I ~ IIIII III ~ IIIII II ~I ~ Ill

SUPERIOR COURT OF CALIFORNIA

COUNTY OF SAN FRANCISCO

Document Scanning Lead Sheet

Feb-25-2014 10:03 am

Case Number: CGC-13-528312

Filing Date: Feb-25-2014 9:58
Filed by: SHAWNA VANTREE
Juke Box: 001

Image: 04389018

ORDER

CALIFORNIA-AMERICAN WATER COMPANY, A CALIFORNIA CO VS. MARINA

COAST WATER DISTRICT et al

001C04389018

Instructions:
Please place this sheet on top of the document to be scanned.

r- I

l~

E D

San Francisco County Superior Court

FE8 2 5 r:o1~

BY~LE~~~~:~l~,~~~~URT_

Deputy Clerk

SUPERIOR COURT OF CALIFORNIA

6

COUNTY OF SAN FRANCISCO

7
8

CALIFORNIA-AMERICAN WATER CO.,

Plaintiff,

10
vs.

11

MARINA COAST WATER DISTRICT, ET

AL.,

12
13

Defendants.

14
AND RELATED CROSS ACTIONS

15
16

17
18

Case No. CGC- 13-528312

--------------------------------~

ORDER DENYING MOTION OF

MARINA COAST WATER DISTRICT FOR
SUMMARY JUDGMENT ON ITS CROSSCOMPLAINT OR IN THE ALTERNATIVE
SUMMARY ADJUDICATION OF EACH 7
CAUSE OF ACTION IN ITS CROSSCOMPLAINT;
AND
GRANTING MOTION OF MARINA
COAST WATER DISTRICT FOR
SUMMARY ADJUDICATION OF THE
FIRST CAUSE OF ACTION IN CAL-AM'S
COMPLAINT

On 7 February 2014 I heard argument on a summary judgment and summary adjudication

19
20

motion' brought by Marina Coast Water District. At argument, I discussed among other things

21

the apparent conflict between the validation statutes and 1090, informed the parties of some

22

research I had done on principles of statutory construction, and asked whether the parties desired

23

to review that research, do their own, and file supplemental briefs. The parties did, and at their

24

request I gave them until21 February for simultaneous briefing, at which time the matter was

25
deemed submitted.

26
1

27

Marina moved, in a single motion, for (1) summary judgment on its Cross-Complaint or in the alternative summary
adjudication of each of the 7 causes of action in its Cross-Complaint; and (2) summary adjudication of the first cause
of action in Cal-Am's Complaint. Cal-Am and Monterey each filed oppositions.

CGC 13-528312

-I -

Background

There are three parties in this action: California-American Water Company (Cal-Am),

3
Marina Coast Water District (Marina), and Monterey County Water Resources Agency

(Monterey).
In 1995, the State Water Resources Control Board (SWR) ordered Cal-Am to diligently

6
7

take action to stop diverting water from the Carmel River by finding sufficient replacement

sources. 2 In a later order, SWR ordered Cal-Am to come into compliance with the above order

no later than December 31, 20 16?

10

Cal-Am planned the Regional Desalination Project (Project) to come into compliance.

11

The Project was planned as a partnership among Cal-Am, Marina, and Monterey.

In connection

12
13

with the Project, the parties entered five written contracts, including ( 1) the Reimbursement

14

Agreement; (2) the Settlement Agreement; (3) the Water Purchase Agreement (WPA)

15

(collectively, Agreements).

16

The Public Utilities Commission (PUC) approved the Agreements. No entity sought judicial

17

The Agreements went into effect on or before January 11, 2011.

review ofthe PUC's final approval.

18
19
20
21

22
23

24

25

26
27

Cal-Am and Monterey's Joint Response to Marina's Separate Statement of Undisputed Material Facts (Cal-Am
Response to SSUF), ~ 11.
3
!d. at~ 24.
4
See id. at~ 33.
5
See id. at~~ 34-37, 42-43, 45-49, 54-56, 60. Marina refers to only these three Agreements using the term
"Agreements." Cal-Am and Monterey refer to all five contracts, including the Credit Line Agreement and the
Project Management Agreement (which engaged RMC Water and Environment) together as the "RDP Agreements."
See Motion, "Glossary ofTerms ... ", Cal-Am Opposition, 4:22-23; Monterey Opposition, 2:4-5; see also CrossComplaint,~ 9; Complaint,~ 18. The parties do not suggest that this difference in terminology is material (even to
Marina's Motion for Summary Adjudication on the first cause of action in the Complaint, which refers to all five
contracts). At the February 7 2014 hearing the parties agreed that for purposes of these motions the contracts rose or
fell together.
6
See id. at~~ 34,47 (parties entered the Reimbursement Agreement in February 2010 and Commission approval
was granted in August 2010), 56 (WPA and Settlement Agreement became effective on January 11, 2011).
7
!d. at~~ 47-49, 52-54,66,70-73.
8
!d. at~ 49, 66, 70-73.

