Court Opinion

ID: 4688256
Source: CourtListenerOpinion
Date Created: 2021-05-19 19:02:58.18187+00
Date Added: 2024-06-11T08:04:46.700820
License: Public Domain

Filed 5/19/21
                        CERTIFIED FOR PUBLICATION

                COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                   DIVISION ONE

                            STATE OF CALIFORNIA

SAN DIEGANS FOR OPEN                        D077652
GOVERNMENT,

        Plaintiff and Appellant,
                                            (Super. Ct. No. 37-2017-
        v.                                  00007369-CU-MC-CTL)

JULIO FONSECA,

        Defendant and Respondent.

        APPEAL from an order of the Superior Court of San Diego County,
Richard S. Whitney, Judge. Affirmed.

        Briggs Law Corporation, Cory J. Briggs and Janna M. Ferraro, for
Plaintiff and Appellant.
        Winet Patrick Gayer Creighton & Hanes and Randall L. Winet for
Defendant and Respondent.
        Plaintiff San Diegans for Open Government (SDOG) sued defendant
Julio Fonseca, the former superintendent of the San Ysidro School District
(District), alleging Fonseca caused the illegal disbursement of District funds
in a settlement between District and third party Enrique Gonzalez, a former
District employee. The court bifurcated the trial and, after an evidentiary
hearing, found SDOG lacked standing under newly amended1 Code of Civil

Procedure2 section 526a. As we explain, we conclude that SDOG did not
meet the taxpayer requirements for standing under section 526a. Affirmed.
                                BACKGROUND
      In March 2017, SDOG sued Fonseca including under Government Code

section 83143 for misappropriation of public funds, alleging, as relevant to
this appeal, standing under section 526a. Fonseca was the superintendent of
District from July 1, 2015 to September 1, 2017. Plaintiff’s complaint alleged
a single cause of action for declaratory, injunctive, and other equitable relief.
      The complaint alleged that Fonseca unlawfully caused the
disbursement of $113,433 by the San Diego County Office of Education, the
public agency responsible for accounting for District’s money and paying its
bills. The complaint further alleged that Fonseca authorized the payment to
Gonzalez in May 2016 pursuant to an alleged settlement agreement between

1     After SDOG filed the instant action in March 2017, the Legislature
amended Code of Civil Procedure section 526a to specify the types of tax
payments that are sufficient to establish taxpayer standing. (Stats. 2018, ch.
319 (Assem. Bill No. 2376), § 1, eff. Jan. 1, 2019.) The parties do not dispute
the amendment to this statute “applies prospectively to this case because the
change in law does not alter the legal consequences of defendant[’s] past
conduct, but instead only expands the scope of who may sue under the
statute.” (A.J. Fistes Corp. v. GDL Best Contractors, Inc. (2019) 38
Cal.App.5th 677, 682–683 (Fistes).)

2     Unless otherwise noted, all further statutory references are to the Code
of Civil Procedure.

3     Government Code section 8314 provides in relevant part: “(a) It is
unlawful for any elected state or local officer, including any state or local
appointee, employee, or consultant, to use or permit others to use public
resources for a campaign activity, or personal or other purposes which are not
authorized by law.”
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District and Gonzalez; and that the settlement arose after Gonzalez claimed
he was unlawfully terminated by District in January 2016, during the
probationary term of his employment, after he disclosed to a supervisor that
Fonseca was having a personal relationship with another District employee
who Fonseca had recommended the District hire.
      In its prayer for relief, SDOG sought a judgment declaring the payment
to Gonzalez be declared illegal, and Fonseca be held to repay to District all
public monies that he caused to be illegally disbursed. SDOG also sought to
recover its legal fees and other expenses incurred in this lawsuit.
      Fonseca in his April 2017 answer generally denied the material
allegations in the complaint and asserted 28 affirmative defenses. As
relevant to this appeal, Fonseca’s second affirmative defense alleged SDOG
lacked standing to maintain this action.
      Before trial, Fonseca moved for summary judgment including on the
ground SDOG lacked standing. The court denied the motion.
      In preparation for trial, the parties submitted multiple motions in
limine, including one by Fonseca seeking bifurcation of trial under section

