Mix v. City of Oakland CA1/1

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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.

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All further statutory references are to the Code of Civil Procedure unless otherwise

noted.

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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).)

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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.

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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 . . . .”

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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.)

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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.)

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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

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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.”

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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

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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,

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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. . . .”

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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.)

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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.

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