Kaatz v. City of Seaside

• Citation: 49 Cal.Rptr.3d 95,143 Cal.App.4th 13
• Decision Date: 20 September 2006
• Docket Number: No. 11027562.,11027562.
• Court: California Court of Appeals
• Parties: Benjamin KAATZ, Plaintiff and Appellant, v. CITY OF SEASIDE et al., Defendants and Respondents.

49 Cal.Rptr.3d 95

143 Cal.App.4th 13

Benjamin KAATZ, Plaintiff and Appellant, v. CITY OF SEASIDE et al., Defendants and Respondents.

No. 11027562.

Court of Appeal, Sixth District.

September 20, 2006.

Jay P. Renneisen, Law Offices of Jay P. Renneisen, Walnut Creek, Heidi K. Whilden, Law Offices of Heidi K. Whilden, Edward P. Dudensing, Law Offices of Edward P. Dudensing, Sacramento, Michael J. Whilden, Law Offices of Michael J. Whilden, for Plaintiff and Appellant.

Donald G. Freeman, Perry & Freeman, Claudia J. Martin, Lee C. Rosenthal, Goldfarb & Lipman, Oakland, for Defendants and Respondents City of Seaside, et al.

Julie L. Woods, Barry R. Levy, Horvitz & Levy, Encino, Kenneth B. Bley, Cox, Castle & Nicholson, Los Angeles, for Defendants and Respondents K & B Bakewell Seaside Venture.

Jennifer B. Henning, California State Association of Counties, David P. Landerman, Breanna E. Moorhead, Sheppard, Mullin, Richter & Hampton, for amicus curiae on behalf of Respondents.

DUFFY, J.

Code of Civil Procedure sections 860 through 870 (hereafter the validation statutes)¹ provide an expedited process by which certain public agency actions may be determined valid and not subject to attack. The public agency may validate its action by either active or passive means. It may initiate an action in rem to establish the validity of the matter. (§ 860.) Alternatively, the agency may do nothing, and if no "interested person" brings suit to determine the validity of the public agency's action within 60 days (§ 863), the action is deemed valid. (§ 869.) But not all actions of a public agency are subject to validation, and the present case requires us to determine the limits of sections 860 through 870.

Benjamin Kaatz brought suit as a taxpayer to challenge certain actions of the City of Seaside (City) arising out of its purchase and sale of 105 acres of residential property that were formerly part of the Fort Ord military base. Kaatz claimed, among other things, that immediately after the City purchased the property from the United States Army in July 2002, it conveyed the entire acreage to a developer, K & B Bakewell Seaside Venture, LLC (K & B Bakewell), for a fraction of its fair market value. Following motions for judgment on the pleadings and for dismissal filed by K & B Bakewell (joined in by the City), the suit was dismissed on the basis that it was time barred. In so doing, the court concluded that (1) the challenged purchase and sale of property were matters that were embraced by Government Code section 53511's language² 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," and (2) Kaatz had not filed suit to determine the validity of the City's actions within 60 days as required by the validation statutes.

As a threshold matter, we will address K & B Bakewell's motion to dismiss the appeal—joined in by the City—on the basis that the notice of appeal was not filed within 30 days of entry of judgment as provided in section 870, subdivision (b) (section 870(b)). We will conclude that the notice of appeal was timely filed; section 870(b) does not apply here, because the appeal is not challenging a "judgment entered pursuant to" the validation statutes. We will then address the primary issue on appeal, namely, whether the City actions challenged by Kaatz were ones that were subject to validation under sections 860 through 870. We will hold, based upon the limited scope of the validation statutes, that the City's conveyance of the property—along with the City's prior execution of the underlying contract with the developer concerning the potential acquisition and sale of the property—was not subject to validation. We will therefore find that the trial court erred in its application of the 60-day statute of limitations for validation proceedings and consequent dismissal of the action. Accordingly, we will reverse the judgment entered on that dismissal.

PROCEDURAL HISTORY

I. Early Proceedings

On May 16, 2003, Kaatz filed a complaint (captioned "Complaint by Taxpayer for Injunctive Relief [CCP § 526a]")³ alleging eight claims for relief against the City.⁴ Kaatz alleged that he resided in the City and had paid real property taxes to the City within one year before the action was initiated. Kaatz challenged, among other things, the validity of a deed by which the City conveyed property known as the "Hayes Park Property" (hereafter Hayes Park or Property) to K & B Bakewell.

