Court Opinion

ID: 4017987
Source: CourtListenerOpinion
Date Created: 2016-07-21 18:02:58.001376+00
Date Added: 2024-06-11T14:34:35.460711
License: Public Domain

Filed 7/21/16 Kagan v. Victor Valley Community College Dist. CA4/2

                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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

           IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                   FOURTH APPELLATE DISTRICT

                                                 DIVISION TWO

MARSHALL KAGAN et al.,

         Plaintiffs and Appellants,                                     E065165

v.                                                                      (Super.Ct.No. CIVDS1501060)

VICTOR VALLEY COMMUNITY                                                 OPINION
COLLEGE DISTRICT et al.,

         Defendants and Respondents.

         APPEAL from the Superior Court of San Bernardino County. Gilbert G. Ochoa,

Judge. Affirmed.

         Marshall J. Kagan, in pro. per., and Larry E. Hoover, in pro. per., for Plaintiffs and

Appellants.

         Parker & Covert and Jonathan J. Mott for Defendants and Respondents.

                                                             I

                                                 INTRODUCTION

         This appeal involves a dispute about college bond proceeds. Plaintiffs Marshall J.

                                                             1
Kagan and Larry E. Hoover brought an action against the Victor Valley Community

College District (the college district) and three individuals.1 The trial court denied

plaintiffs’ petition for writ of mandate.

       On appeal, plaintiffs contend the trial court erred in ruling plaintiffs failed to

establish that bond proceeds were used for an illegal purpose; abused its discretion by not

allowing oral testimony; erred in its finding that plaintiffs did not submit new facts or law

at the motion for reconsideration; and erred in citing plaintiffs for contempt and awarding

$750 attorney’s fees as costs to defendants. We reject these contentions and affirm the

judgment.

                                              II

                   FACTUAL AND PROCEDURAL BACKGROUND

       Plaintiffs are members of a citizen’s oversight committee, charged with reviewing

bond expenditures. Acting in propria persona, plaintiffs filed a second amended petition

in August 2015. In their petition, they allege the college district has violated the

California Constitution by spending $53 million in bond proceeds on payroll and

operating expenses instead of capital improvements, particularly for the construction of

new classrooms.2 Plaintiffs further allege the college district has a deficit budget of $4

       1 Roger Wagner, the current college president, Peter Allan, a former college
president, and G.H. Javaheripour, a college official.

       2   California Constitution, Article 13A, Section 1, subdivision (b)(3), requires that
bonded indebtedness be used for “the construction, reconstruction, rehabilitation, or
replacement of school facilities, including the furnishing and equipping of school
facilities, or the acquisition or lease of real property for school facilities, . . .”

                                               2
million caused by faculty union contracts and resulting in the college being on probation

for accreditation. The first cause of action asserts that millions of bond dollars were

transferred to the general fund instead of being used for capital improvements. The

second cause of action alleges the three individual defendants are liable for misuse of the

bond money. Plaintiffs sought declaratory relief and an injunction. Plaintiffs did not

submit any legal argument or evidence supporting their claims.

       In response, defendants filed an answer, opposing points and authorities,

declarations, and exhibits, and evidentiary objections. Defendants’ submissions trace an

accounting of college district funds, beginning in 1994, to show that no construction

funds were used improperly.

The 1994 COPs

       Wagner’s declaration explains that, in 1994, the college district issued certificates

of participation (COPs) as a fundraising measure for campus construction projects. The

COPs are a form of borrowing by a public entity, secured by anticipated revenues. The

uses for the 1994 COPs were itemized in a private placement memorandum issued for the

1994 Capital Improvement Financing Project: “The Project comprises the acquisition

and construction of certain facilities or improvements to existing facilities on the campus

of Victor Valley Community College, . . .” When COPs are issued, a trust agreement is

created to hold the funds pending their use for the stated purposes. A trustee is appointed

in accordance with the trust agreement.

