Cooper v. Leslie Salt Co.

• Decision Date: 20 March 1969
• Docket Number: Nos. S,S.F. 22617,s. S
• Citation: 70 Cal.2d 627,451 P.2d 406,75 Cal.Rptr. 766
• Court: California Supreme Court
• Parties: , 451 P.2d 406 Walter S. COOPER, Plaintiff and Appellant, v. LESLIE SALT COMPANY et al., Defendants and Respondents. Walter S. COOPER, Plaintiff and Appellant, v. T. Jack FOSTER et al., Defendants and Respondents. F. 22616,

Page 766

75 Cal.Rptr. 766

70 Cal.2d 627, 451 P.2d 406

Walter S. COOPER, Plaintiff and Appellant, v. LESLIE SALT COMPANY et al., Defendants and Respondents.

Walter S. COOPER, Plaintiff and Appellant, v. T. Jack FOSTER et al., Defendants and Respondents.

Nos. S.F. 22616, S.F. 22617.

Supreme Court of California,

In Bank.

March 20, 1969.

As Modified on Denial of Rehearing April 17, 1969.

Funsten & Caldwell and James W. Funsten, San Francisco, for plaintiffs and appellants.

Chickering & Gregory, W. Burleigh Pattee, William E. Trautman, Long & Levit, Bert W. Levit, Gerald Z. Marer, Victor B. Levit, San Francisco, Wilson, Jones, Morton & Lynch and John E. Lynch, San Mateo, for defendants and respondents.

BURKE, Justice.

In this controversy over the establishment and operation of a special improvement district, a hearing was granted by this court, after decision by the Court of Appeal, First Appellate District, Division Four, for the purpose of giving further study to the problems presented. After such study we have concluded that the opinion of the Court of Appeal, prepared by Justice Christian, correctly treats and disposes of the issues involved, and with certain further comments pertinent to contentions urged, it is adopted as and for the opinion of this court. Such opinion (with appropriate deletions and additions as indicated) is as follows: ¹

Plaintiff Walter S. Cooper appeals from judgments of dismissal ² which followed the sustaining of general demurrers without leave to amend in an action attacking the manner in which respondents have caused municipal improvements and services to be financed by the Estero Municipal Improvement District, of which appellant is a taxpayer.

The district was established by special act (Estero Act) of the Legislature. (Stats.1961, 1st Ex.Sess. 1960, ch. 82, p. 459.) The act prescribed the boundaries, organization and powers of the district, as well as methods for its operation, management, financing, change of boundaries, and dissolution. Provision is made in section 121 of the act for an In rem proceeding to establish the validity of 'the creation of the district and any annexations thereto' or to determine its right to issue bonds.

A judgment purporting to establish the constitutionality of the act creating the district and the validity of the district's bonds was rendered in an uncontested In rem proceeding in the Superior Court of San Mateo County on July 20, 1961.

The statute recited that 'The land in the district is not owned by residents. The owners are the ones primarily concerned with the district and the ones who will be supporting the district. The owners should therefore hold the voting power.' (§ 215, subd. (f).) Thus it was provided that voting was to be upon the basis of assessed valuation of land ( ) (§§ 17, 19, 20, 64), and that the district was to be governed by three directors (§ 26) who must be 'owners or officers or legal representatives of owners' (§ 28). The statute places a broad array of municipal functions within the powers of the district, including provision of street lighting, sewerage, storm drainage, garbage service, water service, parks and playgrounds, and reclamation of ( ) land (§ 77). The district is also empowered to construct small craft harbors (§ 78), provide fire protection (§ 79), and 'make and enforce all necessary and proper regulations, not in conflict with the laws of this State, for the * * * supplying of * * * police protection service. A violation of a regulation of the district is a misdemeanor punishable as such.' (§ 97.) The statute includes elaborate financial provisions, including authorization for the directors to issue general obligation bonds (§§ 105--123) and other types of securities to raise money for development of the raw land included within the district so that the owners thereof, who absolutely control the operations of the district, ³ can cause the various improvements to be made which are necessary to make the land fit for marketing as a residential tract. (See Willoughby, The Quiet Alliance, (1965) 38 So.Cal.L.Rev. 72, for a review of several comparable special statutes under which governmental powers have been made serviceable to land developers.)

Appellant's complaint, alleging four causes of action upon various theories, was amended twice before a general demurrer was sustained without leave to amend. Because the four causes of action contain overlapping allegations, and the dismissal was upon a general rather than a special demurrer, we shall analyze as a whole all of the factual allegations of the complaint to determine (1) whether any cause of action was stated, and (2) whether the trial court committed an abuse of discretion in cutting off further amendment.

