Illegal Contract Was No Different Than Public Contract Void Due To Lack Of Authority.
On February 6, 2022, we posted on a case for which rehearing was granted. The case is San Luis Obispo Local Agency Formation Comm’n v. Central Coast Development Co., Case No. B304144 (2d Dist., Div. 6 May 5, 2022) (published). We can report there was no change in result.
There, earlier proceedings had determined that an indemnity agreement in a public agency contract was not supported by consideration and the governmental agency had no statutory standing to impose the indemnity agreement at all. In a word, it was an illegal contract. However, the trial judge awarded substantial fees of $172,850 to the City and $428,864 to the developer under that contract. But all of that went away on appeal. The reason was that voidability of a contract as to a public agency meant that it could neither enforce nor be liable on the contract, including fee recovery. The illegality of the contract was akin to an authorized public agency contract, so that no fees could be assessed against the public agency based on overriding public policies relating to unauthorized or illegal contracts. Even more so, here, because the developer brought a meritless action against the governmental entity such that there was equity in not allowing the entity to be saddled with fees.
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