Court Opinion

ID: 4635886
Source: CourtListenerOpinion
Date Created: 2020-11-24 20:02:35.280509+00
Date Added: 2024-06-11T07:58:27.063015
License: Public Domain

Filed 11/24/20

                           CERTIFIED FOR PUBLICATION

             IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                             FIFTH APPELLATE DISTRICT

 STEPHEN K. DAVIS,
                                                                    F079811
         Plaintiff and Appellant,
                                                        (Super. Ct. No. 12CECG03718)
                 v.

 FRESNO UNIFIED SCHOOL DISTRICT et al.,                           OPINION
         Defendants and Respondents.

        APPEAL from a judgment of the Superior Court of Fresno County. Kimberly A.
Gaab, Judge.
        Carlin Law Group and Kevin R. Carlin for Plaintiff and Appellant.
        Lang Richert & Patch, Mark L. Creede and Stan D. Blyth for Defendant and
Respondent Fresno Unified School District.
        Whitney Thompson & Jeffcoach, Timothy L. Thompson and Mandy L. Jeffcoach
for Defendant and Respondent Harris Construction Company, Inc.
                                         -ooOoo-
        In 2012, plaintiff Stephen Davis sued the Fresno Unified School District (Fresno
Unified) and Harris Construction Co., Inc. (Contractor), alleging they entered into a
$36.7 million contract for the construction of a middle school in violation of California’s
competitive bidding requirements, the statutory and common law rules governing
conflicts of interest, and Education Code sections 17406 and 17417. Defendants filed a
demurrer and obtained a judgment of dismissal. In Davis v. Fresno Unified School Dist.
(2015) 237 Cal.App.4th 261 (Davis I), we reversed the judgment and remanded for
further proceedings. Based on our review of the four corners of the construction
agreements and resolution of Fresno Unified’s board, which were attached to Davis’s
pleadings, we concluded Davis properly alleged three grounds for why Education Code
section 17406’s exception to competitive bidding did not apply to the purported lease-
leaseback contracts. First, the contracts used were not genuine leases but were, in
substance, simply a traditional construction contract with progress payments. (Davis I,
supra, at pp. 286, 290.) Second, the contractual arrangement “did not include a financing
component for the construction of the project.” (Id. at p. 271.) Third, the contractual
arrangement “did not provide for Fresno Unified’s use of the newly built facilities
‘during the term of the lease’ as required by [Education Code] section 17406, subdivision
(a)(1).” (Ibid.) We also concluded California’s statutory and common law rules
governing conflicts of interest extended to corporate consultants and Davis alleged “facts
showing Contractor, as a consultant to Fresno Unified, participated in the making of a
contract in which Contractor subsequently became financially interested”—that is,
Contractor participated in creating the terms and specifications of the purported lease-
leaseback contracts and then became a party to those contracts. (Ibid.)
       After remand, the further proceedings included defendants’ motion for judgment
on the pleadings, which argued the lawsuit had become moot because the construction
was finished and the contracts terminated. The trial court agreed, concluding (1) the case
was a reverse validation action under Code of Civil Procedure section 863,1 which is an
in rem proceeding; (2) invalidating the contracts was no longer effective relief because
the contracts had been fully performed; and (3) disgorgement of monies paid to

1      All undesignated statutory references are to the Code of Civil Procedure.

                                             2.
Contractor was not effective relief because California law does not allow disgorgement in
an in rem proceeding. Davis appealed. As explained below, we reverse.
       First, in determining the type of action or actions Davis is pursuing, his pleading
must be given a liberal yet objectively reasonable interpretation. (§ 452.) The
interpretation must take account of both the allegations of fact and the relief requested.
Here, all of Davis’s causes of action, except for the cause of action labeled declaratory
relief, requested the disgorgement of funds paid under the illegal contracts.
Disgorgement is an in personam remedy available in a section 526a taxpayer’s action, but
is not available in an in rem reverse validation action. Consequently, we interpret
Davis’s pleading as containing both a reverse validation action under section 863 and a
taxpayer’s action under section 526a. (See Regus v. City of Baldwin Park (1977) 70
Cal.App.3d 968, 972 (Regus) [validation action and taxpayer’s action are not mutually
exclusive].) Thus, defendants and the trial court erroneously interpreted Davis’s lawsuit
as exclusively an in rem reverse validation action.
       Second, based on our interpretation of Davis’s pleading, we consider the legal
question of whether California’s validation statutes insulate the completed contracts
between Fresno Unified and Contractor from attack in a taxpayer’s action. The parties’
contentions present this issue as whether the purported lease-leaseback contracts fall
within the ambit of the validation statutes—more specifically, Government Code section
53511, subdivision (a), which refers to “an action to determine the validity of [a local
agency’s] bonds, warrants, contracts, obligations or evidences of indebtedness.” (Gov.
Code, § 53511, subd. (a), italics added.) The term “contracts” is narrowly construed to
encompass only contracts involving financing and financial obligations. In Davis I,
based on our review of the documents, we determined the purported lease-leaseback
contracts “did not include a financing component for the construction of the project.”
(Davis I, supra, 237 Cal.App.4th at p. 271.) As a result, we conclude the contracts do not
fall within the ambit of Government Code section 53511 and California’s validation

                                             3.
statutes. It follows that Davis may pursue a taxpayer’s action and seek an order to
“disgorge any profits earned … under the contract.” (San Diegans for Open Government
v. Public Facilities Financing Authority of City of San Diego (2019) 8 Cal.5th 733, 737
(San Diegans).) Disgorgement qualifies as effective relief and, therefore, the taxpayer’s
action part of this lawsuit is not moot.
       We therefore reverse the judgment and remand for further proceedings.
                                           FACTS
Consulting Relationship
       In February 2012, Fresno Unified and Contractor entered into a preconstruction
services agreement under which Contractor agreed to provide professional consulting
services to Fresno Unified relating to the construction of the Rutherford B. Gaston Sr.
Middle School located in southwest Fresno. A recital stated Contractor agreed to furnish
preliminary design review services under the agreement, including plan and design
review, value engineering, schedule preparation and other services for the project. The
agreement stated Contractor would act as an independent contractor.
       In May 2012, Fresno Unified and Contractor entered into a second, separate
preconstruction services agreement. The second agreement stated Contractor would
provide detailed plans, drawings and other documents for the ultimate fabrication and
erection of steel members to be used in the construction of the project. Davis contends
the second preconstruction services agreement was approved by Fresno Unified’s
governing board. The consulting relationship established by the two preconstruction
service agreements is the basis for Davis’s contention that Contractor had a relationship
with Fresno Unified similar to an employee or officer and, therefore, Contractor was
subject to the conflict of interest rules that barred it from having a financial interest in a
contract that it participated in making.

