1

Filed 8/30/17

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

----

CITY OF ANAHEIM et al.,

Plaintiffs and Appellants,

v.

MICHAEL COHEN, as Director, etc. et al.,

Defendants and Respondents,

C081918

(Super. Ct. No. 34201380001529)

APPEAL from a judgment of the Superior Court of Sacramento County, Michael 

P. Kenny, Judge. Reversed.

Rutan & Tucker, Jeffrey M. Oderman for Plaintiffs and Appellants.

Kamala D. Harris and Xavier Becerra, Attorneys General, Douglas J. Woods, 

Senior Assistant Attorney General, Constance L. LeLouis and Anthony P. O’Brien, 

Deputy Attorneys General, for Defendants and Respondents.
2

In this redevelopment case, the city of Anaheim, acting in its capacity as successor 

to the former Anaheim Redevelopment Agency, sought approval from the California 

Department of Finance (the department) to obtain money from the Redevelopment 

Property Tax Trust Fund (the fund or, sometimes, the RPTTF) to pay back the city of 

Anaheim for payments the City of Anaheim made to a construction company to complete 

certain real property improvements that the former Anaheim Redevelopment Agency was 

obligated to provide on a particular redevelopment project (the packing district project).

1

 

The city and the city as successor characterized the transaction between themselves as a 

loan, but the department ultimately denied the claim for money from the fund because the 

city did not disburse the loan proceeds to the city as successor, but instead paid the 

construction company directly, and because the city as successor did not obtain prior 

approval for the “loan” agreement with the city from the oversight board.

Around the same time, the city as successor sought approval from the department 

to obtain money from the fund to make payments to the Anaheim Housing Authority (the 

authority) under a cooperation agreement between the agency and the authority, the 

purpose of which was to provide funding for the Avon/Dakota revitalization project, 

which was being carried out by a private developer -- The Related Companies of 

California, LLC (Related) -- pursuant to a contract with the authority. The department 

denied that claim because the 2011 law that dissolved the former redevelopment agencies 

renders agreements between a former redevelopment agency and the city that created that 

agency (or, as relevant here, a closely affiliated entity like the authority) unenforceable.2

 

1 We will refer to the former Anaheim Redevelopment Agency as the agency. We 

will refer to the City of Anaheim acting in its capacity as successor to the agency as the 

city as successor and otherwise as the city.

2 We will sometimes refer to the body of laws governing the dissolution of 

redevelopment agencies as the dissolution law.
3

The city, the city as successor, and the authority sought mandamus, declaratory, 

and injunctive relief on both issues in the superior court, but the trial court denied the writ 

petition and dismissed the complaint for declaratory and injunctive relief.3

On plaintiffs’ appeal, we conclude the trial court erred. As we will explain, with 

respect to the packing district project, the fact that the city contracted directly with the 

construction company to construct the improvements the agency was legally obligated to 

provide at that project, and the fact that the city paid the company directly for its work, 

did not mean the agreement between the city and the city as successor with respect to the 

transaction was not a loan, as the department and the trial court concluded. Also, the fact 

that the city as successor did not obtain prior approval from the oversight board to enter 

into a loan agreement with the city did not give the department a valid reason to deny the 

city as successor’s request for money from the fund to pay off the loan.

As for the money from the fund claimed for the Avon/Dakota revitalization 

project, we conclude that enforcing the provision of the dissolution law that renders 

unenforceable an agreement between a former redevelopment agency and the city that 

created it (or an affiliated entity like the authority) would, in this case, unconstitutionally 

impair Related’s contractual rights under its agreement with the authority. Accordingly, 

that provision cannot be enforced here to deny the city as successor the right to obtain 

money from the fund to pay the authority that, in turn, the authority is obligated to pay 

Related to carry out the revitalization project.

Accordingly, we will reverse.

 

3 For ease of reference, we will refer to these three parties, along with Related, who 

was named as a real party in interest in the trial court, jointly as plaintiffs, because all 

four parties are participating as appellants in this appeal and thus share a common interest 

in the case.
4

LEGAL BACKGROUND

Before June 2011, the Community Redevelopment Law (Health & Saf. Code,4

§ 33000 et seq.) authorized cities and counties to establish redevelopment agencies to 

remediate urban decay and revitalize blighted communities. (California Redevelopment 

Assn. v. Matosantos (2011) 53 Cal.4th 231, 245-246 (Matosantos).) To finance their 

activities, redevelopment agencies relied on “tax increment financing . . . . [Citations.] 

Under this method, those public entities entitled to receive property tax revenue in a 

redevelopment project area (the cities, counties, special districts, and school districts 

containing territory in the area) [we]re allocated a portion based on the assessed value of 

the property prior to the effective date of the redevelopment plan. Any tax revenue in 

excess of that amount -- the tax increment created by the increased value of project area 

property -- [went] to the redevelopment agency for repayment of debt incurred to finance 

the project. [Citations.] In essence, property tax revenues for entities other than the 

redevelopment agency [we]re frozen, while revenue from any increase in value [wa]s 

awarded to the redevelopment agency on the theory that the increase [wa]s the result of 

redevelopment.” (Id. at pp. 246-247.)

In June 2011, as a partial means of closing the state’s projected budget deficit, the 

Legislature passed, and the Governor signed, Assembly Bill XI 26, which, in addition to 

other things, “dissolve[d] all redevelopment agencies [citation] and transfer[red] control 

of redevelopment agency assets to successor agencies, which are contemplated to be the 

city or county that created the redevelopment agency.” (Matosantos, supra, 53 Cal.4th at 

p. 251.) A successor agency is required to “[c]ontinue to make payments due for 

enforceable obligations” (§ 34177, subd. (a)), which include “[a]ny legally binding and 

enforceable agreement or contract that is not otherwise void as violating the debt limit or 

 

4 All further section references are to the Health and Safety Code.
5

public policy” (§ 34171, subd. (d)(1)(E)), but which do not include “any agreements, 

contracts, or arrangements between the city, county, or city and county that created the 

redevelopment agency and the former redevelopment agency” (ibid., subd. (d)(2)).

5

To obtain funds to make payments required by enforceable obligations, a 

successor agency must prepare, and submit to the department for approval, a recognized 

obligation payment schedule (ROP schedule) for every six-month fiscal period from 

January 1, 2012 through June 30, 2016 (§§ 34171, subd. (h), 34177, subds. (a)(1), (l) & 

(m)) and thereafter for every fiscal year (§ 34177, subd. (o).) An ROP schedule “set[s]

forth the minimum payment amounts and due dates of payments required by enforceable 

obligations for each six-month fiscal period.” (§ 34171, subd. (h).) For each recognized 

obligation, the schedule must “identify one or more . . . sources of payment.” (§ 34177, 

subd. (l)(1).) Among the possible sources of payment is the fund (id., subd. (l)(1)(E)),

into which the county auditor-controller is charged with depositing tax increment 

funding, i.e., “the amount of property taxes that would have been allocated to each

redevelopment agency in the county had the redevelopment agency not been dissolved.” 

(§ 34182, subd. (c)(1).)

The successor agency’s oversight board must approve each ROP schedule. 

(§ 34180, subd. (g).) Following the oversight board’s approval, the agency must submit 

the ROP schedule to the department for its approval. (§ 34177, subd. (m)(1).) The 

department then determines “the enforceable obligations and the amounts and funding 

sources of the enforceable obligations.” (Ibid.)

 

5 A related provision of the dissolution law provides that “[c]ommencing on the 

operative date of this part, agreements, contracts, or arrangements between the city or 

county, or city and county that created the redevelopment agency and the redevelopment 

agency are invalid and shall not be binding on the successor agency.” (§ 34178, 

subd. (a).)
6

In 2012, the dissolution law was amended to provide a mechanism by which the 

municipality that created a redevelopment agency could lend money to the successor 

agency to make payments due on enforceable obligations. Specifically, former 

subdivision (h) was added to section 34173, and at the time relevant here that subdivision

provided as follows: “The city, county, or city and county that authorized the creation of 

a redevelopment agency may loan or grant funds to a successor agency for administrative 

costs, enforceable obligations, or project-related expenses at the city’s discretion, but the 

receipt and use of these funds shall be reflected on the Recognized Obligation Payment 

Schedule or the administrative budget and therefore are subject to the oversight and 

approval of the oversight board. An enforceable obligation shall be deemed to be created 

for the repayment of those loans.”

