HUMES, P. J.—
To address Monterey County's water needs, two public agencies and a water company entered into five interrelated agreements to collaborate on a water desalination project. After it was revealed that a board
Marina is a public agency formed to provide water for the City of Marina and neighboring communities. Respondent Monterey County Water Resources Agency (Monterey or agency) also is a public water agency. Respondent California-American Water Company (California-American) is a regulated water utility that serves customers in California, including most of the Monterey peninsula.
In 1995, the State Water Resources Control Board ordered California-American to find a new source of water for about two-thirds of the supply it pumped to its customers. In response, California-American entered into agreements with Marina and Monterey to pursue a regional desalination project (RDP or the desalination project). Five of these agreements (the RDP agreements), entered into over the course of a year, are the focus of this case:
— In February and March 2010, the parties entered into a "Reimbursement Agreement," in which California-American agreed to reimburse Marina and Monterey their costs in pursuing the desalination project, subject to later repayment or forgiveness.
— On April 6, 2010, the parties entered into a "Water Purchase Agreement" (WPA), which provided for the design and construction of various facilities.
— Also on April 6, 2010, the parties entered into a "Settlement Agreement," which established a process for proposing the desalination project to the Public Utilities Commission (CPUC) for approval.
— Also in January 2011, the parties entered into a "Credit-Line Agreement," which established a line of credit available to the public agencies to manage their project-related finances.
In the midst of these agreements being negotiated and entered into, the CPUC approved the desalination project in December 2010.
Stephen Collins was a member of Monterey's appointed board of directors when the RDP agreements were being negotiated and, in some cases, entered into. Starting in January 2010, he also was a paid consultant for RMC to advocate for the agreements through a contract he had with Marina. RMC ultimately paid Collins $160,000 for his work. At a February 2011 meeting of Monterey's board of directors, Collins exposed his potential conflict of interest by recusing himself from a vote on the selection of RMC as the manager of the desalination project. Local media began reporting on the possible conflict of interest, and an investigation followed. Collins resigned from Monterey's board of directors on April 1, 2011.
By July 2011, Monterey took the position that the RDP agreements were void due to Collins's conflict of interest. Collins was eventually convicted of a felony for violating Government Code section 1090, which bars public officers or employees from being "financially interested in any contract made by them in their official capacity, or by any body or board of which they are members."
California-American filed its complaint for declaratory relief against Marina and Monterey on October 4, 2012.
Marina sought summary judgment or adjudication of (1) the first cause of action in California-American's complaint (seeking a declaration that the
Although this ruling rejected California-American's first cause of action, it did not entirely foreclose a judicial consideration of whether the RDP agreements could be declared void. In its second important ruling in the first summary judgment order, the trial court considered Marina's cross-complaint alleging that both cross-defendants were time-barred from bringing a claim and held that the validation statutes do not preclude a public agency from seeking to have a contract declared void. (§ 869.) The court thus found that Monterey, as a public agency, could challenge the RDP agreements under Government Code section 1092, and it therefore denied summary adjudication on Marina's claims in its cross-complaint to preclude any such challenge.
Monterey responded to the first summary judgment order by filing its own cross-complaint, with a single cause of action seeking "a declaration of the parties' rights and duties with respect to the RDP Agreements and a declaration the RDP Agreements are void" under Government Code section 1090. Marina answered the cross-complaint by again asserting that such a claim was barred by the statute of limitations governing validation actions, whereas California-American answered by contending that if the RDP agreements were void as to Monterey they were void as to all parties.
Monterey then moved for summary adjudication both on its cause of action in its cross-complaint and on all seven causes of action in Marina's cross-complaint. In what we shall refer to as the trial court's "second summary judgment order," the court first ruled in favor of Monterey as to Marina's cross-complaint, which meant that Monterey's claim seeking to have the agreements declared void under Government Code section 1090 could proceed notwithstanding the validation statutes' limitations period. The court also ruled against Marina on its four causes of action based on various provisions of the Public Utilities Code, which meant that Marina's causes of action based on those provisions could not proceed. Finally, the court denied summary adjudication on the merits of Monterey's cross-complaint because it found that whether Collins violated Government Code section 1090 involved a triable issue of fact.
A bench trial was held over four days in December 2014. Witnesses testified about the desalination project, the preparation of the RDP agreements, and Collins's involvement in the venture.
In its statement of decision issued in April 2015, the trial court reiterated its view that the RDP agreements were contracts subject to the validation statutes under section 52-39 of the Act. And it determined that the Reimbursement Agreement, the Water Purchase Agreement, the Project Management Agreement, and the Credit-Line Agreement also were subject to the validation statutes under two additional statutes (Gov. Code, § 53511
Although the court had concluded in its first summary judgment order that California-American's cause of action under Government Code section 1090 was barred by the short statute of limitations governing validation actions, it revisited and rejected this conclusion in the statement of decision. In the statement of decision, the court held that the longer four-year statute of limitations governing actions under Government Code section 1090 applied to all claims to have the agreements declared void under Government Code section 1090, whether brought by Monterey or California-American, and it found that Collins violated this section by participating in the making of four of the five contracts, but not the Credit-Line Agreement. Accordingly, the court declared void the Reimbursement Agreement, the Settlement Agreement, the Project Management Agreement, and the Water Purchase Agreement.