                                               4.
Construction Agreements
       In September 2012, Fresno Unified’s governing board adopted a resolution
authorizing the execution of contracts under which Contractor would build the project
described as the Rutherford B. Gaston Sr. Middle School, Phase II. The resolution stated
the construction would be “a lease-leaseback project” in which (1) Fresno Unified would
lease the project site, which it owned, to the Contractor, (2) Contractor would build the
project on the site, and (3) Contractor would lease the improvements and the site back to
Fresno Unified. The resolution stated it was in the best interest of Fresno Unified to
construct the project through a lease and leaseback of the site pursuant to Education Code
section 17406, which allows such arrangements without advertising for bids. The
contracts between Fresno Unified and Contractor were a site lease (Site Lease) and a
facilities lease (Facilities Lease; collectively, the Construction Contracts).2 The Site
Lease and the Facilities Lease were executed by Ruth F. Quinto, the deputy
superintendent and chief financial officer of Fresno Unified, and Timothy J. Marsh, the
president of Contractor.   3

Site Lease
       The Site Lease provided Fresno Unified would lease the project site to Contractor
for $1.00 in rent for a period coinciding with the term of the Facilities Lease. The Site
Lease also stated that title to all improvements made on the site during its term “shall vest

2       In Davis I, we referred to the Site Lease and the Facilities Lease collectively as the
“Lease-leaseback Contracts.” (Davis I, supra, 237 Cal.App.4th at p. 271.) Here, we use
the term “Construction Contracts” because it accurately describes the true nature of the
arrangement established by the provisions in those documents. (See Park etc. Co. v.
White River L. Co. (1894) 101 Cal. 37, 39 [calling a paper a lease does not establish it is a
lease; “the contents of the paper determine its true character”].)
3      The resolution, Site Lease and Facilities Lease were attached as exhibits A, B, and
C, respectively, to Davis’s initial complaint and his first amended complaint (FAC),
which is the operative pleading in this appeal.

                                              5.
subject to the terms of the Facilities Lease.” The Site Lease was the “lease” portion of
the purported lease-leaseback arrangement.
Facilities Lease
       The Facilities Lease identified Contractor as the sublessor and Fresno Unified as
the sublessee. The Facilities Lease is the “leaseback” portion of the purported lease-
leaseback arrangement. Under the Facilities Lease, Contractor agreed to build the project
on the site in accordance with the plans and specifications approved by Fresno Unified
and the “Construction Provisions” for the project contained in exhibit D to the Facilities
Lease. The Construction Provisions were a detailed, 55-page construction agreement in
which Contractor agreed to perform all work and provide and pay for all materials, labor,
tools, equipment and utilities necessary for the proper execution and completion of the
project. The guaranteed maximum price of the project was $36,702,876. The time
allowed for Contractor to complete the project was 595 days from the notice to proceed.
       The Facilities Lease included a provision describing Fresno Unified’s obligation to
pay by stating “Lease Payments shall be made for the Site and portions of the Project as
construction of the Project is completed. All Lease Payments will be subject to and not
exceed the Guaranteed Maximum Price set forth in the Construction Provisions.” The
“Schedule of Lease Payments” attached to the Facilities Lease referred to the “payments
for the Project as set forth in the Construction Provisions.” In turn, the Construction
Provisions outlined monthly progress payments for construction services rendered each
month, up to 95 percent of the total value for the work performed, with a 5 percent
retention pending acceptance of the project and recordation of a notice of completion.
Final payment for all the work was to be made within 35 days after Fresno Unified
recorded the notice of completion.
       Despite the fact that the funds paid by Fresno Unified to Contractor under the
Facilities Lease were based solely on the construction services performed by Contractor,
the Facilities Lease stated the lease payments constituted “the total rent[] for the Project”

                                              6.
and were paid “for and in consideration of the right to use and occupy the Project during
each month .…”4 The Facilities Lease also stated the parties “have agreed and
determined that the total Lease Payments … do not exceed the fair rental value of the
Project.”
       The Facilities Lease characterized Fresno Unified’s obligation to make the lease
payments as “a current expense” of Fresno Unified. It stated the lease payment “shall not
in any way be construed to be a debt of [Fresno Unified] in contravention of any
applicable constitutional or statutory limitation or requirement concerning the creation of
indebtedness of [Fresno Unified] .… Lease Payments due hereunder shall be payable
only from current funds which are budgeted and appropriated, or otherwise legally
available, for the purpose of paying Lease Payments … as consideration for use of the
Site during the fiscal year of [Fresno Unified] for which such funds were budgeted and
appropriated .…”
       The Facilities Lease addressed Fresno Unified’s source of funding in a paragraph
labeled “Appropriation.” The provision stated Fresno Unified “has appropriated that
portion of the Guaranteed Maximum Price to be earned during the current fiscal year
from [Fresno Unified’s] current fiscal year and/or State funds to be received during
[Fresno Unified’s] current fiscal year, and has segregated or will segregate such funds in
a separate account to be utilized solely for Lease Payments. [Fresno Unified] will do so

4       It appears Fresno Unified did not actually exercise this right to use and occupy the
construction site during each (or any) month of the purported lease. In Davis I, we noted
the FAC alleged “that Fresno Unified did not occupy or use the newly constructed
facilities during the term of the Facilities Lease” (Davis I, supra, 237 Cal.App.4th at p.
272) and, consistent with Davis’s allegations of fact, Fresno Unified’s opening brief in
that appeal “acknowledged the Facilities Lease was in effect only during the construction
of the school facilities and its counsel confirmed during oral argument that a phased
completion of the project was not used in this case.” (Ibid.) Thus, Davis’s allegations
about use and occupancy were not contradicted by the brief or the statements of its
counsel. (Ibid.)

                                             7.
for each fiscal year during which the Project is to be constructed or Lease Payments are
to be made.”
       During the term of the Facilities Lease, Fresno Unified held title to the land and
obtained title to the improvements “as construction progresse[d] and corresponding Lease
Payments [we]re made to [Contractor].” The Facilities Lease stated it terminated on the
completion of the project and the payment of all lease payments due the Contractor.
After the lease payments were made and the lease term ended, all remaining rights, title
and interest of the Contractor, if any, to the project and the site were vested in Fresno
Unified.
       On December 4, 2014, a notice of completion was recorded by the Fresno County
Recorder. The notice of completion was executed under penalty of perjury by the
purchasing manager of Fresno Unified. It stated the “work of improvement on the
property hereinafter described was completed on November 13, 2014” and described the
work as the construction of the middle school.
                                     PROCEEDINGS
       In November 2012, Davis initiated this litigation by filing a verified complaint
with two causes of action. The first cause of action was labeled “Reverse Validation
Action Against Defendants” Fresno Unified and Contractor. The second cause of action
was labeled “Taxpayer Action for Recovery of Funds Paid by [Fresno Unified] to
[Contractor] on Facilities Lease.” The complaint’s prayer for relief was divided by cause
of action. On the reverse validation action, Davis requested findings that (1) the action
was properly brought under section 863 for judicial invalidation of proceedings leading
up to and including the approval, execution and delivery of the Site Lease and Facilities
Lease and (2) the Site Lease and Facilities Leases were illegal, void and unenforceable.
On the taxpayer action, Davis requested (1) a preliminary injunction and a permanent
injunction enjoining Fresno Unified from paying any further monies to Contractor on any