6

 (Stats. 2012, ch. 26, § 7.)

With this legal background in mind, we turn to the facts of this case.

FACTUAL AND PROCEDURAL BACKGROUND

A

The Parking And Alley Improvements At The Packing District Project

On October 26, 2010, the agency and LAB Holding LLC (LAB) entered into an 

agreement for the redevelopment of several agency-owned properties in the city’s 

“Packing District” (the LAB agreement). Among other things, the LAB agreement 

obligated the agency to construct a surface parking lot and interior alley improvements to 

serve the project (the parking and alley improvements). 

In August 2012, the packing district project was nearing completion, but the city 

as successor had not yet entered into a construction contract for the parking and alley 

 

6 Subdivision (h) of section 34173 was later amended again in 2015 (Stats. 2015, 

ch. 325, § 3), after this action was commenced, and the department concedes the 

amended statute does not apply in this case. Accordingly, our analysis in this opinion is 

limited to the former version of that statute.
7

improvements it was obligated to provide under the LAB agreement. In the ROP 

schedule the city as successor prepared that month for the January 2013 through June 

2013 fiscal period, the city as successor applied for a distribution from the fund of a sum 

needed to complete construction of the parking and alley improvements. 

Despite having previously approved distributions from the fund of other amounts 

necessary for the city as successor to perform the agency’s obligations under the LAB 

agreement, and despite continuing to approve other such distributions going forward, the 

department denied the requested distribution for the parking and alley improvements on 

the ground the money sought was not for an enforceable obligation. The city as 

successor submitted a meet and confer request to the department to challenge that 

determination, and the department issued a revised ruling on the matter in December 

2012 denying the requested distribution because “no contracts [we]re in place for the 

construction.” 

Because the parking and alley improvements needed to be made quickly, and the 

city as successor could not wait for the next round of funding under the ROP system 

(which would not occur until July 2013), the city as successor sought another source of 

funding to complete the improvements. In February 2013, the city as successor entered 

into an agreement with the city entitled “COOPERATION AGREEMENT [¶] (Loan 

Agreement pursuant to Health & Safety Code Section 34173(h))” (bolding omitted) (the 

loan agreement). The loan agreement recited the pertinent factual background, up to and 

including the department’s denial of the requested distribution from the fund, and noted 

that the department’s denial “presente[d] a logistical challenge for [the city as successor],

by requiring the [city as successor] to enter into a construction contract without prior 

authorization from the [department] to make the payments required by such contract.” 

The loan agreement then noted that former subdivision (h) of section 34173 authorized 

the city to loan funds to the city as successor for an enforceable obligation and recited 

that the city desired “to assist the [city as successor] by providing a loan to the [city as 
8

successor] . . . to enable the [city as successor] to enter into [a contract for construction of 

the parking and alley improvements] at this time and to pay for the construction of [those 

i]mprovements, all as required by the LAB [agreement].” The loan agreement went on to 

recite that “[c]oncurrently with this Agreement, the [city as successor] and the City desire 

to enter into a construction contract with Spiess Construction Co. Inc. . . . for the Parking 

and Alley Improvements” and that “the total potential expenditure authorized for” those

improvements was $1,111,102.20.

7

 

The loan agreement then provided that the city would loan to the city as successor, 

and the city as successor would borrow from the city, up to $1,111,102.20, and the 

agreement provided that the city would “disburse proceeds of the [loan] to [the city as 

successor] or directly to [Spiess Construction], as elected by the City, for work performed 

by [Spiess Construction] under the [construction c]ontract, all in accordance with the 

requirements of the” contract. The loan agreement also provided that the city as 

successor would repay the loan upon receipt of money from the fund.8 

Later that month, the city entered into the contract with Spiess Construction 

(Spiess) for the construction of the parking and alley improvements. 

 

7 This amount consisted of the price of the contract with Spiess Construction 

($925,918.50), plus 20 percent of that contract price for potential change orders. 

8 “3. Repayment of City Loan. Successor Agency shall repay the City Loan to 

City promptly upon receipt of RPTTF moneys for the ROPS 13-14A period, and for and 

during each subsequent ROPS periods, if necessary, to repay the City Loan in full; 

provided however, that this Agreement and the Parking and Alley Construction Contract 

shall have been approved by the DOF as enforceable obligations on ROPS 13-14A (and 

each subsequent ROPS, as applicable). Subject to Section 4 below, Successor Agency 

shall repay the entire outstanding principal balance of the City Loan to the City on or 

before five (5) working days following the date the Successor Agency receives a 

disbursement of RPTTF moneys for the ROPS 13-14A period (and/or subsequent ROPS 

periods, as necessary); provided that the Parking and Alley Construction Contract is an 

approved enforceable obligation on ROPS 13-14A.” 
9

In the ROP schedule the city as successor prepared that same month (February 

2013) for the July 2013 through December 2013 fiscal period, the city as successor 

requested a distribution from the fund in the sum of $1,111,102.20 -- the total potential 

amount of the loan provided for in the loan agreement. In April 2013, the department 

denied the request because “the loan was entered into for an item denied by [the 

department] during a prior ROPS period. Therefore, this item is not an enforceable 

obligation . . . .” Following the meet and confer process, the department issued a new 

denial letter in May 2013, denying the request because the city as successor was not a 

party to the construction contract between the city and Spiess. 

In June 2013, the city and the city as successor commenced the present action by 

filing a petition for writ of mandate and complaint for declaratory and injunctive relief in 

the Sacramento County Superior Court. With respect to the parking and alley 

improvements, plaintiffs sought a writ compelling the department to set aside its previous 

actions and determinations and to “issue a formal written determination and directive that 

. . . the LAB [agreement] and [Cooperation] Agreement are enforceable obligations . . . 

eligible for payment from the . . . [f]und” and that the city as successor is “entitled to an 

allocation of moneys from the . . . [f]und in conjunction with future ROPS to the extent 

[the city as successor] places such agreements on the ROPS with a demand for payment 

and funds are available in the . . . [f]und to pay the amounts so requested.”9 

The construction of the parking and alley improvements was completed in 

November 2013, and the city paid for the construction under its contract with Spiess. 

For the next ROP cycle (the fiscal period from January 2014 through June 2014), 

the city as successor did not renew its request for an allocation from the fund for the 

parking and alley improvements. However, in approving allocations from the fund for 

 

9 The mandamus action also encompassed claims relating to the Avon/Dakota 

revitalization project, discussed below.
10

other obligations incurred by the city as successor under the LAB agreement, the 

department acknowledged that the city as successor’s obligation to complete the parking 

and alley improvements was an enforceable obligation that would be eligible for tax 

increment funds in the next ROP cycle. Accordingly, despite the pending litigation, the 

city as successor sought a distribution from the fund for its obligation to the city under 

the loan agreement in its ROP statement for the fiscal period from July 2014 through 

December 2014. Initially, the department denied this request because of lack of 

“additional clarification or documentation,” but then following the meet and confer 

process denied the request again in May 2014 because “the [city as successor] did not 

submit an Oversight Board resolution to [the department] for review prior to entering the 

loan[].” 

In September 2014, the city as successor obtained a stand-alone resolution from 

the oversight board approving the loan agreement.10 The city as successor notified the 

department of the oversight board’s approval in October 2014. Meanwhile, in 

September, the city as successor had once again submitted an ROP statement (this time 

for the fiscal period from January 2015 through June 2015) seeking a distribution from 

the fund for the amount owed to the city under the loan agreement (now fixed at 

$884,429). 

