Marek v. Napa Community Redevelopment Agency

• Decision Date: 23 March 1987
• Court: California Court of Appeals Court of Appeals
• Parties: Previously published at 201 Cal.App.3d 1089 201 Cal.App.3d 1089 James H. MAREK, Jr., etc., Plaintiff and Appellant, v. NAPA COMMUNITY REDEVELOPMENT AGENCY, Defendant and Respondent. A024023.

Page 533

235 Cal.Rptr. 533

Previously published at 201 Cal.App.3d 1089

201 Cal.App.3d 1089

James H. MAREK, Jr., etc., Plaintiff and Appellant, v. NAPA COMMUNITY REDEVELOPMENT AGENCY, Defendant and Respondent.

A024023.

Court of Appeal, First District, Division 4, California.

March 23, 1987.

Review Granted June 25, 1987.

Stephen W. Hackett, County Counsel, Joseph C. Folkard, Deputy County Counsel, Napa, for plaintiff and appellant.

McDonough, Holland & Allen, Richard E. Brandt, David F. Beatty, Sacramento, for defendant and respondent.

SABRAW, Associate Justice.

This is an appeal from a judgment rendered in a declaratory relief action brought pursuant to Health and Safety Code section 33675, subdivision (e).

The parties to the action are plaintiff James H. Marek, Jr., Auditor-Controller for the County of Napa (hereafter appellant or controller) and defendant Napa Community Redevelopment Agency (hereafter respondent or agency). The central dispute in this case revolves around the allocation of tax revenues for the purposes of the Parkway Plaza Redevelopment Project in Napa (hereafter project). We hold that the redevelopment contract before us did not constitute "indebtedness" which would entitle the agency to receive such tax revenues and, accordingly, we reverse.

The pertinent facts reveal that the project was originally adopted by the Napa City Council in December 1969 in order to redevelop the downtown business district into a modern shopping area. The project provided for tax increment financing as authorized by California Constitution, article XVI, section 16, and several provisions of California Community Redevelopment Law (HEALTH & SAF. CODE, § 33000¹ et seq.). ² On or about February 5, 1980, the agency amended the original redevelopment plan and entered into a so-called "Disposition and Development Agreement" (DDA) with the Sequoia partnership to redevelop a 10-acre site within the project. Under the DDA, the agency is obligated to acquire the land and resell it to the Sequoia partnership. In addition, the agency is required to provide for (or bear the expense of) utility relocations, street and traffic improvements and construction of parking facilities. The Sequoia partnership, in turn, has the contractual obligation to buy the land from the agency and develop it in accordance with the DDA, including the construction of a shopping center with a large department store and other retail shops.

Since the execution of the DDA the agency acquired properties at a cost of $149,682 in fiscal year 1980-1981 and at a cost of approximately $830,000 in 1981-1982. In addition, the agency incurred expenses and was proceeding with condemnation actions to acquire the remaining parcels necessary for the construction of the shopping center.

In consonance with section 33675, ³ the agency filed a statement of indebtedness with the controller for both 1981 and 1982 fiscal years, claiming to have an outstanding debt of $11,648,834 toward the Sequoia partnership as of June 30, 1981 and $11,890,780 as of June 30, 1982. The controller disputed the above sums and initiated declaratory relief actions pursuant to section 33675, subdivision (e), to contest the same. Simultaneously, the controller withheld the tax increments otherwise available for distribution to the agency ($550,000 for 1981 and $594,000 for 1982). After consolidation of the two cases, the matter proceeded to trial. The superior court, sitting without a jury, found, inter alia, that the DDA in dispute constituted an indebtedness within the meaning of article XVI, section 16, of the California Constitution and section 33675; and that the amount of indebtedness under the DDA was $11,226,111 for the fiscal year 1981-1982 and $11,955,780 for the fiscal year 1982-1983. Consistent therewith, the court ordered that the full amount of tax increments be transferred and paid to the agency.

The central issue on appeal is whether the DDA entered into between the agency and the Sequoia partnership constitutes "indebtedness" within the meaning of article XVI, section 16, subdivision (b), of the California Constitution and the several provisions of the Community Development Law, its implementing legislation. (§§ 33670, 33675, 33801.)

