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Filed 5/13/22 City of Fresno v. Dept. of Finance CA3 NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

----

CITY OF FRESNO et al.,

Plaintiffs and Respondents,

v. DEPARTMENT OF FINANCE et al.,

Defendants and Appellants. C091324
(Super. Ct. No. 34

- 2015

- 80002174CUWMGDS)

California laws dissolving redevelopment agencies (RDAs) and providing for their winding

- down also provided that loans from a city to its former RDA were2

unenforceable. (Health & Saf. Code, § 34171, subd. (d)(2).) 1 But some loans to a former
RDA may be reinstated and paid if they were “loans for money” with a “required repayment schedule.” (§ 34191.4, subd. (b)(2)(A).) In this case, the Department of Finance (Finance) disapproved reinstatement of
13 loans from the City of Fresno (Fresno) to its former RDA

. 2 However, the trial court granted Fresno’s petiti on for writ of mandate, finding the loans could be reinstated under section 34191.4, subd ivision (b). 3
Finance now contends the loans cannot be reinstated because (1) the loans were not “loans for money , ” and (2) there was no “required re payment schedule” for the loans. Considering first whether there was a “required repayment schedule” for the disputed loans, we conclude the record supports a determination there was no such schedule. Accordingly, we co nclude the trial court erred by finding the loans could be reinstated under 34191.4, subdivision (b). We will reverse the judgment.
BACKGROUND
A Before June 2011, the Community Redevelopment Law (§ 33000, et seq.)
authorized RDAs to remediate urban decay and revitalize blighted communities. ( California Redevelopment Assn. v. Matosantos (2011) 53 Cal.4th 231 , 246 ( M ato santos ).) To finance their activities, RDAs relied on “tax increment” financing

--

1 Undesignated statutory references are to the Health and Safety Code.

2 Other loans were also disputed but are not at issue in this appeal.

3 We will refer to the appellants collectively as Finance and to the respondents collectively as Fresno.3

tax revenue attributed to the increased value of proper ty in the redevelopment project

area

. ( I bi d .) In June 2011, the Legislature passed Assembly Bill No. 26 (2011

- 2012 1st Ex. Sess.) ( A ssembly Bill XI 26 ) , which dissolved RDAs and turned over the winding

- down process to successor agencies

. ( Matosantos , su pra , 53 Cal.4th at pp. 250

- 25 1 .) The Legislature later adopted additional relevant provisions. (Stats. 2012, ch. 26, § 6 ( A ssembly Bill No. 1484 (2011

- 2012 Reg. Sess. )

. ) We will refer to the legislation dissolving RDAs, collectively, as the “ Dissolution Law.” 4 The Dissolution Law generally made agreements between an RDA and its sponsoring agency ( here, the city that created the former RDA ) unenforceable

. However, in some instances, an oversight board for a successor agency could reinstate s uch loans

. Section 34191.4, subdivision (b)(1), which provides for approval of loans from the sponsoring agency to the RDA, states, in part: “[U] pon application by the successor agency and approval by the oversight board, loan agreements entered into bet ween the [RDA and the sponsoring agency] shall be deemed to be enforceable obligations provided that the oversight board makes a finding that the loan was for legitimate redevelopment
purposes. ” Section 34191. 4 , subdivision (b)(2)( A ) provides that “loan a greements” include “ [l]oans for money

. . . where the former redevelopment agency was obligated

to repay the money it received pursuant to a required repayment schedule

. ” (Italics added.)
B As did the parties and the trial court, we will limit our analysis to two of the loans, with the understanding those two loans are representative of the remaining 11 loans.
The analyzed loans were labeled “Loans 3 and 4” or, collectively, the “Central