In November 2014, the department provisionally denied the city as successor’s 

request for a distribution, noting that it had not yet completed its review of the oversight 

board’s resolution approving the loan agreement. Then, on December 8, 2014, the 

department disapproved the resolution. The department explained that “it does not 

appear that the City actually loaned funds to the [city as successor] for amounts owed 

 

10 The oversight board had previously approved the ROP statements in which the 

city as successor sought allocations from the fund for the amount due the city under the 

loan agreement, but the board had not separately approved the loan agreement itself. 
11

under a contract in which the [city as successor] is a party. Rather, the Cooperation 

Agreement seeks to reimburse the City for costs it incurred under an agreement between 

the City and Sp[ie]ss Construction.” The department further asserted that even if former 

subdivision (h) of section 34173 applied to the loan agreement, “a request by the [city as 

successor] to enter into a loan agreement with the city . . . must be approved by the 

oversight board and is subject to [the department’s] review prior to entering into the 

agreement. Additionally, the use of the loaned funds must first be presented on a ROPS 

subject to review by the [oversight board] and [the department]. The [city as successor] 

took none of these steps prior to entering into the Cooperation Agreement or the alleged 

expenditure of the funds pursuant to the Cooperation Agreement. Consequently, the 

[oversight board] has no authority to retroactively approve the actions taken by the [city 

as successor], and therefore the Cooperation Agreement is not effective.” A week later, 

on December 17, 2014, the department rejected the city as successor’s request for a 

distribution from the fund for the amount owed to the city under the loan agreement for 

the reasons stated in its letter of December 8. 

In July 2015, a notice of hearing was filed in this mandamus proceeding, with the 

hearing set for December 2015 (later continued to January 2016). In their memorandum, 

plaintiffs argued that the city as successor was entitled to money from the fund as 

reimbursement for the costs expended to construct the parking and alley improvements at

the packing district project, and plaintiffs set out to refute the various reasons the 

department had given over time for denying that funding. In response, the department 

argued that it did not abuse its discretion in denying the city as successor’s request for 

money from the fund related to the parking and alley improvements because: (1) the city 

as successor was not a party to the construction agreement with Spiess, and therefore that 

agreement was not an enforceable obligation; (2) the city as successor did not obtain 

oversight board approval and submit that approval to the department before entering into 

the loan agreement with the city; and (3) former subdivision (h) of section 34173 did not 
12

contemplate loan agreements in which a third party, rather than the successor agency, 

receives the funds loaned. 

The trial court issued its ruling on submitted matter in February 2016. With 

regard to the parking and alley improvements and the loan agreement, the court noted 

that the city as successor was seeking to enforce an obligation that “is based on a contract 

between the City and the construction company.” According to the court, while the LAB 

agreement “clearly created an enforceable obligation, funds are only due to the extent the 

[city as successor] actually expended funds to complete the parking and alley 

improvements. Because the [city as successor] is not a party to the construction contract 

with Spiess, it is the City, not the [city as successor], [that] expended funds to build the 

parking and alley improvements. There is no reference to the [city as successor] in the 

contract, and it is the City, not the [city as successor], that is given the express right to 

oversee construction and terminate the contractor’s employment should the need 

arise. . . . [¶] Although the [loan a]greement anticipates that the City might pay loaned 

funds directly to the construction company, it does not indicate that the [city as 

successor] is authorizing or directing the City to enter into the parking construction 

contract on its behalf. The City Council, not the [city as successor] via the Oversight 

Board, ‘passed and adopted, approved and authorized’ the construction, converting it into 

a City controlled project. Consequently, the City paid funds pursuant to the City’s 

contractual obligations with Spiess Construction, and as the funds sought are not for 

payment of the [city as successor]’s enforceable obligation, [the department] is correct in 

its denial of the request.” 

In March 2016, the trial court issued its order denying the writ petition and 

dismissing the complaint for declaratory and injunctive relief based on its earlier ruling 

and entered judgment in favor of the department. This timely appeal followed. 
13

B

The Avon/Dakota Neighborhood Revitalization Project

The Avon/Dakota neighborhood is a multifamily residential neighborhood that is 

one of the city’s most blighted areas. To revitalize that neighborhood, on June 22, 2010

the authority entered into a revitalization agreement with Related (the revitalization 

agreement), under which the authority and Related (referred to in the agreement as 

Developer) were to “jointly and cooperatively prepare a revitalization plan for th[e] 

neighborhood” and implement that plan. The revitalization agreement recited that 

“[p]ursuant to one or more separate cooperation agreements between or among the 

Authority, the City of Anaheim, . . . and/or the Anaheim Redevelopment Agency, . . . to 

be considered and action taken concurrently with this Revitalization Agreement, it is 

anticipated that the Authority will be allocated by the City and/or by the Agency certain 

federal, state, and local funds that will be authorized to be expended to carry out this 

Revitalization Agreement and provide financial assistance for the Project along with 

preparation and implementation of the Plan.” With respect to the agency, the agreement

stated that the sources of the anticipated funds to be provided “may include . . . monies 

from the Agency’s Low and Moderate Income Housing Fund (‘Housing Fund’)” and 

“such other funds as may be allocated by . . . Agency to Authority.” The revitalization 

agreement also recited that “Agency receives tax increment revenues pursuant to

Section 33670(b) of the [California Community Redevelopment Law] and is required to 

deposit no less than thirty percent (30%) of the tax increment revenues allocated to 

Agency into Agency’s Low and Moderate-Income Housing Fund (‘Housing Fund’) 

pursuant to Sections 33333.10, 33333.11, 33334.2 and 33334.6 of the [California 

Community Redevelopment Law] and to use such funds in order to increase, improve, 

and preserve the community’s supply of low and moderate-income housing available at 

an affordable housing cost.” 
14

The revitalization agreement went on to specify that the authority would provide 

up to $4.8 million for the preparation and implementation of the revitalization plan. The 

agreement expressly identified the city and the agency as “intended third party 

beneficiaries of this Revitalization Agreement, with full right, but no obligation, to 

enforce the terms hereof.” The agreement further provided that “[t]his Revitalization 

Agreement (together with the other Authority Documents) contains the entire agreement 

between Authority and Developer with respect to the Properties, and all prior 

negotiations, understandings and agreements are superseded by this Revitalization 

Agreement and such other Authority Documents. No modification of any Authority 

Document (including waivers of rights and conditions) shall be effective unless in writing 

and signed by the Party against whom enforcement of such modification is sought, and 

then only in the specific instance and for the specific purpose given.” The term 

“Authority Documents” was defined to mean “this Revitalization Agreement and any and 

all Implementation Agreements entered into in multiple Phases of revitalization of the 

Avon/Dakota Neighborhood pursuant hereto.” 

A week later, on June 28, 2010, the authority, the city, and the agency entered into 

a cooperation agreement for the funding of the Avon/Dakota revitalization project (the 

funding agreement). Like the revitalization agreement, the funding agreement noted the 

agency’s obligation to set aside “a certain portion” of its tax increment funding for low 

and moderate-income housing costs. The funding agreement referred to these funds as 

“the ‘Housing Set-Aside Funds.’ ” The funding agreement then recited the parties’ intent 

to provide for the city to transfer certain funds to the authority, and for the agency to 

transfer “certain Housing Set-Aside funds” to the authority, and for the authority to use 

those funds to implement the revitalization agreement. The funding agreement then 

provided that the city would transfer up to $3.759 million to the authority, while the 
15

agency would transfer up to $1.041 million.11 The authority agreed to impose such 

conditions, covenants, and restrictions in the implementation of the project “as the 

Redevelopment Agency would be required to impose with respect to the use of Housing 

Set-Aside Funds under the California Community Redevelopment Law.” 

On January 31, 2011, the authority and the agency entered into a further 

cooperation agreement for additional funding of the Avon/Dakota revitalization project 

(the additional funding agreement). The additional funding agreement recited that the 

authority and the agency desired to provide for the agency to transfer additional “Housing 

Set-Aside Funds” to the authority and for the authority to use those additional funds to 

implement the revitalization agreement. The additional funding agreement then provided 

that the agency would transfer up to $15 million to the authority, and the authority would 

use that money to implement the revitalization agreement. The additional funding 

agreement further provided that “[t]he payment obligation of the Redevelopment Agency 

hereunder shall be made, at the option of the Redevelopment Agency, from the tax 

increment revenues of Anaheim’s Merged Redevelopment Project Area, bond proceeds 

from Anaheim’s Merged Redevelopment Project, inter-fund-transfer, and/or any other 

funds of the Redevelopment Agency legally available therefor. The payment obligation 

of the Redevelopment Agency hereunder does not constitute a pledge of any particular 

funds and is and shall be subordinate to any pledge or other commitment of the Agency 

made in connection with any Redevelopment Agency bonds, now or hereafter issued.”12 

 

11 The total amount of funding committed to the authority by the city and the agency 

under the funding agreement was equal to the total amount of funding the authority 

promised to Related in the revitalization agreement for the preparation and 

implementation of the revitalization plan.

