American Canyon Fire Protection Dist v. County of Napa

• Decision Date: 22 March 1983
• Court: California Court of Appeals Court of Appeals
• Parties: AMERICAN CANYON FIRE PROTECTION DISTRICT etc. et al., Plaintiffs and Appellants, v. COUNTY OF NAPA et al., Defendants and Respondents. A010318. Civ. 50834.

Page 189

190 Cal.Rptr. 189

141 Cal.App.3d 100

AMERICAN CANYON FIRE PROTECTION DISTRICT etc. et al., Plaintiffs and Appellants, v. COUNTY OF NAPA et al., Defendants and Respondents.

A010318.

Civ. 50834.

Court of Appeal, First District, Division 2, California.

March 22, 1983.

Stephen W. Hackett, County Counsel of the County of Napa, Joseph C. Folkard, Deputy County Counsel, Napa, for plaintiffs and appellants.

Jack B. Burstein, Smith & Burstein, Vallejo, for defendants and respondents.

ROUSE, Acting Presiding Justice.

Appellants, American Canyon Fire Protection District and its commissioners, appeal from a judgment denying them relief in a mandamus/prohibition proceeding against respondents, the County of Napa, the county's board of supervisors and board members. ¹

The facts are undisputed. On August 28, 1979, respondent board of supervisors held a duly noticed and published public hearing as required by section 98.6, subdivision (b), of the Revenue and Taxation Code, for the purpose of determining the distribution of $544,392 in special district augmentation funds (so-called "bail-out" funds). Appellants were one of 23 special districts within Napa County eligible to receive such funds. Ten of those twenty-three districts, including the Napa County Fire Department, were governed either directly or indirectly by respondent board of supervisors. In the case of the Napa County Fire Department, this relationship to the board arises from section 25210.50 of the Government Code, which authorizes the board to furnish structural fire protection services to county service areas established for that purpose. Respondent board provides such services in the unincorporated areas of Napa County through the Napa County Fire Department and is responsible for reviewing and approving the budget of that fire department. Both petitioners and the Napa County Fire Department were represented at the public hearing and requested that funds be distributed to their respective special districts. As a result of the hearing, the board increased by $11,000 the amount of funds to be distributed to appellants.

Respondents distributed $107,583 to appellants and $302,102 to the Napa County Fire Department for the fiscal year in question, 1979-1980. Appellants' and the Napa County Fire Department's respective budget deficits for that fiscal year were $153,190 and $336,762. It appears by our calculations that approximately 63 percent of appellants' and 90 percent of the Napa County Fire Department's budget deficits were thus covered by the funding.

On November 26, 1979, appellants filed a petition for writ of mandate or prohibition in superior court, seeking to have the board's action annulled and to have the court reallocate the funds. After trial of the matter, the court denied the petition. Judgment was entered accordingly on May 15, and appellants filed a timely notice of appeal therefrom on July 10, 1980.

Two issues are presented: (1) Did the fact that respondent board served in a dual capacity as both the body charged with distributing the augmentation funds and the governing board for the Napa County Fire Department, one of the recipients of such funds, create a conflict of interest which, as a matter of law, rendered its distribution of the funds invalid? (2) If not, then, did the board distribute the funds in a procedurally unfair manner and thus fail the mandamus standard of review for quasi-legislative acts?