                                             8.
agreement relating to the project and (2) an order directing Contractor to pay back to
Fresno Unified all monies received under any agreement relating to the project.
       In March 2013, Davis filed his FAC, which listed Fresno Unified, Contractor, and
all persons interested in the matter of the Construction Contracts as defendants. The
FAC’s causes of action are (1) failure to comply with the requirements of Public Contract
Code section 20110 et seq., which applied because the Construction Contracts did not
create the type of lease-leaseback arrangement authorized in Education Code sections
17400 through 17429, (2) breach of fiduciary duty, (3) failure to comply with the
competitive bidding requirements of Education Code section 17417 that applied because
the criteria for the exception outlined in Education Code section 17406 were not satisfied,
(4) statutory and common law conflicts of interest, (5) improper use of Education Code
section 17400 et seq., (6) improper delegation of discretion, and (7) declaratory relief.
Unlike the original complaint, the FAC did not use the term “taxpayer action,” instead
Davis referred to himself throughout as “TAXPAYER.” Also, the labels for each of the
first six causes of action in the FAC echoed the original complaint’s label for the
taxpayer action by beginning: “Recovery of Funds Paid by [Fresno Unified] to
CONTRACTOR .…”5
       Paragraph three of the FAC alleged Davis owned real property within the school
district and paid taxes on that property. It also alleged Davis’s claims did not seek money
or damages from any local public entity and, instead, the action was brought solely in the
public interest to recover Fresno Unified funds paid to others. Paragraph eight of the
FAC alleged the “action is brought in this court as a special in rem proceeding for judicial

5      California Rules of Court, rule 2.112 provides that each separately stated cause of
action must specifically state (1) its number, (2) its nature, (3) the party asserting it if
there are multiple plaintiffs, and (4) the party or parties to whom it is directed. An
example of appropriate labeling is “first cause of action for fraud by plaintiff Jones
against defendant Smith.”

                                             9.
examination and invalidation of the contracts referenced below relative to the Project.”
Paragraph nine of the FAC alleged Fresno Unified did not file an action to validate the
contracts related to the project and, therefore, the action was properly brought by Davis
under section 863.
       Paragraph 15 of the FAC alleges the Construction Contracts were not awarded as
required by law and, therefore, were ultra vires, illegal, void and unenforceable, requiring
monies paid to the Contractor be repaid to Fresno Unified. More specifically, the FAC’s
first and third causes of action allege the Construction Contracts were awarded to
Contractor in violation of the competitive bidding requirements for public construction
contracts because the contracts did not satisfy the criteria for Education Code section
17406’s exception to the competitive bidding requirements.
       In addition, the FAC’s fourth cause of action alleges common law conflict of
interest principles and Government Code section 1090 precluded Contractor from being
awarded the Construction Contracts because Contractor previously acted as a
professional consultant to Fresno Unified relative to the project and was involved in
designing and developing the plans and specifications for the project. The fourth cause
of action further alleges the preconstruction services agreement created a conflict of
interest for Contractor vis-à-vis subsequent contracts involving the project and,
consequently, the Construction Contracts between Fresno Unified and Contractor were
ultra vires, void and unenforceable, requiring all money paid thereunder to be returned by
Contractor to Fresno Unified.
       The final paragraph of each of the FAC’s first six causes of action address the
consequences of the violation or breach asserted by reiterating part of the allegations in
paragraph 15. In particular, those paragraphs state the Construction Contracts are ultra
vires, illegal, void and unenforceable under California law and all monies paid by Fresno
Unified under the contracts must be paid back or returned by Contractor.

                                            10.
       The FAC’s prayer for relief asked the trial court to (1) authorize publication of the
summons as the method for obtaining jurisdiction over all interested parties, (2) find the
“action was properly brought under CCP § 863 et seq., for judicial invalidation of
proceedings leading up to and including the approval, execution and delivery of the Site
Lease and Facilities Lease,” (3) declare the Site Lease and Facilities Lease ultra vires,
illegal, void or unenforceable, and (4) order Contractor to pay back to Fresno Unified all
monies received under the Site Lease and Facilities Lease. Davis also requested
reasonable attorney fees under section 1021.5 and costs.
First Appeal
       In 2013, Fresno Unified and Contractor filed separate, similar demurrers to the
FAC.6 (Davis I, supra, 237 Cal.App.4th at p. 274.) The trial court sustained the
demurrers with leave to amend, Davis chose not to amend, and judgment was entered in
favor of Fresno Unified and Contractor. Davis appealed. (Ibid.)
       In June 2015, we reversed the judgment and remanded with instructions to
overrule the demurrer except as to the second cause of action (breach of fiduciary duty),
the fifth cause of action (improper use of lease-leaseback arrangement when sufficient
funds are available), and the conflict of interest claim based on the Political Reform Act
of 1974, Government Code section 81000 et seq. (Davis I, supra, 237 Cal.App.4th at p.
302.) The FAC’s counts or legal theories that survived the demurrer alleged (1) other
violations of California’s competitive bidding laws and Education Code sections 17406
and 17417 (first and third causes of action) and (2) conflicts of interest under

6        Filing a demurrer or answer without raising a jurisdictional objection constitutes a
general appearance. (See Fireman’s Fund Ins. Co. v. Sparks Construction, Inc. (2004)
114 Cal.App.4th 1135, 1145.) “ ‘A general appearance operates as a consent to
jurisdiction of the person, dispensing with the requirement of service of process, and
curing defects in service.’ ” (Ibid.; Code Civ. Proc., § 410.50, subd. (a).) Here,
Contractor’s general appearance is one basis for concluding the trial court had personal
(i.e., in personam) jurisdiction over Contractor.

                                             11.
Government Code section 1090 and common law principles (fourth cause of action). In
August 2015, after the Supreme Court denied review, this court issued a remittitur to the
trial court.
Proceedings on Remand
        In October 2015, Fresno Unified and Contractor filed answers to the FAC that
contained general denials and asserted many affirmative defenses, including mootness.
        In April 2016, Fresno Unified filed a motion for judgment on the pleadings on the
grounds Davis lacked standing to pursue the claims. In May 2016, the trial court denied
the motion.
        In August 2016, Davis filed a motion for summary adjudication of his statutory
and common law conflict of interest claims against Contractor. In February 2017, the
trial court denied Davis’s motion for summary adjudication, concluding there was at least
a triable issue of fact regarding whether Contractor was an officer or employee for
purposes of Government Code section 1090. Davis filed a petition for writ of mandate
with this court seeking an order directing the trial court to grant the motion for summary
adjudication. We summarily denied the petition.
Judgment on the Pleadings
        In May 2019, Fresno Unified filed another motion for judgment on the pleadings.
This motion argued Davis’s FAC was subject to California validation statutes and his
reverse validation action was moot because the Construction Contracts had been fully
performed. Contractor joined in Fresno Unified’s motion. The motion was supported by
a request for judicial notice of the notice of completion recorded on December 4, 2014,
by the Fresno County Recorder, which notice stated the construction of the middle school
was completed on November 13, 2014.
        Davis’s opposition argued the trial “court can still grant Taxpayer his primary
relief requested (disgorgement from [Contractor] to [Fresno Unified]) so this case is not
moot.” (Fn. omitted.) Davis argued his taxpayer claims were not moot because (1)

