San Diegans for Open Gov't v. Fonseca

• Decision Date: 19 May 2021
• Docket Number: D077652
• Citation: 64 Cal.App.5th 426,279 Cal.Rptr.3d 1
• Court: California Court of Appeals Court of Appeals
• Parties: SAN DIEGANS FOR OPEN GOVERNMENT, Plaintiff and Appellant, v. Julio FONSECA, Defendant and Respondent.

64 Cal.App.5th 426

279 Cal.Rptr.3d 1

SAN DIEGANS FOR OPEN GOVERNMENT, Plaintiff and Appellant,

v.Julio FONSECA, Defendant and Respondent.

D077652

Court of Appeal, Fourth District, Division 1, California.

Filed May 19, 2021

As Modified on Denial of Rehearing June 8, 2021

Briggs Law Corporation, Cory J. Briggs, San Diego, and Janna M. Ferraro, for Plaintiff and Appellant.

Winet Patrick Gayer Creighton & Hanes and Randall L. Winet, San Diego, for Defendant and Respondent.

BENKE, Acting P. J. Plaintiff San Diegans for Open Government (SDOG) sued defendant Julio Fonseca, the former superintendent of the San Ysidro School District (District), alleging Fonseca caused the illegal disbursement of District funds in a settlement between District and third party Enrique Gonzalez, a former District employee. The court bifurcated the trial and, after an evidentiary hearing, found SDOG lacked standing under newly amended¹ Code of Civil Procedure ² section 526a. As we explain, we conclude that SDOG did not meet the taxpayer requirements for standing under section 526a. Affirmed.

BACKGROUND

In March 2017, SDOG sued Fonseca including under Government Code section 8314³ for misappropriation of public funds, alleging, as relevant to this appeal, standing under section 526a. Fonseca was the superintendent of District from July 1, 2015 to September 1, 2017. Plaintiff's complaint alleged a single cause of action for declaratory, injunctive, and other equitable relief.

The complaint alleged that Fonseca unlawfully caused the disbursement of $113,433 by the San Diego County Office of Education, the public agency responsible for accounting for District's money and paying its bills. The complaint further alleged that Fonseca authorized the payment to Gonzalez in May 2016 pursuant to an alleged settlement agreement between District and Gonzalez; and that the settlement arose after Gonzalez claimed he was unlawfully terminated by District in January 2016, during the probationary term of his employment, after he disclosed to a supervisor that Fonseca was having a personal relationship with another District employee who Fonseca had recommended the District hire.

In its prayer for relief, SDOG sought a judgment declaring the payment to Gonzalez be declared illegal, and Fonseca be held to repay to District all public monies that he caused to be illegally disbursed. SDOG also sought to recover its legal fees and other expenses incurred in this lawsuit.

Fonseca in his April 2017 answer generally denied the material allegations in the complaint and asserted 28 affirmative defenses. As relevant to this appeal, Fonseca's second affirmative defense alleged SDOG lacked standing to maintain this action.

Before trial, Fonseca moved for summary judgment including on the ground SDOG lacked standing. The court denied the motion.

In preparation for trial, the parties submitted multiple motions in limine, including one by Fonseca seeking bifurcation of trial under section 1048⁴ among other statutes to allow the court to first decide whether SDOG had standing. In support of his argument plaintiff lacked standing, Fonseca among other points argued that SDOG was not located within District's jurisdiction; that he was not a party to the settlement agreement, and any taxpayer action by SDOG should have been against District and Gonzalez; that at the deposition of SDOG's person most knowledgeable (PMK), chief executive officer Pedro Quiroz, Jr. "could not provide evidence of standing, and was instructed not to produce evidence or answer question[s] regarding individual members" of SDOG and whether they had standing; that there was no evidence SDOG "has paid taxes in the area of the local agency—San Ysidro School District"; and that in any event there was no private right of action under Government Code section 8314.

SDOG in response argued it had "associational standing" under section 526a to maintain this lawsuit "because its members satisfy the taxpayer requirements" of this statute. Specifically, SDOG argued that it may sue on behalf of its members if it demonstrates that any of its members would have standing to sue in their own right; that certain of its members were "resident[s]" within the meaning of subdivision (d)(2) of section 526a, discussed post ; that section 526a should be liberally construed to enable a taxpayer to challenge government action that might otherwise go unchallenged; and that such "resident" members had, "within one year before the commencement of the action, ... paid[ ] a tax that funds the defendant local agency."

