Mix v. City of Oakland CA1/1 ( 2014 )

Filed 10/3/14 Mix v. City of Oakland CA1/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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 This opinion has not been certified for publication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
FIRST APPELLATE DISTRICT
DIVISION ONE
DAVID E. MIX,
Plaintiff and Appellant, A140477
v. (Alameda County
CITY OF OAKLAND, Super. Ct. No. RG12661429)
Defendant and Respondent.
INTRODUCTION
In this action challenging the City of Oakland’s (City) issuance of pension
obligation bonds for its police and fire employee retirement fund, the trial court held the
lawsuit was untimely under the Validation Act (Code Civ. Proc., § 860 et seq.).1 The
Validation Act permits a public agency to validate certain official acts within a 60-day
period, particularly those which, as here, involve public bond funds. Where the public
agency does not bring a validation action, the subject act becomes immune from attack
unless an interested person brings a “reverse validation action” within the 60-day period.
Because plaintiff David E. Mix did not challenge the decision to authorize the pension
obligation bonds by means of a reverse validation action within the required 60-day
period, we affirm.
1
All further statutory references are to the Code of Civil Procedure unless otherwise
noted.
1
FACTUAL BACKGROUND
I. Background of the City’s Prior Validation Action
“[The Police and Fire Retirement System (PFRS)] was created in 1951 when
separate police and fire retirement systems were merged pursuant to article XXVI of the
Oakland City Charter (Charter). [Citation.] Only members of the Oakland Police
Department (Department) or Oakland Fire Department hired prior to July 1, 1976, are
eligible for coverage by PFRS. [Citations.] Current members of the Department . . . are
included in the state-created Public Employees’ Retirement System (PERS). Thus, PFRS
is essentially a closed system with a dwindling pool of retirees. As of January 31, 2012,
PFRS had 619 retired police members and widows, with an average age of 73.
“PFRS is funded through a combination of member contributions (reportedly
between 5 and 13 percent of each member paycheck), investment returns and additional
monies supplied by the City ‘as may be necessary.’ [Citations.] Its governing Board
consists of seven members, including representatives of the City, the Department, the fire
department and the PFRS retirees, as well as a local life insurance executive, a banker
and a community representative. [Citation.] Pursuant to the terms of the Charter, PFRS
is managed and administered by the Board, which has ‘exclusive control of the
administration and investment’ of all PFRS funds. [Citation.] ” (City of Oakland v.
Oakland Police & Fire Retirement System (2014) 224 Cal. App. 4th 210, 216, fn. omitted
(City of Oakland).)
On June 8, 1976, the voters approved Measure R, a Charter amendment affecting
sections of Article XXVI. Among other things, the measure allowed unfunded City
contributions to be amortized over a 40-year period.
On June 7, 1988, the voters approved Measure O, extending the amortization
period for the obligation to fund the PFRS by 10 years, to 2026. (Charter, Art. XXVI, §
2619(6).)
2
On January 23, 1996, the City Council adopted Ordinance No. 11851 to enact the
PFRS Pension Obligation Bond Law, which (1) authorized the City to issue bonds to
finance all or a portion of its obligations to PFRS, (2) established the powers and
procedures relating to the issuance of debentures and bonds for the purpose of funding or
refunding the City’s obligations to PFRS, and (3) provided that an action to determine the
legality and validity of “proceedings previously taken or proposed” relating to such
debentures and bonds could be brought under section 860 et seq. “or any of the general
laws of the State applicable in the premises.”
On February 6, 1996, the City Council adopted Resolution No. 72446, approving
the issuance of one or more debentures and one or more series of pension obligation
bonds, and authorizing delivery of a master trust agreement and additional supplemental
trust agreements.
On August 28, 1996, the City, as authorized by Resolution No. 72447, filed a
complaint for validation pursuant to section 860 et seq. The City sought court
confirmation of the following: (1) the legality of proceedings relating to the issuance of
debentures evidencing the City’s obligations to fund PFRS, (2) the City’s power to issue
bonds, execute and deliver the trust agreement, and enter into an interest rate swap
agreement and any other related agreements or contracts authorized by the Council,
including the January 23, 1996 funding agreement between the City and PFRS, (3) the
City’s power to adopt the ordinance and resolutions pertaining thereto, and (4) the
inapplicability of the constitutional debt limitation.
On September 9, 1996, the City successfully sought an ex parte order authorizing
publication of notice of the pendency of validation proceedings.
On November 15, 1996, the City filed an application for default judgment.
On January 3, 1997, the trial court, noting that no interested parties had appeared
in opposition of the City’s application, entered default judgment in favor of the City.
