Macy v. City of Fontana ( 2016 )

Filed 2/23/16
CERTIFIED FOR PUBLICATION
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
VIRGINIA MACY et al., D068508
Plaintiffs and Appellants,
v. (Super. Ct. No. CIVDS1107686)
THE CITY OF FONTANA,
Defendant and Respondent;
TEN-NINETY, LTD.,
Real Party in Interest and Respondent.
APPEAL from a judgment of the Superior Court of San Bernardino County, David
S. Cohn, Judge. Affirmed.
Western Center on Law and Poverty, S. Lynn Martinez, Richard A. Rothschild,
Stephanie E. Haffner, Sue L. Himmelrich, Maria Eugenie Palomares; The Public Interest
Law Project, Deborah Collins and Michael Rawson for Plaintiffs and Appellants.
Best Best & Krieger, Victor L. Wolf, Danielle G. Sakai and Kevin J. Abbott for
Defendant and Respondent.
No appearance for Real Party in Interest and Respondent.
In 2011, the Legislature adopted legislation, which as of June 29, 2011, dissolved
the redevelopment agencies (RA's) that had been formed by municipalities throughout the
state under the provisions of the Community Redevelopment Law (Health & Saf. Code,1
§ 33000 et seq.; hereafter CRL). (See § 34170; see also Assem. Bill No. 26 (2011-2012
1st Ex. Session); hereafter AB 26.) Before their dissolution, the operations of RA's were
funded by way of so-called "tax increment" financing.
AB 26 provided a fairly detailed scheme for winding down the operations of RA's,
distributing their assets, and resolving claims against them. In particular, AB 26 created
successor agencies that were given responsibility over certain obligations of each
dissolved RA. Importantly, under the dissolution legislation, the liability of successor
agencies was limited to the value of the assets those agencies received from their
respective predecessor RA's.
Shortly before the Legislature dissolved RA's, plaintiffs and appellants Virginia
Macy, a low-income resident of the city; Libreria Del Pueblo, Inc.; and California
Partnership (collectively plaintiffs) filed a petition for a writ of mandate against the
Fontana Redevelopment Agency (the agency), alleging the agency failed to provide the
low- and moderate-income housing required under the CRL. Plaintiffs asked for relief in
the form of the payment of $27 million into the agency's low- and moderate-income
housing fund (LMIHF).
1 All further statutory references are to the Health and Safety Code unless otherwise
indicated.
2
After enactment of AB 26, plaintiffs amended their petition and added defendant
and respondent City of Fontana (the city), initially in its role as the successor agency
provided by AB 26, and later also in its separate capacity as a municipal corporation. In
its capacity as a municipal corporation, the city filed a demurrer to the petition, arguing
that under AB 26 only a successor agency may be held liable for the preexisting
obligations of an RA. The trial court sustained the demurrer without leave to amend.
We affirm. Under the scheme adopted by the Legislature under AB 26, the
liabilities of dissolved RA's are limited to the assets transferred to successor agencies.
There is nothing in AB 26, or later amendments to the dissolution legislation, that would
extend that liability beyond an RA's assets to municipalities and their general funds. As
we explain, the low- and moderate-income housing liabilities plaintiffs seek to enforce
arose under the CRL and were calculated as a percentage of tax increment funds collected
by RA's; prior to dissolution of RA's, those liabilities were never the liabilities of
municipalities and their general funds. An extension of RA statutory liabilities to
municipalities and their general funds would require a very clear expression of the
Legislature's intention to depart from the historical treatment of low- and moderate-
income housing obligations; no such expression appears in AB 26 or later amendments to
the dissolution legislation.
Contrary to plaintiffs' argument on appeal, neither the city's control over the
agency, nor a 1992 agreement the city made with the agency and a developer with respect
to distribution of its tax increment revenue, will support a claim against the city in its
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municipal capacity. Although the city controlled the agency, the city's control did not
make the city and its general fund liable for the agency's obligations with respect to
disposition of tax increment revenue. Admittedly, under the terms of the 1992
agreement, the city received a percentage of the agency's tax increment revenue, and in
light of the agency's obligations to its LMIHF, arguably those payments to the city were
improper. However, the agreement was subject to a successful validation proceeding
brought by the agency, which, as we explain, foreclosed any claims against the city with
respect to tax increment funds it received under the agreement.
