McGee v. Torrance Unified School District

Filed 5/29/20
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
JAMES D. MCGEE, B298122
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. YC068686)
v.
TORRANCE UNIFIED SCHOOL
DISTRICT et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Los
Angeles County. Michael P. Vicencia, Judge. Affirmed.
Carlin Law Group, and Kevin R. Carlin for Plaintiff and
Appellant.
Atkinson, Andelson, Loya, Ruud & Romo, Martin A. Hom
and Jennifer D. Cantrell, for Defendant and Respondent
Torrance Unified School District.
Finch, Thornton & Baird, Jason R. Thornton and Daniel P.
Scholz for Defendant and Respondent Balfour Beatty
Construction.
_____________________________
This appeal is the latest in a series of cases challenging the
legality of lease-leaseback agreements used by school districts for
construction and modernization projects. (See California
Taxpayers Action Network v. Taber Construction, Inc. (2017) 12
Cal.App.5th 115, 122 (Taber).) Authorized by Education Code
section 17406, lease-leaseback agreements are used to “contract[]
for construction or improvement of school facilities. Under a
lease-leaseback agreement, the school district leases its own real
property to a contractor for a nominal amount, and the contractor
agrees to construct school facilities or improve existing facilities
on the property and lease the property and improvements back to
the school district. At the end of the lease-leaseback agreement,
title to the construction project vests in the school district.”
(Taber, supra, at p. 122.)
Starting in 2013, taxpayer James D. McGee filed a series of
three complaints to challenge lease-leaseback agreements
between the Torrance Unified School District (the District) and
Balfour Beatty Construction (Balfour) for several schools in the
district. For the latter two complaints, the California Taxpayers
Action Network joined him as plaintiff (together referred to as
McGee). Labeling the complaints as reverse validation actions
under Code of Civil Procedure section 860 et seq.,1 McGee alleged
a host of claims to invalidate the agreements. After two previous
appeals, McGee’s complaints have been narrowed to his causes of
action for conflict of interest. (McGee v. Torrance Unified School
District (Jan. 23, 2015, B252570) [nonpub. opn.] (McGee I); McGee
1 All undesignated statutory citations refer to the Code of
Civil Procedure.
2
v. Balfour Beatty Construction, LLC (2016) 247 Cal.App.4th 235(McGee II).)
The trial court entered judgment dismissing the remaining
conflict of interest claims because the challenged projects had all
been completed, which it held rendered the reverse validation
action moot. (See Wilson & Wilson v. City Council of Redwood
City (2011) 191 Cal.App.4th 1559, 1579 (Wilson).) McGee argues
this was wrong because the lease-leaseback agreements were not
subject to validation; his conflict of interest claims were in
personam claims separate from his in rem reverse validation
claims; and the court could have ordered disgorgement as a
remedy even though the projects have been finished.
We reject his contentions. The lease-leaseback agreements
were subject to validation, and his conflict of interest claims
necessarily challenge the validity of the agreements, regardless of
label or remedy. Allowing his claims to proceed long after the
projects have been finished would undermine the strong policy of
promptly resolving the validity of public agency actions. Because
the projects were completed, his claims are moot. We affirm the
judgment of dismissal.
BACKGROUND
Between 2012 and 2015, the District and Balfour entered a
series of lease-leaseback agreements for construction projects
through Torrance Unified School District Obligation Bond
Measure Y and Measure Z. Starting in 2013, McGee filed three
complaints challenging them.
The first lawsuit challenged the lease-leaseback
agreements for projects at Hickory Elementary School, Madrona
Middle School, and North High School. The trial court sustained
demurrers to the complaint, and on appeal, we affirmed dismissal
3
of all claims except conflict of interest. We held that claim was
sufficiently pled and remanded it to the trial court. (McGee I,
B252570, 2015 WL 301918, at pp. *1, *6.)