Controller argues that, under general definition, debt is a specified sum of money which is due from one person to another and which calls for a payment schedule, payment of interest on the principal and penalties for delinquent payments, etc. (Jamison v. United States (N.D.Cal.1968) 297 F.Supp. 221, 227; Utility Trailer Manufacturing Company v. United States (S.D.Cal.1962) 212 F.Supp. 773, 785; Black's Law Dict. (5th ed. 1979) p. 363.) Because the obligations arising under the DDA do not include fixed and specified amounts of debt already matured and fail to meet other criteria of debt as well, controller insists that the DDA is at best a commitment to incur debt but not debt or indebtedness upon which tax increments should be paid to the agency. Respondent agency, in turn, takes the position that the terms "debt" or "indebtedness" have different meanings in different statutes; that those phrases are flexible so as to include unmatured debts as well; and that at any rate under the statutory scheme here present, the DDA in dispute constitutes indebtedness as a matter of law. Although we agree that contracts such as the DDA before us may constitute "debt" for purposes of entitlement to tax increments in some circumstances, we conclude that this DDA cannot be so interpreted.

In the broadest sense the word "debt" means all that is due from one person to another under any form of obligation. (In re Marriage of Fithian (1977) 74 Cal.App.3d 397, 404, 141 Cal.Rptr. 506.) While the word "debt" may have different meanings in specific statutes, it has been held that debt or indebtedness may include sums which are payable either in the present or in the future and that it may embrace obligations whether or not yet matured. (UMF Systems, Inc. v. Eltra Corp. (1976) 17 Cal.3d 753, 756-757, 132 Cal.Rptr. 129, 553 P.2d 225.) As our Supreme Court stated in Carman v. Alvord (1982) 31 Cal.3d 318, 326-327, 182 Cal.Rptr. 506, 644 P.2d 192, " 'The term "indebtedness" has no rigid or fixed meaning, but rather must be construed in every case in accord with its context.' [Citations.] It can include all financial obligations arising from contract ... and it encompasses 'obligations which are yet to become due as [well as] those which are already matured.' " (Accord Provident, etc., Assn. v. Davis (1904) 143 Cal. 253, 255, 76 P. 1034.)

In the case at bench, the DDA was concededly a valid, binding contract which imposed rights and duties on both of the contracting parties. Moreover, the obligations and expenses for which the agency claimed the tax increments grew out of the DDA. It does not follow, however, that the latter obligations (present and future) constituted indebtedness within the meaning of the law sufficient to provide the requisite statutory basis for allocation of tax revenues to the agency.

Our conclusion is supported by the related portions of the redevelopment statute, especially when read together with the provisions of the DDA. Section 33811 ⁴ underlines that the redevelopment agencies may request supplemental tax revenues for payment of indebtedness resulting from breach of contract. The term "indebtedness" for which tax increments can be claimed is explicitly defined by the statute. Section 33801 reads in pertinent part: " 'Indebtedness' means any obligations incurred by a redevelopment agency prior to July 1, 1978, the payment of which is to be made in whole or in part out of taxes allocated to the agency pursuant to Section 33670 and includes: ... [p] (c) A contractual obligation which, if breached, could subject the agency to damages or other liabilities or remedies." (Emphasis added.)

For the most part, the court's interpretation of the DDA was based upon its analysis of the bare words of the document. However, some extrinsic evidence regarding the subject was admitted at trial. Significantly, there was no conflicting material evidence on this issue. In such a case, we must make an independent determination of the meaning of the agreement. (Blumenfeld v. R.H. Macy & Co. (1979) 92 Cal.App.3d 38, 44, 154 Cal.Rptr. 652; see Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 866, 44 Cal.Rptr. 767, 402 P.2d 839.)

Controller contends that the DDA is not indebtedness within the purview of section 33801, subdivision (c), because breach of the DDA does not subject the agency to damages or other liabilities. More specifically, appellant claims that if the agency breaches the contract prior to the conveyance of the site, the only remedy available to the Sequoia partnership is to terminate the agreement, recover its deposit and attempt to renegotiate the contract within the time prescribed by law.

The agency contends that controller's position should be rejected for three reasons. First, it argues that section 510 of the DDA gives only an option to the Sequoia partnership to rescind the agreement, recoup the deposit and renegotiate the contract within 120 days: it contends that the partnership is not forced to do so by foregoing other remedies available to it under the agreement. ⁵ Second, the agency argues that, in the event of default or other breach, the DDA expressly provides the parties to the contract may recover damages or may demand specific performance. Third, the agency contends that the remedies set out in sections 507, 508 and 510 are cumulative and not mutually exclusive as demonstrated by two additional sections of the DDA: (1) Section 503 provides that "In addition to any other rights or remedies, either party may institute legal action to cure, correct or remedy any default, or recover damages for any default, or to obtain any other remedy consistent with the purpose of this Agreement. Such legal actions must be...