12 Hereafter, references to the funding agreement encompass the additional funding 

agreement as well (unless otherwise noted).
16

After the additional funding agreement was signed, the authority and Related 

entered into a written amendment to the revitalization agreement (the amendment to the 

revitalization agreement). After noting that the funding for the project had been 

increased by $15 million, the amendment to the revitalization agreement specified that 

the authority would provide up to $19.8 million for the preparation and implementation 

of the revitalization plan. The amendment to the revitalization agreement also added a 

funding schedule and provided that the authority would make moneys available 

according to that schedule.

13

 Under the schedule, the authority was to make $1,113,034 

available to Related in fiscal year 2010-2011 (which the schedule noted had already been 

expended for the acquisition of two properties), $2.5 million a year for each of the eight 

fiscal years after that, and $1,186,966 for the fiscal year from 2018-2019.14 

In the first two ROP cycles (through the fiscal period ending December 31, 2012), 

the city as successor requested, and the oversight board and the department approved, a 

total disbursement of $5,315,700 from the fund for use in funding the Avon/Dakota 

revitalization project. In the ROP schedule the city as successor prepared in August 2012 

for the January 2013 through June 2013 fiscal period, the city as successor requested 

$1,989,227 from the fund with respect to the Avon/Dakota revitalization project. In 

October 2012, the department approved a small portion of the requested amount, but 

denied the rest based on its understanding that “contracts for these line items were 

 

13 Specifically, the amendment to the revitalization agreement added a new section 

3.2 to the revitalization agreement that provided as follows: “Authority shall make 

moneys available for the acquisition of Properties and the planning and implementation 

of the Plan pursuant to the Revitalization Agreement (as amended by this First 

Amendment) in accordance with the Authority Funding Schedule for the Avon/Dakota 

Neighborhood Revitalization Plan, attached hereto as Exhibit C and incorporated herein 

(‘Authority Funding Schedule’).” 

14 Hereafter, references to the revitalization agreement are to that agreement as 

amended (unless otherwise noted).
17

awarded after June 27, 2011.” Following the meet and confer process, in December 

2012, the department confirmed its denial of the requested distribution on the ground that 

the revitalization agreement was between the authority and a third party, and the agency 

was not a party to that agreement. The department further stated, “Section ‘M’ of the 

[revitalization agreement] states that pursuant to separate cooperation agreements, the 

Authority was anticipated to be allocated funds from the City and/or the former RDA. 

Additional documents do not support the amount claimed on the ROPS . . . ; therefore, 

Finance determines that this does not create an enforceable obligation on the former 

RDA. In addition, any cooperation agreements entered would not be considered 

enforceable pursuant to HSC section 34171(d)(2). Therefore, the items are not 

enforceable obligations.” 

Given the department’s determination that payments for the Avon/Dakota 

revitalization project were not for enforceable obligations, the city as successor did not 

seek any further distribution for that purpose in the next four ROP cycles, and instead the 

project proceeded with other available funds. In June 2013, however, plaintiffs included 

a claim related to the denial of funding for the Avon/Dakota revitalization project in this 

mandamus action. Plaintiffs alleged that Related was an intended third party beneficiary 

of the agency’s obligation to make payments to the authority under the funding 

agreement and that the revitalization agreement and the funding agreement “must be read 

together as a single contract between and among all of the parties thereto.” Plaintiffs 

contended that because “Related is a party to and third party beneficiary under the 

Avon/Dakota Cooperation Agreement and Avon/Dakota Neighborhood Revitalization 

Agreement and said agreements must be read together as a single contract . . . , those 

agreements do not constitute agreements ‘between the city . . . that created the 

redevelopment agency and the former redevelopment agency’ within the meaning of 

Health & Safety Code §34171(d)(2).” With respect to this claim, plaintiffs sought a writ 

compelling the department to set aside its previous actions and determinations and to 
18

“issue a formal written determination and directive that . . . the Avon/Dakota Cooperation 

Agreement and Avon/Dakota Neighborhood Revitalization Agreement . . . are 

enforceable obligations . . . eligible for payment from the . . . [f]und” and that the city as 

successor is “entitled to an allocation of moneys from the . . . [f]und in conjunction with 

future ROPS to the extent [the city as successor] places such agreements on the ROPS 

with a demand for payment and funds are available in the . . . [f]und to pay the amounts 

so requested.” 

In February 2015, the city as successor once again sought a distribution from the 

fund for use in funding the Avon/Dakota revitalization project. In April 2015, the 

department again denied that distribution because the agency was not a party to the 

revitalization agreement. 

As we have previously noted, the hearing on plaintiffs’ writ petition was 

eventually set for January 2016. In their memorandum, plaintiffs argued that subdivision 

(d)(2) of section 34171, which excludes from the definition of “enforceable obligation” 

“any agreements, contracts, or arrangements between the city, county, or city and county 

that created the redevelopment agency and the former redevelopment agency,” did not 

apply here because pursuant to Civil Code section 1642 the revitalization agreement and 

the funding agreement must be construed as a single contract, to which Related was a 

party, thereby taking the contract out of that limiting provision.15 Plaintiffs also argued 

that “Related’s rights under the [revitalization agreement] would be obliterated unless 

[the department’s] denial of RPTTF funding is overturned” and thus reversal of the 

department’s decision was necessary to avoid the unconstitutional impairment of 

Related’s contract rights. 

 

15 “Several contracts relating to the same matters, between the same parties, and 

made as parts of substantially one transaction, are to be taken together.” (Civ. Code, 

§ 1642.)
19

In opposition, the department argued that the revitalization agreement and the 

funding agreement were not a single contract, the cooperation agreement was not an 

enforceable obligation, and the department’s denial of RPTTF funding did not violate 

Related’s rights under the contracts clauses of the federal and state Constitutions. 

In its ruling on submitted matter issued in February 2016, the trial court concluded 

that Related was not a party to the funding agreement such that it could enforce payment 

from the agency to the authority, and because the revitalization agreement and the 

funding agreement were not between the same parties, they could not be treated as a 

single contract under Civil Code section 1642. The court further concluded that it did 

“not need to address [plaintiffs’] ‘impairment of contracts’ arguments, as Related has no 

rights under the [funding agreement].” 

As noted above, plaintiffs timely appealed from the resulting judgment in favor of 

the department. 

DISCUSSION

I

The Parking And Alley Improvements At The Packing District Project

A

The Loan Agreement Between The City And The City As Successor 

Gave Rise To An Enforceable Obligation

On appeal, plaintiffs contend the city as successor is entitled to money from the 

fund to repay the loan proceeds used to construct the parking and alley improvements on 

the packing district project. According to plaintiffs, former subdivision (h) of section 

34173 “did not require the City to disburse the loan proceeds to the [city as successor] so 

that the [city as successor] could contract with Spiess. . . . Loan agreements, it must be 

emphasized, typically involve the lender disbursing funds to a party other than the 

borrower. . . . If the Legislature had intended that the definition of ‘loan’ as used in 
20

[former] §34173(h) should have a narrower meaning it easily could have said so. It did 

not.” 

In response, the department argues -- as it did in the trial court -- that “[t]he 

construction agreement between the City and Spiess is not an enforceable obligation 

because it does not include any indebtedness incurred by the [city as successor].” That 

argument goes nowhere, however, because the city as successor did not seek money from 

the fund to make payments due under the construction contract with Spiess. Rather, the 

city as successor sought money from the fund to make payments due under the loan 

agreement -- that is, to pay back to the city the amounts the city paid the construction 

company under the construction contract for the construction of the parking and alley 

improvements the agency was obligated to provide under the LAB agreement. Thus, the 

pertinent question here is not whether the construction contract between the city and 

Spiess was an enforceable obligation, but rather whether the loan agreement between the 

city and the city as successor gave rise to an enforceable obligation.

As we have seen, former subdivision (h) of section 34173 provided as follows: 

“The city, county, or city and county that authorized the creation of a redevelopment 

agency may loan or grant funds to a successor agency for administrative costs, 

enforceable obligations, or project-related expenses at the city’s discretion, but the receipt 

and use of these funds shall be reflected on the Recognized Obligation Payment Schedule 

or the administrative budget and therefore are subject to the oversight and approval of the

oversight board. An enforceable obligation shall be deemed to be created for the 

repayment of those loans.”