       According to the declaration of Michael Ogburn, a financial adviser, a net amount

of $23,712,808.12 was raised from the 1994 COPs, designated as the “Acquisition and

                                             3
Construction Fund” for the 1994 Project. The trustee then invested the Acquisition and

Construction Fund in a guaranteed investment contract referred to as Funding Agreement

No. 4464 with Sun Life Insurance Company (Sun Life GIC 4464). Sun Life GIC 4464

was a permitted investment under the 1994 Trust Agreement and Government Code

section 53601, subdivision (m). In that way, the Acquisition and Construction Fund

would generate interest while the 1994 Project was underway, as funds were gradually

withdrawn to pay for the 1994 Project. Sun Life GIC 4464 is not at issue in this case.

The Guaranteed Investment Contract

       The college district was able to obtain state school construction funds from the

state to reimburse its construction expenses on the 1994 Project. The state

reimbursement was deposited in the general fund.

       In accordance with the trust agreement, the college district entered into another

guaranteed investment contract, referred to as Funding Agreement No. 4463, with

Anchor National Life Insurance Company (Anchor GIC). The Anchor GIC was also a

permitted investment under the 1994 Trust Agreement and Government Code section

53601, subdivision (m). The source of funds for the Anchor GIC could be any funds of

the college district.

       Once the college district certified that it would use the COP proceeds to complete

the 1994 Project, the district was able to invest an amount equal to the amount of the

Acquisition and Construction Fund, with accrued interest, into the Anchor GIC from its

general fund. No funds from the 1994 COPs were used to fund the Anchor GIC, as those

funds went into the Sun Life GIC 4464 and were expended for construction on the 1994

                                             4
Project.

       Since the college district obtained state reimbursement for the cost of the 1994

Project, the district was able to take an equal amount from its general fund and invest that

in the Anchor GIC. Dr. Javaheripour’s memo to the Board of Trustees, dated May 16,

2011, summarizes the amounts placed in the Anchor GIC in 1994-97 and reiterates that

they were “‘from the reimbursement of the 1994 COP issuance into a Guaranteed

Investment Contract (GIC) at 7.75% rate.’” The 1994 COPs would be repaid later from

the 1997 COPs.

The 1996 COPs

       The college district planned a 1996 Capital Improvements Financing Project (the

1996 Project), to refund 1993 COPs and provide more construction funds for “the

remodeling of certain existing facilities into general purpose classrooms. The 1993

Project is expected to be completed in January 1998 and the 1996 Project is expected to

be completed by March 1998.”

The 1997 COPs and Measure JJ (2008 General Obligation Bonds)

       In 1997 the District issued its 1997 COPs, which were used to refund both the

1994 and 1996 COPs, which were still outstanding at that time. The 1997 COPs were

refunded in 2009 from Measure JJ, a general obligation bond measure passed in 2008.

The authorized purposes of the bond measure included: “Retire past funding utilized for

campus improvements, making more funding available for instruction and other

academic programs.”

       The 1997 COPs, which had refunded the 1994 and 1996 COPs, were in turn

                                             5
refunded by a portion of the proceeds of an issuance of general obligation bonds in 2009.

Since retirement of existing debt used for capital improvements (the COPs) was an

authorized purpose of the 2008 bond measure, the college district was able to use some of

the general obligation bond proceeds for that purpose.

       The Anchor GIC is still in effect and provides interest revenue to the college

district each year. The Anchor GIC, dating to 1994, was funded, as described above,

from state reimbursements that became general fund revenues, not from the 1994 COPs

proceeds, which were used as intended for construction. The 1994 COPs and 1996 COPs

were refunded by the 1997 COPs which were in turn refunded by proceeds of the 2009

general obligation bond sale.

