Filed 8/24/26 Onan Capital v. Twin Rivers Unified School Dist. CA3
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
ONAN CAPITAL, INC., C102969
Plaintiff and Appellant,
(Super. Ct. No. 23CV009381)
v.
TWIN RIVERS UNIFIED SCHOOL DISTRICT,
Defendant and Respondent.
During the COVID-19 pandemic, appellant Onan Capital, Inc., agreed to furnish
respondent Twin Rivers Unified School District (the District) approximately $1.5 million
worth of COVID-19 test kits. The District subsequently refused delivery and denied
payment for the kits because the District’s Board of Trustees (the Board) had not
approved the agreement. After Onan Capital sued for breach of contract, the trial court
sustained the District’s demurrer to a first amended complaint, concluding that Onan
Capital did not allege facts showing an enforceable contract because Education Code
section 17604 provides that a school district contract is not valid if it has not been
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approved by the governing board, and equitable estoppel could not contravene the limits
of a school district’s contracting power.1
Onan Capital now contends (1) it had alleged an enforceable agreement,
and (2) the trial court should not have rejected its claim for equitable estoppel.
Finding no merit in the contentions, we will affirm the judgment.
BACKGROUND
“Because this matter comes to us on demurrer, we take the facts from plaintiff’s
complaint, the allegations of which are deemed true for the limited purpose of
determining whether plaintiff has stated a viable cause of action.” (Stevenson v. Superior
Court (1997) 16 Cal.4th 880, 885.)2
In March 2020, state and local governments declared a state of emergency
based on the COVID-19 pandemic. In response to those declarations, the Board
passed Resolution 843. In its preliminary recitations, the resolution stated:
“WHEREAS, in accordance with California Public Contract Code Section 20113,
in an emergency when any repairs, alterations, work, or improvement is necessary
to any facility of public schools to permit the continuance of existing school classes,
or to avoid danger to life or property, the Board may, by unanimous vote, with the
approval of the county superintendent of schools, make a contract in writing or otherwise
on behalf [of] the District for the performance of labor and furnishing of materials or
supplies for the purpose without advertising for or inviting bid, notwithstanding
1 Undesignated statutory references are to the Education Code.
2 The parties have filed three requests for judicial notice. Onan Capital requests judicial
notice of minutes from two Board meetings and a resolution attached to one of the
minutes. The District requests judicial notice of a Board policy. None of the documents
were presented to the trial court. The District opposed the second of Onan Capital’s
requests. We deny the requests as irrelevant. (Evid. Code, § 210; Thompson v.
Department of Corrections (2001) 25 Cal.4th 117, 128, fn. 5.)
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section 20114 ….” The resolution added: “WHEREAS, Education Code section 35161
permits the Board to delegate to an officer or employee of the District any of the Board’s
powers and duties, and the Board desires to delegate to the District Superintendent or
designee certain powers and duties to address the COVID-19 pandemic.”
The resolution provided “that the Superintendent or designee is hereby
delegated the authority, pursuant to Board Policy 2210 and further to its broad
authority under Education Code section 35160 et seq., to take all appropriate action to
respond to the COVID-19 pandemic, including, but not limited to, any action: [¶] … [¶]
(9) By unanimous vote pursuant to section 20113 of the Public Contract Code and
subject to approval by the Sacramento County Superintendent of Schools, to execute
contracts without advertising or inviting bids; and notwithstanding section 20114,
authorize the flexibility of maintenance and operations, to respond to the emergency
conditions at District Sites; [¶] (10) To exercise the provisions of California Public
Contract Code section 20113 on the determination that an emergency condition exists
because of COVID-19 and related extraordinary conditions.”
The resolution concluded by stating it was an emergency measure within the
mandate and jurisdiction of the Board, necessary for the immediate welfare of the schools
and pupils in the District, and thus effective immediately upon its adoption. It would
remain in effect until repealed by formal Board action. All Board members who were
present voted for the resolution.