Here, the city loaned funds to the city as successor for an enforceable obligation 

when, pursuant to the terms of the loan agreement, the city as successor contracted with 

Spiess and paid for the construction of the parking and alley improvements the agency

was legally obligated to provide under the LAB agreement (which no one disputes was an 
21

enforceable obligation). Thus, at first glance at least, it does appear that former 

subdivision (h) of section 34173 was satisfied here.

The department contends, however, that the statute was not satisfied because “the 

[city as successor] never received any money from the City, and therefore never had a 

repayment obligation under the . . . loan agreement.” According to the department, 

because former subdivision (h) of section 34173 provides that “[a]n enforceable 

obligation shall be deemed to be created for the repayment of those loans” (italics added),

a repayment obligation is a necessary requirement of the statute, and there was no such 

obligation here. 

We disagree. To say that the city as successor “never had a repayment obligation 

under the . . . loan agreement” because “the [city as successor] never received any money 

from the City” is to ignore the terms of the loan agreement. As we have seen, the loan 

agreement specifically provided that the city as successor would “repay the City Loan to 

City” upon receiving money from the fund to do so. It is of no matter that the loan 

proceeds were not first paid to the city as successor, so that the city as successor could 

pay them to the construction company, and it is likewise of no matter that the city as 

successor was not a party to the construction contract. There is no dispute that the only

reason the city entered into the contract with Spiess in the first place was because the 

department had thwarted (rightly or wrongly) the city as successor’s earlier attempts to 

obtain money from the fund to pay for the construction of the parking and alley 

improvements that the agency was obligated to provide under the terms of the LAB 

agreement, and the city wanted to “assist the [city as successor] by providing a loan to the 

[city as successor] . . . to enable the [city as successor] . . . to pay for the construction of 

the Parking and Alley Improvements . . . as required by the LAB” agreement, which 

qualified as an enforceable obligation. That the loan agreement allowed the city to 

contract with the construction company and disburse the loan proceeds directly to the 

construction company did not alter the fundamental substance of the transaction as a 
22

loan, under which the city was lending money to the city as successor with the right to be 

paid back. (See Civ. Code, § 3528 [“The law respects form less than substance”].) Just 

as the average person who borrows money to buy a house or a car never personally 

receives the borrowed funds, the city as successor borrowed money from the city here 

even though the city as successor did not receive the borrowed funds, but instead agreed 

the city could pay those funds directly to the construction company.

As for the department’s backup assertion that loan agreement did not give rise to 

an enforceable obligation because the city as successor’s “obligation to repay the loan 

was contingent on [the department] approving the City-Spiess construction contract,” 

“which never occurred,” we are not persuaded. The loan agreement did provide that 

“Successor Agency shall repay the City Loan to City promptly upon receipt of RPTTF 

moneys for the ROPS 13-14A period, and for and during each subsequent ROPS periods, 

if necessary, to repay the City Loan in full; provided however, that this Agreement and 

the Parking and Alley Construction Contract shall have been approved by the DOF as 

enforceable obligations on ROPS 13-14A (and each subsequent ROPS, as applicable).” 

However, the provision relating to the department approving the contract with Spiess as 

an enforceable obligation appears to have been included in contemplation of the 

possibility that the city as successor might be made a party to that contract. This 

possibility was also suggested in the recitals in the loan agreement, which provided that 

“the Successor Agency and City desire to enter into a construction contract with Spiess 

Construction Co. Inc. (‘Contractor’) for the Parking and Alley Improvements.” 

Ultimately, however, the city as successor was not made a party to the construction 

contract, and thus there was no occasion for the department to approve that contract as an 

enforceable obligation during the ROP cycle. Under these circumstances, we do not 

construe the absence of that unnecessary approval as an unfulfilled condition precedent to 

the obligation of the city as successor to pay back the loan the city made by paying the 
23

construction company to complete the parking and alley improvements the agency was 

legally bound to provide under the terms of the LAB agreement.

In summary, we conclude the loan agreement between the city and the city as 

successor gave rise to an enforceable obligation, and the trial court erred in concluding 

otherwise.

B

The City As Successor’s Failure To Obtain Prior Approval From

The Oversight Board To Enter Into The Loan Agreement With

The City Did Not Make The Agreement An Unenforceable Obligation

As we have noted already, in opposing the relief plaintiffs sought in the trial court 

pertaining to the denial of funding to repay the loan from the city pertaining to the 

parking and alley improvements, the department argued that the city as successor did not 

obtain oversight board approval and submit that approval to the department before

entering into the loan agreement with the city. On appeal, plaintiffs contend that even if 

prior approval was required (which they dispute), this amounts to no more than “hypertechnical non-prejudicial error” and thus cannot justify the trial court’s denial of relief on 

this claim.

In a footnote in its respondent’s brief, the department contends we should “remand 

this matter to the trial court for review of” this issue because “[t]he trial court did not 

address this argument.” In support of this suggestion of remand, however, the 

department offers no citation to authority, and we are not aware of any authority that 

would justify the department’s request. “It is judicial action and not judicial reasoning 

which is the subject of review.” (El Centro Grain Co. v. Bank of Italy, etc. (1932) 123 

Cal.App. 564, 567.) Thus, it was incumbent on plaintiffs in this appeal to show that the 

trial court erred in the action that court took on their mandamus petition, namely, denying 

them relief on their claim relating to the city as successor’s claim for money from the 

fund to repay the loan from the city. To show error in that judicial action, plaintiffs in 
24

their opening brief understandably sought to refute all of the arguments the department 

offered in its opposition in the trial court, including the argument that plaintiffs should 

get no relief because the city as successor did not obtain prior approval from the 

oversight board to enter into the loan agreement with the city, and the department had 

every opportunity to respond on that issue in its respondent’s brief. Thus, the issue is 

properly before us for decision in determining whether the trial court’s denial of writ 

relief amounted to judicial error, and there is no reason to remand the case to the trial 

court for that court to address the issue in the first instance. Accordingly, we turn to this 

issue.

The department appears to contend that the trial court’s denial of writ relief was 

proper given the failure of the city as successor to obtain approval of the oversight 

committee before entering into the loan agreement with the city because that failure

prevented the oversight board from exercising its supervisory power over the city as 

successor. We disagree. It is true there are provisions in the dissolution law that require 

a successor agency to obtain approval of the oversight committee before entering into an 

agreement with the municipality that created the redevelopment agency the successor 

agency succeeded. Subdivision (a) of section 34178 provides “that a successor entity 

wishing to enter . . . into agreements with the city, county, or city and county that formed 

the redevelopment agency that it is succeeding may do so . . . upon obtaining the 

approval of its oversight board.” Similarly, section 34180 identifies various “successor 

agency actions” that “shall first be approved by the oversight board,” and included in 

those actions is “[a] request by the successor agency to enter . . . into an agreement with 

the city, county, or city and county that formed the redevelopment agency that it is 

succeeding pursuant to Section 34178.” (§ 34180, subd. (h).) We agree with the 

department (and disagree with plaintiffs) that these provisions require a successor agency 

to obtain oversight board approval before entering into a contract with the municipality 

that created the redevelopment agency the successor agency succeeded. Where we part 
25

ways with the department, however, is with respect to the department’s suggestion that 

the failure to obtain prior approval necessarily justifies the denial of any request for 

money from the fund arising from an agreement that was not approved in advance.

The department contends this should be the result because the failure to obtain 

prior approval prevents the oversight board from exercising its supervisory power over 

the successor agency. That is not actually true, however, particularly with respect to a 

loan agreement under former subdivision (h) of section 34173. This is so for two 

reasons. First, with respect to any agreement that an oversight board may approve 

between a successor agency and the municipality that formed the redevelopment agency 

the successor agency succeeded, subdivision (h) of section 34180 provides that “[a]ny 

actions to establish” such agreements “are invalid until they are included in an approved 

and valid Recognized Obligation Payment Schedule.” Second, with respect to loan 

agreements in particular, former subdivision (h) of section 34173 provided that “[t]he 

city, county, or city and county that authorized the creation of a redevelopment agency 

may loan or grant funds to a successor agency for administrative costs, enforceable 

obligations, or project-related expenses at the city’s discretion, but the receipt and use of 

these funds shall be reflected on the Recognized Obligation Payment Schedule or the 

administrative budget and therefore are subject to the oversight and approval of the 

oversight board.” In other words, under the dissolution law, even if a loan agreement 

between a successor agency and the municipality that created the redevelopment agency 

the successor agency succeeded is not approved in advance, the oversight board is still 

able to exercise its supervisory power over the successor agency with regard to the loan 

agreement because: (1) any actions to establish that agreement are invalid until the 

agreement is included in an approved and valid ROP schedule; and (2) receipt and use of 

the borrowed funds must be reflected on an ROP schedule or administrative budget. In 

these ways, the loan agreement is subject to the oversight and approval of the oversight 
26

board even if the successor agency failed to obtain the oversight board’s approval before

entering into the agreement.