Kaatz sought an order pendente lite enjoining the City from granting any construction permits and from approving any final parcel maps for Hayes Park. On August 7, 2003, after extensive briefing and argument, the court granted a preliminary injunction preventing the City from "taking any action with regard to approval of the final subdivision map" for the Property.⁵

One day after granting the preliminary injunction, the court granted Kaatz's motion for leave to amend the complaint to add K & B Bakewell as a defendant. And less than a week later, K & B Bakewell filed a motion for an order vacating the preliminary injunction, or, in the alternative, an order increasing the amount of the bond from $1,000 to $5,320,000. K & B Bakewell argued that it—as well as buyers of homes who had already planned to move into the development—would suffer substantial injury if the injunction were allowed to remain in effect. Over Kaatz's opposition, the court vacated the preliminary injunction on August 15, 2003, on the condition that K & B Bakewell's parent KB Home, execute an enforceable guaranty of any monetary judgment imposed against K & B Bakewell.⁶

II. Second Amended Complaint

The second amended complaint was the operative pleading addressed in K & B Bakewell's alternative motions to dismiss and for judgment on the pleadings.⁷ Kaatz asserted eight causes of action against all defendants, each claim arising generally out of the City's purchase of Hayes Park from the United States Army and the City's immediate resale of that Property to K & B Bakewell. As to the majority of the claims, Kaatz cited as authority the statute permitting suit by a taxpayer to prevent the "illegal expenditure of, waste of, or injury to, the estate, funds, or other property of a . . . city" under section 526a. (See fn. 3, ante.)

The relevant allegations of the second amended complaint consisted of the following: (1) Following the enactment of the Defense Base Closure and Realignment Act of 1990, as amended,⁸ the United States closed the Fort Ord military base located in Monterey County; (2) The federal government was authorized to sell as surplus property (under the National Defense Authorization Act for Fiscal Year 1996)⁹ portions of the former Fort Ord, including Hayes Park; (3) On or about May 4, 1998, the City, pursuant to its council's resolution authorizing such action, entered into an agreement with K & B Bakewell concerning Hayes Park entitled "Land Disposition Agreement" (LDA); (4) On or about July 25, 2002, the federal government conveyed the Property by quitclaim deed to the City for a purchase price of $5,100,000; (5) Also on or about July 25, 2002, the City transferred all of its interest in Hayes Park to K & B Bakewell for $5,950,000; (6) The City's transfer of the Property was in contravention of the City Council's resolution approving the LDA that the Property "not be sold for other than `fair market value,'" was a breach of the City's "statutory duty to make the surplus property available for affordable housing," was done "without ever considering any other bid, proposal, or offer for the [Property]," and was "in violation of the constitutional and statutory prohibition against cities giving away public property"; and (7) As a result, K & B Bakewell stood to "pocket, in addition to standard profit on the housing construction, an approximately $115 million pure cash windfall representing the value of the [Property] purportedly purchased from the City . . . for a fraction of its fair market value."

The first cause of action sought to invalidate the deed of the Property from the City to K & B Bakewell. Kaatz alleged that the alleged transfer was void because the LDA, as approved by the City Council, required that Hayes Park be sold at its fair market value.

The second cause of action likewise sought to void the transfer of Hayes Park to K & B Bakewell—and to invalidate the LDA—on the ground that the City, both through its execution of the LDA in 1998 and its conveyance of the Property in July 2002, violated the Surplus Land Act (Gov. Code, § 54220 et seq.).¹⁰ Kaatz alleged that that statute required the City to provide statutory notice to specified public agencies prior to selling or otherwise disposing of surplus public land acquired from the federal government to facilitate that law's goal of making such surplus land available for affordable housing.

Kaatz alleged as a third cause of action that the deed of the Property to K & B Bakewell and the underlying LDA were void because they constituted a sale of city property below fair market value and did not fall within the statutory exception of Government Code section 37364, under which a city may sell its land for below fair market value where the sale's specific purpose is to create affordable housing.¹¹

The fourth cause of action claimed that the LDA required K & B Bakewell, in conjunction with acquiring the Property, to construct two public works projects to be located on City-owned land outside of Hayes Park, namely, a 4,000 square foot building and 10 housing units for homeless persons. Kaatz alleged that the LDA was void because the City failed to solicit competitive bids for construction of these two public works, as required under Public Contract Code section 20162.

Under the fifth cause of action, Kaatz similarly sought avoidance of the LDA. He alleged that,...