                                             12.
conflict of interest claims are not subject to the validation statutes, (2) the contracts at
issue were not the kind that are subject to validation, and (3) effective relief in the form
of Contractor’s disgorgement of monies received from Fresno Unified was available
despite the contracts being fully performed. Davis characterized the FAC’s gravamen7 as
“disgorgement back to [Fresno Unified] of all funds paid by [Fresno Unified] to
[Contractor] under the challenged contracts based on breach of the legal duties asserted in
each cause of action.” (Italics added.) This argument is supported by, among other
things, the statement in paragraph three of the FAC that “this action is brought solely in
the public interest to recover to [Fresno Unified] funds it has paid to others under the
contracts referenced below.” (Italics added.)
       In June 2019, the trial court heard argument on defendants’ motion for judgment
on the pleadings. On July 3, 2019, the court issued a written order granting the motion as
to both defendants without leave to amend. The court later filed a judgment stating
Davis’s FAC was dismissed in its entirety and awarding allowable costs to Fresno
Unified and Contractor. Davis appealed.
                                        DISCUSSION
I.     BASIC LEGAL PRINCIPLES
       A.     Judgment on the Pleadings
              1.      Statutory Provisions
       Section 438 allows defendants who have filed an answer to the complaint to
“move for judgment on the pleadings.” (§ 438, subds. (b)(1), (f)(2).) The two grounds a
defendant may raise are that (1) “[t]he court has no jurisdiction of the subject of the cause

7      Black’s Law Dictionary (8th ed. 2004) defines “gravamen” as “[t]he substantial
point or essence of a claim, grievance, or complaint.” (Id. at p. 721.) In effect, Davis is
arguing that his FAC’s point of substance is the recovery of funds paid because a
judgment stating a contract is invalid has less substance or impact than a judgment
directing the disgorgement of funds.

                                              13.
of action alleged in the complaint” or (2) “[t]he complaint does not state facts sufficient
to constitute a cause of action against that defendant.” (§ 438, subd. (c)(1)(B).)8 These
grounds “shall appear on the face of the challenged pleading or from any matter of which
the court is required to take judicial notice.” (§ 438, subd. (d).) If the motion is based on
a matter that may be judicially noticed under Evidence Code sections 452 or 453, “the
matter shall be specified in the notice of motion, or in the supporting points and
authorities,” unless the court permits otherwise. (§ 438, subd. (d); see Cloud v. Northrop
Grumman Corp. (1998) 67 Cal.App.4th 995, 999 [appellate court’s review of a judgment
on the pleadings is limited to factual allegations in pleading and any matter for which
judicial notice may be taken].) For purposes of this appeal, we treat defendants’
mootness argument as a challenge to whether Davis has alleged sufficient facts9 to
constitute a cause of action (§ 438, subd. (c)(1)(B)(ii)), rather than a challenge to the trial
court’s subject matter jurisdiction (§ 438, subd. (c)(1)(B)(i)).
       When determining whether a complaint states facts sufficient to constitute a cause
of action, trial and appellate courts apply the following principle: “In the construction of
a pleading, for the purpose of determining its effect, its allegations must be liberally
construed, with a view to substantial justice between the parties.” (§ 452.) If a motion
for judgment on the pleadings is granted as to the entire complaint without leave to

8      The quoted text is identical to that appearing in section 430.10, subdivisions (a)
and (e) except the quoted text refers to the “complaint” instead of the “pleading.” Section
430.10 sets forth the grounds that may be raised in a demurrer.
9      Davis’s allegations include the contents of the Construction Contracts and related
board resolution, which were attached to the FAC as exhibits. A motion for judgment on
the pleadings, like a general demurrer, admits the contents of a contract attached to the
complaint as an exhibit. (See Martinez v. Socoma Companies Inc. (1974) 11 Cal.3d 394,
400 [general demurrer admits the contents of an instrument attached to the complaint].)
Our interpretation of the Construction Contracts in Davis I did not consider parol
evidence or the more basic question of whether parol evidence was admissible for use in
construing those contracts. (See Winet v. Price (1992) 4 Cal.App.4th 1159, 1165–1166
[admissibility and use of parol evidence in contract interpretation].)

                                              14.
amend, “then judgment shall be entered forthwith in accordance with the motion.”
(§ 438, subd. (h)(3).)
              2.      Standard of Review
       Some of the foregoing statutory provisions are reflected in our Supreme Court’s
statements about appellate review of an order granting a motion for judgment on the
pleadings:

       “[W]e treat the properly pleaded allegations of [the] complaint as true, and
       also consider those matters subject to judicial notice. [Citations.]
       ‘Moreover, the allegations must be liberally construed with a view to
       attaining substantial justice among the parties.’ [Citation.] ‘Our primary
       task is to determine whether the facts alleged provide the basis for a cause
       of action against defendants under any theory.’ [Citation.]” (Alliance
       Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1232.)
       When liberally construing a pleading, courts give its allegations an objectively
reasonable interpretation, reading it as a whole and its parts in their context. (Blank v.
Kirwan (1985) 39 Cal.3d 311, 318.) When a motion for judgment on the pleadings is
granted for failing to state facts sufficient to constitute a legally cognizable claim,
appellate courts apply the same rules that govern the review of orders sustaining a general
demurrer. (Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395, 1401.)
Thus, appellate courts are not bound by the trial court’s interpretation of the pleading but
are required to render their independent judgment on the legal question of whether a
cause of action has been stated. (Hoffman v. State Farm Fire & Casualty Co. (1993) 16
Cal.App.4th 184, 189; see Cellular Plus, Inc. v. Superior Court (1993) 14 Cal.App.4th
1224, 1231 [sufficiency of allegations is a question of law].)
       B.     Mootness Doctrine
       Generally, California courts decide only justiciable issues. (Wilson & Wilson v.
City Council of Redwood City (2011) 191 Cal.App.4th 1559, 1573 (Wilson).)
Justiciability means the questions litigated are based on an actual controversy. (Ibid.)
Unripeness and mootness describe situations where there is no justiciable controversy.

                                              15.
(Ibid.) Unripe cases are those in which an actual dispute or controversy has yet to come
into existence. (Ibid.) In comparison, mootness occurs when an actual controversy that
once was ripe no longer exists due to a change in circumstances. (Ibid.)
       As the parties recognize, the test for determining whether a case is moot is
“whether the court can grant the plaintiff any effectual relief.” (Wilson, supra, 191
Cal.App.4th at p. 1574.) As a general rule, when events render a case moot, the trial or
appellate court should dismiss it. (Ibid.; see Connerly v. Schwarzenegger (2007) 146
Cal.App.4th 739, 752 [if a controversy is not justiciable, the proper remedy is to dismiss
rather than rendering judgment for one side or the other].)
       C.     Validation Actions
              1.     Action by Public Agency
       A validation action “is a lawsuit filed and prosecuted for the purpose of securing a
judgment determining the validity of a particular … governmental decision or act.” (Blue
v. City of Los Angeles (2006) 137 Cal.App.4th 1131, 1135, fn. 4.) Validation actions are
governed by the chapter in the Code of Civil Procedure that contains sections 860
through 870.5. Section 860 provides:

       “A public agency may upon the existence of any matter which under any
       other law is authorized to be determined all to this chapter, and for 60 days
       thereafter, bring an action in the superior court … to determine the validity
       of such matter. The action shall be in the nature of a proceeding in rem.”
       Public agencies are not obligated to bring validation actions. Instead, an agency
may choose to do nothing and allow the agency decision or act to be validated by
operation of law based on the passage of time. (California Commerce Casino, Inc. v.
Schwarzenegger (2007) 146 Cal.App.4th 1406, 1420, fn. 12.) Section 869 provides that
“[n]o contest … of any thing or matter under this chapter shall be made other than within
the time and the manner herein specified.”