3
II. Issuance of Pension Obligation Bonds
On February 1, 1997, the City issued pension obligation bonds in the amount of
$436,289,659.15 under a master trust agreement and a first supplemental trust agreement.
On February 25, 1997, the City executed a pension obligation debenture
acknowledging indebtedness to PFRS in the amount of $432,867,300.
On September 1, 2001, the city issued a second series of pension obligation bonds
in the amount of $195,636,449.10 under a second supplemental trust agreement.
On June 19, 2012, the City Council adopted Resolution No. 83940, approving the
terms of sale of a third series of pension obligation bonds to fund PFRS.
On June 28, 2012, the City Council adopted Ordinance No. 13128, the final
authorization for issuance and sale of the Series 2012 pension obligation bonds.
On July 1, 2012, the City issued a third series of pension obligation bonds in the
amount of $212,540,000 under a third supplemental trust agreement.
On July 30, 2012, the City executed a pension obligation debenture
acknowledging indebtedness to the PFRS the amount of $210,000,000.
PROCEDURAL HISTORY
On December 27, 2012, plaintiff filed a complaint for declaratory and injunctive
relief and a petition for writ of mandate challenging the authorization, issue, and sale of
the Series 2012 pension obligation bonds. He claimed the bond issued violated the
California Constitution’s debt limit provision. (Cal. Const, art. XVI, § 18, subd. (a).)2
He asserted his action was timely under sections 312 and 349.2 as having been filed
within six months of the City’s adoption of Ordinance No. 13128.
On March 27, 2013, the City filed a first amended answer to the complaint.
2
Article XVI, section 18, subdivision (a) reads, in relevant part: “No county, city, town,
township, board of education, or school district, shall incur any indebtedness or liability
in any manner or for any purpose exceeding in any year the income and revenue provided
for such year, without the assent of two-thirds of the voters of the public entity voting at
an election to be held for that purpose . . . .”
4
On August 23, 2013, the City filed a motion for judgment on the pleadings. In
part, the City asserted the complaint was barred by the 60-day statute of limitations set
forth in sections 8603 and 8634.
On September 26, 2013, the trial court filed its order granting the motion for
judgment on the pleadings without leave to amend.
On October 31, 2013, plaintiff filed a motion to set aside and vacate the judgment
under section 663.
On December 9, 2013, the trial court denied the motion to set aside and vacate the
judgment. This appeal followed.
DISCUSSION
I. Standard of Review
Appellate courts review the grant of a motion for judgment on the pleadings by
applying the same rules that govern review of an order sustaining a general demurrer.
(Smiley v. Citibank (1995) 11 Cal. 4th 138, 146.) In each context, appellate courts
independently determine whether a cause of action has been stated. (Mendoza v.
Continental Sales Co. (2006) 140 Cal. App. 4th 1395, 1401.)
The City initially claims the 1997 validation action judgment addressed future
bonds holdings, in that it specifically held that future supplemental trust agreements
issued under the master trust agreement are legal, binding, and do not violate
constitutional debt limitations. The City argues the 1997 action is therefore final and
3
Section 860 provides: “A public agency may upon the existence of any matter which
under any other law is authorized to be determined pursuant to this chapter, and for 60
days thereafter, bring an action in the superior court of the county in which the principal
office of the public agency is located to determine the validity of such matter. The action
shall be in the nature of a proceeding in rem.” (Italics added.)
4
Section 863 provides, in relevant part: “If no proceedings have been brought by the
public agency pursuant to this chapter, any interested person may bring an action within
the time and in the court specified by Section 860 to determine the validity of such
matter. . . .” (Italics added.)
5
conclusive as to the issues raised in the present action. We need not resolve this issue,
however, because we conclude that the instant lawsuit is barred by the Validation Act’s
60-day limitation period even assuming the 1999 judgment does not preclude the suit.
The determination of the statute of limitations applicable to a cause of action is a question
of law subject to independent review. (McLeod v. Vista Unified School Dist. (2008) 158
Cal. App. 4th 1156, 1164 (McLeod).)
II. The Validation Act Applies to Plaintiff’s Claims
A. The Validation Act
The Validation Act authorizes a public agency to bring an action to validate
certain matters, but does not specify the matters to which it applies. (McLeod, supra, 158
Cal.App.4th at p. 1165.) “Rather, section 860 provides the validation procedure applies
to ‘any matter which under any other law is authorized to be determined pursuant to this
chapter.’ [Citation.]” (Id. at pp.1165-1166, fn. omitted.) “ ‘A validating proceeding
differs from a traditional action challenging a public agency’s decision because it is an in
rem action whose effect is binding on the agency and on all other persons.’ [Citation.]”