4 For a summary of the Dissolution Law, see Matosantos, supra , 53 Cal.4th at pp. 250

- 25 1 and City of Brentwood v. Campbell (2015) 237 Cal.App.4th 488, 494.4

Bus iness District Loans , ” during these proceedings. Loan 3 was for $192,100 in January 1996, and Loan 4 was for $246,700, disbursed in two payments of $200,000
and $46,700, in October 1996 and January 1997, respectively. The combined total
of all the loans from Fresno to the former RDA identified in this litigation was more than $6 million, but, as noted, we will limit our analysis to Loans 3 and 4.
After the former RDA’s successor agency received a finding of completion under section 34179.7, the successor agency’s oversight board adopted resolutions finding that
the loans from Fresno to the former RDA were enforceable obligations. However,
Finance determined Loans 3 and 4 were unenforceable, finding the loan documentation did not support enforceability un der section 34191.4. Fresno filed in the trial court a petition for writ of mandate under Code of Civil Procedure section 1085, challenging Finance’s denial of reinstatement of the loans.
The trial court considered five documents to determine whether Loa ns 3 and 4 were eligible for reinstatement under section 34191.4: (1) A 1963 agreement between Fresno and the former RDA concerning repayment of advances ( the 1963 Agreement). This agreement provided that sums, either in money or the value of services, Fresno advanced to the former RDA for the Central Business District renewal project would be repaid to Fresno. The 1963 Agreement did not actually advance money but, instead, pro vided a framework for advancing and repaying money. It required the former RDA each year to furnish to Fresno a promissory note for the amount advanced to the former RDA in that fiscal year . It also provided : “All revenues received by the [RDA] pursuant to this Agreement shall be paid to City as soon as the
same shall be received

. . . .” “[H]owever, payment upon said note and each of them shall not commence until any and all bonded indebtedness of [ the RDA] .

. . shall have been repaid

. . . .” The 19 63 Agreement provided that each promissory note would bear
interest at the rate of 4 percent per annum.5

(2) A Cash Account Report. This report showed transaction s in the former RDA’s bank account, including deposits and disbursements. It reflected the f ollowing three deposits, labeled as loan proceeds on the Central Business District project: $192,100 on January 26, 1996; $200,000 on October 14, 1996; and $46,700 on January 24, 1997.
This report was audited as part of the former RDA’s audited financial statements. The entries do not state the source of the funds other than “LOAN PROCEEDS.” Fresno submitted an additional document purporting to show that the deposits of loan proceeds in the Cash Account Report were from Loans 3 and 4, but the trial cour t did not rely on
it because Fresno did not explain who prepared the report and when it was prepared.
The additional document also did not establish Fresno was the source of the funds
received. (3) A Reconciliation Statement. This document , identified a s for “Tax Year 1997

- 98,” reflects seven rows of amounts purporting to show indebtedness based on promissory notes. As the trial court noted, however, there is no proof these purported promissory notes actually existed because Fresno did not produce promi ssory notes. The Reconciliation Statement also does not identify who holds the promissory notes, to whom the former RDA is indebted, or payment terms and interest rates for the promissory notes. (4) Fiscal Year 1997 and 1998 Budget Reports. The reports reflect receipt of “Loan Proceeds” for the Central Business District project matching the amounts for Loans 3 and 4. However, as the trial court observed, the budget reports do not identify the lender or the terms relating to the loan proceeds. (5) Financial Statements/Auditor’s Report for fiscal year ending June 30, 1998.
In this audited report showing advances received from Fresno , two entries appear to be
consistent with Loans 3 and 4. One entry states : “Central Business District

- $192,100
adv ance of January 26, 1996, interest rate at 5.49%.” And another entry states: “Central
Business District

- $24 6 ,700 advance [of] June 30, 1997, bearing interest at 6.0%.”6

In a similar report, however, for the fiscal year ending June 30, 1996, the

stateme nt included the Central Business District advance of January 26, 1996, for $192,000 in a list of cash advances to the former RDA from Fresno. At the bottom of the list, the report stated: “The above advances are payable on demand and secured by and payable from the incremental property tax revenues of the redeveloped properties. Payments on the advances and related interest expenditures are based on budgetary priorities as approved by the [former RDA]. ” (Italics added.)
At the end of its analysis of the Financial Statements/Auditor’s Report for fiscal year ending June 30, 1998 , the trial court wrote: “When combined with the Cash Account Report and the Budget Reports, this is strong evidence that it was indeed the City that loan ed $192,100 and $246,700, in cash, to the RDA on the dates and pursuant to
the terms listed in the financial statements.” In a footnote, the trial court added: “In other words, the financial statements supply the information on the source of the loans
th at was missing from the Cash Account Report, the Reconciliation Statement, and the Budget Report.” Having found that Fresno successfully established it made Loans 3 and 4 as “ cash
loans ” to the former RDA, the trial court proceeded to address whether ther e was a “required repayment schedule.” Even though the 1963 Agreement required that the loans to the former RDA be reflected in promissory notes and the interest rates for Loans 3
and 4 did not match the 4