CGC 13-528312

- 2-

On October 4, 2012, Cal-Am filed its Complaint against Marina and Monterey, asserting
two causes of action for declaratory relief: ( 1) seeking a declaration as to whether the five

3
contracts entered into pursuant to the Project are void pursuant to Government Code 1090 due

4
9

5
6

to a conflict of interest attributed to Stephen Collins; and (2) seeking a declaration that,
assuming the five contracts are not void, Cal-Am was entitled to terminate the contracts based on
10

Monterey's anticipatory repudiation.

Am and Monterey. Marina alleged seven causes of action for declaratory relief: (1) seeking a

declaration that challenges to the validity of the Agreements were barred by the validation

10

Thereafter, Marina filed its Cross-Complaint against Cal-

statutes, which were triggered by any of three statutory provisions (first three causes of action);

11
and (2) seeking a declaration that challenges to the validity of the Agreements are barred by
12

13
14

operation of the Public Utilities Code (last four causes of action).

11

Marina asserted the same

theories as alleged in the first five causes of action in its second affirmative defense.

12

15

In the present Motion, Marina seeks summary judgment on its Cross-Complaint,

16

summary adjudication ofthe first cause of action in Cal-Am's Complaint, and summary

17

adjudication of Marina's second affirmative defense. Specifically, Marina argues that judicial

18
review of the validity of the Agreements, even where a challenge is brought under Government
19
Code 1090, is barred either by (1) the validation statutes; or (2) operation of the Public Utilities
20
21

Code. Cal-Am and Monterey filed separate opposition briefs, with each joining the other.

22
23

24
25

26
27

It is undisputed for present purposes that Collins was paid for work he performed for a contractor on behalf of
Marina in connection with the Project while serving on Monterey's Board of Directors, and that a Remcho Report
concluded that Collins participated in the making of the Agreements while he had a financial interest therein in
violation of Government Code 1090. See Marina's Response to Cal-Am and Monterey's Joint Statement of
Undisputed Facts,~~ 1-10, 12-13,15-18,31.
10
Complaint,~~ 28-29. 31-32.
11
Cross-Complaint, ~~ 20-44.
12
Marina Answer, ~ 2.

CGC 13-528312

-3-

Requests for Judicial Notice

None of the requests for judicial notice is opposed. They are granted. There are also a

3
large number of undisputed facts, arguably obviating the need to take judicial notice of several of
4

5
6

the documents (many of which are also attached to declarations). Marina Exhibits L, 0, and R,
referred to below, are PUC decisions subject to judicial notice.

13

7
8

Discussion

A.

10

Standards

The standards for summary judgment and adjudication are known to the reader. 14

11

B.

Validation Statutes

12
Marina relies on the 60-day limitations period provided by the validation statutes, which

13

14

it argues were triggered by any of three separate provisions: (1) 52-39 of Annotated Water

15

Code Appendix (the Agency Act); (2) Water Code 30066; and (3) Government Code

16

53511. 15 Cal-Am and Monterey argue that a four-year limitations period applies pursuant to

17

Government Code 1092(b), either because Government Code 1092(b) trumps the validation

18
statutes where a contract is allegedly invalid based on a conflict of interest or because the
19
20

validation statutes do not apply to the contracts in this case. 16

The validation statutes are found at C.C.P 860-870. They provide a mechanism

21

22

whereby a public agency may bring a validation proceeding in superior court within 60 days of

23

"the existence of any matter which under any other law is authorized to be determined pursuant

24

25
26

13

Prattv. Coast Trucking, Inc., 228 Cal.App.2d 139, 143-44 (1964).

C.C.P. 437c; Aguilar v. Atlantic Richfield Company, 25 Cal.4th 826 (2001).
15
Motion, 13.
16
Cal-Am Opposition, 9-15; Monterey Opposition, 5-12.
14

27

CGC 13-528312

- 4-

2
3

to [the validation statutes.]" 17 If an agency does not initiate a validation proceeding, "any
interested person may bring an action within the time and in the court specified by Section 860 to
determine the validity of such matter." 18 The interested person must bring a validating

proceeding within 60 days: "No contest except by the public agency or its officer or agent of any

thing or matter under this chapter shall be made other than within the time and the manner herein

specified." 19

8
9
10

That is, if the validation statutes apply a public agency may either ( 1) initiate a validation
proceeding, or (2) do nothing- in which case the act will become immune from attack if no
interested person brings a proceeding to establish the acts validity or invalidity within 60 days? 0

11

A validation judgment is conclusive. 21 If a judgment in a validation is affirmed on appeal,

12

13

or if no appeal is taken, the judgment "shall, notwithstanding any other provision of law ...