The second lawsuit challenged lease-leaseback agreements
for projects at Tower Elementary School and Riviera Elementary
School. Again, the trial court sustained demurrers, and again we
affirmed except for the conflict of interest claim. (McGee II,
supra, 247 Cal.App.4th at pp. 246–250.) We held McGee had
standing to bring his conflict of interest claim pursuant to
Government Code section 1090 and the claim was sufficiently
pled. (McGee II, supra, at pp. 246–250.)
The third lawsuit challenged lease-leaseback agreements
for projects at Torrance High School, Edison Elementary School,
and Yukon Elementary School. The operative complaint
contained a single cause of action for conflict of interest.2
McGee alleged each complaint was “brought in this court as
a special in rem proceeding” to declare the challenged agreements
void and invalid. Each complaint’s prayer for relief sought a
declaration the action was properly brought pursuant to the
validation statutes for “judicial invalidation” of the lease-
leaseback agreements. The complaints also sought declarations
each agreement was void and invalid and requested
disgorgement of all money paid to Balfour.
McGee’s conflict of interest claims essentially alleged
Balfour “had a conflict of interest based on its professional
program management, construction management, and
preconstruction services to the District. Plaintiffs allege Balfour
2 The agreements for the Edison and Yukon schools were
rescinded in 2015, so they are no longer at issue.
4
provided preconstruction services including budgeting,
development of plans and specifications and that these services
‘filled the roles and positions of officers, employees and agents’ of
the District.” (McGee II, supra, 247 Cal.App.4th at p. 246.)
The trial court consolidated the cases and held a bench trial
limited to the mootness issue. The court heard testimony that all
the projects had been completed. Because that was the only fact
necessary to decide mootness, the court declined to admit
stipulated exhibits offered by McGee. The court found McGee’s
case was an “in rem reverse validation action” filed pursuant to
section 860 et seq. that was rendered moot by the completion of
the challenged projects. It entered judgment of dismissal.
DISCUSSION
“A case is considered moot when ‘the question addressed
was at one time a live issue in the case,’ but has been deprived of
life ‘because of events occurring after the judicial process was
initiated.’ [Citation.] Because ‘ “the duty of . . . every . . . judicial
tribunal . . . is to decide actual controversies by a judgment which
can be carried into effect, and not to give opinions upon moot
questions or . . . to declare principles or rules of law which cannot
affect the matter in issue in the case before it[,] [i]t necessarily
follows that when . . . an event occurs which renders it impossible
for [the] court, if it should decide the case in favor of plaintiff, to
grant him any effectual relief whatever, the court will not proceed
to formal judgment. . . .” [Citations.]’ ” (Wilson, supra, 191
Cal.App.4th at p. 1574.) The pivotal question in determining
mootness is “whether the court can grant the plaintiff any
effectual relief.” (Ibid.) We review the issue de novo when, as
here, the facts are not disputed. (K.G. v. Meredith (2012) 204
Cal.App.4th 164, 174.)
5
Section 860 enables a public agency to commence an action
to validate “any matter which under any law is authorized to be
determined pursuant to this chapter, and for 60 days thereafter.”
If the 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.”
(§ 863.) A case brought by an interested person is frequently
called a “reverse validation” action. (California Commerce
Casino, Inc. v. Schwarzenegger (2007) 146 Cal.App.4th 1406,
1420, fn. 12 (Commerce Casino).)
By statute, a validation action “shall be in the nature of a
proceeding in rem.” (§ 860.) That means “a validation action
operates against the property, as distinct from an injunction that
operates against persons. [Citation.] As an in rem proceeding, a
validation action differs from traditional actions challenging a
public agency decision; its effect binds the agency and all other
persons.” (Friedland v. City of Long Beach (1998) 62 Cal.App.4th
835, 843 (Friedland).)
An agency need not bring a validation action to validate a
decision, however. Instead, “ ‘an agency may indirectly but
effectively “validate” its action by doing nothing to 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 was legally valid or not.’
[Citations.] As to matters ‘which have been or which could have
been adjudicated in a validation action, such matters . . . must be
raised within the statutory limitations period in section 860 et
seq. or they are waived.’ ” (Commerce Casino, supra, 146
Cal.App.4th at p. 1420; see § 870, subd. (a).)