After the trial court issued its statement of decision, California-American dismissed its second cause of action without prejudice. The court then entered judgment on the three different complaints.
Marina timely appealed from the judgment, and this court granted the district's request for calendar preference. Two related appeals from orders regarding attorney fees and costs remain pending and are currently stayed until 30 days after the court's opinion becomes final in this appeal.
Respondents filed a joint motion to dismiss the appeal, arguing that the appeal violates the "one final judgment rule" because there are separate but related complaints for damages pending in the trial court based on the same underlying facts. On November 24, 2015, the court denied the motion. In its respondent's brief, Monterey again argues that the appeal should be dismissed, but we decline to revisit the court's previous ruling.
As we have discussed, the trial court's statement of decision ruled on declaratory-relief causes of action that were asserted in three separate complaints, in unique procedural postures, and brought by different types of entities (one water utility and two public agencies). But the upshot of the court's rulings on all of these causes of action was the same: none of the claims seeking to have the RDP agreements declared void were time-barred, and four of the five agreements were declared void.
On appeal, Marina continues to insist that the challenges to the RDP agreements were time-barred because they were not filed within the validation statutes' 60-day limitations period. Respondents maintain that Marina's argument leads to absurd results. We reject Marina's argument, as did the trial court in the first summary judgment order, for the more basic reason that the limitation period does not apply to public entities, such as Monterey, under the express terms of the validation statutes.
True enough, the broad language of section 52-39 of the Act appears to make the validation statutes applicable to any claim, even one brought under Government Code section 1090, that challenges a contract entered into by Monterey. In sweeping language, that section provides that "[a]ny judicial action or proceeding to attack, review, set aside, void, annul, or challenge the validity of ... any contract entered into by [Monterey] ... shall be commenced within 60 days of the effective date thereof" under the validation statutes. (Stats. 1990, ch. 1159, § 39, p. 4851, West's Ann. Wat. — Appen.,
Given the broad language, the trial court concluded in the first summary judgment order that section 52-39 of the Act means that the validation statutes applied to all five RDP agreements. Monterey disagrees with this conclusion and notes that there is no evidence the agency has ever applied such a literal interpretation to the provision, which "would subject Monterey's employment agreements, vendor contracts and routine agreements for services and supplies to the validation statutes." We share Monterey's concerns over such a literal construction of the statute but conclude that we need not reach the issue to resolve this appeal. We will assume, but specifically do not decide, that all the RDP agreements are within the scope of section 52-39's language.
Marina ignores this third option and argues that because an agency's action may be validated by doing nothing, the RDP agreements here could not be challenged after 60 days, when they were "validated by operation of law." In making its argument, Marina places undue reliance on Millbrae School Dist. v. Superior Court (1989) 209 Cal.App.3d 1494, 1498-1499 [261 Cal.Rptr. 409]. In Millbrae, a redevelopment agency and a city council approved a redevelopment project, and various public agencies not connected to the project challenged it under the validation statutes. (Millbrae School Dist., at p. 1496.) The trial court dismissed their action because they failed to properly serve summons under section 863, and they argued in a writ proceeding that they were permitted under section 869 to challenge an action without meeting the requirements for validation proceedings because of their status as public agencies. (Millbrae School Dist., at p. 1498.) Division Three of this court explained that after the validation statutes were expanded to cover more types of local agencies, the second sentence of section 869 (regarding the availability to public agencies of remedies other than the validation statutes) was added to leave no doubt that local agencies would retain previously available means to "validate[] and enforce[] their own decisions," but the statute did not grant to all public agencies "a new right to make third party challenges to each other's actions outside of the validating procedures." (Millbrae School Dist., at p. 1499, italics added.) Here, of course, Monterey was not a third party but was an actual party to the RDP agreements.
Marina further contends that doing nothing within the validation statutes' 60-day limitations period has the same effect as securing a validation judgment, but we disagree with this contention as well. By statute, validation judgments are "forever binding and conclusive." (§ 870, subd. (a).) In San Bernardino County v. Superior Court, supra, 239 Cal.App.4th at page 684, the court rejected a challenge to a contract under Government Code section 1090 because the challengers were not parties to the contract and thus lacked standing. The same court contemporaneously held in Colonies Partners, L.P. v. Superior Court (2015) 239 Cal.App.4th 689, 692-695 [191 Cal.Rptr.3d 45], that even if the challengers could amend their complaint to allege standing, they still could not maintain their action under the Government Code because San Bernardino County previously had obtained a validation judgment concluding that its obligations were valid, legal, and binding. Marina placed great weight on Colonies Partners at oral argument, but the discussion in Colonies Partners arguably is dicta in light of the court's conclusion in San Bernardino. In any event, we need not and do not decide the effect of such a judgment on the parties' ability to bring a subsequent action under Government Code section 1090 here, because no validation action was ever initiated and thus no validation judgment was obtained.