14

thereupon become and thereafter be forever binding and conclusive as to all matters therein

15

adjudicated or which at that time could have been adjudicated." 22

There are three potential triggers for the validation statutes in this case. 23

16
17

First, 52-39 of the Agency Act:

18
Any judicial action or proceeding to attack, review, set aside, void, annul,
or challenge the validity or legality of the formation of a zone, any
contract entered into by the agency or a zone, any bond or evidence of
indebtedness of the agency or a zone, or any assessment, rate, or charge of

19
20
21
22
23

24
25

26
27

17

Kaatz v. City of Seaside, 143 Cal.App.4th 13, 29 (2006), quoting C.C.P 860.
Jd. at 30, quoting C.C.P. 863.
19
Jd., quoting C.C.P. 869.
20
ld., citing Friedland v. City ofLong Beach, 62 Cal.App.4th 835, 850-51 (1998). See also City of Ontario v.
Superior Court, 2 Cal.3d 335, 341 (1997) ("a statute which begins by providing a remedy to be pursued by public
agencies, ... concludes by making it unnecessary for such agencies to do anything at all, and the incidental or
derivative remedy of an 'interested person' turns out to be controlling.")
21
Friedland, 62 Cal.App.4th at 844.
22
Jd. at 846 (emphasis in original), quoting C.C.P. 870(a).
23
Cal-Am and Monterey take the position that all three triggers for the validation statutes are sufficiently analogous
that the case law interpreting each can be applied to all three. Cal-Am Opposition, 10 (each trigger is inapplicable
for the same reasons); Monterey Opposition, 8 (for the purposes of the issues presented here, the language in all
three statutes is equivalent). Marina counters that Agency Act 52-39 is broader than the other two provisions with
respect to the scope of the contracts to which it applies. Reply, 7-8. As noted below, I agree.
18

CGC 13-528312

-5-

the agency or a zone shall be commenced within 60 days of the effective

date thereof.

The action or proceeding shall be brought pursuant to Chapter 9

(commencing with Section 860) of Title 10 of Part 2 of the Code of Civil
Procedure.

The agency may bring an action pursuant to that Chapter 9 to determine

the validity of any of the matters referred to in this section.

6
7

Second, Water Code 30066 provides:

8
An action to determine the validity of an assessment, or of warrants,
contracts, obligations, or evidences of indebtedness pursuant to this
division may be brought pursuant to Chapter 9 (commencing with Section
860) of Title 10 of Part 2 of the Code of Civil Procedure.

9
10
11

12

Third, Government Code 53511 provides:

13

(a) A local agency may bring an action to determine the validity of its
bonds, warrants, contracts, obligations or evidences of indebtedness
pursuant to Chapter 9 (commencing with Section 860) of Title 10 of Part 2
of the Code of Civil Procedure.

14
15
16

(b) A local agency that issues bonds, notes, or other obligations the
proceeds of which are to be used to purchase, or to make loans evidenced
or secured by, the bonds, warrants, contracts, obligations, or evidences of
indebtedness of other local agencies, may bring a single action in the
superior court of the county in which the local agency is located to
determine the validity of the bonds, warrants, contracts, obligations, or
evidences of indebtedness of the other local agencies, pursuant to Chapter
9 (commencing with Section 860) of Title 10 of Part 2 of the Code of
Civil Procedure.

17
18
19

20
21

22
In spite of its broad language, not all public agency contracts fall within the purview of
23

24
25

53511.

24

The term "contracts" in the context of 53511 refers to contracts involving financing

and financial obligations.

25

26

27

24
25

Kaatz, 143 Cal.App.4th at 32.

Friedland, 62 Cal.App.3th at 843.

CGC 13-528312

- 6-

The Kaatz Court identified four reasons to read the term "contracts" narrowly: (1) the
Legislative Counsel's digest characterized the measure as one to determine the validity of

3
evidences of indebtedness; (2) 53511 was placed in a Chapter entitled "Bonds" rather than the

5
6

chapters entitled "General" or "Miscellaneous;" (3) the "bonds, warrants, contracts, obligations
or evidences of indebtedness" language was taken from an earlier statute that applied to such

matters as the legality of the local entity's existence, the validity of bonds and assessments, and

the validity of joint financing agreements with other agencies; and (4) the inclusion of the word

"contracts" amidst four other terms that all deal with the limited topic of a local agency's

10

financial obligations. 26 But Kaatz cited Agency Act 52-39 as an example of language that

11

clearly provides a broad scope for matters embraced by the validation statutes- permitting
12
13

14

proceedings to determine the validity of any contract. The four rationales for a constructed
reading of the other validation statutes do not apply to 52-39. 27

Government Code 1092(b)

15

C.

16

Government Code 1090 prohibits public officials or employees from having a financial

17

interest in any contract made by them in their official capacity or by any body or board of which

18
they are members. Section 1092(a) invalidates contracts made in violation of 1090.
19
"The evil to be thwarted by section 1090 is ... : If a public official is pulled in one

20
21

direction by his financial interest and in another direction by his official duties, his judgment

22

cannot and should not be trusted, even if he attempts impartiality." 28 "Where a prohibited

23

interest is found, the affected contract is void from its inception ... and the official who engaged

24

in its making subject to a host of civil and (if the violation was willful) criminal penalties .... " 29

25

26

26

Kaatz, 143 Cal.App.4th at 35, citing City of Ontario, 2 Cal.3d at 343-44.

