision of affordable housing: Fifty of the units are designated as " moderate income" and seven as " low-income."
The Development Agreement provides that (1) only qualified buyers (those with incomes in a specified range) can buy any of the 57 units; and (2) no unit can be sold at a price above certain set limits. Through the Development Agreement the City delegated to Bulmer the discretion to make eligibility determinations, which is customary in the affordable housing industry, and to inform the City of those designations. The Development Agreement also required the City to issue a Certificate of Compliance, certifying that the prospective purchase complies with the Development Agreement. The parties agree that Bulmer misinformed the City about buyer qualifications in several cases, resulting in the City's improper issuance of Certificates of Compliance and the sale of restricted properties to buyers who were not qualified for AHP units because their income levels exceeded AHP qualifying income levels.
Plaintiffs purchased two of the seven " low income" Seneca Highlands townhomes in 2001. Because of the misunderstanding, they paid more than the restricted prices. Later that year, plaintiffs and other homeowners in Seneca Highlands discovered that Bulmer's sales agents had not disclosed that the townhomes were affordable housing units with price restrictions.
Plaintiffs sued the City and Bulmer in 2004. The causes of action directed against the City in each complaint were declaratory relief, negligence and negligence per se/violation of statutory duty. In their declaratory relief cause of action, plaintiffs sought a declaration that the AHP's restrictions did not apply to their units and were not enforceable, or, if the court enforced the restrictions, monetary damages. The negligence cause of action was dismissed at trial. In their negligence per se/violation of statutory duty cause of action, plaintiffs alleged the City breached its " affirmative obligation" under California's affordable housing statute, section 65580 et seq., " to enforce the [AHP], or to ensure its enforcement." Specifically, plaintiffs alleged the City did not tell them that the AHP's " low income" restrictions applied to their units and that Bulmer sold the units to them at higher prices than the [167 Cal.Rptr.3d 826] low income level. As a result, plaintiffs overpaid for their properties. Plaintiffs also requested private attorney general fees under Code of Civil Procedure section 1021.5.
The parties stipulated to the appointment of a temporary judge. The City moved for judgment on the pleadings based on the City's public entity immunity. The trial court denied the motion. Following a bench trial, the trial court issued its Statement of Decision. Stating that " equitable principles" controlled because of the declaratory relief cause of action, ...