6
“A key objective of a validation action is to limit the extent
to which delay due to litigation may impair a public agency’s
ability to operate financially.” (Friedland, supra, 62 Cal.App.4th
at p. 843.) To that end, the validation statutes enable a “ ‘
“speedy determination of the validity of the public agency’s
action . . . plac[ing] great importance on the need for a single
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.]’ ” (Commerce Casino, supra, 146
Cal.App.4th at pp. 1420–1421.) They “fulfill the important
objective of ‘facilitat[ing] a public agency’s financial transactions
with third parties by quickly affirming their legality.’ [Citation.]
In particular, ‘ “[t]he fact that litigation may be pending or
forthcoming drastically affects the marketability of public
bonds[.]” ’ ” (Id. at p. 1421; see Friedland, supra, at p. 843.)
Given the public interest in quickly resolving the legality of
agency decisions, “California law has long recognized that the
completion of a public works project moots challenges to the
validity of the contracts under which the project was carried out.”
(Wilson, supra, 191 Cal.App.4th at p. 1575.) Thus, a reverse
validation action “may well become moot if the challenged
redevelopment project is allowed to proceed during the pendency
of the action.” (Id. at p. 1579.)
In Wilson, the court dismissed a reverse validation action
attacking a project and the resolutions authorizing it because the
project had been completed before final judgment. (Wilson,
supra, 191 Cal.App.4th at pp. 1575–1576.) The case had been
pending for five years without explanation, which ran counter to
the intent of “[v]alidation actions . . . to settle promptly all
7
questions about the validity of an agency’s action.” (Id. at
p. 1580.) The delay was partly attributable to the plaintiff, which
did not try to stop the project during the lawsuit: “ ‘Since [the
plaintiff] made no effort to seek preliminary injunctive relief or a
stay order in order to preserve the status quo, [it] is not in any
position to complain of the very change in circumstances that [it]
might have prevented by seeking such relief.’ ” (Id. at p. 1581.)
As in Wilson, McGee’s reverse validation action was
rendered moot by the completion of the challenged projects.
McGee filed his first lawsuit as far back as 2013, and the trial
court did not dismiss the cases until 2019. During those six
years, McGee did nothing to stop the projects from moving
forward while the validity of the lease-leaseback agreements was
litigated. He tries to explain that choice by claiming he did not
want to “impair District’s ability to operate” and he had an
“adequate remedy at law” through disgorgement. Even if true,
that does not change the fact that the projects were completed.
As Wilson recognized, this years-long delay destroyed the very
purpose behind the validation statutes—“to settle promptly all
questions about the validity of an agency’s action.” (Wilson,
supra, 191 Cal.App.4th at p. 1580, italics added.) Having sought
no stay or injunction, he is in no position “ ‘to complain of the
very change in circumstances that [he] might have prevented by
seeking such relief.’ ” (Id. at p. 1581.)
McGee does not seriously dispute the holding in Wilson
that a reverse validation action becomes moot if the challenged
project is completed. Instead, he argues his conflict of interest
claims fall outside Wilson because they were not subject to the
validation statutes in a number of ways. His arguments are
unpersuasive.
8
First and most fundamentally, McGee contends the lease-
leaseback agreements themselves are not subject to validation.
The validation statutes apply “when ‘any other law’ authorizes
their application.” (Golden Gate Hill Development Co. v. County
of Alameda (2015) 242 Cal.App.4th 760, 765–766.) In
determining whether his claims “fall[] within the boundaries of a
particular legislative declaration that the validation statutes
apply, we assess whether ‘ “[t]he gravamen of a complaint and
the nature of the right sued upon, rather than the form of the
action or relief demanded . . . ” ’ falls within the language of the
declaration.” (Santa Clarita Organization for Planning & the
Environment v. Abercrombie (2015) 240 Cal.App.4th 300, 308
(Abercrombie); see McLeod v. Vista Unified School Dist. (2008)