Section 52-39.
28
Lex in v. Superior Court, 4 7 Cal. 4th 1050, 1073 (20 10) (citation omitted).
29 !d.

27

27

CGC 13-528312

- 7-

Section 1092(b) provides: "An action under this section shall be commenced within four
years after the plaintiff has discovered, or in the exercise of reasonable care should have

3
discovered, a violation in subdivision (a)." Section 1092(b) was enacted in 2007.
4

The legislative history noted conflicting court rulings on the length of the statute of

5
6

limitations and settled on four years, noting that the bill would give public entities more time to

gather information and develop their cases for voiding contracts that are grounded in violations

of the public trust. 30 The reports also tend to confirm the view, cited by Cal-Am and Monterey,

to account for the fact that 1090 claims involve coordinated action between board members

10

and private parties who hide their relationships such that a minimum of a four-year statute of

11

limitations was necessary from the date of discovery to protect a public entity's rights.
12

D. Conflict of Statutes

13

I address two questions: (1) whether the validation statutes apply here; and (2) whether

14

15

1092(b) overrides the validation statutes.

16

1. Application of Validation Statutes

17

Marina argues that the validation statutes apply to any contract Monterey enters under the

18
plain language of Agency Act 52-39. Next, Marina argues that the other validation statutes
19
20
21

apply because the contracts at issue are pursuant to Government Code 53511 and Water Code
30066; that is so, Marina argues, because the Agreements contemplate financial commitments.

22
23
24
30

25
26
27

The history contains four reports: an Assembly Committee Report, an Assembly Floor Report, a Senate
Committee Report, and a Senate Floor Report. These reports reflect a desire to clarify the statute of limitations
applicable to 1092 actions. Both Assembly Reports, at page 3, indicate that 1090 defendants argued a one-year
or three-year statute of limitations applied, whereas public entities seeking to invalidate contracts argued that a fouryear statute of limitations applied. Both Senate Reports reflect, at page 2, that existing law does not specify what
statute of limitations applies to 1090 or 1092 claims, and further reflect, at page 3, that defendants have sought to
assert a one-year statute of limitations.

CGC 13-528312

- 8-

1
2

The first argument is persuasive. Agency Act 52-39 is part of Monterey's enabling
act. 31 The Agency Act grants Monterey numerous powers, including the power to "[m]ake

3
contracts, and employ labor, and do all acts necessary for the full exercise of all powers vested in
4
5
6

the agency or any ofthe officers thereof, by this act." 32 Section 52-39 subjects "[a]ny judicial
action or proceeding to attack, review, set aside, void, annul, or challenge the validity or legality

of the formation of a zone, any contract entered into by the agency or a zone, any bond or

evidence of indebtedness of the agency or a zone, or any assessment, rate, or charge of the

agency or a zone" to a sixty day statute of limitations.

10

As noted above, Kaatz cited this statute as an example demonstrating that the Legislature

11
knows how to draft language that invokes the validation statutes to determine the validity of any
12
13

contract. 33 Kaatz of course made this distinction with respect to the very statutes which Cal-Am

14

and Monterey now argue are essentially the same as 52-39, e.g. Government Code 53511.

15

Cal-Am and Monterey provide no good argument why I should reject Kaatz or otherwise find

16

that 52-39 does not apply to all agency contracts.

17

Because Monterey was a party to the Agreements, the validation statutes apply to the

18
Agreements. Thus the Agreements were validated by operation of statute.
19
As a result I need not decide whether Government Code 53511 or Water Code 30066

20
21

apply with respect to the first cause of action in the Complaint.

However, Water Code 30066 and Government Code 53511 are implicated by the

22
23

second and third causes of action in the Cross-Complaint, respectively. All parties assume the

24

analysis is the same for both statutes. These statutes apply when the contracts at issue involve

25
26
27

31

Agency Act 52-3 (title), 52-4 (creating agency), 52-5.2(a) (defining "Agency" to mean "Monterey County
Water Resources Agency").
32
Agency Act, 52-9(k) ("Powers of agency").
33
Kaatz, 143 Cal.App.4th at 41.

CGC 13-528312

- 9-

2
3

financing and financial obligations? 4 These statutes do not apply to all the Agreements at issue
now. The Water Purchase Agreement contemplates financing, but does not create it. Marina Ex.
Z at~ 7.1(a). Nor does the Settlement Agreement involve the creation of financing or financing

obligations. Accordingly I cannot grant judgment on the second or third causes of action.

2. The Impact of 1090

8
9

10

The dispute resolved here is whether the validation statutes bar challenges based on
Government Code 1090 brought more than 60 days after the public agency enters the relevant
contract.

