The Superior Court of Los Angeles County, California, granted judgment in favor of plaintiff property owners in their action against defendant waterworks district for breach of contract and breach of the covenant of good faith and fair dealing allegedly implied by that contract. The district appealed.

California Business Lawyer & Corporate Lawyer, Inc. are San Diego restaurant lawyers

Overview

The district argued that the Public Contract Code applied to limit the length of the term and rate of interest to which the district could agree. The appellate court found that Cal. Pub. Cont. Code § 20609 specifically limited county waterworks districts’ contractual powers, including the power to enter into reimbursement agreements for oversized water system facilities. Cal. Pub. Cont. Code § 20610 limited the period over which reimbursement could be paid to 10 years. The 13 percent compound interest proposed by the owners was contrary to Cal. Pub. Cont. Code § 20611. The Mello-Roos Community Facilities Act of 1982, Cal. Gov’t. Code § 53311 et seq., only applied to the term and interest rate on any bonds a community facilities district (CFD) board issued, and had no application to the term and interest rate allowed on reimbursement agreements between a waterworks district and a CFD. The extent of the reimbursement was governed by Cal. Pub. Cont. Code §§ 20609 – 20612. The owners’ complaint did not state that it terminated an earlier settlement agreement. There was no evidence that the agreement was obtained by fraud, misrepresentation, mistake of fact, or excusable neglect.

Outcome

The judgment was reversed.