10484 among other statutes to allow the court to first decide whether SDOG
had standing. In support of his argument plaintiff lacked standing, Fonseca
among other points argued that SDOG was not located within District’s
jurisdiction; that he was not a party to the settlement agreement, and any
taxpayer action by SDOG should have been against District and Gonzalez;

4      Subdivision (b) of section 1048 provides: “The court, in furtherance of
convenience or to avoid prejudice, or when separate trials will be conducive to
expedition and economy, may order a separate trial of any cause of action,
including a cause of action asserted in a cross-complaint, or of any separate
issue or of any number of causes of action or issues, preserving the right of
trial by jury required by the Constitution or a statute of this state or of the
United States.”
                                       3
that at the deposition of SDOG’s person most knowledgeable (PMK), chief
executive officer Pedro Quiroz, Jr. “could not provide evidence of standing,
and was instructed not to produce evidence or answer question[s] regarding
individual members” of SDOG and whether they had standing; that there
was no evidence SDOG “has paid taxes in the area of the local
agency—San Ysidro School District”; and that in any event there was no
private right of action under Government Code section 8314.
      SDOG in response argued it had “associational standing” under section
526a to maintain this lawsuit “because its members satisfy the taxpayer
requirements” of this statute. Specifically, SDOG argued that it may sue on
behalf of its members if it demonstrates that any of its members would have
standing to sue in their own right; that certain of its members were
“resident[s]” within the meaning of subdivision (d)(2) of section 526a,
discussed post; that section 526a should be liberally construed to enable a
taxpayer to challenge government action that might otherwise go
unchallenged; and that such “resident” members had, “within one year before
the commencement of the action, . . . paid[] a tax that funds the defendant
local agency.”
      SDOG relied on Fistes to support its argument that the payment of
taxes to the state, as opposed to the “local agency” (i.e., District), was
sufficient to establish taxpayer standing under section 526a. Fistes held a
plaintiff corporation’s allegation that it had paid state taxes was sufficient to
overcome a demurrer on the ground it lack standing under section 526a in an
action against the defendant school district because the state was the
primary source of funds for that defendant. (Fistes, supra, 38 Cal.App.5th at
pp. 692–693.)

                                         4
      The trial court granted Fonseca’s request to bifurcate, allowed the
parties to file supplemental briefs on the standing issue, and set the matter
for an evidentiary hearing. In addition to his previous arguments, Fonseca in
his supplemental brief argued that SDOG lacked standing because its
lawsuit was not seeking to “restrain[] and prevent[]” an illegal expenditure or
waste of funds as set forth in section 526a, but rather was a suit to “set aside
a settlement and recover attorney’s fees”; that before initiating suit, SDOG
failed to demand that District “cure the situation complained of and received
a refusal by the District to do so”; and that section 526a does not apply when
the lawsuit involves an abuse of discretion by a government body, as opposed
to a duty to act, and the settlement between District and Gonzalez was the
result of an exercise of discretion by District.
      In its supplemental brief, SDOG argued section 526a was not limited to
a judgment “restraining and preventing” an illegal expenditure or waste of
funds but also included an action to disgorge funds on an illegal contract.
SDOG also argued it was not required to make a demand on District prior to
initiating its lawsuit because such a demand would have been “useless and
unavailing” given that Fonseca was District’s superintendent at the time.
      Regarding the “resident” requirement in subdivision (a) of section 526a,
SDOG argued it had paid a tax within the meaning of the statute.
Specifically, SDOG board member Theresa Quiroz stated that “ ‘in the middle
of 2016’—which is within the 12 months preceding the commencement of this
lawsuit—SDOG held an open-government training session within the
geographic boundaries [of] the District. [Citation.] Mr. Quiroz [also stated]
that the training session was conducted at a restaurant where SDOG
purchased food for the training session. [Citation.] SDOG’s purchases at the