- percent rate stated in the 1963 Agreement, the tr ial court looked to the 1963 Agreement to establish the repayment terms . The trial court concluded that, because the 1963 Agreement required the former RDA to pay to
Fresno all tax

- increment revenues it received after having satisfied the former RDA’s
bon d indebtedness obligations, the 1963 Agreement provided a “require d repayment schedule.” Having analyzed two of the 13 loans, the trial court entered a judgment that grant ed the petition for writ of mandate in part and remand ed the matter to [Finance] to7

conduct its analysis of the remaining 11 loans in a manner consistent with the trial court’s analysis of Loans 3 and 4. Finance filed a notice of appeal, but this court dismissed the appeal because it was from an interlocutory remand, not a final judgment . ( City of Fresno v. Department of Finance (C083084, June 5, 2019) [nonpub. opn.] .) Finance
then conceded that, in applying the trial court’s analysis of Loans 3 and 4 to the remaining 11 loans, Finance would be constrained to conclude that all of the loans were enforceable obligations under section 34191.4 . T he trial court entered judgment granting the petition for w rit of mandate as to all 13 loans.
STANDARD OF REVIEW “Courts exercise limited review in ordinary mandamus proceedings. They may not reweigh the evidence or substitute their judgment for that of the agency. They uphold an agency action unless it is arbi trary, capricious, lacking in evidentiary support, or was made without due regard for the petitioner ’ s rights. [Citations.] However, courts must ensure that an agency has adequately considered all relevant factors, and has
demonstrated a rational connect ion between those factors, the choice made, and the purposes of the enabling statute. [Citation.] Because trial and appellate courts perform the same function in mandamus actions, an appellate court reviews the agency ’ s action de

novo. [Citation.]” ( Se quoia Union High School Dist. v. Aurora Charter High School (2003) 112 Cal.App.4th 185 , 195 ( Sequoia Union ) .) “In a petition for writ of mandate brought pursuant to Code of Civil Procedure
section 1085

. . . , the petitioner bears the burden of pleading a nd proving the facts on which the claim for relief is based. (Code Civ. Proc., § 1109; Evid. Code, § 500; [citations].)” ( California Correctional Peace Officers Assn. v. State Personnel Bd. (1995) 10 Cal.4th 1133, 1153

- 1154.) Therefore, Fresno bore the burden of pleading and proving facts in the trial court to establish Fresno loaned money to the former RDA with a required repayment schedule. The trial court’s task in this regard was to determine whether substantial evidence supported Finance’s determin ation. This is just another way8

of saying the trial court’s task was , without reweighing the evidence, to determine whether Finance’s determination was “lacking in evidentiary support.” ( Sequoia Union,

supra , 112 Cal.App.4th at p. 195.) In other words, a mandamus proceeding is not a species of trial de novo in the trial court; instead, it is only a review of an agency’s action whether it was “ arbitrary, capricious, lacking in evidentiary support, or was made without due regard for the p etitioner ’ s rights. ( Ibid .) Fresno asserts Finance denied reinstatement of Loans 3 and 4 based solely on the absence of promissory notes to support the loans. With this assertion, Fresno attempts to limit Finance’s arguments and our review to whether th e loans could be reinstated without promissory notes. (See Southern Cal. Edison Co. v. Public Utilities Com. (2000) 85 Cal.App.4th 1086, 1111 [“We may not affirm an agency’s action on a basis not embraced by the agency itself.”].) However, we conclude Fr esno’s attempt to thus limit Finance’s arguments and our review is unavailing because Finance’s denial of
reinstatement of the loans was not so limited. While the correspondence between Finance and Fresno shows that Finance asked repeatedly for the promis sory notes supporting Loans 3 and 4, it appears Finance requested the promissory notes because they would provide evidence to support reinstatement of the loans, not necessarily that promissory notes were the sine qua non of an agreement . Furthermore, the 1963 Agreement stated the former RDA would provide a promissory note for the cash advances received from Fresno each fiscal year, so it is understandable that Finance would look for promissory note s as evidence of loans . In the end, Finance denied
reinst atement of the loans because Loans 3 and 4 did not meet the requirements of
section 34191.4, subdivision (b) for reinstatement. We will not, therefore, limit our review to whether a loan may be reinstated under 34191.4, subdivision (b) without a promissor y note evidencing the loan.
Fresno notes that Finance denied reinstatement of Loans 3 and 4 , which did not have promissory notes, but approved reinstatement of other loans that were evidenced by9