FACTUAL AND PROCEDURAL BACKGROUND
A. 1992 OPA
Since 1976, the CRL has required that RA's use 20 percent of their revenue in
support of low- and moderate-income housing. (Fontana Redevelopment Agency v.
Torres (2007) 153 Cal.App.4th 902, 906 (Fontana I); see § 33334.2 et seq.) As fully set
forth in the court's opinion in Fontana I, for a number of years the agency failed to meet
the low- and moderate-income housing obligations imposed on it under the CRL. (Id. at
pp. 914-915.)
In substantial measure, this failure grew out of the agency's agreement to pay its
tax increment revenue to a developer, who was the predecessor in interest of real party in
interest, Ten-Ninety, Ltd. (Ten-Ninety). The agency agreed to pay its tax increment
revenues to Ten-Ninety in exchange for capital and construction financing Ten-Ninety
provided for the completion of infrastructure improvements needed for development of
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8,800 housing units and related commercial and other use facilities. (Fontana I, supra,
153 Cal.App.4th at p. 906.) The agreement with Ten-Ninety was called an Owner
Participation Agreement (OPA) and, in addition to the agency and Ten-Ninety, by way of
amendment, the city became a party to the OPA in 1992.
Under the amended OPA, the agency agreed that its tax increment revenues would
be paid to a fiscal agent and that the fiscal agent would pay 65 percent of the revenues to
Ten-Ninety and 35 percent of the revenues to the agency and the city. The amended
OPA stated that the infrastructure Ten-Ninety financed would support the development of
low- and moderate-income housing and that the agency's payments to Ten-Ninety thereby
met the agency's low- and moderate-income housing obligations under the CRL. The
amended OPA further stated that the payments the city received under the amended OPA
were compensation to the city for fiscal costs the city incurred as a result of Ten-Ninety's
development within the city. Importantly, the agency and the city brought a validation
action under Code of Civil Procedure section 860 with respect to the amended OPA, and
a final judgment finding that the amended agreement was valid was entered.
B. Fontana I
In 1992, the Legislature amended section 33334.2 and expressly required that
funds for low- and moderate-income housing be used for improvements if "the
improvements are made as part of a program which results in the new construction or
rehabilitation of affordable housing units for low[-] or moderate-income persons that are
directly benefited by the improvement or . . . the agency finds that the improvements are
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necessary to eliminate a specific conditions that jeopardizes the health or safety of
existing low[-] or moderate-income residents." (Italics added.)2
In 2001, the State Department of Housing and Community Development (the
department) performed an audit of the agency's programs, including in particular its
compliance with the CRL's low- and moderate-income housing obligations. The
department's audit found that the agency needed to reimburse two of its LMIHF's a total
of $67 million. (See Fontana I, 153 Cal.App.4th at p. 907.) Following the department's
audit, the agency and the department entered into a settlement agreement under which the
agency agreed to pay $6.1 million into one of its LMIHF's. (Ibid.)
At the time of the settlement agreement, the agency also approved the issuance of
tax allocation bonds totaling $40 million. The agency planned to issue the proceeds of
the bonds as a means of meeting its obligations to Ten-Ninety.
The agency brought a validation proceeding in which it sought validation of both
its settlement agreement with the department and issuance of the bonds. In Fontana I, a
low-income resident of the city and a nonprofit community organization, Libreria Del
Pueblo, Inc. (Libreria), challenged the validation, and, on appeal, they were successful.
The court found that the settlement agreement with the department was not subject to
validation under Code of Civil Procedure section 860 and that the bond issue was invalid
because, if the bonds were issued, the agency would exceed debt limitations it had
adopted. (Fontana I, supra, 153 Cal.App.4th at pp. 910-913.) In the alternative, the
2 The amendment became effective on January 1, 1993. (See Stats. 1992, ch. 1356,
§ 8.)
