People ex rel. City of Bellflower v. Bellflower County Water Dist.

Decision Date20 December 1966
Citation55 Cal.Rptr. 584,247 Cal.App.2d 344
PartiesThe PEOPLE of the State of California, upon the relation of CITY OF BELLFLOWER, a municipal corporation, Plaintiff and Appellant, v. BELLFLOWER COUNTY WATER DISTRICT, a public corporation, Defendant and Respondent. Civ. 30409.
CourtCalifornia Court of Appeals Court of Appeals

Thomas C. Lynch, Atty. Gen., Sanford N. Gruskin, Deputy Atty. Gen., Alexander Googooian, City Atty. (City of Bellflower), and Ralph B. Helm (Special Counsel), for appellant.

Cecil E. Clough, Bellflower, and Burris & Lagerlof, Los Angeles, for respondent.

LILLIE, Justice.

It being contended that defendant water district, upon the inclusion of its entire area within the corporate limits of relator city, became merged by operation of law with defendant municipality, the existence of defendant was challenged by this quo warranto proceeding. After a trial, mostly on questions of law, judgment was rendered for defendant from which the People appeal.

The complaint alleged, and the answer admitted, that Bellflower became an incorporated city on September 3, 1957, on which date the entire territory within the limits of defendant district, organized as a public corporation on March 27, 1957, under provisions of the Water Code, was included within the city's boundaries. The defendant not having formally consented to the above inclusion of its territory, and the city apparently not having theretofor sought such consent, on August 27, 1962, its council adopted a resolution declaring the fact of such merger; this resolution followed the decision of this court in the Downey case (April 23, 1962), infra; thereafter, the instant action was commenced on August 27, 1963, to obtain an adjudication to that effect. Invoked by plaintiff was the doctrine of merger by operation of law discussed and applied in People ex rel. City of Downey v. Downey Water Dist. (1962), 202 Cal.App.2d 786, 21 Cal.Rptr. 370: 'This doctrine of merger by operation of law is predicated on the theory of duplication of functions--otherwise two distinct local governmental bodies claiming to exercise the same authority, powers and franchises simultaneously over the same territory would 'produce intolerable confusion, if not constant conflict.' (Citations.)' (P. 792, 21 Cal.Rptr. p. 373.) In conformity with this doctrine, and subsidiary to the adjudication sought, the complaint asked that a transfer be ordered to the relator of defendant's assets, properties and facilities, as well as an accounting.

Defendant contended, and its answer in effect so set forth, that the Downey case on its facts was distinguishable. Thus, it is alleged that while defendant's entire territory is within the limits of the city, property is owned by defendant outside the municipality's boundaries, to wit, a vault house and pipeline situated in the City of Downey. Too, and by way of affirmative defenses, it is alleged that the action is barred by section 30325, Water Code, requiring that proceedings contesting defendant's validity be brought within three months from its incorporation; that under the First Validating Act of 1958 (Stats.1958, Ch. 10) any action challenging defendant's existence was required to be commenced within six months from April 7, 1958; and finally, that certain bonds in the face amount of $775,000.00 (paid down to $745,000.00 at the commencement of this action) were issued after September 3, 1957 (the date of alleged merger and dissolution) which, if voluntarily assumed by the relator city under the theory of automatic merger, would (1) violate the limitations imposed upon its bonded debt, and (2) impair the existing contract between the bondholders and defendant by the transfer of the latter's liabilities thereunder to the city, or (3) if an automatic dissolution of defendant be declared to have occurred, retroactively void such bonds since they were issued by a corporation then out of existence, all contrary to guarantees contained in the state and federal constitutions.

Initially, we dispose of the claim additionally made in defendant's brief that while permission to sue was properly granted by the attorney general (People ex rel. Conway v. San Quentin Prison Officials, 217 Cal.App.2d 182, 183, 31 Cal.Rptr. 649), plaintiff made no showing or representation that leave to appeal was likewise obtained. (People ex rel. Southwest Exploration Co. v. City of Huntington Beach, 128 Cal.App.2d 452, 455, 275 P.2d 601.) Although some reference thereto should have been made in the opening brief, there is included as an appendix to the reply brief a true and correct copy of a letter from the attorney general to the relator's counsel (Mr. Googooian), timely dated, in which the former consents to the taking of the instant appeal. We therefore pass to the remaining points requiring determination.