11

The validation statutes are designed to quickly determine the validity of public agency

12
13

action? 5 The validation statutes should be construed so as to uphold this purpose. Validation

14

statutes are commonly used to facilitate financial transactions with third parties by quickly

15

affirming their validity. 36 Courts have recognized that the validation statutes provide a short

16

statute of limitations, but have noted that what constitutes a reasonable time is a question

17

ordinarily left to the Legislature. 37 The sixty day statute of limitations is not unreasonable. 38

18
An action seeking a declaration that a contract subject to the validation statutes is "void"
19

20

21

is within the scope ofthe validation statutes. Matters, including constitutional challenges, which
have been or which could have been adjudicated in a validation action are waived if they are not

22
23
24
25
34

26
27

Friedland, 62 Cal.App.3rd at 843; City of Ontario v. Superior Court, 2 Cal.3d 335, 343-345 (1970).
California Commerce Casino, Inc. v. Schwarzenegger, 146 Cal.App.4th 1406, 1420-21 (2007).
36
!d. at 1421.
37
!d. at 1420, citing Friedland, 62 Cal.App.4th at 846.
38
!d., citing Friedland, 62 Cal.App.4th at 843, 846.
35

CGC 13-528312

- I 0-

raised within the limitations period. 39 There is no authority exempting challenges under
Government Code 1090.

3
Cal-Am and Monterey have made two arguments that the validation statutes do not apply.
4

In the first they suggest that because the Agreements were void "ab initio" (as opposed to being

merely voidable) there were no extant contracts to be subject to the validation statutes. A second

argument, made at the February 7 hearing and reiterated in supplemental briefing, was that

because the validation statutes contemplate 'in rem' proceedings, only attacks confined to the

"four corners" of the contracts are truly contemplated and accordingly attacks that are premised

10

on extrinsic matters (such as a section 1090 attack based on a conflict of interest) are not

11
contemplated by the validation statutes, and hence such 1090 attacks are permitted outside the 60
12

13

day statute of limitations.

As to the first argument, I must note that validation statutes expressly hold that attacks

14
15

because contracts are "void" are covered. Here it is again:

16

Any judicial action or proceeding to attack, review, set aside, void, annul,
or challenge the validity or legality of the formation of a zone, any
contract entered into by the agency or a zone, any bond or evidence of
indebtedness of the agency or a zone, or any assessment, rate, or charge of
the agency or a zone shall be commenced within 60 days of the effective
40
date thereof.

17
18
19

20
21

As to the second argument, I think it misconstrues the impact of the in rem proceeding
contemplated the statute. The Latinate phrase comes from C.C.P. 860 which notes that the

22
validation proceeding which an agency may commence is a proceeding 'in rem'. The
23

24

25

26
27

proceeding which must be brought some other interested person, 863, too is an in rem action,
because the summons too must be as for the 860 proceeding, that is, to all interested persons,
39

Friedland, 62 Cai.App.4th at 846-47; see also Travis v. County of Santa Cruz, 33 Cal.4th 757, 767-78 (2004) (90day limitations period after which all persons are barred from any further action or proceeding cannot be avoided by
claiming that the permit or condition is "void" and thus subject to challenge at any time).
40
Agency Act 52-39 (emphasis supplied).

CGC 13-528312

- II -

which is the typical mode for in rem proceeding. In either event, the point is to have single
proceeding and bind all persons who might conceivably have some right in the subject (here, in

3
the contract).

41

4
The result, and indeed the very point of such a proceeding, is to have "a resulting

5
6

judgment conclusive as against all the world." 42 After the time expires, no one, except the public
43

agency, can "contest the legality of validity" of the matter.

between some claims which are barred and some which are not. Specifically, I have not seen

any authority that suggest that some sort of claims are excluded from this res judicata effect, that

10

11

I do not see a distinction here

is, that claims based on extrinsic evidence (such as conflicts of interest, or perhaps fraudulent
inducement or promissory fraud, 44 incapacity, or a whole host of other attacks which might

12
13

invoke extrinsic evidence) can avoid the impact of the validation statutes. Because the effect of
45

14

these sorts of proceeding is the same as (after 60 days) no proceeding at all,

15

the public agency may assert claims-no matter what sort of claim they might conceive of.

16

3. Principles to Resolve Statutory Conflicts

17
18

no person except

Section 52-39 bars the actions because they are brought beyond the 60 day limit, but
1090 permits them because they were brought within four years. There are a variety of tests one

19
might invoke to resolve the conflict.

