(Finnegan), and Terry v. Bender (1956) 143 Cal.App.2d 198, 204 (Terry). In each of
those cases, taxpayers were permitted to challenge government contracts on the grounds
they violated section 1090. In Stigall, in addition to assuming taxpayers have standing,
the court held the policy underlying section 1090 was so fundamental that it applied even
when the party who received the challenged contract was the lowest bidder and even
when that party was not a member of the city council when the bid was accepted, but had
8
only participated in preliminary approvals of the subject project. (Stigall, at pp. 570–
571.)
In Gilbane, which was decided by this court, in addition to assuming that Code of
Civil Procedure section 526a provided standing to bring a section 1090 claim, we found
that the fact SDFOG alleged that one of its members resided within and paid taxes to the
school district which was the subject of SDFOG's claim was sufficient to give SDFOG
standing under section Code of Civil Procedure section 526a. In doing so we relied on an
earlier case we decided, Taxpayers for Accountable School Bond Spending v. San Diego
Unified School District (2013) 215 Cal.App.4th 1013, 1032.
More recently courts have directly considered the issue of standing to bring an
action under section 1090. These case have reached somewhat conflicting conclusions.
In San Bernardino County v. Superior Court (2015) 239 Cal.App.4th 679
(San Bernardino), a group of taxpayers challenged a settlement agreement a county and
flood control district had reached with a property owner with respect to property the
county had taken as part of a regional flood control project. Under the terms of the
settlement the county and district agreed to pay the property owner $102 million;
significantly, the county obtained a judgment validating the agreement. Five years later,
the taxpayers brought their action under section 1090, in which they alleged that
campaign contributions the property owner had made to a former county supervisor were
in fact bribes and invalidated the settlement.
In a writ proceeding, the Court of Appeal found the plaintiff taxpayers did not
have standing to challenge the settlement. The San Bernardino court found that although
9
section 1092 provides that "[e]very contract made in violation of any of the provisions of
Section 1090 may be avoided at the instance of any party except the officer interested
therein," the taxpayers were not parties to the contract and thus section 1092 did not
provide the taxpayers with standing. The court stated: "Nothing in the plain language of
either section 1090 or section 1092 grants nonparties to the contract, such as plaintiffs,
the right to sue on behalf of a public entity that may bring a claim as provided in section
1092, but has not done so. Indeed, the Legislature's choice of the word 'party' in section
1092—as opposed to, say 'person'—suggests the Legislature intended only parties to the
contract at issue normally have the right to sue to avoid contracts made in violation of
section 1090." (San Bernardino, supra, 239 Cal.App.4th at p. 684.)
The court in San Bernardino also rejected the plaintiffs' contention they had
standing under Code of Civil Procedure section 526a. By its terms Code of Civil
Procedure section 526a permits "[a]n action to obtain a judgment, restraining and
preventing any illegal expenditure of, waste of, or injury to, the estate, funds, or other
property of a county, town, city or city and county of the state, . . . against any officer
thereof, or any agent, or other person, acting in its behalf." (Italics added.) The court in
San Bernardino noted that " '[t]axpayer suits are authorized only if the government body
has a duty to act and has refused to do so. If it has discretion and chooses not to act, the
courts may not interfere with that decision.' [Citation.]" (San Bernardino, supra, 239
Cal.App.4th at p. 686.) The court further noted that a public agency's decision to bring or
not bring legal action is generally an exercise of discretion and hence Code of Civil
Procedure section 526a did not provide the taxpayers with standing to challenge the
10
county's apparent decision not to challenge validity of the settlement. (San Bernardino,
at pp. 686–687.) Importantly in rejecting the plaintiffs' contention that the county had no
discretion with respect to its obligations under section 1090, the court drew a distinction
between prospective action by a governmental agency and fully executed contracts, such
as the settlement. The court found that the plaintiffs' contention with respect to the
county's duties: "would be more to the point if plaintiffs were seeking to enjoin the
County from entering into such a settlement agreement. But that ship has long since
sailed. The issue now is the County's decision (or lack thereof) with respect to bringing
suit on the basis of the alleged violation of . . . section 1090, and whether this decision is
an exercise of discretion or a mandatory duty that County—so far, at least—has failed to
perform." (San Bernardino, at p. 687.)