In short, even if we set aside our skepticism and accept for the sake of argument Marina's assertion that the validation statutes' 60-day limitation period applies generally to claims brought under Government Code section 1090 where a contract implicates the validation statutes, we must still conclude that that limitation period does not control here because Monterey, as a public agency, is exempt from it. (§ 869.) Thus, we agree with the trial court's rulings that the 60-day limitation period did not preclude Monterey's challenge. (Ibid.)
We next turn to consider whether Monterey's cause of action was filed within Government Code section 1090's four-year limitation period, and we conclude that it was because it related back to Marina's cross-complaint. Marina contends that the limitations period began to run "in or around January 2010" (when Collins started to be paid for his work for RMC),
Here, both Monterey and Marina were named as defendants in California-American's original complaint. Marina argues that this case is thus akin to Western Pipe, because Monterey was a defendant who filed a cross-complaint against the original plaintiff (California-American) and another defendant (Marina). (Western Pipe, supra, 63 Cal.App.2d at pp. 31-32.) But this argument overlooks that Marina filed its own cross-complaint naming Monterey as a defendant before Monterey filed its cross-complaint. In its cross-complaint, Marina sought a declaration that challenges to the RDP agreements were time-barred. By doing so, it forfeited any objection to Monterey filing its own cross-complaint for declaratory relief arising out of the identical subject matter. Marina argues it would be unjust for the court to hold that Monterey's cross-complaint related back to Marina's cross-complaint because that would "punish Marina solely for timely asserting affirmative defenses to Cal[ifornia]-Am[erican]'s initial complaint." But Marina did not solely assert affirmative defenses to the original complaint — it also filed a separate cross-complaint. We conclude, as did the trial court, that Monterey's claim under Government Code section 1090 was timely filed because it related back to Marina's earlier cross-complaint filed on November 19, 2012, and that date was well within the four-year statute of limitations for claims that Marina argues began to accrue in January 2010.
Having concluded that the trial court was not time-barred from considering Monterey's request to have the agreements declared void, we turn to consider whether the court properly found on the merits that four of the five agreements were void. Marina argues that the court erred in declaring them void because Collins lacked a sufficient "financial interest" in the RDP agreements to constitute a violation Government Code section 1090. We again agree with the trial court.
The trial court concluded that Collins had a financial interest in the Reimbursement Agreement, Settlement Agreement, and WPA, because the evidence showed that RMC increased his pay while he was participating in making these contracts and working to gain their approval. The court considered Collins's interest in the Project Management Agreement a closer question because Collins's contract with RMC ended the day the CPUC approved the desalination project and there was no direct evidence showing that Collins expected a benefit from the contract's execution. The court nonetheless concluded that Collins had a cognizable interest in the agreement because he had been paid for his work and could have reasonably expected to receive more work.
Marina argues, without discussing the evidence relied upon by the trial court, that the court failed to follow this court's opinion in Eden Township Healthcare Dist. v. Sutter Health (2011) 202 Cal.App.4th 208 [135 Cal.Rptr.3d 802]. In Eden Township, this court affirmed summary judgment in a lawsuit claiming that agreements to purchase a hospital and to change its service role were void due to a conflict of interest by two of the people who played a role in negotiating the agreements. (Id. at pp. 212-213.) The court held that neither of these people had a financial interest in the contracts because no evidence showed that they would benefit directly or indirectly from them. (Id. at pp. 220-222, 228-229.) Although one of the two served as an unpaid chief executive officer (CEO) of a health care district and received a salary as CEO of a nonprofit that operated a hospital for the district, the court concluded that no nexus had been shown between the contracts and the person's compensation. (Id. at pp. 213-214, 221-222.)
Marina claims this case is analogous to Eden Township because Collins's contract with RMC ended on December 2, 2010, "well before the asserted final approval date" of the Project Management Agreement and the Credit-Line Agreement on January 11, 2011. But Marina's comparison to Eden Township is inapt because that case turned on the lack of nexus between the contracts and the relevant officials' compensation, not the timing of the contracts. (Eden Township Healthcare Dist. v. Sutter Health, supra, 202 Cal.App.4th at pp. 220-222, 228-229.) Here, as the trial court explained, the evidence revealed that Collins entered a contract with RMC under which he was to receive $220 per hour, up to a maximum of $25,000 in compensation, to provide consulting services for the desalination project. Over the next year,
Marina's reliance on dicta in People v. Vallerga (1977) 67 Cal.App.3d 847 [136 Cal.Rptr. 429] is also misplaced because that portion of the opinion addressed the hypothetical situation of whether a defendant, who was to be paid as a consultant regardless whether the relevant contract was executed, would violate Government Code section 1090 if he or she did nothing other than to provide consulting services before the contract's execution. (Vallerga, at pp. 867-868, fn. 5.) Again, we agree with the trial court when it pointed out that, unlike the defendant in Vallerga, Collins had a financial interest in the Reimbursement Agreement, Settlement Agreement, and WPA "when he participated in making the contracts and obtaining that approval, whether or not subsequent final approval was required."
Marina's request for judicial notice, filed on January 20, 2016, is denied.
California-American's request for judicial notice, filed on February 9, 2016, is granted.
The judgment is affirmed.
Margulies, J., and Banke, J., concurred.