promissory notes. W e will not conclude from this circumstan ce that Finance must be limited on judicial review to whether a loan may be reinstated even though it was not supported by a promissory note . Finance has authority to ensure compliance with
section 34191.4, subdivision (b) for each loan. ( § 34179 , subd. (h).) Thus, it was justified in treating each loan separately, considering the differing evidence provided by
Fresno for the loans.
DISCUSSION
Finance contends Fresno did not establish that Loans 3 and 4 were for money and that the former RDA was obligat ed to pay on a schedule. W e will proceed directly to whether the former RDA was obligated to repay Fresno “pursuant to a required repayment schedule

. ” (§ 34191.4, subd. (b)(2)(A).) Fresno’s argument regarding a required repayment schedule depends entirely on whether Loans 3 and 4 were made under the 1963 Agreement. According to Fresno, the 1963 Agreement provided that “revenues received by the [former RDA] pursuant to this Agreement shall be paid to the City as soon as the same shall be received” by the former RDA, but that “payment upon said note and each of them shall not commence until any and all bond indebtedness of the Agency .

. . shall have been repaid.” Thus, the former RDA was obligated, under the 1 963 Agreement, to use all of its revenue to pay its bond ed indebtedness then to repay the loans. The trial court also relied on this provision of the 1963 Agreement to conclude Loans 3 and 4 had a required repayment schedule.
Even if we were to assume th at the 1963 Agreement established a “schedule” for repayment

-- a question that seems debatable

-- the repayment schedule would only assist
Fresno in this case if Loans 3 and 4 were made under the 1963 Agreement . If Loans 3
and 4 were not made under the 1 963 Agreement , there was no required repayment
schedule. There is some evidence to support Fresno’s contention that Loans 3 and 4 were made under the 1963 Agreement . For example, the 1963 Agreement referred to the10

Central Business District renewal projec t and stated that the former RDA would become indebted to Fresno for “any and all sums which are advanced by the City in furtherance of the development of the [ Central Business District renewal project] whether such sums be advanced by way of cash or the p erformance of services and the furnishing of materials.” Fresno claims t he explicit reference to the Central Business District renewal project in the transfers for Loans 3 and 4 is sufficient evidence that the loans were, in fact, made under the 1963 Agre ement. According to this assertion, even though there are no loan documents specifically referencing Loans 3 and 4, those loans were made for the Central Business District renewal project, and the 1963 Agreement also referred to loans
made for the Central Business District renewal project. But under our standard of review, w e do not review the record for sufficient evidence to support the petitioner’s factual assertions; instead, we review the record
for sufficient evidence to support the Agency’s decisio n. ( Sequoia Union, supra , 112 Cal.App.4th at p. 195.) Such a distinction makes a difference here , because although
there is evidence that Loans 3 and 4 were made under the 1963 Agreement, there is also
evidence that Loans 3 and 4 were not made under the 1963 Agreement. The following evidence would support a fact

- finder in concluding that Loans 3 and 4 were not made under the 1963 Agreement. The 1963 Agreement was e xecuted 33 years before Loans 3 and 4 . T here is no document stating that Loans 3 and 4 were made under the 1963 Agreement. The 1963 Agreement provided for a 4 percent interest rate, but Loans 3 and 4 had interest rates of 5.49 and 6 percent, respectively. The financial statement and audit report for the fiscal year ending Jun e 30, 1996 indicated that the cash advances on that statement (including Loan 3) were payable “on demand,” “based on budgetary priorit y as approved by the [former RDA] ,” which is not only inconsistent with a “schedule” of repayment, but is also inconsisten t with the requirement of the 1963 Agreement that “revenues received by the [former RDA] pursuant to this Agreement shall be paid to [ the ] City as soon as the same shall be received,” subject only to “any and11