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court found the bonds were unlawful because they would perpetuate the agency's failure
to meet its low- and moderate-income housing obligations. (Id. at pp. 913-914.) The
court noted the defendants were not challenging the validity of prior implementation
plans the agency had adopted, the OPA, or any amendment of the OPA. (Id. at p. 913.)
However, the court found that the defendants in Fontana I could challenge the validity of
the agency's new effort, by way of the settlement agreement with the department and the
issuance of new bonds, to perpetuate its past unlawful practices. (Id. at pp. 913-914.)
The court stated: "What the record inescapably demonstrates is [the agency's] lack of
compliance with the required 20 percent contribution for affordable housing since
1987. . . . Although defendants may not be able to challenge earlier actions by [the
agency], they should be able to curtail this most recent effort to evade the statutory
obligation to provide and promote affordable housing." (Id. at p. 914.)
C. These Proceedings
On June 21, 2011, plaintiffs filed a petition for a writ of mandate in which they
alleged that the agency was continuing its practice of failing to use 20 percent of its tax
increment revenues in support of low- and moderate-income housing, as required by
section 33334.2 et seq. Plaintiffs alleged that between 2001 and 2010, the agency had
failed to pay into its LMIHF a total of $26 million otherwise required by section 33334.2
AB 26 became effective as of June 29, 2011. Under its terms, no new RA's could
be created, and, as we indicated, it provided a detailed scheme for winding down the
activities of existing RA's. In short, it provided that, other than an RA's' housing assets,
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all assets and liabilities of individual RA's would be assumed by individual "successor
agencies" and that the RA's housing assets would be assumed by individual "housing
successors." AB 26 gave any municipality that created an RA the option of becoming
either the RA' s "successor agency," "housing successor," or both; AB 26 also permitted
local housing authority to become "housing successors." Significantly, AB 26,
discontinued as of June 29, 2011, the obligation of RA's and their successors to pay 20
percent of their tax increment revenue in support of low- and moderate-income housing.
(§§ 34163, subd. (c)(4), 34176, subd. (d), 34176.1.)
Following adoption of AB 26, the city elected to become the agency's successor
agency; because the city was not willing to do so, the Fontana Housing Authority
(housing authority) became the agency's housing successor. In light of the city's election,
plaintiffs amended their petition to add the city as a defendant in its capacity as the
agency's successor agency and the housing authority as housing successor. As we
indicated at the outset, later plaintiffs amended their petition to add the city in its capacity
as a municipal corporation. Plaintiffs alleged that under the amended OPA the city had
assumed responsibility for the agency's compliance with the CRL and further that it had
unlawfully received and continued to unlawfully receive tax increment revenues.
The city, in its capacity as a municipal corporation, demurred to the complaint,
and its demurrer was sustained without leave to amend. A judgment of dismissal was
entered in the city's favor, and plaintiffs filed a timely notice of appeal.3
3 The city and the housing authority in their successor capacities also filed
demurrers to the plaintiffs' petition on the grounds it was barred by provisions of AB 26.
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DISCUSSION
I
Contrary to plaintiffs' suggestion on appeal, nothing in the CRL itself makes a
municipality, such the city, responsible for the obligations of an RA. (See Pacific States
Enterprises, Inc. v. City of Coachella (1993) 13 Cal.App.4th 1414, 1424-1425 (Pacific
States Enterprises).) In Pacific States Enterprises, a developer sued a city alleging
breach of contract by the city's RA. In affirming an order sustaining the city's demurrer
without leave to amend, we stated: "Redevelopment agencies are governmental entities
which exist by virtue of state law and are separate and distinct from the communities in
which they exist. Health and Safety Code section 33100 states: 'There is in each
community a public body, corporate and politic, known as the redevelopment agency of
the community.' Health and Safety Code section 33125 states: 'An agency may: (a) Sue
and be sued. . . . (c) Make and execute contracts and other instruments necessary or
convenient to the exercise of its powers.' [¶] . . . [¶]
"Well-established and well-recognized case law holds that the mere fact that the
same body of officers acts as the legislative body of two different governmental entities
does not mean that the two different governmental entities are, in actuality, one and the
same. [Citations.] This principle was perhaps stated most succinctly in the County of
L.A. v. Continental Corp. [(1952) 113 Cal.App.2d 207] opinion: 'Thus, the Board of
The trial court overruled their demurrers, and we denied the agency and the city's petition
for a writ of mandate, although we noted that there are substantial obstacles to the relief
the plaintiffs seek.