20
21

22
23

24
25
26

27

41

Friedland v. City of Long Beach, 62 Cal. App. 4th 835, 843 (1998); Cmty. Youth Athletic Ctr. v. City of Nat. City,
170 Cal. App. 4th 416, 427 (2009).
42 Cmty. Youth Athletic Ctr. v. City of Nat. City, 170 Cal. App. 4th 416, 427 (2009); Eiskamp v. Pajaro Valley Water
Management Agency 203 C.A.4th 97, 105 (2012) (stipulated judgment was binding and conclusive against all
persons). See generally, 2 B Witkin, CALIFORNIA PROCEDURE (5 1h ed. 2008) Jurisdiction 245 (2012).
43
C.C.P. 869.
44
E.g., Riverisland Cold Storage v. Fresno-Madera Etc. Credit, 55 Cal. 4th 1169 (20 13).
45
Kaatz, 143 Cal.App.4th at 41.

CGC 13-528312

- 12-

First, courts are instructed to make the conflict go away under the rule of 'harmonious
construction,' and so give effect to both statutes. 46

3
On occasion courts look to the timing of the statutes. Thus for example, the second

5
6

statute may be held to in effect amend the earlier one. 47 Or to the opposite effect, we might say
that the Legislature is presumed to be aware of the earlier law, and not having addressed the

conflict thusly intended the prior statutes to remain in full force. 48 We might tend to this because

there is deep presumption against a court finding of "implicit repeal. " 49 But that repeal might

indeed be the result when "there is no rational basis for harmonizing the two potentially

10

11

conflicting statutes [citation], and the statutes are 'irreconcilable, clearly repugnant, and so
inconsistent that the two cannot have concurrent operation." 50

12
Typically courts resort to the heuristic that distinguishes general from specific statutes,

13

14

favoring the latter as exceptions to the former. 5 1 Under those circumstances, it doesn't matter

15

which statute came first.

16

specific than the other. 53 So too here. Government Code 1092(b) applies to a specific subset

52

But this might not help--sometimes neither law appears to be more

17
18
19
20

21

22
23

24

25

26
27

46

Strother v. California Coastal Comm'n, I73 Cal.App.4th 873, 88I (2009). See also, Stone St. Capital, LLC v.
California State Lottery Comm 'n, I65 Cal.App.4th I 09, II9 (2008)("courts are bound, if possible, to maintain the
integrity of both statutes if the two may stand together").
47
Stone St. Capital, LLC v. California State Lottery Comm'n, I65 Cal. App. 4th I 09, I24 (2008) ("rule giving
precedence to the more recently enacted statute is invoked only if the two cannot be harmonized").
48
Anson v. County of Merced, 202 Cai.App.3d II95, II99 (1988).
49
Garcia v. McCutchen, I6 Cal.4th 469, 476-77 (1997).
50
Garcia v. McCutchen, I6 Cal.4th 469, 476-77 (1997).
51
Strother v. California Coastal Comm'n, I73 Cal. App. 4th 873, 879 (2009); McLaughlin v. State Bd. of Educ., 75
Cal.App.4th I96, 224 (1999); C.C.P. I959; Creditors Collection Serv. v. Castaldi, 38 Cal.App.4th I039, 1043-44
(1995).
52
Bradwell v. Superior Court, 156 Cal.App.4th 265, 269 (2007).
53
E.g., Garcia v. McCutchen, 16 Cal.4th 469, 478 (1997); Anson v. Cnty. of Merced, 202 Cal. App. 3d 1195, 1199
(1988).

CGC 13-528312

- I3 -

of government contracts that are void based specifically on a conflict of interest. And Agency

Act 52-39 applies to a specific subset of government contracts entered into by Monterey. 54

4.

Resolution of the Conflict

4
Here, the validation statutes and Government Code 1092(b) can be harmoniously

5
6

construed by applying both to this action. The validation statutes afford finality. The validation

statutes preclude any "contest except by the public agency or its officer or agent of any thing or

matter" within their purview "other than within the time and manner specified" in the validation

statutes. 55 "The availability to any public agency ... of the remedy provided by [the validation

10

statutes] shall not be construed to preclude the use by such public agency ... of mandamus or any

11
other remedy to determine the validity of any thing or matter. "

56

Here, the validation statutes

12
13

were triggered by Agency Act 52-39, which validates Monterey's contracts. As noted above,

14

the legislative history of Government Code 1092(b) reflects the legislative intent to allow

15

public agencies sufficient time to gather information and develop their cases for voiding

16

contracts that are grounded in violations of the public trust. Applying both the validation statutes

17

and Government Code 1092(b), the contracts were validated by the passage of time such that

18
no entity except for Monterey can seek to void the contracts in this case on the basis of a 1092
19
20

violation.

As a result, Marina's motion for summary adjudication as to the first cause of action in

21

22

57

Cal-Am's Complaint is granted- Cal-Am is barred from seeking to void these agreements by the

23

24
25

26
27

54

Anson v. County of Merced, 202 Cal.App.3d 1195, 1199 (1988) (both statutes addressed specific areas of lawgovernment tort liability and medical negligence liability- such that each could be viewed as a subset of the other;
rule that specific statute of limitations trumps general statute of limitations inapplicable).
55
C.C.P. 869.
56
Id.; see also Kaatz, 143 Cal.App.4th at 30 n.l7 (public agency is in effect authorized by C.C.P. 869 to disregard
the 60-day statute of limitations imposed by 860); City of Ontario, 2 Cal. 3d at 341 (same).
57
While this interpretation limits the finality afforded by the validation statutes, that limitation results from the plain
language ofC.C.P. 869.