In August 2022, Francine Brissey, the District’s Director of Purchasing, requested
a quote from Onan Capital for COVID-19 test kits. After Onan Capital provided the
quote, Brissey responded with an e-mail saying, “ ‘[w]e are going to go ahead and place
our order with you. Thank you for being so patient with the process.’ ” Brissey signed
and sent a purchase order to Onan Capital, saying the District agreed to purchase 300,000
test kits for approximately $1.5 million. The purchase order referenced Resolution 843
and stated that “ ‘[i]ssuance of this Contract evidences the District’s acceptance of
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[Seller’s] offer’ ” and “ ‘Seller’s commencement of performance or acceptance of this
Contract in any manner shall conclusively evidence agreement to this Contract as
written.’ ” The purchase order was accompanied by a purchase requisition, signed by
the “ ‘Principal/Administrator’ ” and “ ‘Budget Services’ ” District employee. Over the
following months, Onan Capital stored the test kits and the parties communicated about
delivery dates.
In June 2023, the District informed Onan Capital that it would not accept delivery
of the test kits, would not pay for them, and was repudiating the purchase order
agreement. The District issued the purchase order knowing that the agreement had not
been approved by the Board under section 17604, which generally disclaims any
enforceable contract obligations against a school district unless the contract has been
“approved or ratified by the governing board, the approval or ratification to be evidenced
by a motion of the board duly passed and adopted.”
In July 2023, Onan Capital served a claim for damages on the District based
on the District’s refusal to pay for the test kits. The District rejected the claim. On
October 3, 2023, Onan Capital filed a complaint for damages against the District,
asserting a cause of action for breach of contract. The District filed a demurrer, arguing
that the purchase order had not been approved under section 17604, and therefore there
was no enforceable contract between the parties. The trial court sustained the demurrer,
agreeing that no enforceable contract existed, but granted Onan Capital leave to file an
amended complaint.
Onan Capital filed a first amended complaint in April 2024, adding an
equitable estoppel theory of recovery and alleging it had reasonably relied on the
District’s actions. The District again demurred, reiterating that there was no
enforceable contract and adding that equitable estoppel did not apply. Onan Capital
responded that equitable estoppel should apply because of the injustice that would
otherwise result.
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The trial court sustained the demurrer in a written order. It found that the first
amended complaint did not allege an enforceable contract because it appeared to
concede that the purchase order was not approved under section 17604, and
Resolution 843 did not demonstrate such approval. The trial court added that
equitable estoppel did not apply because section 17604 establishes the applicable
measure of a school district’s power to contract and estoppel is not applicable to an
agency that has not acted in compliance with the measure of its power. In addition,
the trial court rejected Onan Capital’s assertion that injustice would result, stating that
equitable estoppel could not contravene the limits of a school district’s contracting
power.
Although Onan Capital did not request further leave to amend, the trial court
provided another opportunity to file an amended complaint. Onan Capital did not file
a second amended complaint. The trial court signed an order dismissing the case and
entered judgment in favor of the District.
STANDARD OF REVIEW
“A demurrer tests the legal sufficiency of the factual allegations of a complaint to
state a cause of action.” (Thornton v. California Unemployment Ins. Appeals Bd. (2012)
204 Cal.App.4th 1403, 1411.) On appeal from a dismissal after an order sustaining a
demurrer, “ ‘ “we examine the operative complaint de novo to determine whether it
alleges facts sufficient to state a cause of action under any legal theory.” ’ ” (Silva v.
Langford (2022) 79 Cal.App.5th 710, 715.) To evaluate the complaint, we assume the
truth of all material facts properly pleaded in the complaint. (Balikov v. Southern Cal.
Gas Co. (2001) 94 Cal.App.4th 816, 819.) We also accept as true facts that are
reasonably implied or may be inferred from the complaint’s express allegations. (Ibid.)
We do not assume the truth of contentions, deductions, or conclusions of fact or law.
(Khodayari v. Mashburn (2011) 200 Cal.App.4th 1184, 1189.) We do not consider
“the substance of declarations, matter not subject to judicial notice, or documents
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judicially noticed but not accepted for the truth of their contents.” (Donabedian v.
Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.)