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Supervisors of the Los Angeles County Flood Control District [which is comprised of the
same legislative body of persons as the Board of Supervisors of the County of Los
Angeles], when acting as such, are not county officers, but state officers, and any action
taken by such board is not action by the Board of Supervisors of the County of Los
Angeles, as such, or of the county of Los Angeles.' (113 Cal.App.2d at p. 220; bracketed
material added.)
"Thus, . . . the legislative body which exercises local governmental power within a
given jurisdictional territory (a community) may, if it so chooses, also exercise the
powers of the redevelopment agency in that territory. But: When a 'dual capacity
legislative body' acts as the governing board of a redevelopment agency, it is the
redevelopment agency which is acting by and through that legislative body; and when
that same legislative body acts as the governing body of the 'community' (i.e., city) over
which it exercises local governmental powers, it is the 'community' which is acting by
and through that legislative body. The redevelopment agency and the 'community' are
not one and the same governmental entity. The redevelopment agency, by state law,
exists 'in each community' with certain limited powers and functions (Health & Saf.
Code, §§ 33020, 33100, 33120)--it is not the same entity as the community within which
it exists. The mischief which would be done if it were otherwise is apparent. As argued
by the City in its respondent's brief: 'Permitting a damages suit against the City for an
alleged breach of contract by the Redevelopment Agency is as improper as allowing a
redevelopment agency to take [city] funds earmarked for welfare assistance and spend it
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on a new commercial development.' Although the City's hypothetical example may be a
bit extreme, we agree in principle with the concern which it highlights." (Pacific States
Enterprises, supra, 13 Cal.App.4th at pp. 1424-1425, fn. omitted.)
The holding of Pacific States Enterprises with respect to an RA's contractual
liability applies to its statutory responsibilities as well. An RA and a municipality may,
as here, have the same governing body; however, given their separate identities and
liabilities, the statutory duties imposed on the RA may not be ascribed to the
municipality.4
In this regard, we note that the low- and moderate-income housing obligation of
RA's was defined as a percentage of tax increment revenues received by RA's.
(§ 33334.2.) Plainly, given this definition, this obligation was never considered one
imposed on a city's general fund.
II5
We also reject plaintiffs' suggestion that the city may be held liable under AB 26
and related legislation for the agency's low- and moderate-income housing obligations.
4 Although plaintiffs rely on the holding in Nolan v. Redevelopment Agency (1981)
117 Cal.App.3d 494, 498, in Pacific States Enterprises we expressly rejected Nolan.
(Pacific States Enterprises, supra, 13 Cal.App.4th at pp. 1424-1425.) We see no reason
to depart from our holding in Pacific States Enterprises or its rejection of Nolan.
5 We grant in their entirety plaintiffs' and the city's requests for judicial notice of
city ordinances, agency agreements, earlier validation proceedings and AB 26 as
approved by the Legislature and signed by the Governor. (Evid. Code, §§ 451, subd. (a),
452, subds. (c) & (d), 459.)
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AB 26 was enacted in 2011 in the midst of a state and local fiscal crisis
engendered by the economic recession that had commenced in 2008. (AB 26, § 1.)6 By
6 AB 26, section 1 states: "SECTION 1. The Legislature finds and declares all of
the following:
"(a) The economy and the residents of this state are slowly recovering from the
worst recession since the Great Depression.
"(b) State and local governments are still facing incredibly significant declines in
revenues and increased need for core governmental services.
"(c) Local governments across this state continue to confront difficult choices and
have had to reduce fire and police protection among other services.
"(d) Schools have faced reductions in funding that have caused school districts to
increase class size and layoff teachers, as well as make other hurtful cuts.