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restaurant were subject to sales tax. [Citation.] Nearly 4% of the sales tax is
levied by the State. See Rev. & Tax. Code § 6051 et seq.”
      SDOG also argued that certain of its members lived within District’s
jurisdiction; that the members had paid property, income, and sales tax to
the state for the last five years; and citing Fistes, that such payments were
sufficient for standing, even if the payments were not made directly to
District. (See Fistes, supra, 38 Cal.App.5th at pp. 692–693.) Finally, it
argued District was not a necessary party as an action under 526a may be
maintained against an officer, agent, or other person acting on behalf of a
local agency.
      The initial hearing on standing took place on February 11, 2020. Mr.
Quiroz testified he has been a board member of SDOG, “a watchdog
organization for governments,” for more than 10 years. As noted, he also had
been designated SDOG’s PMK. Mr. Quiroz stated SDOG uses a “P.O. box” for
mail because it has “no money”; and it holds meetings in restaurants
throughout San Diego and in its attorney’s law office. A person can become a
member of SDOG by filling out an application through SDOG’s website or on
“Twitter.” Membership in SDOG is free. The record shows the court
admitted three unredacted application forms from members of SDOG that
stated they lived within District’s jurisdiction.
      Mr. Quiroz also testified that when SDOG holds meetings it buys soft
drinks and food for its members, which are “subject to sales tax.” Mr. Quiroz
did not state when these purchases were made, however. He further testified
that he lived in the City of San Diego, and that over the last five years he has
paid income, property, and sales tax.
      On cross-examination, Mr. Quiroz initially stated SDOG had not held
any meetings within District’s jurisdiction within one year prior to the

                                        6
commencement of this action. He did not know if SDOG had ever paid taxes
in District’s jurisdiction. He admitted that he was not a resident of, nor did
he work or own property in, District. He also did not attend classes within
District’s boundaries.
      Mr. Quiroz also stated he had never met any of the three individuals
whose applications were admitted to show SDOG members lived within
District’s jurisdiction. He admitted a portion of these applications—where it
says at the bottom of the form whether the applicant was admitted or
denied—were not checked off or filled out, although he recalled the three
applicants were approved as members of SDOG. However, Mr. Quiroz did
not know when the three applications had been submitted to, and reviewed
by, SDOG.
      Mr. Quiroz recalled that certain SDOG members’ applications had been
redacted and that at his PMK deposition he was instructed by counsel of
SDOG not to disclose the applicants’ names on privacy grounds. Therefore,
Mr. Quiroz agreed that, at his deposition, he did not provide the names of any
SDOG member; that he did not have any independent knowledge whether
members whose applications had been redacted actually resided in the
jurisdiction of District; that he did not personally know any of these
particular members, when they became members or if they were still
members; and that he also had no knowledge whether any such members had
ever attended an SDOG meeting.
      Mr. Quiroz at the hearing was then asked about the details of this
lawsuit. He stated SDOG was not trying to restrain or prevent some act from
occurring in this lawsuit, as it instead was trying to recoup money that was
illegally allocated for a settlement. Mr. Quiroz testified, albeit incorrectly,
that SDOG had sued the parties who had entered into the settlement

                                        7
agreement. He later testified he did know whether District had been sued,
and was unsure who were the parties in the settlement, despite being the
PMK for, and CEO of, SDOG.
      On redirect, Mr. Quiroz was asked about a “boot camp” SDOG held in a
restaurant in 2016 somewhere near District headquarters. He replied, “I do
remember a boot camp in a restaurant, but I didn’t know if that was near
the . . . District.” Mr. Quiroz added to get to the “boot camp” he took one of
the last few exits before reaching the Mexican border, and SDOG paid the
restaurant “for some of the food that was made available” for the event.
However on recross, Mr. Quiroz confirmed he was unsure whether the
restaurant was located within District.
      Ms. Quiroz testified she has been on the board of SDOG for about 12
years. She recalled SDOG “in the middle of 2016” held a training session at a
restaurant within District’s jurisdiction. Ms. Quiroz also testified that
around February 17, 2017, when an article was disseminated about the
subject matter of this case, SDOG had held a board meeting and at that
meeting it had considered the three unredacted applications previously
admitted by the court. Specifically, she testified the three applications were
approved by the board of SDOG between February 17 and March 1, 2017, the
latter being the date this lawsuit was filed. However on further cross-
examination, Ms. Quiroz admitted the board did not consider and approve the
three applicants whose names had not been redacted until January 24, 2018,
several months after SDOG filed its lawsuit.
      The court issued its tentative ruling on February 14, 2020, finding
SDOG lacked standing under section 526a. The court found, “The statute
does not provide the basis for a plaintiff to challenge a completed settlement
between a government entity and a third party, because such a settlement is