158 Cal.App.4th 1156, 1165 (McLeod).)
Here, the applicable law is Government Code section
53511, which declares the validation statutes apply to “an action
to determine the validity of [a local agency’s] bonds, warrants,
contracts, obligations or evidences of indebtedness.” (Gov. Code,
§ 53511, subd. (a), italics added.) McGee argues the lease-
leaseback agreements are not “contracts” as the term is used in
Government Code section 53511. “California courts have read
[Government Code] section 53511’s reference to ‘contracts’
‘narrow[ly]’ to reach only those contracts that ‘are in the nature
of, or directly relate[d] to a public agency’s bonds, warrants or
other evidences of indebtedness.’ ” (Abercrombie, supra, 240
Cal.App.4th at p. 309; see Commerce Casino, supra, 146
Cal.App.4th at p. 1429.) But contracts “involving financing and
financial obligations” fall within this provision (Friedland, supra,
62 Cal.App.4th at p. 843), as do contracts that are “ ‘inextricably
9
bound up’ ” with bond funding and financing (McLeod, supra,
158 Cal.App.4th at p. 1169).
We previously held Education Code section 17406
authorizes lease-leaseback agreements without competitive
bidding. (McGee II, supra, 247 Cal.App.4th at p. 242.) That
provision has been characterized as providing a method of
“financing school construction.” (Taber, supra, 12 Cal.App.5th at
p. 136 [noting Education Code section 17406 provided method for
“financing school construction,” but did not require school district
to lack funds in order to enter lease-leaseback agreements].)
As such, “the use of validation actions is a common practice for
school construction projects structured as a lease-leaseback
arrangement.” (Davis v. Fresno Unified School Dist. (2015) 237
Cal.App.4th 261, 273, fn. 4 (Davis).) Here, the challenged lease-
leaseback agreements were “funded through Torrance Unified
School District General Obligation Bond Measure[s].” (See
McGee II, supra, 247 Cal.App.4th at p. 240 [“The contracts were
awarded to Balfour and were funded through a general obligation
bond.”].) Thus, the lease-leaseback agreements involved the
District’s financial obligations and were inextricably bound up in
the District’s bond financing, bringing them within the scope of
“contracts” covered by Government Code section 53511.
Were there any doubt, McGee’s own treatment of the lease-
leaseback agreements throughout this litigation demonstrates
they fall within Government Code section 53511. His operative
complaints expressly alleged these cases were brought under
section 863 as in rem actions to invalidate the lease-leaseback
agreements. That includes his most recent lawsuit, which
asserted only a conflict of interest claim and yet characterized the
suit as an in rem proceeding and sought a declaration the lawsuit
10
was properly brought as a reverse validation action. McGee filed
each complaint within the short 60-day statute of limitations for
reverse validation actions. (§§ 860, 863.) He complied with the
statutory procedure for service of a reverse validation action by
publication. (§§ 861, 863.) Co-plaintiff California Taxpayers
Action Network was not a party to the first complaint, but it filed
an answer, alleging it had “an interest in the validity of the
contracts.” It could have only done so as an “interested party”
subject to jurisdiction by publication of the summons according to
the validation statutes. (§ 861; see Friedland, supra, 62
Cal.App.4th at p. 843.)
Beyond the pleadings, McGee previously argued in the trial
court the lease-leaseback agreements were subject to validation.
In opposing motions for judgment on the pleadings, he relied on
Davis to take the position the lease-leaseback agreements “[a]re
[s]ubject to [v]alidation” pursuant to Government Code section
53511 because they “are for the purpose of financing.” He also
distinguished Abercrombie because the court in that case held the
challenged contracts were not subject to validation.
(Abercrombie, supra, 240 Cal.App.4th at pp. 309–310.) McGee
even went so far as to claim Balfour “cannot dispute lease
leaseback contracts like the ones at issue here are subject to
validation actions because [the defendants] have in prior motions
requested the Court take judicial notice of scores of prior
validation actions as evidence of the legality of their transaction.