DISCUSSION
I
Onan Capital contends it alleged an enforceable agreement. It argues a plaintiff’s
burden on demurrer is light, the first amended complaint alleged that the purchase order
was authorized by the District, and the purchase order identified Resolution 843 as the
basis for the authority. As we will explain, however, those allegations were not sufficient
because the first amended complaint also alleged that the District knew the purchase
order was not approved or ratified by the Board.
“[T]he elements of a cause of action for breach of contract are (1) the existence of
the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s
breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v.
Goldman (2011) 51 Cal.4th 811, 821.) A contract requires the consent of parties capable
of contracting. (Civ. Code, § 1550.)
“ ‘A school district acts through a board with powers limited both in scope and
by the method of their exercise, and is bound by the action of its board only when the
latter acts with respect to a matter within a power conferred and in conformance with
required formalities.’ ” (Santa Monica Unified Sch. Dist. v. Persh (1970) 5 Cal.App.3d
945, 952 (Santa Monica).) Under section 17604, a board may delegate the power to
contract to a designee, but “no contract made pursuant to the delegation and authorization
shall be valid or constitute an enforceable obligation against the district unless and
until the same shall have been approved or ratified by the governing board, the
approval or ratification to be evidenced by a motion of the board duly passed and
adopted.”
In Santa Monica, supra, 5 Cal.App.3d 945, the cross-complainants sought
to enforce an agreement with a school district for the purchase of real property.
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(Id. at pp. 947-950.) Although the district’s board had passed a resolution authorizing
the county counsel to make offers to the cross-complainants, there was no substantial
evidence that a contract was ratified or approved by the district’s board, as required
by the Education Code. (Santa Monica, at p. 952.) The Second District Court of Appeal
held that a contract was not enforceable against the district because the district employees
had acted beyond their statutory authority. (Id. at pp. 952-953.) According to the court,
the statutory requirements demonstrated a legislative intent that major decisions be open
and subject to public scrutiny, and the lack of approval by the board would contravene
that intent. (Id. at p. 953.)
Similarly, in El Camino Community College District v. Superior Court (1985)
173 Cal.App.3d 606 (El Camino), a software company signed an agreement with a
district regarding payroll software. (Id. at p. 610.) Although the initial agreement was
approved by the district’s board, the company later sent additional agreements containing
an arbitration clause to the district. (Id. at pp. 610-611.) The later agreements were
signed by two vice presidents of the district but were not approved by the board.
(Id. at pp. 612-613.) The Second District Court of Appeal concluded the arbitration
clauses were not enforceable obligations of the district. (Ibid.)
Here, although Onan Capital received a purchase order signed by the
District’s director of purchasing, there is no allegation that a contract was approved
or ratified by the Board. Rather, the first amended complaint alleged that the District
knew the purchase order was not approved or ratified by the Board. A contract was
not enforceable against the district because the district employees had acted beyond
their statutory authority. (Santa Monica, supra, 5 Cal.App.3d at pp. 952-953.)
Onan Capital argues Santa Monica is distinguishable because it involved
the purchase of real property, not test kits. However, nothing in the language of
section 17604 indicates it is limited to real property contracts. Moreover, the court in
El Camino arrived at the same conclusion as Santa Monica in a case involving software,
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not real property. (El Camino, supra, 173 Cal.App.3d at pp. 610-611.) Onan Capital
further argues Santa Monica is inapposite because it did not involve a demurrer. But it is
appropriate to consider the application of a statutory provision to facts assumed
to be true for the purposes of a demurrer (Villery v. Department of Corrections &
Rehabilitation (2016) 246 Cal.App.4th 407, 413), and we see no reason to disregard
the analysis in Santa Monica simply because that application occurred at trial rather
than in connection with a demurrer.
To the extent Onan Capital argues Resolution 843 provided the authority
to create an enforceable agreement, we are not persuaded. As we have explained,
a board resolution cannot contravene a statutory restriction. Section 17604
required board approval or ratification, and the Board could not dispense with that
requirement. (Patton v. Governing Board (1978) 77 Cal.App.3d 495, 501 (Patton);
see § 35010, subd. (b) [school boards “shall prescribe and enforce rules not inconsistent
with law”].)