There is no allegation that the formation and operation of the district failed to conform to the provisions of the Estero Act; rather it is charged that the act itself is void in that it purports to create a corporation for municipal purposes by special act of the Legislature in violation of article XI, section 6, of the California Constitution. ⁴

Respondents contend that Code of Civil Procedure section 803 precludes appellant from contesting the validity of proceedings leading to the formation of the district. Section 803 provides:

'An action may be brought by the attorney-general, in the name of the people of this state, upon his own information, or upon a complaint of a private party, against any person who usurps, intrudes into, or unlawfully holds or exercises any public office, civil or military, or any franchise, or against any corporation, either de jure or de facto, which usurps, intrudes into, or unlawfully holds or exercises any franchise, within this state. And the attorney general must bring the action, whenever he has reason to believe that any such office or franchise has been usurped, intruded into, or unlawfully held or exercised by any person, or when he is directed to do so by the governor.'

In San Ysidro Irr. Dist. v. Superior Court (1961) 56 Cal.2d 708, 16 Cal.Rptr. 609, 365 P.2d 753, ( ) (this) court held that, absent constitutional or statutory regulations providing otherwise, quo warranto is the only proper remedy in cases in which it is available. Therefore, it is the exclusive remedy for testing the legality of the existence of an irrigation district. As those districts are delegated agencies of the state government their existence should not be subject to attack at the caprice of private interests, but should be open to question only in a direct proceeding controlled by an officer charged with protecting the public interest. The court therefore held that the superior court would not have jurisdiction of an action challenging the lawful existence of a special district unless brought by the Attorney General.

In City of San Diego v. Otay Municipal Water Dist. (1962) 200 Cal.App.2d 672, 19 Cal.Rptr. 595, the city brought an action to enjoin the ( ) (furnishing of water to inhabitants of an improvement district). Three landowners intervened seeking a determination of the validity of proceedings resulting in the formation of the district. The court held (p. 681, 19 Cal.Rptr. 595) that the interveners had no authority to bring the action to annul the existence of the district on the grounds that it was invalidly formed or that the statute under which it was formed was unconstitutional. Such a remedy is not available to a taxpayer; it is within the exclusive province of the Attorney General through a quo warranto action. (Accord Wilson v. City of San Bernardino (1960) 186 Cal.App.2d 603, 9 Cal.Rptr. 431; 41 Cal.Jr.2d, Quo Warranto, § 5, p. 614; 74 C.J.S., Quo Warranto § 5, p. 183; 74 C.J.S. Quo Warranto § 4, pp. 179--181.)

Appellant contends that quo warranto is not the exclusive remedy here because the Estero district is neither de facto nor de jure a corporation, citing Brandenstein v. Hoke (1894) 101 Cal. 131, 35 P. 562. There the court found patently unconstitutional, a statute under which a levee district was formed (and denied recovery to plaintiff bondholder who sought to compel defendant board of supervisors to levy and collect a tax to pay the bonds). The court considered that because there was no valid statute under which the purported corporation could have been created, no de facto corporation could exist. But later cases have held that without regard to the claimed unconstitutionality of any statute, it is only where proceedings to create a district have not been fully completed that a private citizen can question their validity. (Alden v. Superior Court (1963) 212 Cal.App.2d 764, 769--770, 28 Cal.Rptr. 387; City of Colton v. City of Rialto (1964) 230 Cal.App.2d 174, 40 Cal.Rptr. 766; Hazelton v. City of San Diego (1960) 183 Cal.App.2d 131, (135), 6 Cal.Rptr. 723; (see also Yorty v. Anderson (1963) 60 Cal.2d 312, 316, 33 Cal.Rptr. 97, 384 P.2d 417).) The following elements are prerequisite to de facto corporate status: (1) there must be a charter or general law under which a corporation may be formed; (2) there must be a good faith attempted compliance with the statute; (3) there must be a colorable compliance with the statutory requirements; and (4) there must be an assumption of the corporate powers. (1 McQuillan, Municipal Corporations, § 3.48; City of Colton v. City of Rialto, Supra, 230 Cal.App.2d 174, 182, 40 Cal.Rptr. 766.) There is no allegation that the Estero District has not satisfied all these requirements; thus it would at least be a corporation de facto. Moreover, since the act is not patently unconstitutional, the rule of Brandenstein v. Hoke, Supra, does not apply. Once the district's existence is established, either de facto or de jure, it follows that a private person may not contest the validity of proceedings leading to its formation. (Hazelton v. City of San Diego, Supra, 183 Cal.App.2d 131, 135, 6 Cal.Rptr. 723.) In the present case the prior validation judgment...