                                        8
in the discretion of a governing board and it is not an action ‘restraining and
preventing an illegal expenditure.’ See San Bernardino County v. Superior
Court (2015) 239 Cal.App.4th 679, 686–688 (a case in which Mr. Briggs was
plaintiff’s counsel). This is particularly true when the plaintiff has sued a
defendant who is not even a party to the agreement.”
      The court also found SDOG failed to establish that either it, or one of
its members who qualifies as a “resident” within the meaning of subdivisions
(a) and (d)(2) of section 526a, paid a tax that funded District within one year
prior to the commencement of this action. The court noted it was
“astonished” by Mr. Quiroz’s “complete lack of knowledge and understanding
of the intricacies of this legal issue involving the lawsuit filed by his
organization.”
      The court cited in detail to Mr. Quiroz’s testimony including that he
had never met any of the three applicants who sought membership in SDOG
and that did not know when SDOG had admitted the three as members of the
organization, despite the fact Mr. Quiroz was the “CEO of SDOG.” The court
also found information that it considered to be part of the “key question” in
deciding standing was omitted as a direct result of the instruction by SDOG’s
counsel at Mr. Quiroz’s PMK deposition not to identify the names of SDOG’s
members whose applications had been redacted. The court also found Mr.
Quiroz’s testimony that SDOG held a “boot camp/lunch in the school district
at a restaurant that was within the confines of the school district” lacking in
detail and unpersuasive, noting the “best the witness could remember was
that the restaurant was located somewhere North of the Mexico Border in
South Bay—San Diego County.”
      Regarding the standing issue that was addressed in Fonseca’s
summary judgment motion, the court ruled it had then addressed that issue

                                         9
“in a very peripheral fashion” and it then had not taken into account the law
and evidence subsequently offered by the parties. The court thus found it
was “in a better position to address this issue fully on its merits and sua
sponte reverse[d] its previous ruling on standing which was in favor of the
plaintiff[].”
       Following its tentative ruling, the court on February 19, 2020 heard
argument for a second time on the standing issue. The following day, the
court affirmed its tentative after reading and reviewing “all cases cited in the
supplemental argument by counsel.” It ordered the case dismissed with
prejudice, finding the lack of standing was jurisdictional that could never be
waived by the parties and that could be ruled on “at any time before and
including trial.”
                                  DISCUSSION
       A. Section 526a
       “ ‘At its core, standing concerns a specific party’s interest in the
outcome of a lawsuit. [Citations.] We . . . require a party to show that he or
she is sufficiently interested as a prerequisite to deciding, on the merits,
whether a party’s challenge to legislative or executive action independently
has merit.’ (Weatherford [v. City of San Rafael (2017)] 2 Cal.5th [1241,] 1247;
accord, People ex rel. Becerra v. Superior Court (2018) 29 Cal.App.5th 486,
495 [‘ “Standing is a threshold issue necessary to maintain a cause of action,
and the burden to allege and establish standing lies with the plaintiff.” ’].)
Under section 367, ‘ “[o]nly a real party in interest has standing to prosecute
an action, except as otherwise provided by statute.” ’ (Summers v.
Colette (2019) 34 Cal.App.5th 361, 367; accord, Turner v. Seterus, Inc. (2018)
27 Cal.App.5th 516, 525.)” (Fistes, supra, 38 Cal.App.5th at p. 688.)