They can[]not have it both ways.”
We also previously held McGee had standing to bring his
conflict of interest claims in part because “this case involved a
validation action in which the court had authority to set aside
void contracts.” (McGee II, supra, 247 Cal.App.4th at p. 248.)
11
Similarly, other recent appellate decisions evaluating lease-
leaseback agreements arose in cases brought under the
validation statutes. (See Taber, supra, 12 Cal.App.5th at p. 122;
Los Alamitos Unified School Dist. v. Howard Contracting, Inc.
(2014) 229 Cal.App.4th 1222, 1225; Davis, supra, 237 Cal.App.4th
at p. 273, fn. 4.) We are satisfied the lease-leaseback agreements
fall within Government Code section 53511, bringing them within
the validation statutes.3
The centerpiece of McGee’s appeal is his argument the
conflict of interest claims were in personam taxpayer claims
brought pursuant to section 526a falling outside the validation
statutes.4 Section 526a allows a taxpayer to bring “[a]n action to
obtain a judgment restraining and preventing any illegal
expenditure of, waste of, or injury to, the estate, funds, or other
property of a local agency . . . against any officer thereof, or any
agent, or other person, acting in its behalf.” (§ 526a, subd. (a).)
“The purpose of section 526a ‘is to permit a large body of persons
to challenge wasteful government action that otherwise would go
unchallenged because of the standing requirement.’ [Citation.]
‘The essence of a taxpayer action is an illegal or wasteful
3 Balfour and the District invoke various legal doctrines to
argue McGee is precluded from asserting this argument due to
his prior positions in the trial court. We need not rely on those
principles. McGee’s previous treatment of the lease-leaseback
agreements is proof enough to support the conclusion the
agreements are, in fact, subject to the validation statutes.
4 McGee argues the trial court had personal jurisdiction over
Balfour and the District because they made general appearances.
That aspect of personal jurisdiction over the parties is not
disputed and is not at issue here.
12
expenditure of public funds or damage to public property.’ ”
(McLeod, supra, 158 Cal.App.4th at p. 1165; see Taber, supra, 12
Cal.App.5th at p. 141.)
McGee contends he may use section 526a to assert conflict
of interest claims pursuant to common law and Government Code
section 1090. “[S]ection 526a is, as a general rule, available to
taxpayers who wish to challenge government contracts affected
by financial conflicts of interest,” including pursuant to
Government Code section 1090. (San Diegans for Open
Government v. Public Facilities Financing Authority of City of
San Diego (2019) 8 Cal.5th 733, 746 (San Diegans).)5
Government Code section 1090 “ ‘ “codifies the long-standing
common law rule that barred public officials from being
personally financially interested in the contracts they formed in
their official capacities.” [Citation.] Government Code “section
5 McGee has withdrawn an argument he may independently
assert a conflict of interest claim pursuant to Government Code
section 1092, which permits “any party” to avoid a contract that
violates Government Code section 1090. San Diegans held that
section does not “create[] a private right of action for nonparties
to sue to avoid public contracts.” (San Diegans, supra, 8 Cal.5th
at p. 746.) The District and Balfour go further to argue McGee
also cannot pursue a section 526a taxpayer claim—which is
permissible under San Diegans—because he distinguished a case
in his opening appellate brief on the ground it “involved a CCP
§ 526a action not a GC § 1092 action as is the case here.” His
opening brief was filed before San Diegans was issued. In his
reply brief, he argued he could bring his claim pursuant to
section 526a. The District and Balfour filed supplemental briefs
addressing San Diegans. Considered against this backdrop, we
will not treat McGee’s isolated comment as a bar to his reliance
on section 526a.