(Id. at p. 1166.) “Validation actions are ‘forever binding and conclusive.’ [Citation.]”
(Ibid.)
“ ‘The validating statutes contain a 60-day statute of limitations to further the
important policy of speedy determination of the public agency’s action.’ [Citations.]
‘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.]” (McLeod, supra, 158 Cal.App.4th at p. 1166.)
“If the public agency does not bring a validation action, ‘any interested person
may bring an action within the time and in the court specified by Section 860 to
determine the validity of such matter.’ [Citation.] A validation action by an interested
person is called a ‘ “reverse validation action.” ’ [Citation.] ‘Under the statutory scheme,
“an agency may indirectly but effectively ‘validate’ its action by doing nothing to
6
validate it; unless an ‘interested person’ brings an action of his own under section 863
within the 60-day period, the agency’s action will become immune from attack whether it
is legally valid or not.” ’ [Citations.]” (McLeod, supra, 158 Cal.App.4th at p. 1166,
italics omitted; see also Friedland v. City of Long Beach (1998) 62 Cal. App. 4th 835, 846-
847 [“as to matters which have been or which could have been adjudicated in a validation
action, such matters—including constitutional challenges—must be raised within the
statutory limitations period in section 860 et seq. or they are waived”], italics added.)
B. The June 28, 2012 Authorization of the Series 2012 Pension Obligation
Bonds
As noted above, the Validation Act applies to “any matter which under any other
law is authorized to be determined pursuant to this chapter.” (§ 860.) The City asserts the
ordinance approving the Series 2012 bonds is subject to the provisions of the Validation
Act under the authority set forth in Government Code section 53511.
The applicability of the Validation Act was relatively limited until the enactment
of Government Code sections 53510 and 53511 in 1963. (Ontario v. Superior Court
(1970) 2 Cal. 3d 335, 342 (Ontario).) Government Code section 53511, subdivision (a)
provides that a local agency “may bring an action to determine the validity of its bonds,
warrants, contracts, obligations or evidences of indebtedness pursuant to [the Validation
Act].”5 The language of this provision is very broad, especially since there “is no
limitation or qualification on the word ‘contracts.’ ” (Ontario, supra, at p. 343.)
However, considering the statutory scheme as a whole, and the surrounding words within
the statute itself, the Supreme Court has suggested the statute’s reach is limited to the
topic of “a local agency’s financial obligations.” (Id. at p. 344.)
Even taking into account this limitation on the statute’s applicability, there can be
little question that Government Code section 53511 authorizes validation actions for acts
5
Government Code section 53510 defines “local agency” as “county, city, city and
county, public district or any public or municipal corporation, public agency or public
authority.”
7
and contracts related to bonds, including pension obligation bonds. (See Walters v.
County of Plumas (1976) 61 Cal. App. 3d 460, 468 [“We perceive the essential difference
between those actions which ought and those which ought not to come under [the
validation statutes] to be the extent to which the lack of a prompt validating procedure
will impair the public agency’s ability to operate. The fact that litigation may be pending
or forthcoming drastically affects the marketability of public bonds; it has little effect
upon such matters as a contract with a public defender or the purchase of a computer”],
italics added.) We conclude the present action concerning the Series 2012 pension
obligation bonds falls within Government Code section 53511 which, by its express
terms, applies to actions to determine the validity of bonds issued by a local agency such
as the City.
III. The 60-Day Statute of Limitations Applies
As noted above, section 863 provides, in relevant part: “If no proceedings have
been brought by the public agency pursuant to this chapter, any interested person may
bring an action within the time and in the court specified by Section 860 to determine the
validity of such matter.” Again, the time limit specified by section 860 is 60 days.