SDOG relied on Fistes to support its argument that the payment of taxes to the state, as opposed to the "local agency" (i.e., District), was sufficient to establish taxpayer standing under section 526a. Fistes held a plaintiff corporation's allegation that it had paid state taxes was sufficient to overcome a demurrer on the ground it lack standing under section 526a in an action against the defendant school district because the state was the primary source of funds for that defendant. ( Fistes, supra , 38 Cal.App.5th at pp. 692–693, 251 Cal.Rptr.3d 423.)

The trial court granted Fonseca's request to bifurcate, allowed the parties to file supplemental briefs on the standing issue, and set the matter for an evidentiary hearing. In addition to his previous arguments, Fonseca in his supplemental brief argued that SDOG lacked standing because its lawsuit was not seeking to "restrain[ ] and prevent[ ]" an illegal expenditure or waste of funds as set forth in section 526a, but rather was a suit to "set aside a settlement and recover attorney's fees"; that before initiating suit, SDOG failed to demand that District "cure the situation complained of and received a refusal by the District to do so"; and that section 526a does not apply when the lawsuit involves an abuse of discretion by a government body, as opposed to a duty to act, and the settlement between District and Gonzalez was the result of an exercise of discretion by District.

In its supplemental brief, SDOG argued section 526a was not limited to a judgment "restraining and preventing" an illegal expenditure or waste of funds but also included an action to disgorge funds on an illegal contract. SDOG also argued it was not required to make a demand on District prior to initiating its lawsuit because such a demand would have been "useless and unavailing" given that Fonseca was District's superintendent at the time.

Regarding the "resident" requirement in subdivision (a) of section 526a, SDOG argued it had paid a tax within the meaning of the statute. Specifically, SDOG board member Theresa Quiroz stated that " ‘in the middle of 2016’—which is within the 12 months preceding the commencement of this lawsuit—SDOG held an open-government training session within the geographic boundaries [of] the District. [Citation.] Mr. Quiroz [also stated] that the training session was conducted at a restaurant where SDOG purchased food for the training session. [Citation.] SDOG's purchases at the restaurant were subject to sales tax. [Citation.] Nearly 4% of the sales tax is levied by the State. See Rev. & Tax. Code § 6051 et seq."

SDOG also argued that certain of its members lived within District's jurisdiction; that the members had paid property, income, and sales tax to the state for the last five years; and citing Fistes , that such payments were sufficient for standing, even if the payments were not made directly to District. (See Fistes, supra , 38 Cal.App.5th at pp. 692–693, 251 Cal.Rptr.3d 423.) Finally, it argued District was not a necessary party as an action under 526a may be maintained against an officer, agent, or other person acting on behalf of a local agency.

The initial hearing on standing took place on February 11, 2020. Mr. Quiroz testified he has been a board member of SDOG, "a watchdog organization for governments," for more than 10 years. As noted, he also had been designated SDOG's PMK. Mr. Quiroz stated SDOG uses a "P.O. box" for mail because it has "no money"; and it holds meetings in restaurants throughout San Diego and in its attorney's law office. A person can become a member of SDOG by filling out an application through SDOG's website or on "Twitter." Membership in SDOG is free. The record shows the court admitted three unredacted application forms from members of SDOG that stated they lived within District's jurisdiction.

Mr. Quiroz also testified that when SDOG holds meetings it buys soft drinks and food for its members, which are "subject to sales tax." Mr. Quiroz did not state when these purchases were made, however. He further testified that he lived in the City of San Diego, and that over the last five years he has paid income, property, and sales tax.

On cross-examination, Mr. Quiroz initially stated SDOG had not held any meetings within District's jurisdiction within one year prior to the commencement of this action. He did not know if SDOG had ever paid taxes in District's jurisdiction. He admitted that he was not a resident of, nor did he work or own property in, District. He also did not attend classes within District's boundaries.

Mr. Quiroz also stated he had never met any of the three individuals whose applications were admitted to show SDOG members lived within District's jurisdiction. He admitted a portion of these applications—where it says at the bottom of the form whether the applicant was admitted or denied—were not checked off or filled out, although he recalled the three applicants were approved as members of SDOG. However, Mr. Quiroz did not know when the three applications had been submitted to, and reviewed by, SDOG.

Mr. Quiroz recalled that certain SDOG members' applications had been redacted and that at his PMK deposition he was instructed by counsel of SDOG not to disclose the applicants' names on privacy grounds. Therefore, Mr. Quiroz agreed that, at his deposition, he did not provide the names of any SDOG member; that he did not have any...