In McGee v. Balfour Beatty Construction, LLC (2016) 247 Cal.App.4th 235, 247–
248 (McGee), the court disagreed with the reasoning in San Bernardino and found that
taxpayers had standing to bring an action alleging violation of section 1090. In McGee,
like Davis the plaintiffs challenged the validity of a lease-leaseback transaction between a
school district and a construction company on the grounds, among others, that in
providing consulting and other services to the district, the construction company filled the
roles of officers, employees and agents of the district and, therefore, the construction
company was subject to section 1090. The court in McGee determined that the taxpayer
plaintiffs had standing to raise a section 1090 challenge to the validity of the lease-
leaseback transaction and that their allegation the construction company was, by virtue of
the services it provided, subject to section 1090, was sufficient to survive a demurrer.
11
(McGee, at pp. 248–249.) With respect to the issue of standing, the court in McGee
relied on the opinions in Thomson and Davis and distinguished San Bernardino on the
grounds the court in San Bernardino itself suggested, i.e., that unlike the proceedings in
San Bernardino, the plaintiffs in McGee initiated their complaint as a validation action
before the disputed contract had been performed. "As in Davis, this case involved a
validation action . . . In contrast, in San Bernardino, plaintiffs' challenge to the agreement
was barred by a prior validation judgment." (McGee, at p. 248.) The court further
determined: "[I]n contrast to the San Bernardino court, we find Thomson . . . , supra, 38
Cal.3d 633 apposite as our high court could not have concluded a contract was invalid in
violation of section 1090 without implicitly concluding that the taxpayers challenging it
had standing to challenge it." (Ibid.)
More recently the court in California Taxpayers Action Network v. Taber
Construction, Inc. (2017) 12 Cal.App.5th 115, 144–145 (California Taxpayers),
considered another section 1090 challenge to a school district's lease-leaseback
transaction. The court agreed with the reasoning of the courts in Davis and McGee and
found standing. In disagreeing with, as well as distinguishing, San Bernardino, the court
in California Taxpayers stated: "We conclude that Davis and McGee are more like this
case than San Bernardino, and the weight of authority supports permitting a taxpayer to
bring a claim under . . . section 1090 under the circumstances here. If the lease-leaseback
agreement in this case violates section 1090, then it is void, not merely voidable. Whether
the lease-leaseback agreement is void is not a matter within the School District's
discretion. [Citation.] And, even assuming San Bernardino was correctly decided under
12
its facts, the case is distinguishable (as it was in McGee). . . . [I]n San Bernardino, a
prior, validation action had concluded long before the plaintiffs sued; here, plaintiff's
action is itself a reverse validation action." (California Taxpayers, at pp. 144–145.)
C. Analysis
The strict and important policy embodied in section 1090, which in Thomson
required imposition of a substantial forfeiture on an official who had acted in good faith,
will not be vindicated if public officials believe section 1090's substantive provisions
may only be enforced by the very public officials or public entities who have violated the
statute's provisions. Plainly, a public official's duty to avoid even temptation cannot be
advanced by adopting a rule which limits civil enforcement to that public official or
public entities controlled by the official. The self-evident nature of this proposition—that
civil enforcement of section 1090 was never intended to be left in all cases to the parties
to a government contract—arguably explains the silence of the courts Stigall, Thomson,
Gilbane, Finnegan and Terry, as well as the brief footnoted dicta in Davis.