The trial court answered both questions in the negative, stating in its memorandum of decision, "The Napa County Board of Supervisors was not disqualified from allocating Special District Augmentation Funds to [appellants] and others by reason of a prohibited conflict of interest or the occupancy of incompatible offices. The procedure established by the legislature in Revenue and Taxation Code section 98.6(b) and as implemented by respondents was consistent with public policy and fairly conducted in a lawful manner." For reasons expressed herein, we agree with the trial court and accordingly affirm the judgment denying the petition. Appellants do not claim that any of the individual board members were financially interested in the matter under review. (See Gov.Code, §§ 1090, 87100, 87103 and 87200, prohibiting board of supervisors members from maintaining a financial interest in actions performed in their official capacities.) Instead, we are faced with a claim of nonstatutory or "common law" conflict of interest stemming from the holding of incompatible offices or trusts by board members--in this case, by all members of the board. (See discussions in People ex rel. Chapman v. Rapsey [1940] 16 Cal.2d 636, 641-642, 107 P.2d 388; People v. Garrett [1925] 72 Cal.App. 452, 455-458, 237 P. 829; cf. City of Imperial Beach v. Bailey [1980] 103 Cal.App.3d 191, 196, 162 Cal.Rptr. 663 [involving a statute prohibiting financial interest].) Appellants argue that the financial interest cases have application to the facts of this case because the board's agency, the Napa County Fire Department, received financial benefits. We find that argument superficial and attenuated, for there is no evidence that board members even indirectly received any personal financial benefit by the distribution of funds to its agency. Nevertheless, we agree that the public policy considerations which underlie both the incompatible offices and financial interest strains of conflict of interest law are similar. Irrespective of the source of the conflict, the common concern is the redounding detriment to the public, although in the financial interest situation there appears to be an additional and independent concern that public officials not be allowed to personally profit from decisions made in their official capacities. In any event, there is no financial interest problem here, and we are left with the pure question of real or potential public detriment. ²

Any harm to the public in this case flows from the possibility that board members, in their dual capacities as distributors of the augmentation funds and governing board of a special district receiving such funds, might not give the public undivided allegiance in the performance of their duties in either capacity. That potential harm, while perhaps sufficient to make out a common law conflict of interest, does not necessarily render the board's actions invalid, i.e., a prohibited conflict of interest does not necessarily arise.

Although a conflict of interest may arise under the common law rule against incompatible offices, "There is nothing to prevent the Legislature ... from allowing, and even demanding, that an officer act in a dual capacity." (McClain v. County of Alameda [1962] 209 Cal.App.2d 73, 79, 25 Cal.Rptr. 660.) Appellants rely heavily on a string of opinions by the California Attorney General ³ as support for their contention that the board's alleged conflict of interest invalidated the distribution, but fail to respond to the McClain case, or acknowledge that the Attorney General opinions give full recognition to McClain. For example, in 63 Ops.Cal.Atty.Gen. 748 (1980), it was noted, at page 750, that "The Legislature may ... and often does abrogate the common law doctrine when it considers it necessary or convenient to permit officers to hold incompatible offices. (See McClain v. County of Alameda [supra, at p. 79, 25 Cal.Rptr. 660]; 61 Ops.Cal.Atty.Gen. 396, 398 (1978).)"

In McClain, it was argued that the procedure as then established by the County Employees Retirement Law of 1937 for the investment of retirement funds in public improvements (Gov.Code, §§ 31601-31607) created a prohibited conflict of interest on the part of a board of supervisors because the board concurrently acted as officers of the county and as the approving body for the board of retirement in lease-purchase contracts entered into between the county and the board of retirement. The court rejected the argument, concluding, "certainly the Legislature may, as it has done, establish a carefully planned system whereby counties may have the advantage of financing public improvements by contracts which provide for the use of retirement funds; the retirement funds, on the other hand, having the advantage of prime investments, even though there is imposed upon public officers the duty of creating a contract that is fair to both parties." (209 Cal.App.2d 73, 79, 25 Cal.Rptr. 660.)

This case is analogous. As in McClain v. County of Alameda, supra, 209 Cal.App.2d 73, 25 Cal.Rptr. 660, the Legislature has not explicitly abrogated the common law prohibition, yet it is implicitly evident from the statutory scheme that the Legislature intended to do so. Like McClain, this case concerns a potential conflict of interest as to the entire board of supervisors, not just as to individual members whose conflicting offices might not have been anticipated in drafting the legislation. Finally, unlike most cases in which the conflict of interest doctrine is raised, both this and the McClain case concern a conflict arising from different functions of the same office rather than from two different offices as such. ⁴ All of the above-mentioned factors lend support to our conclusion that the dual functions imposed by the Legislature on the board of supervisors were imposed deliberately and with knowledge that a conflict could result.

A closer look at the statutes makes our conclusion inescapable, for the scheme contemplates that the county board of supervisors is the only body authorized to perform both functions or "offices."

Section 98.6, subdivision (b), of the Revenue and Taxation Code, enacted in 1979, creates the special district augmentation fund, provides for augmentation funds to be allocated to each area's "governing body" and mandates that the governing body "shall determine the amount of funds to be disbursed to each special district." The term "governing...