Here, the oversight board approved ROP schedules that included requests for 

money from the fund to pay back the amount due the city under the loan agreement on 

multiple occasions, and the oversight board approved the loan agreement separately on 

one occasion -- albeit after the city as successor entered into that agreement. In this 

manner, the oversight board exercised its supervisory power over the city as successor 

pursuant to the terms of the dissolution law. Thus, contrary to the department’s 

argument, the failure of the city as successor to obtain prior approval from the oversight 

board before entering into the loan agreement did not prevent the oversight board from 

exercising its supervisory power over the city as successor with respect to this particular 

transaction and thus did not give the department a valid reason to deny the city as 

successor’s request for money from the fund to repay the loan.

For the foregoing reasons, we conclude the trial court erred when it denied 

plaintiffs’ petition for a writ of mandate pertaining to the parking and alley improvements 

at the packing district project.

II

The Avon/Dakota Neighborhood Revitalization Project

A

Integration Of The Revitalization Agreement And The Funding Agreement

Is Immaterial To Plaintiffs’ Impairment Argument

On appeal, plaintiffs contend that “[u]nder settled principles of law, the 

[revitalization agreement and the funding agreement] must be viewed as constituting a 

single integrated contract.” They then argue that “retroactive invalidation of [that] 

Agreement under §34171(d)(2) would deny Related over $10 million of the $16,041,000 

in [agency] funds promised to it in the Revitalization Agreement and thereby 

unconstitutionally impair its vested contract rights.” (See U.S. Const., art. I, § 10; Cal. 
27

Const., art. 1, § 9.) Given this result, they contend, “§34171(d)(2) must be interpreted as 

not to apply when the invalidation of a multi-party contract to which a city, its former 

redevelopment agency, and a private person or entity are parties would substantially 

impair the private person’s or entity’s contract rights.”16 Plaintiffs contend this result is 

consistent with the rule that, if possible, a statute should be interpreted in a manner that is 

consistent with, rather than in conflict with, the Constitution. (See City of Cerritos v. 

State of California (2015) 239 Cal.App.4th 1020, 1035.)

The problem with plaintiffs’ argument is that they have attempted to frame it as an 

issue of statutory interpretation, when what they are really raising is an “as applied” 

constitutional challenge to the statute. It is true that “[i]f a statute is susceptible of two 

constructions, one of which will render it constitutional and the other unconstitutional in 

whole or in part, or raise serious and doubtful constitutional questions, the court will 

adopt the construction which, without doing violence to the reasonable meaning of the 

language used, will render it valid in its entirety, or free from doubt as to its 

constitutionality, even though the other construction is equally reasonable.” (Miller v. 

Municipal Court (1943) 22 Cal.2d 818, 828.) What that rule means, however, is that if a 

particular construction of a statute will render the statute unconstitutional or raise serious 

questions about the constitutionality of the statute on its face -- that is, without regard to 

“its application to the particular circumstances of an individual” (Tobe v. City of Santa 

Ana (1995) 9 Cal.4th 1069, 1084) -- then that construction is to be avoided if reasonably 

possible. That does not mean, however, that we ought to adopt a particular interpretation 

 

16 Recall that subdivision (d)(2) of section 34171 excepts from the definition of 

“ ‘enforceable obligation’ ” “any agreements, contracts, or arrangements between the 

city, county, or city and county that created the redevelopment agency and the former 

redevelopment agency.”
28

of a statute applicable to all cases because in some circumstances a constitutional 

violation may result from that interpretation.

Here, plaintiffs do not contend that if subdivision (d)(2) of section 34171 is 

applied to every contract in which a private third party is involved along with a former 

redevelopment agency and the municipality that formed it, an unconstitutional 

impairment of contract will necessarily result every time, nor do they contend that there 

is a serious question as to whether a constitutional violation will result every time. 

Instead, they ask us to interpret the statute only so that it does not apply “when the 

invalidation of a multi-party contract to which a city, its former redevelopment agency, 

and a private person or entity are parties would substantially impair the private person’s 

or entity’s contract rights.” That is nothing more and nothing less than an “as applied” 

challenge to the constitutionality of the provision, because under plaintiffs’ argument the 

statute should be deemed unconstitutional only when the application of the statute “would 

substantially impair the private person’s or entity’s contract rights.” As will become 

apparent below, the determination of whether contract rights have been substantially 

impaired by legislation depends on the specific contract at issue. So the real question 

here is not whether subdivision (d)(2) of section 34171 should be interpreted so that it is 

not facially unconstitutional, or to avoid a serious question of facial unconstitutionality, 

but rather whether the statute violates the contract clauses of the federal and state 

Constitutions in particular circumstances. Thus, we will address plaintiffs’ argument as 

an “as applied” challenge to the constitutionality of the statute under the facts presented 

by this case.

In addressing that challenge, the question the trial court found dispositive --

whether the revitalization agreement and the funding agreement are to be treated as a 

single integrated contract or as separate contracts -- is immaterial. This is so because 

even if plaintiffs are wrong on the integration issue and the two contracts are separate, it 

is undisputed that subdivision (d)(2) of section 34171 would operate to invalidate the 
29

funding agreement to the extent that agreement obligated the agency to provide up to 

$16.041 million to the authority to fund the Avon/Dakota revitalization project. And 

because the revitalization agreement and the funding agreement are unquestionably

interdependent -- because the revitalization agreement clearly contemplated that the 

authority would obtain the funding the authority promised to give Related from the city 

and the agency pursuant to the funding agreement -- even if the contracts are separate, the 

issue still arises as to whether the invalidation of the funding agreement resulted in an 

unconstitutional impairment of the contractual rights of Related under the revitalization 

agreement. Thus, we need not answer the question of whether the two agreements were a 

single integrated contract or two separate contracts. The significant question for us is 

whether the invalidation of the agency’s promise to provide funds to the authority, so that 

the authority could provide them to Related, unconstitutionally impaired Related’s 

contractual rights. It is to that question that we now turn.17

B

The Statutory Invalidation Of The Funding Agreement With Respect

To The Agency Results In An Unconstitutional Impairment Of

Related’s Rights Under The Revitalization Agreement

“The contract clauses of both the federal and California Constitutions prohibit a 

state from passing laws impairing the obligation of contracts. (U.S. Const., art. I, § 10, 

cl. 1; Cal. Const., art. I, § 9.) Pursuant to these clauses, the state’s ability to modify its 

own contracts with other parties, or contracts between other parties, is limited. 

[Citations.] [¶] Not every impairment runs afoul of the contract clauses, however. 

 

17 Because the trial court did not reach this issue, the department argues (once again) 

that we should “remand this case to allow the trial court an opportunity to address [the] 

contract clause argument.” Again, however, the department offers no authority, and no 

reasoning, in support of this argument. Because the issue is one of law on a record the 

parties had every opportunity to fully develop, we will address it.
30

‘ “ The constitutional prohibition against contract impairment does not exact a rigidly

literal fulfillment; rather, it demands that contracts be enforced according to their ‘just 

and reasonable purport”; not only is the existing law read into contracts in order to fix 

their obligations, but the reservation of the essential attributes of continuing 

governmental power is also read into contracts as a postulate of the legal order.’ ” 

(Teachers’ Retirement Bd. v. Genest (2007) 154 Cal.App.4th 1012, 1026-1027.)

The first question under the contract clauses is whether the obligations of any 

contract have actually been impaired. (See City of Torrance v. Workers’ Comp. Appeals 

Bd. (1982) 32 Cal.3d 371, 377 (City of Torrance).) “ ‘The obligations of a contract are 

impaired by a law which renders them invalid, or releases or extinguishes them . . . .’ ” 

(Ibid.)

