Holloway v. Showcase Realty Agents, Inc.
| Decision Date | 05 April 2018 |
| Docket Number | H043704,H043492 |
| Citation | 22 Cal.App.5th 758,231 Cal.Rptr.3d 872 |
| Court | California Court of Appeals Court of Appeals |
| Parties | Bruce HOLLOWAY, Plaintiff and Appellant, v. SHOWCASE REALTY AGENTS, INC. et al., Defendants and Respondents. Bruce Holloway, Plaintiff and Appellant, v. Gregory Dildine et al., Defendants and Respondents. |
Redenbacher & Brown, Gary Redenbacher, Santa Cruz, for Plaintiff and Appellant Bruce Holloway
Shannon B. Jones Law Group, Shannon B. Jones, Danville, Mark V. Isola, San Jose, for Defendants/Respondents Showcase Realty Agents, Inc., Terry Vierra Case No. H043492.
Gregory and Edwige Dildine, in Pro. per.
Nossaman, Gina R. Nicholls, Los Angeles, Atkinson–Farasyn, Marc G. Hynes, Los Altos, Colantuono, Highsmith & Whatley, Michael G. Colantuono, Pasadena, Leonard P. Aslanian, Pasadena, for Defendants/Respondents, San Lorenzo Valley Water District.
The San Lorenzo Valley Water District (District) acquired real property in Boulder Creek, California from Gregory and Edwige Dildine (Dildines). Bruce Holloway is a taxpayer within District, and filed suit claiming the contract was void under Government Code section 1090, because one of District's directors, Terry Vierra, had an interest in the contract by nature of his partial ownership in Showcase Realty (Showcase), the agency that facilitated the property sale, and the fact that his wife was the listing agent for the property.
District and Showcase brought a successful demurrer on the ground that Holloway lacked standing to assert a claim for conflict of interest.
On appeal, we consider whether Holloway had standing under Government Code section 1092 to bring an action for conflict of interest. We also consider whether Holloway was required to bring a validation action to challenge the real estate contract under Code of Civil Procedure section 863.
Holloway filed his second amended complaint in July 2015 alleging the following: He is a citizen and taxpayer served by District. Vierra was a board member of District, and a majority shareholder of Showcase. In September 2010, District began negotiations to purchase real property in Boulder Creek, California from the Dildines. The contract was finalized and escrow closed in November 2010. When escrow closed, Vierra received a real estate broker's commission of $13,050 through his ownership of Showcase, as well as a community property interest in his wife's real estate commission for facilitating the sale. Holloway became aware that Vierra's wife, who worked for Showcase, was the listing agent for the property in November 2013.
Holloway asserted causes of action for conflict of interest against District, Showcase and Vierra pursuant to Government Code section 1090, and liability pursuant to Government Code section 91005.2 He sought a declaration that the real estate contract was void, and disgorgement of public monies paid to Vierra in real estate commissions, and the Dildines for the property sale.
In September 2015, District, Showcase and Vierra filed a demurrer to the second amended complaint arguing Holloway lacked standing under Government Code section 1092,3 and the second cause of action for liability under Government Code section 91005 was time barred by a four-year statute of limitations as stated in Government Code section 91011, subdivision (b).
The court sustained the demurrer without leave to amend as to the first cause of action for conflict of interest, finding Holloway did not have standing to assert the claim. The court overruled the demurrer as to the second cause of action, finding facts sufficient to justify Holloway's delayed discovery of Vierra's financial interest in District's action.4
Holloway filed a notice of appeal of the judgment entered following the court's sustaining the demurrer to his conflict of interest cause of action in the second amended complaint.
Holloway argues that the trial court erred in finding he did not have standing to bring a conflict of interest challenge pursuant to Government Code section 1090.5
In response, District and Showcase argue for the first time that the trial court lacked jurisdiction to consider the matter, because Holloway failed to bring a validation action within 60 days of District entering into the real estate contract as required by Code of Civil Procedure section 863.6
Holloway filed his complaint challenging District's actions in 2014, four years after District entered into the real estate contract in 2010. District and Showcase argue that we should dismiss this appeal for lack of jurisdiction because Holloway's complaint was filed beyond the 60–day period for validation actions as set forth in Water Code section 30000 et seq., and Code of Civil Procedure sections 860 and 863.
Whether Holloway's conflict of interest claim is encompassed within Water Code section 30000 et seq., and the 60–day statute of limitations set forth in the validation statutes is a question of law requiring our independent review. ( Kaatz v . City of Seaside (2006) 143 Cal.App.4th 13, 28, 49 Cal.Rptr.3d 95 ( Kaatz ).)