                                         10
      “[S]ection 526a permits a taxpayer to bring an action to restrain or
prevent an illegal expenditure of public money. No showing of special
damage to a particular taxpayer is required as a requisite for bringing a
taxpayer suit.” (Connerly v. State Personnel Bd. (2001) 92 Cal.App.4th 16,
29.) The primary purpose of section 526a is to “ ‘enable a large body of the
citizenry to challenge governmental action which would otherwise go
unchallenged in the courts because of the standing requirement.’ ” (Blair v.
Pitchess (1971) 5 Cal.3d 258, 267–268 (Blair).) To promote this remedial
purpose, section 526a is construed broadly. (Id. at p. 268.)
      Subdivision (a) of the statute provides: “An action to obtain a
judgment, restraining and preventing any illegal expenditure of, waste of, or
injury to, the estate, funds, or other property of a local agency, may be
maintained against any officer thereof, or any agent, or other person, acting
in its behalf, either by a resident therein, or by a corporation, who is assessed
for and is liable to pay, or, within one year before the commencement of the
action, has paid, a tax that funds the defendant local agency, including but
not limited to, the following: [¶] (1) An income tax. [¶] (2) A sales and use tax
or transaction and use tax initially paid by a consumer to a retailer. [¶] (3) A
property tax, including a property tax paid by a tenant or lessee to a landlord
or lessor pursuant to the terms of a written lease. (4) A business license tax.”
(§ 526a, subd. (a), italics added.)
      Subdivision (d)(1) of section 526a defines a “ ‘local agency’ ” to mean “a
city, town, county, or city and county, or a district, public authority, or any
other political subdivision in the state.” (Italics added.) Subdivision (d)(2) of
the statute defines “ ‘resident’ ” to mean “a person who lives, works, owns
property, or attends school in the jurisdiction of the defendant local agency.”
(§ 526a, subd. (d)(2), italics added.)

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      B. Guiding Principles
      Familiar principles guide our consideration. Our fundamental task is
to ascertain the Legislature’s intent and effectuate the law's purpose, giving
the statutory language its plain and commonsense meaning. (Garcia v.
McCutchen (1997) 16 Cal.4th 469, 476.) We examine that language in the
context of the entire statutory framework to discern its scope and purpose
and to harmonize the various parts of the enactment. (Coalition of Concerned
Communities, Inc. v. City of Los Angeles (2004) 34 Cal.4th 733, 737
(Coalition).) “If the language is clear, courts must generally follow its plain
meaning unless a literal interpretation would result in absurd consequences
the Legislature did not intend. If the statutory language permits more than
one reasonable interpretation, courts may consider other aids, such as the
statute’s purpose, legislative history, and public policy.” (Ibid.)
      “ ‘Both standing and the interpretation of statutes are questions of law
to which we typically apply a de novo standard of review.’ ” (California DUI
Lawyers Assn. v. Department of Motor Vehicles (2018) 20 Cal.App.5th 1247,
1258; accord, San Luis Rey Racing, Inc. v. California Horse Racing Bd. (2017)
15 Cal.App.5th 67, 73.) Here, the court dismissed the action for lack of
standing after making among other findings that neither SDOG nor a
“resident,” as defined in section 526a, subdivisions (a) and (d)(2), paid a tax
that funded District within one year before the commencement of the action.
In reviewing the court’s determination, we must “view the evidence in the
light most favorable to the judgment [or order of dismissal], and are bound by
the trial court’s findings that are supported by substantial evidence.” (People
ex rel. Dept. of Motor Vehicles v. Cars 4 Causes (2006) 139 Cal.App.4th 1006,
1012.)

                                        12
      Where, as here, a court finds a plaintiff has failed to carry his or her
burden of proof, the question is more properly stated not in terms of
substantial evidence, but rather “whether the appellant’s evidence was (1)
‘uncontradicted and unimpeached’ and (2) ‘of such a character and weight as
to leave no room for a judicial determination that it was insufficient to
support a finding.’ ” (In re I.W. (2009) 180 Cal.App.4th 1517, 1528 (I.W.)
[noting in a “case where the trier of fact has expressly or implicitly concluded
that the party with the burden of proof did not carry the burden and that
party appeals, it is misleading to characterize the failure-of-proof issue as
whether substantial evidence supports the judgment . . . because such a
characterization is conceptually one that allows an attack on (1) the evidence
supporting the party who had no burden of proof, and (2) the trier of fact’s
unassailable conclusion that the party with the burden did not prove one or
more elements of the case”], disapproved on another ground as stated
in Conservatorship of O.B. (2020) 9 Cal.5th 989, 1010, fn. 7.)
      C. Analysis
      We conclude section 526a, subdivisions (a) and (d)(2) are unambiguous.
(See Coalition, supra, 34 Cal.4th at p. 737.) For SDOG to have standing to

maintain this action, it was required to show either it, or one of its members5
who was a “resident” within the meaning of the statute, paid a tax that
funded District within one year of the commencement of the action.
      With respect to SDOG, the evidence it proffered at the standing
hearing does not compel as a matter of law a finding in its favor. (See I.W.,
supra, 180 Cal.App.4th at p. 1528.) To the contrary, the court found the