                                             16.
              2.     Reverse Validation by Interested Person
       Prior to the expiration of the 60-day period, an “interested person” may initiate a
proceeding to determine the validity of a particular agency decision or act. (§ 863.)
Generally, such a proceeding is called a “ ‘reverse validation action.’ ” (Planning &
Conservation League v. Department of Water Resources (2000) 83 Cal.App.4th 892, 922;
cf. Santa Clarita Organization for Planning & Environment v. Castaic Lake Water
Agency (2016) 1 Cal.App.5th 1084, 1096 [action under § 863 is “a so-called ‘inverse’ or
‘reverse’ validation proceeding”] (Castaic Lake).) Section 863 states: “If no proceedings
have been brought by the public agency pursuant to this chapter, any interested person
may bring an action within the time and in the court specified by Section 860 to
determine the validity of such matter.”10 When the 60-day period passes without an
interested person bringing an action under section 863, the agency’s decision becomes
immune from attack whether it is legally valid or not. (City of Ontario v. Superior Court
(1970) 2 Cal.3d 335, 341–342 (Ontario).)
              3.     Statutory Purpose
       The validation statutes and the 60-day limitation period seek (1) to limit the extent
to which litigation may delay and thus impair a public agency’s ability to operate
financially and (2) to remove uncertainty adversely impacting the agency’s access to
credit. (Friedland v. City of Long Beach (1998) 62 Cal.App.4th 835, 843 (Friedland).)
Litigation, either pending or forthcoming, affects the marketability of public bonds and

10      The remainder of section 863 states: “The public agency shall be a defendant and
shall be served with the summons and complaint in the action in the manner provided by
law for the service of a summons in a civil action. In any such action the summons shall
be in the form prescribed in Section 861.1 except that in addition to being directed to ‘all
persons interested in the matter of [specifying the matter],’ it shall also be directed to the
public agency. If the interested person bringing such action fails to complete the
publication and such other notice as may be prescribed by the court in accordance with
Section 861 and to file proof thereof in the action within 60 days from the filing of his
complaint, the action shall be forthwith dismissed on the motion of the public agency
unless good cause for such failure is shown by the interested person.”

                                             17.
the agency’s ability to obtain other types of third-party financing. (Ibid.) The inability to
obtain financing or the higher cost of that financing may impair the agency’s ability to
fulfill its responsibilities. (Ibid.)
       Based on these concerns with delays and uncertainty, a central theme in the
validation procedures is the speedy determination of the validity of the public agency’s
decision or act in a single dispositive final judgment. (Friedland, supra, 62 Cal.App.4th
at p. 843.) Accordingly, the validation statutes are construed to further their purpose—
that is, promptly settling all questions about the validity of the agency’s decision or act.
(Ibid.; see § 870 [conclusive and binding effect of a judgment in a validation action].)
               4.      Scope of Validation Actions
       Not all acts or transactions of a public agency are subject to validation. (Kaatz v.
City of Seaside (2006) 143 Cal.App.4th 13, 19 (Kaatz).) The language in section 860
does not specifically identify the matters subject to validation actions. Instead, section
860 refers to “any matter which under any other law is authorized to be determined
pursuant to this chapter.” Based on this reference to “any other law,” California courts
examine other statutes (and cases interpreting those statutes) to determine the scope of
agency decisions and acts that are subject to validation under the validation statute.
California has over 200 statutes that provide validation proceedings, most of which are
found in the Government Code and the Water Code. (Kaatz, supra, at p. 31, fn. 19.)
       The scope of the validation statutes is further defined by the text referring to a
validation action as an in rem proceeding. As an in rem proceeding, a validation action
operates against the property in question and, therefore, is distinct from a judgment, order
or injunction that operates against persons. (Friedland, supra, 62 Cal.App.4th at p. 843.)
       For purposes of this appeal, “any other law” refers to Government Code section
53511, subdivision (a), which states in full: “A local agency may bring an action to
determine the validity of its bonds, warrants, contracts, obligations or evidences of

                                             18.
indebtedness pursuant to Chapter 9 (commencing with Section 860) of Title 10 of Part 2
of the Code of Civil Procedure.” (Italics added.) Application of this text raises the
question of whether the Construction Contracts qualify as “contracts” for purposes of
Government Code section 53511, subdivision (a). Davis contends they do not.
Defendants argue the contrary. The narrow interpretation given to the term “contracts”
and how that interpretation applies to the Construction Contracts is discussed in part
III.B.2., post.
                  5.    Relief Available in Validation Action
       California’s test for mootness asks whether the court can grant any effectual relief.
(Wilson, supra, 191 Cal.App.4th at p. 1574.) Consequently, we identify the relief
available in a validation action. A typical validation proceeding “seeks a declaratory
judgment that the bonds, assessments, etc., of the agency are or are not valid.” (Ontario,
supra, 2 Cal.3d at p. 344.) Injunctive relief or an order compelling restitution to the
public agency of all money unlawfully paid are not authorized by the validation statutes.
(Id. at pp. 344–345.) Accordingly, regardless of whether a validation action is brought by
a public agency or an interested person, the relief available is limited to a judgment
declaring the subject matter of the action is valid or invalid.
       D.         Taxpayer’s Action
       “[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. (Blair, supra, at p. 268.) The breadth of taxpayer’s

                                              19.
actions is demonstrated by the variety of legal theories that may be raised. For example,
a taxpayer’s action may include claims alleging fraud, collusion, ultra vires transaction,
or the failure to perform mandatory duties. (Harman v. City and County of San
Francisco (1972) 7 Cal.3d 150, 160; see Miller v. McKinnon (1942) 20 Cal.2d 83, 96
[taxpayer had standing to sue based on noncompliance with competitive bidding statute].)
The scope of taxpayer’s actions is not unlimited; they must not trespass into the domain
of legislative or executive discretion but must measure governmental performance against
a legal standard. (Harman, supra, at pp. 160–161.)
       Section 526a addresses the remedies available in a taxpayer’s action by referring
to a judgment “restraining and preventing any illegal expenditure” of funds or other
property by a local agency. Thus, an injunction preventing the illegal payment of funds
is explicitly authorized. (Blair, supra, 5 Cal.3d at p. 268.) Our Supreme Court has
construed the statute broadly and has “even permitted taxpayers to sue on behalf of a city
or county to recover funds illegally expended. (Osburn v. Stone (1915) 170 Cal. 480, 482
[150 P. 367].)” (Blair, supra, at p. 268; see 59 Cal.Jur.3d (2012) Taxpayers’ Actions,
§ 7, pp. 191–193 [restoration of public funds].) Furthermore, “the fact that [the taxpayer]
could have enjoined the illegal expenditure does not prevent [him] seeking to recover on
behalf of the [local agency] monies illegally expended.” (59 Cal.Jur.3d, supra,
Taxpayers’ Actions, § 7, pp. 192–193, citing Osburn v. Stone, supra, 170 Cal. 480.)
II.    INTERPRETING DAVIS’S PLEADING
       The first dispute we consider is whether the FAC alleges only a validation action
or, alternatively, sets forth both a validation action and a taxpayer’s action. This is a
matter of interpretation, which is a question of law. Our interpretation of Davis’s
pleadings is guided by the principle that the “label given a petition, action or other
pleading is not determinative; rather, the true nature of a petition or cause of action is
based on the facts alleged and remedy sought in that pleading.” (Escamilla v.