The conflict between these cases, as well as the recent opinions in McGee and
California Taxpayers on one hand, and San Bernardino on the other hand, is, in the end
narrower than appears at first blush. Notwithstanding the important public policies
embodied in section 1090, a validation judgment, such as the one the defendants obtained
in San Bernardino long before the complaint attacking the settlement was filed, plainly
barred any attack on the validity of the settlement agreement and thus, in that sense at
least, deprived the plaintiffs of standing to attack the judgment. (See Code of Civ. Proc.,
§ 870, subd. (a); Friedland v. City of Long Beach (1998) 62 Cal.App.4th 835, 844.) Code
13
of Civil Procedure section 870, subdivision (a) states: "The judgment, if no appeal is
taken, or if taken and the judgment is affirmed, shall, notwithstanding any other provision
of law including, without limitation, Sections 473 and 473.5, thereupon become and
thereafter be forever binding and conclusive, as to all matters therein adjudicated or
which at that time could have been adjudicated, against the agency and against all other
persons, and the judgment shall permanently enjoin the institution by any person of any
action or proceeding raising any issue as to which the judgment is binding and
conclusive." In light of the broad and conclusive impact of the validation judgment, the
limitations on application of section 1092 and Code of Civil Procedure section 526a the
court in San Bernardino discussed were not necessary to reach its holding that the
plaintiffs' claims were barred.3
In any event, we do not agree with the limited interpretation of section 1092
adopted by the court in San Bernardino. As we have indicated, the weight of authority
plainly finds that standing to assert section 1090 claims goes beyond the parties to a
public contract. Because of that authority and the important and strict policy embodied in
section 1090, we interpret section 1092's reference to "any party" to include any litigant
with an interest in the subject contract sufficient to support standing. (See Davis, supra,
237 Cal.App.4th at p. 273, fn. 4.) In this regard, we believe the cases which have
discussed the interests which support standing under Code of Civil Procedure sections
3 In contrast to San Bernardino of course, Davis, McGee and California Taxpayers were each themselves timely reverse validation actions brought under Code of Civil Procedure section 863 and hence not subject to the bar of a validation judgment as set forth in Code of Civil Procedure section 870.
14
526a and 863 provide some guidance with respect to interests sufficient to support
standing under section 1092. With respect to Code of Civil Procedure section 526a, our
Supreme Court has recently found that it requires that a plaintiff "allege she or he has
paid, or is liable to pay, to the defendant locality a tax assessed on the plaintiff by the
defendant locality." (Weatherford v. San Rafael (2017) 2 Cal.5th 1241, 1252
(Weatherford).) Similarly, cases have consistently held that taxpayers of a municipality
have standing as interested parties to bring a reverse validation action under Code of
Civil Procedure section 863. (See Regus v. City of Baldwin Park (1977) 70 Cal.App.3d
968, 971–973.) SDFOG has alleged the taxpayer interests required by both Code of
Procedure sections 526a and 863; indeed, the city has conceded SDFOG has alleged an
interest sufficient to maintain a reverse validation action under Code of Civil Procedure
section 863. Thus, SDFOG has alleged an interest which is sufficient to provide it with
standing under the narrower provisions of section 1092.4 Accordingly, the trial court
erred in dismissing plaintiff's complaint and its judgment must be reversed.
4 Because SDFOG has alleged its interest on behalf of a taxpayer who is a resident of the city, we do not consider what other circumstances might also support standing under section 1092. Nonetheless we note that the requirement imposed on mandate applicants by Code of Civil Procedure section 1086, that they have a beneficial interest in the relief requested, has been repeatedly waived where " ' " 'the question is one of public right and the object of the mandamus is to procure the enforcement of a public duty.' " ' [Citations.]. . . . [[A] party's interest ' "in having the laws executed and the duty in question enforced" ' is sufficient even absent a '"legal or special interest" '].) This exception to the beneficial interest requirement protects citizens' opportunity to 'ensure that no governmental body impairs or defeats the purpose of legislation establishing a public right.' [Citation.]" (Weatherford, supra, 2 Cal.5th at p. 1248.) Although the cases which have discussed standing under Code of Civil Procedure sections 526a and 863 have informed our application of section 1092, we need not and do
15
DISPOSITION
The judgment is reversed. SDFOG to recover its costs on appeal.
BENKE, Acting P. J.
WE CONCUR:
HUFFMAN, J.
HALLER, J.
not determine whether, on this record standing is also available under those Code of Civil Procedure provisions.
16
AI Brief
AI-generated · verify before citing
Holding. Taxpayers have standing under Government Code section 1092 to challenge a municipal contract on the grounds that it violates the conflict of interest provisions of section 1090.
Issues
Do taxpayers have standing to challenge a municipal contract for violations of Government Code section 1090?
Does the term 'any party' in Government Code section 1092 limit standing to parties to the contract?
Does a taxpayer organization have standing to bring a section 1090 challenge when it has alleged taxpayer interests?
Disposition. reversed
Quotations verified verbatim against the opinion
“we interpret section 1092's reference to "any party" to include any litigant with an interest in the subject contract sufficient to support standing.”
“the weight of authority plainly finds that standing to assert section 1090 claims goes beyond the parties to a public contract.”