Moreover, to the extent Onan Capital argues Resolution 843 allowed a contract
to be authorized under section 17605, the argument lacks merit. Section 17605 provides
for the general purchase of supplies and does not have a board approval requirement, but
only for purchases below a certain amount. According to Onan Capital, Resolution 843
removed the general requirements for the competitive bidding process in public contracts;
and because competitive bidding is otherwise required for contracts over a certain amount
for the purchase of supplies under section 17605, Resolution 843 effectively removed the
dollar limitation, permitting the purchase order to be approved under section 17605
without Board approval.
We disagree for two reasons. First, section 17605 forbids any rule that would
authorize an officer or employee to make a purchase above the amount specified in
Public Contract Code section 20111. A resolution that purports to permit purchases
above the amount specified – $50,000 as adjusted by inflation – would run afoul of
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section 17605 and would exceed the Board’s authority. (Pub. Contract Code, § 20111,
subd. (a); see Patton, supra, 77 Cal.App.3d at p. 501 [the rulemaking authority of
governing boards is limited to rules not in conflict with other statutory restrictions].)
Second, Resolution 843 does not support Onan Capital’s argument.
The resolution states that the superintendent or other designated person is permitted,
by unanimous vote and subject to approval by the Sacramento County Superintendent
of Schools, to execute contracts without advertising or inviting bids; and notwithstanding
section 20114, to authorize the flexibility of maintenance and operations, to respond to
the emergency conditions at District sites. Section 20113 of the Public Contract Code
anticipates such a situation, saying that in emergencies, “the board may, by unanimous
vote, with the approval of the county superintendent of schools, do either of the
following: [¶] (1) Make a contract in writing or otherwise on behalf of the district for the
performance of labor and furnishing of materials or supplies for the purpose without
advertising for or inviting bids. [¶] (2) Notwithstanding Section 20114, authorize the use
of day labor or force account for the purpose.” Thus, Resolution 843 appears to
effectuate Public Contract Code section 20113 by declaring that such an emergency
exists, but neither that statute nor the resolution makes any mention of section 17605.
We decline to circumvent section 17605 by interpreting and applying provisions that do
not mention it. The purchase order was not authorized under section 17605 because it far
exceeded the dollar value covered by that statute.
II
Onan Capital further asserts that the trial court should not have rejected its claim
for equitable estoppel.
“ ‘The doctrine of equitable estoppel is founded on concepts of equity and fair
dealing. It provides that a person may not deny the existence of a state of facts if he
intentionally led another to believe a particular circumstance to be true and to rely upon
such belief to his detriment. The elements of the doctrine are that (1) the party to be
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estopped must be apprised of the facts; (2) he must intend that his conduct shall be acted
upon, or must so act that the party asserting the estoppel has a right to believe it was so
intended; (3) the other party must be ignorant of the true state of facts; and (4) he must
rely upon the conduct to his injury.’ ” (El Camino, supra, 173 Cal.App.3d at p. 613.)
“ ‘[Persons] dealing with a school district are chargeable with notice of limitations on its
power to contract.’ ” (Ibid.) Although the application of equitable estoppel is normally a
question of fact, it is a question of law “ ‘where the complaint pleads undisputed facts
establishing that equitable estoppel does not apply’ ” and “’ may be resolved on
demurrer.’ ” (Citizens for a Responsible Caltrans Decision v. Department of
Transportation (2020) 46 Cal.App.5th 1103, 1128.)
Generally, “[e]quitable estoppel ‘will not apply against a governmental body
except in unusual instances when necessary to avoid grave injustice and when the result
will not defeat a strong public policy.’ ” (City of Goleta v. Superior Court (2006)
40 Cal.4th 270, 279.) More particularly, the principle of estoppel is not applicable to a
municipal agency that has not acted in compliance with a statute establishing the measure
of its power. (Santa Monica, supra, 5 Cal.App.3d at p. 953; see also Kajima/Ray Wilson
v. Los Angeles County Metropolitan Transportation Authority (2000) 23 Cal.4th 305, 316
[“ ‘neither the doctrine of estoppel nor any other equitable principle may be invoked
against a governmental body where it would operate to defeat the effective operation of a
policy adopted to protect the public’ ”]; Chaidez v. Board of Administration etc. (2014)
223 Cal.App.4th 1425, 1432 [“ ‘no court has expressly invoked principles of estoppel to
contravene directly any statutory or constitutional limitations’ ”].)