Plaintiff argues that a different statute of limitations period—the six-month period
found in section 349.2—applies.6 He notes that Oakland Municipal Code section
6
Section 349.2 provides, in part: “Where any acts or proceedings are taken under color
of law by or on behalf of any city, county, city and county, special district, public
corporation or other public entity for the authorization, sale or issuance of bonds: [¶] (1)
The validity of any such acts or proceedings for the authorization of bonds shall not be
contested in any action unless such action shall have been brought within six months
from the date of election authorizing said bonds, in cases where said bonds are required
by law to be authorized at an election, or within six months from the date of adoption of a
resolution or ordinance authorizing such bonds, in cases where bonds are not required by
law to be authorized at an election; [¶] (2) The validity of any such acts or proceedings
for the sale of bonds (including all acts or proceedings taken prior thereto and providing
for the issuance of such bonds) shall not be contested in any action unless such action
shall have been brought within six months from the date of sale of said bonds; [¶] (3) The
validity of any such acts or proceedings for the issuance and delivery of, or payment for,
8
4.44.030, subdivision (C) provides: “An action may be brought pursuant to Chapter 9
(commencing with Section 860) of Title 10 of Part 3 of the Code of Civil Procedure of
the State of California [the Validation Act] or any of the general laws of the state
applicable in the premises, to determine the validity of the debentures and bonds and the
legality and validity of all proceedings . . . .” (Italics added.) He asserts section 349.2
represents “a general law of the state” that is “clearly applicable in the premises.” He
thus contends he was not required to file a reverse validation action under the Validation
Act to assert his claims. He further argues his complaint does not fall within section 860
because it is not a proceeding “in Rem” and does not relate to “bonds” within the
meaning of Government Code section 53511. Instead, he claims he seeks “nullification
of the bond approval, issue and sale,” and asserts section 349.2 is “clearly an appropriate
statute by which to challenge the ‘validity’ of those bonds.” He is mistaken.
While plaintiff claims section 349.2 “is also a ‘bond validation’ statute,” it is
merely a statute of limitations provision. It does not contain the basis for an independent
right of action. Enacted prior to the Validation Act, section 349.2 operates solely to set
forth the outer time limit within which to bring an action to contest the validity of bonds.
We observe there are no reported cases construing this provision. However, it is well
established that specific statutes take precedence over more general ones. (Salazar v.
Eastin (1995) 9 Cal. 4th 836, 857.) Along these lines, section 869 of the Validation Act
emphasizes the exclusiveness of the time constraints involved in bringing bond-related
challenges: “No contest except by the public agency or its officer or agent of any thing or
matter under this chapter shall be made other than within the time and the manner herein
specified.” (§ 869, italics added.)
bonds shall not be contested in any action unless such action shall have been brought
within six months from the date of issuance and delivery of, or payment for, said
bonds. . . .”
9
As discussed above, plaintiff’s claims fall squarely within the provisions of section
860 et seq. As noted in Ontario, supra, it is a “fact that both section 860 and
Government Code section 53510 purport to govern . . . those validation proceedings
which are brought by or against a public agency . . . .” (2 Cal. 3d 335, 343, original
italics omitted, italics added.) Further, as that opinion also observes, “[t]he typical
validating action seeks a declaratory judgment that the bonds, assessments, etc., of the
agency are or are not valid . . . .” (Id. at p. 344.) As plaintiffs admits, he seeks to
invalidate and nullify the Series 2012 bond issuance. However, he failed to file this
action in a timely manner. Consequently we agree with the trial court that his challenge
is not cognizable: “Where the Legislature has provided for a validation action to review
government actions, mandamus is unavailable to bypass the statutory remedy after the
limitations period has expired. [Citation.]” (Barratt American, Inc. v. City of Rancho
Cucamonga (2005) 37 Cal. 4th 685, 705.) Even if section 349.2 authorizes an
independent claim, it has no application to the Series 2012 bonds because, under the
Validation Act, the City’s actions became “immune from attack” after 60 days, per
McLeod, supra, 158 Cal.App.4th at p. 1166, and the authorities cited therein.
Nor is this lawsuit saved by the holding of Kaatz v. City of Seaside (2006) 143
Cal. App. 4th 13 (Kaatz), on which plaintiff relies. In Kaatz, the defendant real estate
developer successfully moved in the trial court for dismissal on the ground that the
plaintiff had not sued under the validation statutes within 60 days. The appellate court
reversed, holding that the municipality’s conveyance of public property—along with the
prior execution of the underlying contract with the developer concerning the potential
acquisition and sale of the property—was not subject to validation. (Id. at p. 20.) In so
holding, the court found the validation statutes did not apply to that action, in part
because the challenged contract had no relationship to the issuance of bonds. (Id. at p.
42.)
10
Here, by contrast, plaintiff’s claims specifically relate to the issuance of bonds and
do not include any other substantive basis for a decision that would take it outside the
reach of the validation statutes. We also note his claims bear a direct relationship to the
City’s 1997 validation action and seek the same relief that is authorized by section 863 –
invalidation of the City’s conduct in authorizing the Series 2012 pension obligation
bonds. Accordingly, the Validation Act governs. As plaintiff filed his complaint well
beyond the 60-day statute of limitations period that applies to such lawsuits, the action is
untimely.
DISPOSITION
The order is affirmed.
_________________________
Dondero, J.
We concur:
_________________________
Humes, P.J.
_________________________
Banke, J.
11