all bond ed indebtedness of the Agency

. . . .” Fresno did not produce evidence showing that the former RDA made payments on Loans 3 and 4 as soon as it received revenue not required to satisfy its bond indebtedness obligations. And Fresno failed to produce promissory notes supporting Loans 3 and 4, e ven though the 1963 Agreement required the former RDA to deliver to Fresno a promissory note for loans made during each fiscal year. With all these deviations from the 1963 Agreement, a factfinder would be justified in concluding that Loans 3 and 4 were m ade under an agreement or multiple agreements independent of the 1963 Agreement. Indeed, Fresno makes no argument that it could not have loaned money to the former RDA under an agreement other than the 1963 Agreement. Another way of describing the state of the record is that the evidence does not show, as a matter of law, that Loans 3 and 4 were made under the 1963 Agreement. Therefore, we cannot say Finance’s denial of reinstatement of Loans 3 and 4 was lacking in evidentiary suppor t . On the other hand , we can say Fresno fail ed to carry its burden of establishing that Finance’s determination s were lacking in evidentiary support. ( Sequoia Union, supra , 112 Cal.App.4th at p. 195.) Fresno makes several arguments that the deviations from the 1963 Agreement
do not preclude a finding that Loans 3 and 4 were made under the 1963 Agreement

. For the most part, these arguments lack merit because they do not recognize
that Fresno bore the bu rden of showing that Finance’s decision lacked evidentiary support. ( Sequoia Union, supra , 112 Cal.App.4th at p. 195.) We address each argument
in turn

. Fresno argues the former RDA’s failure to perform on Loans 3 and 4 consistent with the requirements of the 1963 Agreement is insignificant because, in Fresno’s words, “failure to perform nonmaterial terms of an agreement is not a breach and does not
invalidate the contract

. ” This argument, however, misses the point that the
inconsistencies between the 1 963 Agreement and Loans 3 and 4 constitute substantial12

evidence Loans 3 and 4 were not made under the 1963 Agreement. It is not a question of
breach or invalidation of a contract.
Fresno also argues: “[T]he fact that the Successor Agency [Fresno] could not locate any statements or promissory notes for [Loans 3 and 4], made decades ago , does not mean that they did not exist at one time. [Finance] cannot use the absence of evidence to infer that it never existed. Nor were promissory notes required to fin alize
the Agreement. Indeed, the 1963 Agreement does not condition the [former] RDA’s indebtedness on a promissory note.” Contrary to Fresno’s argument, the absence
of statements and promissory notes supports a conclusion Loans 3 and 4 were not
made unde r the 1963 Agreement. Fresno had the burden to produce evidence to the contrary. Fresno further argues there was some evidence from which it can be inferred the former RDA complied with the required repayment schedule in the 1963 Agreement.
But Fresno b ore the burden of establishing that fact. And, even if it is true the former RDA complied with the repayment provisions of the 1963 Agreement, there is other evidence Loans 3 and 4 were not made under the 1963 Agreement

-- for example, the inconsistent interest rates, the inconsistent repayment requirements, and the absence of promissory notes. Fresno additionally argues the difference in the stated interest rate s is irrelevant because the Dissolution Law provides for an interest rate of 3 percent on reinstatement of a loan between a sponsoring agency and its former RDA. (See § 34191.4, subd. (b)(3).) This argument also misses the legal point, which is that the difference in the interest rates in the 1963 Agreement and the audited financi al statements with respect to Loans 3 and 4 is evidence that Loans 3 and 4 were not made under the 1963 Agreement. Indeed, there is no evidence in this record that Fresno and the former RDA had the 1963 Agreement in mind when they entered into Loans 3 a nd 4.13

We therefore conclude Finance’s determination that Loans 3 and 4 could

not be reinstated under 34191.4, subdivision (b) was not lacking in evidentiary support

. DISPOSITION The judgment is reversed, and the matter is remanded with directions to enter judgment denying the petition for writ of mandate

. Appellants are awarded their costs on appeal. (Cal. Rules of Court, rule 8.278(a).)

/S/ MAURO, J.

We concur:

/S/ HULL, Acting P. J.

/S/ DUARTE, J.