The department contends “Related has no relevant contract rights to be impaired” 

here, but then fails to explain how this could be so, when (1) the authority promised to 

provide Related with up to $19.8 million for the Avon/Dakota revitalization project;

(2) the revitalization agreement expressly anticipated that the authority would get the 

bulk of those funds -- $16.041 million -- from the agency pursuant to the funding 

agreement; and (3) subdivision (d)(2) of section 34171 (as well as subdivision (a) of 

section 34178) rendered the funding agreement unenforceable. Not only did Related 

have “relevant contract rights to be impaired,” but its contract rights were impaired, 

because the invalidation of the funding agreement destroyed the funding mechanism that 

in large part made the revitalization agreement possible in the first place.

To the extent the department argues, in support of its assertion that “Related has 

no relevant contract rights to be impaired,” that “ ‘[A] statute does not violate the 

Contract Clause simply because it has the effect of restricting, or even barring altogether, 

the performance of duties created by contracts entered into prior to its enactment,’ ” the 

department is mixing apples and oranges. At this point, we are not concerned with 

whether any impairment that occurred violated the contract clauses, but with whether 
31

there was any impairment in the first place. Those are two distinct questions. As our 

Supreme Court has explained, “a finding that the state in the exercise of its police power 

has abridged an existing contractual relationship does not in and of itself establish a 

violation of the contract clause. It is the beginning, not the end of the analysis. A finding 

of impairment merely moves the inquiry to the next and more difficult question --

whether that impairment exceeds constitutional bounds.” (City of Torrance, supra, 32 

Cal.3d at p. 377.) Thus, while the department is correct to the extent it can be 

understood to argue that abridgement of a contractual relationship does not necessarily 

violate the contract clause, the department cites no authority for the implied assertion that 

the abridgement of a contractual relationship is not an impairment of a contractual 

obligation.

This case is distinguishable from City of Galt v. Cohen (2017) 12 Cal.App.5th 

367, in which this court found no impairment of contract. In that case, City of Galt 

contended that “not allowing it to use . . . tax allocation bond proceeds to fund [projects 

pursuant to a cooperation agreement with City of Galt’s former redevelopment agency] 

unconstitutionally impairs contracts, namely the obligations of the bondholders.” (Id. at 

p. 378.) This court concluded that if City of Galt was actually claiming that its own 

constitutional rights were being impaired, “then it has no standing because a municipality 

may not complain that the state is impairing its contract.” (Ibid.) If, on the other hand, 

City of Galt was attempting to assert the bondholders’ rights, “then City of Galt has no 

standing to assert the rights of others.” (Ibid.) In any event, the court concluded, “City 

of Galt makes no attempt to establish that bondholders will not be paid under the terms of 

the bonds,” and because “the former redevelopment agency had no contractual obligation 

to the bondholders to use the bond proceeds to fund [the projects under the cooperation 

agreement], [the department] did not impair those contracts (the bond agreements) when 

it determined that the bond proceeds could not be used to fund [those] projects.” (Id. at 

pp. 378, 379)
32

In contrast to the situation in City of Galt, here plaintiffs are not asserting that any 

vested contractual rights of a municipality or of absent bondholders are being impaired. 

Instead, they are asserting that the rights of Related -- a private developer and a party to 

this proceeding -- are being impaired. Thus, City of Galt does not govern here.

Having concluded that subdivision (d)(2) of section 34171 operated here to impair 

Related’s contractual rights under the revitalization agreement, we turn to the next 

question in a contracts clause analysis -- whether that impairment exceeded constitutional 

bounds. “Legislation adjusting the rights and responsibilities of contracting parties must 

be upon reasonable conditions and of a character appropriate to the public purpose 

justifying its adoption.” (United States Trust Co. v. New Jersey (1977) 431 U.S. 1, 22 [52 

L. Ed.2d 92, 109-110] (United States Trust).) “The extent of impairment is certainly a 

relevant factor in determining its reasonableness.” (Id. at p. 27 [52 L. Ed. 2d at p. 113].) 

It has also been said that “United States Trust places the justification for an impairment 

of a contractual funding obligation under the light of strict scrutiny.” (California 

Teacher’s Assn. v. Cory (1984) 155 Cal.App.3d 494, 511.) “In considering the standard 

applicable to such a fiscal obligation the court said: ‘As with laws impairing the 

obligations of private contracts, an impairment may be constitutional if it is reasonable 

and necessary to serve an important public purpose. In applying this standard, however, 

complete deference to a legislative assessment of reasonableness and necessity is not 

appropriate because the State’s self-interest is at stake. A governmental entity can always 

find a use for extra money, especially when taxes do not have to be raised. If a State 

could reduce its financial obligations whenever it wanted to spend the money for what it 

regarded as an important public purpose, the Contract Clause would provide no 

protection at all.’ (Fns. omitted.)” (Cory, at p. 511, quoting United States Trust, supra, 

431 U.S. at pp. 25-26 [52 L.Ed.2d at pp. 111-112].) Thus, “United States Trust rules out, 

as a permissible justification, a legislative purpose simply to expend the obligated money 

for a purpose deemed a better expenditure.” (Cory, at p. 512.)
33

The department contends that the impairment of Related’s contract rights 

“survives this constitutional challenge because [the department’s] decisions here were 

based on a law that has a significant and legitimate public purpose.” According to the 

department, “the State’s interest in passing the Dissolution Law far exceeds any possible 

contractual interest lost by Related” because, essentially, the Legislature was seeking to 

address a financial emergency. Moreover, the department contends, “[t]he Legislature 

appropriately tailored the Dissolution Law to the public’s interest, noting that state and 

local governments were facing declines in revenues and increased need for core 

governmental services.” 

We are not persuaded. The impairment here was unquestionably significant, 

because the Legislature rendered the funding agreement -- the mechanism by which the 

revitalization agreement was to be funded -- almost completely inoperative. While 

certainly the city was still bound to perform its funding obligation to the authority under 

the funding agreement, the city’s funding obligation amounted to less than 20 percent of 

the total funding that was to be provided. The remaining 80 percent was the 

responsibility of the agency, but subdivision (d)(2) of section 34171 renders that funding 

obligation unenforceable. 

More important, however, is that the state’s justification for rendering the 

agency’s funding obligation unenforceable is the perceived justification Cory says was 

ruled out by United States Trust, namely, to spend the money somewhere else that the 

Legislature deemed more worthy. As our Supreme Court noted in the opening sentence 

of Matosantos, the dissolution law was “intended to stabilize school funding by reducing 

or eliminating the diversion of property tax revenues from school districts to the state’s 

community redevelopment agencies.” (Matosantos, supra, 53 Cal.4th at p. 241.) Thus, 

the Legislature determined that the tax increment funds that previously went to 

redevelopment agencies to, among other things, increase the supply of affordable housing 

for low and moderate-income households, should instead go to school districts, to help 
34

reduce the burden on the state to provide state funds for schools. (See id. at pp. 242-252.) 

However laudable, under Cory and United States Trust this was not a permissible 

justification for impairing vested contractual rights like those that belonged to Related 

here.

Moreover, it should be noted that subdivision (d)(2) of section 34171 is not 

reasonably tailored to achieve its ostensible purpose. As plaintiffs contend in their reply 

brief, “when the Dissolution Law was adopted, the Legislature still saw fit to preserve all 

other redevelopment agency bond and contract obligations to private parties (see . . . 

§34171(d)(1)(A)-(E)),” but Related’s contractual rights were not preserved due to the 

circumstance that Related’s funding was to come, not directly from the agency, but 

through the middleman of the authority. The department offers no valid reason for 

preserving the contractual rights of a private party that entered into a contract directly 

with a redevelopment agency, but destroying the contractual rights of a private party that 

instead entered into a contract with the city that created the redevelopment agency (or an 

entity treated as the equivalent of the city, like the authority here) that was to be funded 

pursuant to a related contract between the city and the agency the city created.

For the foregoing reasons, the Legislature’s impairment of Related’s contractual 

rights under the revitalization agreement by means of its invalidation of the funding 

agreement between the agency and the authority under subdivision (d)(2) of 

section 34171 (and subdivision (a) of section 34172) was unconstitutional and invalid. 