13
1090 is concerned with ferreting out any financial conflicts of
interest, other than remote or minimal ones, that might impair
public officials from discharging their fiduciary duties with
undivided loyalty and allegiance to the public entities they are
obligated to serve. [Citation.] Where a prohibited interest is
found, the affected contract is void from its inception [citation]
and the official who engaged in its making is subject to a host of
civil and (if the violation was willful) criminal penalties,
including imprisonment and disqualification from holding public
office in perpetuity [citations].” ’ [Citation.] ‘ “[A] contract in
which a public officer is interested is void, not merely
voidable.” ’ ” (McGee II, supra, 247 Cal.App.4th at p. 247.)
While in rem validation actions and in personam taxpayer
actions are not mutually exclusive, section 526a taxpayer claims
alleging violations of section 1090 may still fall within the
validation statutes. (See McLeod, supra, 158 Cal.App.4th at p.
1167; Regus v. City of Baldwin Park (1977) 70 Cal.App.3d 968,
972.)6 The form of the claim does not govern; we must examine
“ ‘[t]he gravamen of a complaint and the nature of the right sued
upon,” in order to determine whether his claims fall within the
validation statutes. (McLeod, supra, at p. 1165; see Committee
for Responsible Planning v. City of Indian Wells (1990) 225
Cal.App.3d 191, 198 [requiring consolidation under validation
6 McGee argues he timely filed all his claims within the 60-
day period required by the validation statutes. (McLeod, supra,
at pp. 1166–1167 [Both in rem and in personam “actions may be
brought to challenge governmental action if suit is filed within
the 60-day limitations period for validation actions.”].) Balfour
does not dispute the issue, so it is not clear why McGee focuses on
it. We need not address it.
14
statutes of all claims that “relate to the same fundamental issue:
the validity of Indian Wells’ actions”].) The ultimate question is
whether the claim “go[es] beyond the determination of the
validity of the challenged matter” or is merely a “request for
invalidation . . . in other words.” (Katz v. Campbell Union High
School Dist. (2006) 144 Cal.App.4th 1024, 1034 (Katz).)
In McLeod, for example, a taxpayer brought a suit
pursuant to section 526a to challenge aspects of a school district’s
measure authorizing the issuance of construction bonds.
(McLeod, supra, 158 Cal.App.4th at p. 1160.) The taxpayer
sought declaratory and injunctive relief, but did not plead a claim
under the validation statutes. (Id. at p. 1163.) The suit was filed
well beyond the 60-day statute of limitations for a validation
claim, so the issue was whether the section 526a claim was
subject to that limitations period or some longer period that
would have made it timely. The court held the 60-day period for
filing validation claims applied because the section 526a claim
attacked a decision that was subject to the validation statutes.
(McLeod, at pp. 1164–1165.) Recognizing section 526a claims and
validation claims are not mutually exclusive, the court held the
taxpayer action “directly challenged the validity of a planned
bond issuance, and the lack of a prompt validating procedure
would impair the District’s ability to operate.” (McLeod, at
p. 1169.)
The court in Katz reached a similar conclusion. In that
case, the taxpayer filed a complaint to invalidate a newly passed
tax and alleged additional claims for a declaration defining a
term in the new tax provision and for an injunction restraining
imposition of the tax. (Katz, supra, 144 Cal.App.4th at p. 1029.)
The publication of the summons was defective under the
15
validation statutes, and the court rejected the taxpayer’s
argument his declaratory and injunctive relief claims were not
affected because they were not subject to validation. (Id. at
p. 1033.) The taxpayer’s complaint did “not seek relief unrelated
to the parcel tax he claims is invalid.” (Id. at p. 1034.) Instead,
the declaratory relief claim requested the court define the term at
issue so the tax was valid and the injunction sought to restrain
levy of the tax, which was “merely a request for invalidation of
the tax stated in other words.” (Ibid.)
As in McLeod and Katz, regardless of how McGee
characterizes his conflict of interest claims or the relief he seeks,
the gravamen is the invalidity of the lease-leaseback agreements.