"(e) Redevelopment agencies have expanded over the years in this
state. The expansion of redevelopment agencies has increasingly shifted property taxes
away from services provided to schools, counties, special districts, and cities.
"(f) Redevelopment agencies take in approximately 12 percent of all
of the property taxes collected across this state.
"(g) It is estimated that under current law, redevelopment agencies
will divert $5 billion in property tax revenue from other taxing
agencies in the 2011-12 fiscal year.
"(h) The Legislature has all legislative power not explicitly restricted to it. The
California Constitution does not require that redevelopment agencies must exist and,
unlike other entities such as counties, does not limit the Legislature's control over that
existence. Redevelopment agencies were created by statute and can
therefore be dissolved by statute.
"(i) Upon their dissolution, any property taxes that would have been allocated to
redevelopment agencies will no longer be deemed tax increment. Instead, those taxes will
be deemed property tax revenues and will be allocated first to successor agencies to make
payments on the indebtedness incurred by the dissolved redevelopment agencies,
with remaining balances allocated in accordance with applicable
constitutional and statutory provisions.
"(j) It is the intent of the Legislature to do all of the following
in this act:
"(1) Bar existing redevelopment agencies from incurring new
obligations, prior to their dissolution.
"(2) Allocate property tax revenues to successor agencies for
making payments on indebtedness incurred by the redevelopment agency
prior to its dissolution and allocate remaining balances in accordance with applicable
constitutional and statutory provisions.
"(3) Beginning October 1, 2011, allocate these funds according to the existing
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its terms, AB 26 was enacted as means of alleviating that crisis by dissolving RA's and
transferring to municipalities, school districts and community college districts, the
property tax increment revenue RA's would otherwise collect and devote to
redevelopment activities. (AB 26, § 1.) In particular, in enacting AB 26, the Legislature
expressly set forth its intent to "[a]llocate property tax revenues to successor agencies for
making payments on indebtedness incurred by the redevelopment agency prior to its
dissolution and allocate remaining balances in accordance with applicable constitutional
and statutory provisions." (AB 26, § 1, subd. (j)(2).) As we have indicated, among other
matters, AB 26 discontinued the requirement that agencies and their successors provide
support for low- and moderate-income housing. (§§ 34163, subd. (c)(4), 34176, subd.
(d), 34176.1.) Nothing on the face of AB 26 itself imposes on municipalities any liability
with respect to a dissolved RA's pre-existing low- and moderate-income housing
obligations; under AB 26, only successor agencies have such responsibility and then only
to the extent they have received funds from a dissolved RA. (See AB 26, § 1, subd.
(j)(2).)
In 2012, in follow-up legislation, the Legislature adopted and the Governor signed
AB 1484. As the city points out, AB 1484 was enacted as a means of assuring that assets
property tax allocation within each county to make the funds available for cities,
counties, special districts, and school and community college districts.
"(4) Require successor agencies to expeditiously wind down the affairs of the
dissolved redevelopment agencies and to provide the successor agencies with limited
authority that extends only to the extent needed to implement a winddown of
redevelopment agency affairs."
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and income successor agencies received from dissolved RA's were in fact distributed to
all the local agencies,—e.g., school districts and community college districts—the
Legislature intended as recipients of the funds. In this regard, AB 1484 subjected
successor agencies and municipalities acting as successor agencies to an audit procedure
and, for purposes of conducting such audits, defined cities and counties as including
agencies it controlled. (§ 34167.10.) The audit procedures to which the expanded
definition of cities set forth in section 34167.10 applies do not expressly or by
implication expand the liability of municipalities; rather, as the city contends, the
expanded definition is simply a procedural device that gives the required audits necessary
breadth.
In sum, AB 26 and AB 1484 do not lend themselves to an interpretation under
which municipalities, although among the local agencies intended to benefit from
dissolution of RA's, would have their liabilities expanded beyond the assets transferred to
them when acting as successor agencies. Given that the expressed intention of AB 26
was to assist local municipalities in meeting their fiscal needs in a time of economic
crisis, it would be incongruous to interpret either AB 26 or AB 1484 in a manner that
expanded their liability to include responsibility for low- and moderate-income housing
obligations that had never previously been imposed on them.