The Trial Court’s Ruling

       At the hearing on September 18, 2015, the court explained to plaintiffs that they

could not testify because it was not an evidentiary hearing. Instead, the court heard

argument from both sides and took the matter under submission. The court issued its

detailed written ruling, denying the petition for writ of mandate. The court held,

“[p]etitioners have failed to cite specific facts and reasons for a belief that some illegal

expenditures or injury to the public is occurring or will occur. Instead Petitioners have

made general allegations claiming the bond proceeds are being used for payroll and

operating expenses. Petitioners have failed to establish the bond proceeds are being used

for an illegal purpose.”

       Plaintiffs filed a motion for reconsideration, including points and authorities and

declarations. Defendants filed opposition and evidentiary objections. After plaintiffs did

                                               6
not appear for the hearing on the reconsideration motion, the court denied the motion and

set a sanctions and/or contempt hearing against plaintiffs for violation of Code of Civil

Procedure section 1008, subdivision (a), for failure to allege new or different facts or law.

       Plaintiffs filed a response and defendants requested an award of attorney’s fees of

$4,960. The court issued its ruling awarding $750 in costs to defendants.

                                             III

                                       DISCUSSION

   A. Standard of Review

       A judgment or order of the lower court is presumed correct. All intendments and

prescriptions are indulged to support it on matters as to which the record is silent, and

error must be affirmatively shown. (Denham v. Superior Court (1970) 2 Cal.3d 557,

564.) Where findings were waived, it is implied in favor of the judgment that the court

found all the facts necessary to support it. (Stewart v. Langer (1935) 9 Cal.App.2d 60,

61.) The trial court’s resolution of disputed factual issues must be affirmed so long as

supported by substantial evidence. (Winograd v. American Broadcasting Co. (1998) 68

Cal.App.4th 624, 632.)

       For a writ of mandate to issue under Code of Civil Procedure section 1085, two

basic requirements are essential, namely, a clear, present and usually ministerial duty on

the part of respondent and a clear, present and beneficial right in plaintiff to performance

of that duty. (Fair v. Fountain Valley School District (1979) 90 Cal.App.3d 180, 186;

Kavanaugh v. West Sonoma County Union High School Dist. (2003) 29 Cal.4th 911,

916.) The writ will not compel the exercise of discretion on the part of a public official

                                              7
but it is available to correct an abuse of discretion. (Kong v. City of Hawaiian Gardens

Redevelopment Agency (2002) 101 Cal.App.4th 1317, 1325-1326; Fair, at p. 187.)

       The petitioner bears the burden of pleading and proving the facts on which the

claim for relief is based. (California Correctional Peace Officers Assn. v. State

Personnel Bd. (1995) 10 Cal.4th 1133, 1153-1154.) Pursuant to Education Code section

15284, subdivision (a)(1)-(3), plaintiffs had the burden to prove an expenditure of general

obligation bond funds in violation of the California Constitution.

B. The Trial Court’s Ruling

       Plaintiffs’ substantive argument is that bond proceeds were used for an illegal

purpose by the college district. They maintain that Kagan’s testimony about a 2003

Internal Revenue Service arbitrage agreement would have established the illegality.

However, plaintiffs did not explain the significance of the proffered testimony at the time

of the September hearing. Plaintiffs also failed to file a request for oral testimony at the

hearing, showing good cause, and describing the proposed testimony and the estimated

time required. (Cal. Rules of Court, rule 3.1306(b).) The court did not abuse its

discretion in denying the request to allow Kagan’s oral testimony because documentary

evidence is more important than the demeanor of witnesses in this kind of case involving

disputed accountings. (Eddy v. Temkin (1985) 167 Cal.App.3d 1115, 1121.) Plaintiffs’

citation to Elkins v. Superior Court (2007) 41 Cal.4th 1337, 1354, involving hearsay

evidence in family law proceedings, has no bearing on the issues here.

       Furthermore, as defendants explain, the 2003 agreement reflects the settlement of

a claim by the Internal Revenue Service for interest earned on the investment of residual

                                              8
funds from the proceeds of the 1994 and 1996 COPs. The residual funds were invested

in a capitalized interest account and applied to the payment of interest on the COPs.