                                             20.
Department of Corrections & Rehabilitation (2006) 141 Cal.App.4th 498, 511.)
Although captions and labels are not determinative, they may provide some insight into
the claims a plaintiff attempted to pursue. (See Cal. Rules of Court, rules 2.111(6) [first
page of pleading must state the character of the action or proceeding], 2.112 [information
about each cause of action or count].)
       Once we have identified the claim or claims Davis attempted to pursue, we can
proceed to the question of whether the claim “falls within the boundaries of a particular
legislative declaration that the validation statutes apply.” (Santa Clarita Organization for
Planning & Environment v. Abercrombie (2015) 240 Cal.App.4th 300, 308
(Abercrombie).) In this case, the “particular legislative declaration” is Government Code
section 53511, subdivision (a). (See pt. I.C.4., ante.) Whether Davis’s claim or claims
fall within the boundaries or language of Government Code section 53511, subdivision
(a) involves an assessment of the gravamen of the complaint and the nature of the right
sued upon, rather than the form of the action or relief demanded. (Abercrombie, supra, at
p. 308.) That assessment is undertaken in part III.B.2. of this opinion.
       A.     Contents of the Pleadings
              1.     Original Complaint
       The original complaint provides background for our interpretation of the FAC. Its
caption states it is a complaint for (1) reverse validation pursuant to section 863 and (2)
recovery of public funds expended on an illegal contract. The second cause of action was
labeled “Taxpayer Action for Recovery of Funds Paid by [Fresno Unified] to
[Contractor] on Facilities Lease.” Consistent with the label’s reference to a taxpayer
action, paragraph 24 of the original complaint states: “Pursuant to long standing
California law, any contract not made in strict conformity with the legal requirements
thereto is null, void and unenforceable and a taxpayer can bring an action on behalf of
the public entity involved therein for recovery of all funds paid thereunder.” (Italics

                                             21.
added.) Thus, the labels and allegations contained in the original pleadings show Davis
attempted to state both a reverse validation action under section 863 and a taxpayer’s
action.
          Furthermore, the prayer for relief on the second cause of action requested
injunctive relief and an order directing Contractor “to pay back to [Fresno Unified] all
monies received under any contract relative to the Project.” Based on the foregoing
contents of the original complaint, an objectively reasonable person familiar with
California law would construe it as asserting both a reverse validation action (first cause
of action) and a taxpayer action (second cause of action).
                       2.     First Amended Complaint
          Davis’s FAC, unlike his original complaint, does not use the term “taxpayer
action.” Also, the FAC does not cite section 526a. These omissions create the possibility
that Davis abandoned the taxpayer action when he filed the FAC and focused exclusively
on bringing a reverse validation action. However, the FAC’s allegations, labels, and
prayer for relief demonstrate otherwise.
          For instance, Davis refers to himself as “TAXPAYER” throughout the FAC.
Also, the FAC’s first paragraph states Davis brings the action on behalf of himself,
taxpayers and all others similarly interested to (1) contest the validity of the Construction
Contracts and (2) “recover to FRESNO UNIFIED … all monies paid by it under said
contracts.” The recovery of monies paid is emphasized in the labels for each of the
FAC’s first six causes of action, all of which begin: “Recovery of Funds Paid by [Fresno
Unified] to CONTRACTOR .…” The last sentence in the final paragraph of each of the
first six causes of action—that is, paragraphs 26, 31, 41, 47, 51 and 55 of the FAC—
assert the Construction Contracts are ultra vires, illegal, void and unenforceable under
California law and all monies paid by Fresno Unified under the contracts must be paid
back or returned by Contractor.

                                              22.
       The prayer for relief in the FAC is drafted so that each of the seven numbered
paragraphs apply to “each of the foregoing causes of action.” The first numbered
paragraph requests an order allowing notice of the lawsuit be given by publication, a
procedure specifically authorized by the validation statutes. (§§ 861, 861.1.) The second
paragraph requests a finding that “this action was properly brought under CCP § 863 et
seq., for judicial invalidation of proceedings.” The third paragraph asks the court to
declare the Site Lease and the Facilities Lease “are ultra vires, illegal, void, and/or
unenforceable.” The fourth numbered paragraph of the FAC’s prayer for relief requests
that Contractor be ordered to pay back to Fresno Unified all monies received under the
Site Lease and the Facilities Lease.
       B.     Analysis of the First Amended Complaint
              1.     Claims Remaining
       Our analysis of the FAC’s contents to determine whether Davis attempted to assert
only a validation action or whether he attempted to combine a validation action with a
taxpayer’s action examines only the causes of action remaining after defendants’ earlier
demurrer. In other words, we consider only the operative portions of the FAC. In Davis
I, we reversed the judgment of dismissal and directed the trial court to enter an order
sustaining the demurrer on the breach of fiduciary duty claim (the second cause of
action), the conflict of interest claim based on a violation of the Political Reform Act of
1974, and the fifth cause of action alleging the use of a lease-leaseback arrangement is
improper when funds for construction are available to a school from another source.
(Davis I, supra, 237 Cal.App.4th at p. 302.) We also directed the trial court to overrule
“the demurrer as to the other causes of action.” (Ibid.) As a result, the legal theories
surviving the demurrer fall into two categories: (1) violations of California’s competitive
bidding laws and Education Code sections 17406 and 17417 (first and third causes of

                                             23.
action) and (2) conflict of interest claims (fourth cause of action). The conflict of interest
claims are based on Government Code section 1090 and common law principles.
              2.     Reverse Validation Action
       It is undisputed that the FAC sets forth a reverse validation action asserting the
invalidity of the Construction Contracts based on conflicts of interest and violations of
California’s competitive bidding laws and Education Code sections 17406 and 17417.
Thus, the FAC’s many references to validation or invalidation and the related statutes
need not be described here. Because the FAC unambiguously alleges a reverse validation
action, the critical question is whether Davis attempted to combine a taxpayer action with
the reverse validation action.
              3.     Taxpayer’s Action
       California law allows a claim brought under the validation statutes to be combined
in a single lawsuit with other types of claims. In Regus, supra, 70 Cal.App.3d 968, the
court set forth the principle that “a validation action under … section 860 et seq., and a
taxpayer’s action under … section 526a are not mutually exclusive.” (Id. at p. 972.)
Accordingly, California law allowed Davis to pursue a validation action and a taxpayer
action in a single lawsuit. In other words, the fact that Davis pursued a reverse validation
action in the FAC does not necessarily prevent his pursuit of a taxpayer’s action in the
same pleading.
       Initially, we note that paragraph eight of the FAC stated in full: “This action is
brought in this court as a special in rem proceeding for judicial examination and
invalidation of the contracts referenced below relative to the Project.”11 Paragraph eight

11     This statement is similar to the statement made in the complaints considered in
McGee v. Torrance Unified School Dist. (2020) 49 Cal.App.5th 814 (McGee II). There,
the Second District stated, “McGee alleged each complaint was ‘brought in this court as a
special in rem proceeding’ to declare the challenged agreements void and invalid.” (Id. at
p. 820.)