5     For purposes of this analysis, we will assume—without deciding—that
SDOG may assert “associational standing” if one or more of its members
qualify as a “resident” within the meaning of section 526a, as SDOG argues
on appeal.
                                       13
testimony of Mr. Quiroz, the CEO and PMK of SDOG, less than credible. It
was “astonished” by his lack of knowledge about this lawsuit and its parties,
and found the “best” he could do regarding a “boot camp” held by SDOG when
it allegedly paid taxes on food and soft drinks was to remember it took place
at some unnamed restaurant sometime in 2016, possibly within the
jurisdiction of District. (See Oldenburg v. Sears, Roebuck & Co. (1957) 152
Cal.App.2d 733, 742 [recognizing the time-honored principle that the trier of
fact is the exclusive judge of the credibility of the evidence and can reject
evidence as unworthy of credence].)
      The record also shows SDOG offered the testimony of Ms. Quiroz to
support its claim it paid taxes on food and soft drinks at the “boot camp.”
While she confirmed the “boot camp” was held within the jurisdiction of
District, she, like Mr. Quiroz, was unable to offer any details including when
it was held, where it was held, how much tax was paid, and who was in
attendance. SDOG also did not offer any receipt or other document to
support her testimony or that of Mr. Quiroz regarding SDOG’s alleged
payment of taxes. We conclude this evidence is woefully insufficient to
support a finding as a matter of law that prior to the commencement of this
action SDOG in 2016 itself paid taxes that funded District. (See I.W., supra,
180 Cal.App.4th at p. 1528.)
      We reach the same conclusion with respect to the members of SDOG
that it claims resided within District’s jurisdiction and who paid taxes within
one year of the commencement of this action. As to the three unredacted
applications that Ms. Quiroz stated were considered by the board of SDOG in
the weeks before it initiated this action, we note she was impeached on this
point during cross-examination when she admitted the applications actually

                                       14
were submitted on January 24, 2018, or months after SDOG commenced this
lawsuit.
      In addition, even if such testimony is credited, there was no evidence
that any of these three applicants/members paid any taxes within one year
before SDOG commenced this action. As such, we likewise conclude this
evidence is woefully insufficient to support a finding that, as a matter of law,
any one of the three applicants had standing under section 526a—in turn
giving SDOG “associational standing”—to pursue this action. (See I.W.,
supra, 180 Cal.App.4th at p. 1528.)
      Moreover, with respect to the redacted member applications that were
the subject of Mr. Quiroz’s PMK deposition, we find this evidence is also
insufficient to support standing. The record shows the court viewed the
redacted applications as “key” missing information in the case, as counsel of
SDOG instructed Mr. Quiroz not to reveal the names of such applicants who
presumably lived within District. In any event, there also is no evidence that
any of these members paid taxes as required under section 526a to support
SDOG’s standing to bring this action.
      Finally, with respect to Mr. Quiroz’s testimony that he paid income,
property, and sales tax to the state during the five years prior to the
commencement of this action, we note he does not qualify as a “resident”
within the meaning of subdivision (d)(2) of section 526a, inasmuch as he
testified he did not live, work, own property, or attend school within District’s

jurisdiction.6

6     In light of our decision, we deem it unnecessary to reach any of the
other issues raised by the parties.
                                        15
                               DISPOSITION
      The order dismissing SDOG’s action with prejudice for lack of standing
is affirmed. Defendant Fonseca to recover his costs of appeal.

                                                         BENKE, Acting P. J.

WE CONCUR:

HUFFMAN, J.

O'ROURKE, J.

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