Because the residual funds were not tax-exempt, a penalty had to be paid to the Internal

Revenue Service. The settlement was completed in 2003 using funds from a guaranteed

investment account, and had nothing to do with the 1997 COPs which were eventually

refunded by proceeds of the 2008 bond issue. Nothing about this information served to

show the college district’s misuse of construction funds.

B. Motion for Reconsideration

       In an effort to cure the deficiencies of their original submission, plaintiffs filed a

motion for reconsideration submitting several declarations and exhibits that had not been

presented before.3 These included a declaration of Xinyuan Ai, Kagan’s daughter, about

her dissatisfaction with classroom space; a declaration of Carl Tate about union disputes

when he was serving on the Board of Trustees between 1987 and 1999; and Kagan’s own

declaration.

       Apparently, plaintiffs do not understand that a motion for reconsideration is not a

second chance for a do-over. Instead, a motion for reconsideration must be based on

evidence “that the moving party could not, with reasonable diligence, have discovered or

produced . . . at the trial.” (New York Times Co. v. Superior Court (2005) 135

Cal.App.4th 206, 212-213.) Reconsideration cannot be granted based on claims the court

misinterpreted the law in its initial ruling. There must be both new facts or circumstances

       3 Some of the exhibits were copies of defendants’ exhibits and had already been
considered by the trial court.

                                               9
and some valid reason for not offering it earlier. (Gilberd v. AC Transit (1995) 32

Cal.App.4th 1494, 1500; Code Civ. Proc., § 1008.) A motion for reconsideration is

properly denied where based on evidence that could have been presented in connection

with the original motion. (Morris v. AGFA Corp. (2006) 144 Cal.App.4th 1452, 1460;

Hennigan v. White (2011) 199 Cal.App.4th 395, 406.)

       None of the material submitted by plaintiffs met the requirements for

reconsideration. There is no explanation about what new or different facts, circumstances

or law existed and could not, with reasonable diligence, have been presented at the

hearing on September 18, 2015. Plaintiffs offered no valid reason for not providing their

declarations and exhibits earlier at the original hearing. Therefore, the court did not

abuse its discretion in denying the motion for reconsideration. (Gilberd v. AC Transit,

supra, 32 Cal.App.4th at p. 1500.)

C. Contempt and Sanctions

       If a motion for reconsideration is found to lack evidentiary support or legal merit,

sanctions may be imposed against the moving party under Code of Civil Procedure

section 128.7. Code of Civil Procedure section 1008, subdivision (d), provides in

pertinent part: “A violation of this section may be punished as a contempt and with

sanctions as allowed by Section 128.7. . . .” In addition, a motion for reconsideration

justifies sanctions under Code of Civil Procedure section 128.5 if the underlying motion

was frivolous in the sense that it was totally devoid of merit, lacking any basis in

statutory or case law, or without any necessary evidence to support it. (Karwasky v.

Zachay (1983) 146 Cal.App.3d 679, 681.)

                                             10
       Defendants did not file any supporting material for the original hearing, instead

relying solely on their second amended petition. The reconsideration motion failed to

show “new or different facts, circumstances, or law.” (Code Civ. Proc., § 1008, subd.

(a).) Plaintiffs offered nothing in their motion for reconsideration that they could not

have submitted at the time of the hearing.

       The court awarded defendants only $750 as costs, less than 15 percent of the fee

request submitted. The court’s order is documented at page 19 of the register of actions.

The court did not abuse its discretion in awarding minimal attorney’s fees as costs for

responding to the meritless motion for reconsideration. (On v. Cow Hollow Properties

(1990) 222 Cal.App.3d 1568, 1576-1578.)

                                             IV

                                      DISPOSITION

       We affirm the judgment. In the interests of justice, the parties shall bear their own

costs on appeal.

       NOT TO BE PUBLISHED IN OFFICIAL REPORTS

                                                                CODRINGTON
                                                                                            J.

We concur:

HOLLENHORST
                   Acting P. J.

McKINSTER
                             J.

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