III
Finally, we must reject plaintiffs' contention the city's role as a party to the OPA
and, under its terms, a recipient of tax increment funds, makes the city responsible for the
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agency's past failures to meet its low- and moderate-income housing obligations.
As plaintiffs point out, under the 1992 amendment to the OPA, which made the city a
party to the OPA, the city warranted and covenanted that the agency had met its low- and
moderate-income housing obligations under the CRL, and the parties agreed that 35
percent of the agency's tax increment revenues would be paid into an account controlled
by the city as compensation for fiscal impacts development by Ten-Ninety had on the
city. As we have indicated, these provisions were the subject of a successful validation
proceeding under Code of Civil Procedure section 860.
As the city points out, the validation judgment forecloses any claims that attack
the validity of the OPA or its terms. Code of Civil Procedure section 870 provides in
pertinent part that a validation judgment "if no appeal is taken, or if taken and the
judgment is affirmed, shall, notwithstanding any other provision of law including,
without limitation, Sections 473 and 473.5, thereupon become and thereafter be forever
binding and conclusive, as to all matters therein adjudicated or which at that time could
have been adjudicated, against the agency and against all other persons, and the
judgment shall permanently enjoin the institution by any person of any action or
proceeding raising any issue as to which the judgment is binding and conclusive."
(Italics added.) "A validation action implements important policy considerations. '[A]
central theme in the validating procedures is speedy determination of the validity of the
public agency's action.' [Citation.] 'The text of section 870 and cases which have
interpreted the validation statutes have placed great importance on the need for a single
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dispositive final judgment.' [Citation.] The validating statutes should be construed so as
to uphold their purpose, i.e., 'the acting agency's need to settle promptly all questions
about the validity of its action.' [Citation.]" (Friedland v. City of Long Beach (1998) 62
Cal.App.4th 835, 842)
Here, the central premise of the city's participation in the OPA is the agreement's
affirmation that the agency was meeting its obligations under the CRL and that it was
lawful to distribute the agency's tax increment funds to Ten-Ninety and the city. The
central premise of plaintiffs' claims is, of course, their assertion that the agency was not
meeting its obligations under the CRL and that its distributions to Ten-Ninety and the city
were not lawful. By obtaining the validation judgment, the city protected itself, as well
as the agency and Ten-Ninety, from precisely the claims that plaintiffs' now assert arise
under and by virtue of the agreement.
We recognize the amended version of the OPA expressly requires that the city and
the agency do nothing that adversely impacts Ten-Ninety's right to receive the pledged
tax increment revenue, unless ordered to do so by way of a final order in any action
challenging the validity of the OPA. This covenant and condition is part of a provision
which further requires that the agency cooperate with Ten-Ninety in "asserting all legal
and equitable defenses available to any such action." In simply recognizing the
possibility the OPA might be challenged and subject to conflicting orders of a court, but
promising not to undermine the OPA and agreeing to cooperate in defending the validity
of the pledge, the agency and the city in no sense waived one of the principle defenses to
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validity of the OPA, the bar provided by Code of Civil Procedure section 870.
Moreover, plaintiffs' reliance on the holdings in Fontana I, County of Solano v.
Vallejo Redevelopment Agency (1999) 75 Cal.App.4th 1262 and Starr v. City and County
of San Francisco (1977) 72 Cal.App.3d 164, 178-179 (Starr) is unpersuasive. In
Fontana I, the court expressly noted the plaintiffs were not attacking the validity of the
OPA or any prior action of the agency, but only challenging its then most recent attempt
to perpetuate its improper distribution of tax increment funds. (Fontana I, supra, 153
Cal.App.4th at p. 913.) In County of Solano v. Vallejo Redevelopment Agency, the court
found that a city that improperly benefited from the distribution of its RA's tax increment
was subject to a claim for unjust enrichment. (County of Solano v. Vallejo
Redevelopment Agency, supra, 75 Cal.App.4th at pp. 1277-1280.) Significantly,
however, the city did not assert that mechanism by which it was benefitted, the use of
redevelopment funds for school and road improvements, was subject to a validation
judgment. Thus, the court in County of Solano v. Vallejo Redevelopment Agency was not,
as we are, compelled to give effect to such a validation judgment.