McGee admits he seeks “a finding that the contracts were ultra
vires, illegal, void, and unenforceable due to a conflict of
interest.” His complaints alleged as much. A judgment finding
Balfour violated section 1090 would render the lease-leaseback
agreements “ ‘void from [their] inception.’ ” (McGee II, supra, 247
Cal.App.4th at p. 247.) Although McGee focuses on the fact that
he seeks disgorgement directly from Balfour, any judgment
ordering disgorgement would require a finding the lease-
leaseback agreements were void. In other words, the agreements
would necessarily be invalidated.
A judgment in McGee’s favor would also undermine the
very purpose behind the validation statutes. A cloud has hung
over the challenged projects for years, destroying any hope in
prompt validation of the underlying lease-leaseback agreements.
That delay is largely attributable to McGee, who strategically
chose not to prevent the projects from moving forward. Beyond
the specific projects here, a judgment in McGee’s favor would
threaten future projects with the prospect of lawsuits long after
16
completion. That would undoubtedly inhibit the District’s ability
to obtain financing for them. (See Friedland, supra, 62
Cal.App.4th at p. 843 [“A key objective of a validation action is to
limit the extent to which delay due to litigation may impair a
public agency’s ability to operate financially.”].) “ ‘[T]he essential
difference between those actions which ought and those which
ought not to come under [the validation statutes] [is] 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’ ” and likely would have “ ‘a chilling effect upon
potential third party lenders, thus resulting in higher interest
rates or even the total denial of credit.’ ” (McLeod, supra, 158
Cal.App.4th at pp. 1167–1168.)
Because his conflict of interest claims are subject to
validation, McGee cannot obtain effective relief through
disgorgement. He cites Thomson v. Call (1985) 38 Cal.3d 633(Thomson), but it is distinguishable. That case involved a
taxpayer challenge to a city’s fully performed real estate
transaction alleging a violation of Government Code section 1090.
The court held the city could retain title to the land and recoup
the purchase price from the councilman with the alleged conflict
of interest. (Thomson, supra, at pp. 646–647; see San Diegans,
supra, 8 Cal.5th at p. 737 [citing Thomson to note penalty for
violating Government Code section 1090 “is substantial: The
interested official must disgorge any profits earned, and may not
recover any consideration paid, under the contract”].) Thomson
did not arise under the validation statutes, so the court did not
address whether the disgorgement remedy remains available
17
when a Government Code section 1090 claim seeks to void a
completed contract falling within the validation statutes.
We will follow the reasoning in Wilson. The court in that
case noted the plaintiff sought relief similar to what McGee seeks
here—a judgment the challenged actions were “ ‘invalid, illegal,
void and of no effect’ ” and an order to direct the public agencies
to “seek reimbursement ‘for all monies illegally and improperly
spent’ ” on the challenged project. (Wilson, supra, 191
Cal.App.4th at p. 1567.) McGee points out Wilson did not involve
direct disgorgement from a private party like Balfour, but Wilson
did not focus on the precise form of the claims or requested relief;
it focused on the fact the challenged project had been completed.
Because “[v]alidation actions are intended to settle promptly all
questions about the validity of an agency’s action,” the completion
of the project rendered the action moot. (Id. at pp. 1580–1581,
italics added.)
The question McGee raises is whether the lease-leaseback
agreements were infected by a conflict of interest. If so, the only
way he can obtain the remedy of disgorgement is with a judgment
declaring the lease-leaseback agreements were “ ‘void from [their]
inception.’ ” (McGee II, supra, 247 Cal.App.4th at p. 247.)
Because the agreements were subject to validation and he seeks
to invalidate them, the completion of the challenged projects
rendered his claims moot.7
7 In light of our conclusion, we need not address McGee’s
argument the trial court abused its discretion by refusing to
admit his stipulated exhibits. As the trial court noted, the only
relevant fact was whether the projects had been finished, which
was proved through testimony. For the same reason, we deny
18
DISPOSITION
The judgment is affirmed. Respondents are entitled to
costs on appeal.
CERTIFIED FOR PUBLICATION
BIGELOW, P. J.
WE CONCUR:
GRIMES, J.
STRATTON, J.
McGee’s request for judicial notice as unnecessary to resolve the
appeal.
19