ENCINITAS — Treggon Owens and his wife June, who ran the Moonlight Beach concession stand for more than three and a half years, filed a breach-of-contract lawsuit against the city last month.
The couple is alleging the city prematurely terminated its lease with them when it didn’t have the power to do so. At the beginning of 2009, the Owens signed on to take over the concession stand. The one-year contract included four one-year renewal options.
In 2010, 2011 and 2012, city staff sent letters to the Owens notifying them they were renewing the contract.
But Attorney Michael Curran, representing the Owens, argued the couple retained the right to renew the contract each year, not the city, given prevailing legal cases and government code.
“The city wasn’t in a position to renew the option; the city wasn’t the option holder,” Curran said.
Jace Schwarm, city risk management department leader, said staff wasn’t able to comment at this time because the matter is in litigation.
Curran said the Owens originally “didn’t think anything” of the city’s lease renewal notifications since “they’re not lawyers.”
Also, the city and the Owens disagree over the contract’s termination date and the legal options at the couples’ disposal.
In February 2012, city staff sent the Owens a letter stating the lease would end in nine months due to a planned revamp at Moonlight Beach. This past fall, construction crews tore down the old concession stand and started work on a new one as part of a 3,600-square-foot building.
The city maintains the February 2012 letter triggered the end of the contract, according to a response letter from the city sent to Curran. Consequently, the letter states, the Owens had until February 2013 to file a claim, but because they didn’t do so until June, they have no legal recourse, as per the California tort claims act.
In turn, Curran said the tort claims act doesn’t apply to the case because the contract explicitly allows the Owens to take legal action, making the timing of the lawsuit irrelevant.
Regardless, the February 2012 letter was only a warning of the end of the contract, rather than the actual termination, he said.
Curran went on to argue the contract wasn’t breached until this past spring. He maintained the Owens were under the impression they would operate the new stand once the upgrades debuted.
“They believed the contract was still in place,” Curran said.
This past February, the city announced it was seeking proposals from businesses to operate the space. Curran said his clients were led to believe the process was a formality.
The Owens turned in a proposal. Yet ultimately, the city awarded a new lease to Moonlight Beach Deli & Dogs this past May.
The Owens submitted a plan to take over the concession stand in mid-2008. Upon inking the deal with the city, they spent roughly $80,000 on repairs, a menu expansion and other improvements, according to the lawsuit.
The 2009 contract with the city stipulated the Owens would pay $25,000 or 14 percent of gross revenue; whichever is greater, to the city annually.
They maintain they were unaware the Moonlight Beach upgrades would come so soon; the city was talking about improvements at Beacon’s Beach first.
“There’s nothing in the contract to advise them that their lease may be disrupted,” Curran said.
With the lawsuit, the Owens are seeking $120,000 in damages. That includes money for the repairs and lost profits. Additionally, they’re seeking to recover legal fees.
The case was filed with the San Diego Superior Court.
Last summer, the Encinitas City Council approved the $4.8 million Moonlight Beach project.