If, as argued by defendant, the present case is distinguishable from Downey, and a supplementing decision similarly entitled (220 Cal.App.2d 539, 33 Cal.Rptr. 842), then the several defenses above mentioned are good. The claim for distinguishability consists in the main of certain legislative enactments assertedly evidencing a legislative intent opposed to the application of the doctrine of automatic merger as reenunciated in the Downey cases. That automatic merger may thus be prevented was clearly recognized in the first Downey case: 'Whether merger occurs depends not alone on 'the probability of a potential conflict between corporations possessing dual authority,' but rests upon the intent of the legislature in the premises. (Citations.) The doctrine of implied legislative intent developed in Petition of (Sanitary Board of) East Fruitvale Sanitary District, 158 Cal. 453, 111 P. 368, is based on a recognition of the legislature's absolute power over public corporations established as agencies of the state for purposes of local government. (Citation.)' (P. 797 of 220 Cal.App.2d, p. 376 of 33 Cal.Rptr.) The Fruitvale case declared that in the absence of a specific provision in the act creating the special district that it shall continue in existence upon being entirely included within the boundaries of a municipal corporation, it must be implied that the Legislature intended that a merger occur and the district cease to exist. (202 Cal.App.2d 786, 797--798, 21 Cal.Rptr. 370.) After further reference to the Fruitvale case, the decision continues: 'This holding would seem to indicate that there must be more than mere silence on the part of the legislature; that there must be some affirmative declaration in the law creating the district to the effect it shall continue in existence upon inclusion by a municipal corporation, before the court will conclude that the legislature intended that the district shall remain a separate entity under such circumstances.' (P. 798, 21 Cal.Rptr. p. 377.)

That the trial court for the reasons above stated was persuaded of the present proceeding's distinguishability is manifest from its findings of fact and conclusions of law drawn therefrom, several of which are opposed to the determinations (expressly or impliedly) made in the Downey cases. For example, it found that defendant owned property outside the district's boundaries, although in the first Downey case mention was made (at page 792, 21 Cal.Rptr. 370) of City of Escalon v. Escalon Sanitary Dist., 179 Cal.App.2d 475, 3 Cal.Rptr. 889, which holds that the purchase of real property and the acquisition of a right-of-way outside of the district 'did not make such property a part of the district.' (Pp. 481--482, 3 Cal.Rptr. p. 893.) The trial court also concluded, from facts theretofor found, that if merger and dissolution by operation of law had occurred on September 3, 1957, the city would have to assume all of the duties and obligations of the district, including the obligations for retiring the outstanding bonded indebtedness of the district; but in the first Downey case a contrary view (extensively discussed) was taken of this claimed defense to the objectives sought by the instant action. Thus, 'We find no merit in this argument, for under the merger the city would not only succeed to all of the property and assets of the extinguished district but would inherit all of its liabilities including the fundamental obligation of bonded indebtedness (citations); the city would be obliged to assume the indebtedness and there is no limitation on its power to do so which could result in an impairment of the bondholders' contract; and the city has the same powers with respect to taxation to protect the bondholders as the district.' (P. 804 of 202 Cal.App.2d, p. 380 of 21 Cal.Rptr.) Also referred to in the findings is the enactment by the Legislature, following the formation of the district on March 27, 1957, and the incorporation of the city later that year, of its First Validating Act of 1958 (Stats.1958, Ch. 10), effective April 7, 1958. It was not expressly found, nor was it concluded, that the present action was barred by the six months' limitation found in the subject enactment. 1 If, however, it be implied that such enactment constitutes an expression of the Legislature's intention that defendant should not lose its existence under the circumstances at bar, then it is contrary to the following declaration in the second Downey case with respect to this same validating measure: 'It may be said generally that curative or validating acts are for the purpose of curing procedural or technical defects in organization, and not for the purpose of reviving an entity that has ceased to exist.' (220 Cal.App.2d 539, 543, 33 Cal.Rptr. 842, 844.) Inherent in such declaration is the determination that the validating act did not compel the result claimed for it by appellant there (and defendant here).

We come now to still another legislative enactment which the findings quote in part and presumably from which the following conclusion...

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