CGC 13-528312

- 14-

validation statutes. 58 On the other hand, Marina's motion for summary adjudication of the first
cause of action in its Cross-Complaint is denied. On the present record, Monterey's time for

3
challenging the validity of the agreements under 1092 has not expired.
4

E.

Public Utilities Code

Marina argues that no party may challenge the validity of the Agreements because the

59

Agreements were approved by final PUC decisions under P.U.C. 1731(b) and 1756().

Marina also says those final decisions are conclusive pursuant to P.U.C. 1709. Finally, Marina

argues that no court may review, reverse, correct, or annul the PUC 's final, conclusive decisions

10

concerning the Agreements pursuant to P.U.C. 1759(a).

11
In short the argument is that the PUC's final decisions, when not timely appealed, divest
12
13

the courts of jurisdiction. Monterey and Cal-Am counter that that Government Code 1090

14

allegations are outside the scope of the Commission's purview and so not subject to the finality

15

rules. 60

16

1.

17
18

Commission Decisions

Marina relies on Commission decisions D.1 0-08-008 and D.1 0-12-016. 61 "No ... water
corporation ... shall begin the construction of a ... plant, or system, or of any extension thereof,

19
20
21

without having first obtained from the commission a certificate that the present or future public
convenience and necessity require or will require such construction." 62 Cal-Am is a water

22
23
24
58

25
26
27

Even so, Marina's motion for summary adjudication of its second affirmative defense cannot be granted because
as plead in the Answer it extends to both causes of action in the Complaint- and the second cause of action assumes
that the Agreements are valid.
59
Motion, 8-9.
60
Monterey Opposition, 12-17; Cal-Am Opposition, 15-19.
61
Marina Exs. L, 0.
62
P.U.C. 1001.

CGC 13-528312

- I 5-

corporation, as defined in Public Utilities Code 241. The PUC considers community values,

recreational and park areas, historical and aesthetic values, and influence on environment. 63

3
In Application 04-09-019 (A.04-09-019), Cal-Am applied for such a certificate to
4

5
6

construct and operate a desalination plant and associated facilities. 64 Monterey and Marina
joined in the proceedings, and all three joined in a motion for approval of the Reimbursement

Agreement, pursuant to which Cal-Am would advance funds to Monterey and Marina to cover

project related costs, subject to future repayment. 65 The PUC approved the Reimbursement

Agreement in D.1 0-08-008. 66 No conflict of interest issue was raised nor was the validity of the

10

Reimbursement Agreement raised by any party or discussed by the PUC.

11

Then the PUC issued D.10-12-016, in which it approved the Settlement Agreement
12
13

(including the Water Purchase Agreement), approved the Project, and issued a certificate to Cal-

14

Am for several components of the Project. 67 The PUC found that the Settlement Agreement and

15

the Water Purchase Agreement were reasonable, in compliance with the law, and in the public

16

mterest. 68
0

17
18

Proceedings on A.04-09-019 were not closed until the Commission issued D.12-07-008. 69
The PUC found the Project had no reasonable prospect of achieving its goals 70 and so declined to

19
20
21
22

require Cal-Am to continue to pursue the Project. Marina asked the Commission to find that the
Water Purchase Agreement was valid against a Government Code 1090 challenge by operation
of the statute of limitations. PUC Commission expressly did not address the argument. 71

23
63

24
25
26
27

P.U. C. 1002(a); see also Marina Ex. L at 193.

Marina Ex. 0 at 2.
65
/d. at 4, 7
66
/d. at 2, 27-30.
67
Marina Ex. L at 5-6
68
Rule 12.1(d) ofthe Commission's Rules of Practice and Procedure.
69
Marina Ex. R at 1.
70
/d. at 19.
71
!d. at 19.
64

CGC 13-528312

- 16-

2.

Law

P.U.C. 1731(b) provides for requests for a rehearing following a PUC decision. But the

3
scope of rehearing is limited to the issues raised in the underlying proceeding.

72

And no cause of

5
6

action arising out of any order or decision of the commission accrues absent a timely application
for rehearing. 73 If there is a timely request for rehearing, then the aggrieved party may petition
74

for a writ of review in the appropriate court.

"review, reverse, correct, or annul any order or decision of the commission or to suspend or

delay the execution or operation thereof, or to enjoin, restrain, or interfere with the commission

10

Otherwise, no California court has jurisdiction to

in the performance of its official duties, as provided by the law and the rules of court."

75

"In all

11
collateral actions or proceedings, the orders and decisions of the commission which have become
12
13

final shall be conclusive. "

76

It is undisputed here that D.1 0-08-008 and D .1 0-12-016 are final

14

decisions, and that no entity sought rehearing of either decision on the basis of contract

15

invalidity.