The validation statutes are found in Code of Civil Procedure sections 860 through 870.5. A public agency may file a validation action to determine the validity of any matter brought within the scope of the validation statutes. ( Code Civ. Proc., § 860.) Alternatively, any "interested person" may bring a validation action to determine the validity of the matter. ( Id ., § 863.) A validation action initiated by an " ‘interested person’ " is sometimes referred to as a " ‘reverse validation action.’ " ( Kaatz , supra , 143 Cal.App.4th at p. 30, fn. 16, 49 Cal.Rptr.3d 95.) If an agency does nothing, and no interested person brings suit to determine the validity of the action within 60 days, the action is deemed valid. ( Id . at p. 19, 49 Cal.Rptr.3d 95.)
The procedures for validation actions are accelerated so the agency or interested persons can obtain a definitive ruling on the validity of the agency's action. ( Code Civ. Proc., § 860 et seq. ) If the validation statutes apply, the complaint must be filed within 60 days of the agency's act being challenged. ( Kaatz , supra , 143 Cal.App.4th at p. 19, 49 Cal.Rptr.3d 95.)
Not all actions of a public agency are subject to validation. The validation statutes do not apply just because a claim or action seeks to invalidate an agency's action. ( Kaatz , supra , 143 Cal.App.4th at p. 19, 49 Cal.Rptr.3d 95 ; Santa Clarita Organization for Planning & Environment v . Castaic Lake Water Agency (2016) 1 Cal.App.5th 1084, 1096, 206 Cal.Rptr.3d 33.) The validation statutes themselves do not state what actions are subject to validation; rather, Code of Civil Procedure section 860 permits validation as to "any matter which under any other law is authorized to be determined pursuant to this chapter."
Here, District and Showcase argue that because Holloway's complaint seeks to challenge a county water district's action of entering into a contract, it is subject to Water Code section 30000 et seq., which provides, in relevant part, "County water districts shall be managed under the provisions of this division and may exercise the powers therein expressly granted or necessarily implied therefrom." ( Wat. Code, § 31000.) Water Code section 30066 further provides: "An action to determine the validity of an assessment, or of warrants, contracts, obligations, or evidences of indebtedness pursuant to this division may be brought pursuant to Chapter 9 (commencing with Section 860 ) of Title 10 of Part 2 of the Code of Civil Procedure." Because Water Code section 30066 encompasses validation of contracts, District asserts it necessarily applies to the present case involving Holloway's challenge to District's real estate contract.
District's position is based on a broad reading of Water Code section 30066 to include all contracts entered into by a county water district being subject to the validation requirements. District does not address case law that interprets the term "contracts" under both Government Code section 53511, and its nearly identical counterpart, Water Code section 30066, narrowly to include only those agreements that address an agency's bonds, warrants or other evidence of indebtedness.
Kaatz is one such case and was decided by this court. In Kaatz , a taxpayer brought an action challenging a city's purchase and sale of residential property at a fraction of fair market value. The trial court dismissed the suit because a validation action had not been filed within the 60–day time limit. The trial court reasoned that the challenge to a city's purchase and sale of property was embraced by Government Code section 53511's language permitting a local agency to bring a proceeding under the validation statutes to " ‘determine the validity of its bonds, warrants, contracts, obligations or evidences of indebtedness.’ " ( Kaatz , supra , 143 Cal.App.4th at p. 19, 49 Cal.Rptr.3d 95.)
We reversed the decision of the trial court, finding that the term "contracts" should be viewed narrowly to include "only those that are in the nature of, or directly relate to a public agency's bonds, warrants or other evidences of indebtedness." ( Kaatz , supra , 143 Cal.App.4th at p. 42, 49 Cal.Rptr.3d 95.) In arriving at this conclusion, we note the Supreme Court's decision in City of Ontario v . Superior Court (1970) 2 Cal.3d 335, 341–344, 85 Cal.Rptr. 149, 466 P.2d 693 ( City of Ontario ), which construed "contracts" narrowly based in part on the fact that the validation statutes were " ‘made applicable only to such matters as the legality of the local entity's existence, the validity of its bonds and assessments, and the validity of joint financing agreements with other agencies.’ " ( Kaatz , supra , 143 Cal.App.4th at p. 40, 49 Cal.Rptr.3d 95, quoting City of Ontario , supra , at p. 343, 85 Cal.Rptr. 149, 466 P.2d 693.)
Moreover, in City of Ontario , the Supreme Court noted a broad reading...
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