In Starr, a municipality and its local RA entered into a financing agreement under
which the municipality agreed to lease a sports and exhibition center to be financed by
way of bonds issued by the RA. The financing agreement expressly contemplated
execution of a more specific project lease and supplemental leases. The financing
agreement was the subject of a successful validation action, and a judgment validating it
was entered by default. Later, the city and the RA entered into a project lease and
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separate repayment contract which obligated the city to make payments that exceeded the
debt limitations of article XVI, section 18 of the California Constitution. In finding that
the financing agreement validation judgment did not prevent a constitutional challenge to
the later repayment contract, the court stated: "The financing agreement and settlement
agreement which were validated by the court in the 1974 All Persons action contain no
hint of the provisions which are violative of the constitutional debt limitation, and which
were added in 1975. Under well settled law, the doctrine of res judicata does not apply
where there are changed conditions and new facts which were not in existence at the time
of the prior judgment, and upon which such judgment was based. [Citations.]" (Starr,
supra, 72 Cal.App.3d at pp. 178-179.)
In important respects Starr is analogous to Fontana I: In both cases, what was in
dispute was not any past action the municipality had already taken, but the validity of a
new, different action the municipality proposed to take. In both cases, the respective
courts found the new action was different from the past action and not protected by the
earlier validation judgment. Here, of course, neither the city nor the agency have
proposed any new action related to the agency's past payment of tax increment revenues
to either the city or Ten-Ninety. Rather, in the end, with respect to the city, plaintiffs at
most propose recovering from the city payments paid to the city and Ten-Ninety under
the terms of the validated 1992 amendment to the OPA. Under Code of Civil Procedure
section 870, the propriety of that past activity is not subject to relitigation.
Moreover, the 1992 amendment to the CRL, which more strictly limited the ways
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in which an RA could meet its low- and moderate-income housing obligations, is not a
changed circumstance that would permit a challenge to the validated amendment to the
OPA. (See Slater v. Blackwood (1975) 15 Cal.3d 791, 796-797 [no relief from bar of res
judicata "founded on a change in law following the original judgment"]; Smith v. Brovan
(1979) 97 Cal.App.3d 19, 24.) Admittedly, where an agency has a continuing duty and
that duty is altered by way of an act of the Legislature, injunctive relief previously
granted with respect to that ongoing duty may be adversely affected. (See Welfare Rights
v. Frank (1994) 25 Cal.App.4th 415, 422-424.) Thus, in Frank, a consent judgment by
which a county agreed to calculate welfare assistance payments consistent with the then
controlling statutory authority, was, with respect to future payments, subject to change
when the underlying statutory requirement was altered. (Ibid.) Here, of course, the low-
and moderate-income housing obligation of RA's has been discontinued in its entirety,
and there is no longer any obligation going forward. Thus, what is at issue is the city and
Ten-Ninety's prior receipt of tax increment funds under the terms of the validated
amendment to the OPA. Having relied on the validation judgment in taking those funds,
the city cannot now be asked to return those funds without directly undermining the
validation judgment.7
7 In applying the bar provided by res judicata and Code of Civil Procedure section
870, we in no sense embrace the city's administration of the agency and the agency's
obvious and longstanding failure to meet its obligations under the CRL. (See Fontana I,
supra, 153 Cal.App.4th at pp. 913-914.) However, as the court in Slater v. Blackwood
stated: "The consistent application of the traditional principle that final judgments, even
erroneous ones [citations], are a bar to further proceedings based on the same cause of
action is necessary to the well-ordered functioning of the judicial process. It should not
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DISPOSITION
The judgment is affirmed. The city to recover its costs of appeal.
BENKE, Acting P. J.
WE CONCUR:
HALLER, J.
PRAGER, J.*
be impaired for the benefit of particular plaintiffs, regardless of the sympathy their plight
might arouse in an individual case." (Slater v. Blackwood, supra, 15 Cal.3d at p. 797.)
* Judge of the San Diego Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
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