                                             24.
did not state the action was brought as “exclusively” or “only” as an in rem proceeding
for the invalidation of the Construction Contracts. Conversely, it did not state that it was
brought as, “among other things,” a special in rem proceeding. Consequently, the
question of interpretation presented is whether to infer the entire lawsuit was brought
exclusively as an in rem validation proceeding. Whether such an inference should be
drawn requires an evaluation of the contents of the FAC as a whole. (See Blank v.
Kirwan, supra, 39 Cal.3d at p. 318 [pleading interpreted as a whole with its parts read in
context.) Also, because “pleadings are to be liberally construed in favor of the pleader”
(Advanced Modular Sputtering, Inc. v. Superior Court (2005) 132 Cal.App.4th 826, 835),
the inference drawn should be favorable to Davis so long as it is objectively reasonable.
       Viewing the FAC as a whole and reading its parts in context, we consider its
repeated statements that all monies paid to Contractor by Fresno Unified under the
Construction Contracts must be paid back by Contractor and its prayer for relief
requesting that Contractor be ordered to pay back the monies. These statements and
prayer for relief unequivocally demonstrate Davis was seeking a remedy that is not
available in a validation action but is available in a taxpayer’s action. In Ontario, supra,
2 Cal.3d 335, our Supreme Court stated a typical validation proceeding “seeks a
declaratory judgment that the bonds, assessments, etc., of the agency are or are not
valid.” (Ontario, supra, 2 Cal.3d at p. 344.) The plaintiff in Ontario prayed for a
declaration invalidating agreements for the creation and operation of a speedway and
related bonds. (Ibid.) The plaintiff also sought two other kinds of relief: (1) an
injunction restraining the parties from spending funds or doing any other acts to further
the project and (2) an order compelling restitution to the city of all money unlawfully
paid in connection with the project. (Ibid.) As to the injunctive relief, the Supreme Court
concluded it was not authorized under the validation statutes but remained available in a
taxpayer action. (Id. at pp. 344–345.) As to the restitution of public funds, the court
stated: “Nothing in the general validating statute contemplates such an in personam

                                             25.
cause of action for repayment of public money unlawfully expended, and again no reason
appears to deny plaintiffs their normal remedy in this regard.” (Id. at p. 345.) This
statement about a normal remedy refers to the relief available in a taxpayer action and
comports with the principle that a validation action may be combined with taxpayer
action in a single lawsuit.
       Based on Ontario and the contents of the FAC, we conclude an objectively
reasonable person would construe the FAC as pursuing (i.e., attempting to assert) both a
validation action and a taxpayer action. Accordingly, the trial court’s conclusion that this
lawsuit should be characterized solely as a reverse validation action cannot be upheld
based on our interpretation of the FAC and the claims it attempted to assert.
              4.      Dual Nature of the Lawsuit Was Not Abandoned
       The dual nature of Davis’s lawsuit means the FAC’s remaining legal theories or
causes of action—specifically, the alleged violations of California’s competitive bidding
laws and Education Code sections 17406 and 17417 and the conflict of interest claims—
were intended to perform a double duty. First, looking at the FAC as a reverse validation
action, those theories of illegality set forth the grounds for invalidating the Construction
Contracts. Second, examining the FAC as a taxpayer’s action, those theories of illegality
adequately allege a basis for requiring Contractor to return (i.e., repay, refund, restore or
disgorge) the public funds paid under the Construction Contracts. In other words, in the
taxpayer’s action, Davis is attempting to establish public funds were illegally expended
by proving the Construction Contracts (1) violated California’s competitive bidding laws
and Education Code sections 17406 and 17417, (2) violated the prohibition on conflicts
of interest set forth in Government Code section 1090, or (3) violated the common law
principles governing conflicts of interest.12 (See San Diegans, supra, 8 Cal.5th at p. 746

12     These claims, which also can be referred to as theories of liability, are described in
Davis I, supra, 237 Cal.App.4th at pages 271, 290 (pt. II.E., summary of competitive

                                             26.
[“violations of section 1090 can be challenged … by taxpayers under Code of Civil
Procedure section 526a where appropriate”].)
       The foregoing interpretation of the FAC is supported by the arguments Davis
made in opposing the motion for judgment on the pleadings and the arguments he raised
on appeal. For example, Davis’s opposition to the motion asserted his taxpayer’s
complaint was not moot (1) because the conflict of interest claims were not subject to the
validation statutes, (2) the court could grant effectual relief by ordering disgorgement
even though the contracts were fully performed, and (3) the Construction Contracts were
not the kind of contracts that are subject to the validation statutes. Davis argued the cases
relied upon by defendants were distinguishable because the plaintiffs in those cases did
not seek disgorgement of monies paid under void contracts—a remedy not available in a
reverse validation action. On appeal, Davis’s opening brief cites Regus for the principle
that a validation action and a taxpayer’s action under section 526a are not mutually
exclusive. Furthermore, that brief requests this court to reverse the judgment and remand
the matter with directions to “immediately proceed with trial on the merits of [Davis’s] in
person[a]m taxpayer claims against [Contractor].” The brief also states Davis “expressly
seeks a judgment against [Contractor] for disgorgement of all money paid by [Fresno
Unified] to [Contractor] under the challenged contracts that are void on account of one
or more of Appellant’s causes of action.” (Italics added.) Consequently, Davis’s
opposition to the motion for judgment on the pleadings and his appellate briefing cannot
be construed as abandoning or forfeiting the taxpayer’s action portion of this lawsuit.
III.   AVAILABLE REMEDIES AND MOOTNESS
       Based on our conclusion that Davis is pursuing both a validation action and a
taxpayer action, our application of California’s mootness doctrine considers what

bidding allegations), 299 to 301 (pt. IV.B.3., analysis of statutory conflict of interest
claim), and 301 (pt. V.C., common law conflict of interest claim).