16

There is a three part test to determine whether an action is barred by section 1759:

17

(1) whether the commission had the authority to adopt a regulatory policy; (2) whether
the commission exercised that authority; and (3) whether the superior court action would
77
hinder or interfere with the commission's exercise of regulatory authority.

18
19
20

21

22
23

24

25
26
27

72

City of Huntington Beach v. Pub. Uti!. Comm 'n of the State of Cal., 214 Cal.App.4th 566, 592-93 (20 13); see also
P.U.C. 1731(b)(l) (" ... may apply for a rehearing in respect to any matters determined in the action or proceeding
and specified in the application for rehearing. The commission may grant and hold a rehearing on those
matters ... ").
73
P.U.C. 1731(b)(1).
74
P.U.C. 1756(a). Review of decisions pertaining solely to water corporations shall only be by petition for writ of
review in the Supreme Court, except that review of complaint or enforcement proceedings may be in the court of
appeal or the Supreme Court. P.U.C. 1756(f).
75
P.U.C. 1759(a).
76
P.U.C. 1709.
77
San Diego Gas and Electric Company v. Superior Court, 13 Cal.4th 893 (1996) (Covalt), Sarale v. Pacific Gas &
Elec. Co., 189 Cal.App.4th 225, 236 (20 10), quoting Koponen v. Pacific Gas & Elec. Co., 165 Cal.App.4th 345, 351
(2008).

CGC 13-528312

- 17-

3.

Discussion

The first question is whether the PUC had authority to validate the Agreements. No party

has thoroughly explained the scope of the PUC's authority to review contracts in approving

5
6

them, or whether that review encompasses the validity of a contract. Marina points to the

Pellandini case 78 to support the proposition that the Commission has authority to determine the

validity of public utility contracts. There the PUC interpreted a written contract that was

purportedly for the sale of limestone as one for transportation, and ordered a party to collect

undercharges. 79 The Court noted that the Commission had exclusive jurisdiction over the issues

10

involved in the case- regulation and enforcement of rights of public carriers. 80 Accordingly, the

11

Commission's determination was conclusive.

81

The case did not involve a determination of

12

13

contract validity.
In Camp Meeker 82 the Court stated that the PUC functions do not include determining the

14
15

validity of contracts, whether claims may be asserted under a contract, or interests in or title to

16

property; those being questions for the courts. Rather, the Commission has jurisdiction to

17
18

construe the existing rights of a public utility for the purposes of exercising its regulatory and
ratemaking authority. 83 For that reason, Camp Meeker held that the PUC acted within its

19

20
21

jurisdiction when it constrained itself to the latter purpose.

24

this suggests the PUC does not

have the authority to validate the Agreements.

The second factor examines whether the PUC validated the Agreements. The PUC

22
23

84

certainly approved the Agreements. With respect to the Settlement Agreement and the Water
78

Pellandini v. Pacific Limestone Products, Inc., 245 Cal.App.2d 774 (1966).

Pellandini, 245 Cal.App.2d at 775.
80
!d. at 779.
81 !d.
82
Camp Meeker Water System, Inc. v. Public Utilities Commission, 51 Cal. 3d 845, 861 ( 1990), superseded by
statute on other grounds as stated in Pacific Bell v. Public Utilities Com., 79 Cal.App.4th 269, 281 (2000).
83
Camp Meeker, 51 Cal.3d at 861.
84 !d.
79

25
26

27

CGC 13-528312

- 18 -

Purchase Agreement, this included the determination that the Agreements were in compliance
with the law- although it is not clear from the Commission decisions or from the parties' briefs

whether the Commission was referring to all law or some narrower set of laws within its
4

5
6

purview. It is clear that the Commission never addressed the 1090 challenges raised now. The
Commission did not analyze whether the contracts were "valid." Importantly, when the 1090

issues were brought to the Commission's attention, it declined to address them. Thus, it does not

appear that the Commission validated the Agreements.

10

The third question is whether this action would hinder or interfere with the Commission's
exercise of its regulatory authority. It follows from the above that court action now would not

11

interfere with any PUC authority. To be sure, the PUC has authority to, and did, approve
12

13
14
15
16
17

projects. But here the Commission has already decided that the project may be abandoned,
leaving the question of contractual liability to the courts.
Accordingly I conclude that the suit before me would not violate the rules of
administrative finality such as those in P.U.C. 1709, 1731(b) and 1756() and 1759(a).
Marina's motion for summary adjudication is denied as to causes of action 4-7 of its Cross-

18
Complaint.
19

20
21

22
23

Conclusion

For these reasons, Marina's motion is granted with respect to the first cause of action in
Cal-Am's Complaint and denied in all other respects.

24
25
26

Dated: February 25, 2014

27

Judge of The Superior Court

CGC 13-528312

- 19-