Accordingly, the trial court erred when it denied plaintiffs’ petition for a writ of mandate 

pertaining to the funding of the Avon/Dakota revitalization project.

III

Prejudgment Interest

In the trial court, plaintiffs argued (briefly) that they were entitled to prejudgment 

interest under Civil Code section 3287, subdivision (a) “on the sums wrongfully 
35

withheld.”18 The department disagreed. The trial court never reached the issue because 

that court determined (erroneously) that plaintiffs were not entitled to any relief. 

On appeal, plaintiffs assert that the city as successor is entitled to prejudgment 

interest, and they ask that our “ruling include a direction for the trial court, upon remand, 

to include an appropriate award of prejudgment interest in the writ of mandate and 

judgment to be entered.” The department responds that the case should be remanded to 

the trial court for that court to determine whether plaintiffs are entitled to prejudgment 

interest. In reply, plaintiffs assert this is a “purely legal issue that should be resolved by 

this Court.” In support of that assertion, they cite Code of Civil Procedure section 43 and 

Pacific S. P. Co. v. U. S. Fidelity etc. Co. (1921) 185 Cal. 515.

Section 43 of the Code of Civil Procedure provides (in relevant part) that “[t]he 

Supreme Court, and the courts of appeal, may affirm, reverse, or modify any judgment or 

order appealed from, and may direct the proper judgment or order to be entered, or direct 

a new trial or further proceedings to be had. In giving its decision, if a new trial be 

granted, the court shall pass upon and determine all the questions of law involved in the 

case, presented upon such appeal, and necessary to the final determination of the case.” 

(Italics added.) Meanwhile, the court in Pacific Sewer Pipe held that “[w]here a case is 

determined upon an agreed statement of facts which discloses every fact essential to a 

correct judgment, and the trial court draws an incorrect conclusion therefrom, the correct 

judgment will be ordered upon a reversal.” (Pacific S. P. Co. v. U. S. Fidelity etc. Co., 

supra, 185 Cal. at p. 519.) Essentially, plaintiffs rely on these authorities for the 

 

18 “A person who is entitled to recover damages certain, or capable of being made 

certain by calculation, and the right to recover which is vested in the person upon a 

particular day, is entitled also to recover interest thereon from that day, except when the 

debtor is prevented by law, or by the act of the creditor from paying the debt. This 

section is applicable to recovery of damages and interest from any debtor, including the 

state or any county, city, city and county, municipal corporation, public district, public 

agency, or any political subdivision of the state.” (Civ. Code, § 3287, subd. (a).)
36

proposition that we should decide whether the city as successor is entitled to prejudgment 

interest on any sum wrongfully withheld by the department, rather than allowing the trial 

court to decide that issue in the first instance on remand, because the issue is one of law 

that we can decide just as easily as the trial court.

Accepting plaintiffs’ invitation to us to address this issue under the foregoing 

authorities, we conclude the city as successor is not entitled to prejudgment interest. It is 

true that when a mandamus action is properly characterized as an action for “damages” 

within the meaning of Civil Code section 3287, the claimant may recover prejudgment 

interest when three conditions are satisfied: “(1) There must be an underlying monetary 

obligation; (2) the recovery must be certain or capable of being made certain by 

calculation; and (3) the right to recovery must vest on a particular day.” (Tripp v. Swoap

(1976) 17 Cal.3d 671, 682 & fn. 12, disapproved on other grounds in Frink v. Prod

(1982) 31 Cal.3d 166, 180.) As we will explain, however, plaintiffs have not shown to 

our satisfaction that they fall within this rule.

The first issue is whether this case can properly be characterized as an action for 

“damages.” For purposes of Civil Code section 3287, damages are the 

“compensation . . . in money” that may be recovered from “the person in fault” by 

“[e]very person who suffers detriment from the unlawful act or omission of another.” 

(Civ. Code, § 3281; see also Union Pacific Railroad Co. v. Santa Fe Pacific Pipelines, 

Inc. (2014) 231 Cal.App.4th 134, 198-199 [applying this definition of “damages” to Civil 

Code section 3287].) If this is an action for damages, then the department would have to 

be “the person in fault,” the city as successor would have to be the “person who 

suffer[ed] detriment from the unlawful act or omission of” the department, and the city as 

successor would be entitled to recover “compensation . . . in money” from the department 

for the detriment suffered. But plaintiffs are not seeking a money judgment against the 

department in this case, or even a writ commanding the department to pay money to the 

city as successor. The department’s role in this matter was to determine “the enforceable 
37

obligations and the amounts and funding sources of the enforceable obligations” 

(§ 34177, subd. (m)(1).) The department was not responsible for paying money to the 

city as successor, or even allocating money from the fund (or from any other source) to 

the city as successor; that was the role of the county auditor-controller. (See § 34183.) 

Thus, the writ relief to which plaintiffs are entitled here is a writ commanding the 

department to vacate its previous determinations denying the city as successor’s claims 

for money from the fund to repay the loan from the city pertaining to the parking and 

alley improvements at the packing district project and to fund the Avon/Dakota 

revitalization project and to issue new determinations approving those claims. Under 

such a writ, the department will not be ordered to pay money to the city as successor as 

compensation for detriment the city as successor suffered from an unlawful act or 

omission of the department. In other words, the department will not be ordered to pay the 

city as successor “damages,” and absent an award of damages, there can be no 

prejudgment interest under Civil Code section 3287.

As if that conclusion were not sufficient, the second issue is whether plaintiffs 

have shown that they have satisfied the three conditions that must be met for an award of 

prejudgment interest even when the underlying action is properly characterized as one for 

damages, and plaintiffs lose on that issue, too. For the same reason plaintiffs have not 

shown that the relief they are entitled to here is an award of damages from the 

department, they have not shown that the department owes them an “underlying 

monetary obligation” on which an award of prejudgment interest could be based. The 

department’s obligation was to approve the city as successor’s claims for money from the 

fund, not to pay the city as successor money. The former is not a monetary obligation 

that would support an award of prejudgment interest.

Moreover, plaintiffs have not shown that they had a right to recover a sum certain 

(or a sum capable of being made certain by calculation) that vested on a particular day. 

The only assertion they offer on this condition is that the dissolution law “requires the 
38

Auditor-Controller to make ROPS payments to the Successor Agency each June 1 and 

January 2.” But it is not clear to us that the city as successor necessarily had a right to 

receive all of the money it claimed on a particular date. Indeed, even in their petition for 

writ relief in this case, plaintiffs sought a writ commanding the department to issue a 

formal written determination and directive that, among other things, plaintiffs “are 

entitled to an allocation of moneys from the Trust Fund . . . to the extent . . .funds are 

available in the Trust Fund to pay the amounts . . . requested.” If the city as successor’s 

right to money from the fund on a particular day was dependent on the presence of 

money in that fund on that day, then we cannot say the city as successor had a right to 

recover that sum on that day, which is a prerequisite to an award of prejudgment interest.

For all of the foregoing reasons, we conclude plaintiffs are not entitled to 

prejudgment interest in this case.

IV

Relief

As we have concluded that the trial court erred in denying plaintiffs’ petition for 

writ relief challenging the department’s denial of the city as successor’s claims for money 

from the fund to repay the loan from the city pertaining to the parking and alley 

improvements at the packing district project and to fund the Avon/Dakota revitalization 

project, we must reverse the judgment. Because plaintiffs have not tried to suggest the 

terms of the writ to which they believe they are entitled, we will leave it to the trial court 

to determine in the first instance on remand, with the input of the parties as necessary, the 

appropriate terms of an order, judgment, and writ of mandate in this case. In that regard, 

it will be up to the trial court, with the input of the parties, to determine the proper 

resolution of plaintiffs’ complaint for declaratory and injunctive relief.

DISPOSITION

The judgment is reversed, and the case is remanded to the trial court with 

instructions to vacate its order denying plaintiffs’ petition for writ of mandate and 
39

dismissing plaintiffs’ complaint for declaratory and injunctive relief and to enter a new 

order granting plaintiffs’ writ petition consistent with this opinion and granting such other 

relief as the trial court may deem appropriate. Plaintiffs shall recover their costs on 

appeal. (Cal. Rules of Court, rule 8.278(a)(2).)

/s/ 

Robie, J.

We concur:

/s/ 

Blease, Acting P.J.

/s/ 

Duarte, J.