The court in Santa Monica, supra, 5 Cal.App.3d 945, rejected an argument that
equitable estoppel could apply under the circumstances of that case, stating that “ ‘when
by statute the power of the board or municipality to make a contract is limited to a certain
prescribed method of doing so and any other method of doing it is expressly or impliedly
prohibited, no implied liability can arise for benefits received under a contract made in
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violation of the particular prescribed statutory mode. Under such circumstances the
express contract attempted to be made is not invalid merely by reason of some
irregularity or some invalidity in the exercise of a general power to contract, but the
contract is void because the statute prescribes the only method in which a valid contract
can be made, and the adoption of the prescribed mode is a jurisdictional prerequisite to
the exercise of the power to contract at all and can be exercised in no other manner so as
to incur any liability on the part of the municipality. Where the statute prescribes the
only mode by which the power to contract shall be exercised the mode is the measure of
the power. A contract made otherwise than as so prescribed is not binding or obligatory
as a contract and the doctrine of implied liability has no application in such cases.’ ”
(Id. at pp. 953-954.)
The court in El Camino, supra, 173 Cal.App.3d 606, also rejected the
application of equitable estoppel, reasoning that because individuals and entities
dealing with a school district are chargeable with notice of the limitations on its power
to contract, the company could not establish the estoppel element of ignorance. (Id. at
pp. 613-614.)
Citing Long Beach v. Mansell (1970) 3 Cal.3d 462, 496-497 (Mansell), Onan
Capital nevertheless notes that the California Supreme Court has permitted equitable
estoppel against public entities in certain circumstances. In Mansell, the Supreme Court
explained: “The government may be bound by an equitable estoppel in the same manner
as a private party when the elements requisite to such an estoppel against a private party
are present and, in the considered view of a court of equity, the injustice which would
result from a failure to uphold an estoppel is of sufficient dimension to justify any effect
upon public interest or policy which would result from the raising of an estoppel.” (Id. at
pp. 496-497.) The Supreme Court cautioned, however, that estoppel applied in that case
based on a “rare combination of government conduct and extensive reliance” such that
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the decision would “create an extremely narrow precedent for application in future
cases.” (Id. at p. 500.)
We have some sympathy for Onan Capital in this case. By all accounts, it
responded to the District’s request and made preparations during the pandemic to provide
a large quantity of needed test kits. Even so, this is not the type of rare case referenced
in Mansell. (Mansell, supra, 3 Cal.3d at p. 501.) According to the Supreme Court,
in Mansell thousands of homeowners had relied on the long continuing conduct of
the government entities and had believed that the land upon which they resided was
their own. (Id. at p. 500.) Whereas here, Onan Capital was chargeable with notice of
the limitations on the District’s power to contract (El Camino, supra, 173 Cal.App.3d
at pp. 613-614), and permitting the equitable estoppel claim to proceed would
contravene an express statutory restriction that exists to promote transparency and public
scrutiny of public contracts (Santa Monica, supra, 5 Cal.App.3d at p. 953; El Camino,
at p. 617).
Onan Capital argues that although a desire for transparency forms the foundation
of the competitive bidding process, Resolution 843’s circumvention of that process
demonstrates there is no threat to public contracting if equitable estoppel is applied in this
case. As we have explained, however, the emergency waiver of the competitive bidding
process was anticipated and authorized by statute, whereas a waiver of board approval
or ratification was prohibited by statute. (Compare Pub. Contract Code, § 20113 with
Ed. Code, § 17604.) The court in El Camino also rejected the argument that Mansell
should be controlling, stating that Mansell presented a factual situation differing so
sharply from the circumstances presented as to render it inapplicable. (El Camino,
supra, 173 Cal.App.3d at p. 615.)
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DISPOSITION
The judgment is affirmed.
/S/
MAURO, J.
We concur:
/S/
HULL, Acting P. J.
/S/
KRAUSE, J.
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