                                             27.
remedies are available in each type of action and whether any available remedy would
constitute “effectual relief.” (Wilson, supra, 191 Cal.App.4th at p. 1574.)
       A.      Validation Action
       The relief granted in a validation action is a declaratory judgment stating the
subject of the lawsuit is or is not valid. (Ontario, supra, 2 Cal.3d at p. 344.) Here, the
Site Lease and the Facilities Lease have been fully performed and they are no longer in
effect. Accordingly, the question presented is whether a declaratory judgment stating the
leases are invalid would constitute effectual relief. Based on existing case law, we
conclude a declaratory judgment invalidating the fully performed leases would not be
effectual relief.
       In Jennings v. Strathmore Public Utility Dist. (1951) 102 Cal.App.2d 548
(Jennings), the plaintiff filed a lawsuit against a public utility district and two contractors
seeking an injunction and a declaration that certain construction contracts were void. (Id.
at p. 548.) The injunction sought to stop further construction of a sewage disposal plant
and distribution lines. (Ibid.) The plaintiff alleged the contracts had been made in
violation of the Labor Code prevailing wage rate requirements. (Jennings, supra, p. 549.)
The utilities district filed a motion to dismiss, contending (1) the remedies in the Labor
Code were exclusive and (2) the plaintiff was not a taxpayer and, therefore, lacked the
requisite interest to maintain the action. (Jennings, supra, at p. 549.) The trial court
granted the motion to dismiss and the plaintiff appealed. While the appeal was pending,
“the work, which was in the process of completion at the time of trial, [was] fully
completed, all contractors and workmen [were] paid in full, and notice of completion
[was] filed and recorded in June 1950.” (Ibid.)
       The utilities district argued on appeal that the matter had become moot and the
appeal should be dismissed. (Jennings, supra, 102 Cal.App.2d at p. 549.) The appellate
court agreed. First, the court concluded the issue of enjoining or restraining the district

                                              28.
from proceeding with the work had become moot because the work had been completed.
Second, the court concluded the question of the invalidity of the two contracts was moot
because “a declaration that the contracts were void would not afford plaintiff any relief.”
(Id. at p. 550.) In other words, “a decision as to the validity of the contracts, at this time,
after the work has been completed and after the payments have been made and where no
relief under the complaint could be afforded plaintiff, would be purely academic and
would serve no useful purpose.” (Id. at p. 551.)
       Although Jennings is distinguishable from the present case because Jennings did
not include a taxpayer action, we conclude it establishes the precedent that a declaratory
judgment as to the validity of completed contracts is not effectual relief. Based on this
precedent, we conclude Davis’s request for a declaratory judgment stating the Site Lease
and the Facilities Lease are invalid is moot because such a judgment provides no
effectual relief. (See Daily Journal Corp. v. County of Los Angeles (2009) 172
Cal.App.4th 1550, 1557 [county contract in question had expired]; County Sanitation
Dist. No. 2 v. County of Kern (2005) 127 Cal.App.4th 1544, 1628–1629 [certain
environmental claims were moot because they challenged acts taken under a contract that
was no longer in effect]; Giles v. Horn (2002) 100 Cal.App.4th 206, 227 [challenge to
county contracts was moot where contracts had been fully performed and had expired].)
Accordingly, dismissal of the validation portion of Davis’s lawsuit is appropriate on
grounds of mootness. (See Wilson, supra, 191 Cal.App.4th at p. 1574; Connerly v.
Schwarzenegger, supra, 146 Cal.App.4th at p. 752 [proper remedy for mootness is
dismissal rather than rendering judgment for one side or the other].)
       B.     Taxpayer Action
       Next, we consider whether disgorgement of monies received by Contractor is a
remedy that continues to be available in Davis’s taxpayer’s action. In the taxpayer’s
action, Davis alleges the expenditure of funds under the Construction Contracts was

                                              29.
illegal because of (1) violations of California’s competitive bidding laws and Education
Code sections 17406 and 17417 and (2) conflicts of interest. As described below,
restoration of illegally expended public funds is an available remedy and, therefore,
Davis’s taxpayer action is not moot.
              1.      Disgorgement in Taxpayer Actions
       In Ontario, supra, 2 Cal.3d 335, the Supreme Court discussed the scope of the
validation statutes and their relationship to taxpayer actions under section 526a.
(Ontario, supra, at pp. 344–345.) The court determined (1) the validation statutes did not
repeal section 526a by implication, (2) restitution of public funds paid for unlawful
purposes was a remedy available in a taxpayer action, and (3) no reason appeared to
justify denying taxpayers the normal remedy of restitution in an in personam cause of
action for repayment of public monies unlawfully expended. (Ontario, supra, at pp. 344–
345; see Miller v. McKinnon, supra, 20 Cal.2d at p. 96 [cause of action exists for
taxpayer to, on behalf of public agency, recover illegally paid money from person
receiving such funds].)
       More recently, in San Diegans, supra, 8 Cal.5th 733, the Supreme Court noted,
but did not decide, the question of whether the plaintiff taxpayer organization’s claim of a
conflict in interest brought as a taxpayer action could seek disgorgement of payments
received. That question was remanded to the Court of Appeal. (Id. at p. 747.) In San
Diegans, the main issue addressed and resolved by the Supreme Court was whether the
plaintiff had standing under Government Code section 1092 to raise the conflict of
interest claim and seek invalidation of the contracts. The court concluded that
Government Code section 1092 “does not provide plaintiff a private right of action
because it was not a party to the contracts.” (San Diegans, supra, at p. 736.)13 In its
rationale, the court stated:

13    In footnote 20 of Davis I, supra, 237 Cal.App.4th at page 297, we stated
“Defendants did not base their demurrer on the ground Davis lacked standing to bring the

                                            30.
       “Because violations of section 1090 can be challenged by contractual
       parties under section 1092, by taxpayers under Code of Civil Procedure
       section 526a where appropriate, and by the Attorney General, district
       attorneys, and the [Fair Political Practices] Commission, there is no
       compelling reason to conclude that section 1092 creates a private right of
       action for nonparties to sue to avoid public contracts.” (San Diegans,
       supra, 8 Cal.5th at p. 746, italics added.)
       Our Supreme Court’s statement that violations of Government Code “section 1090
can be challenged … by taxpayers under … section 526a where appropriate” (San
Diegans, supra, 8 Cal.5th at p. 746, italics added) raises the question of whether, in the
circumstances presented, Davis’s conflict of interest claims and his other statutory claims
are “appropriate” for a taxpayer’s action under section 526a.
              2.     Contracts Subject to Validation
       For purposes of this appeal, we assume without deciding that the taxpayer’s action
is not “appropriate” if the specific contracts in question fall within the scope of the
validation statutes and therefore could be successfully validated. (See generally, § 869.)
We frame the appropriateness issue in this manner for two reasons.
       First, we stated earlier that after identifying the claims Davis attempted to pursue,
we would address whether those claims “fall[] within the boundaries of a particular
legislative declaration that the validation statutes apply” (Abercrombie, supra, 240
Cal.App.4th at p. 308) and identified the “particular legislative declaration” as
Government Code section 53511, subdivision (a). (See pt. II.A., ante.) We noted such

conflict of interest claim under Government Code section 1090 since it is recognized that
either the public agency or a taxpayer may seek relief for a violation of section 1090.”
We supported this statement by citing Thomson v. Call (1985) 38 Cal.3d 633 and
Kaufmann & Widiss, The California Conflict of Interest Laws (1963) 36 So.Cal. L.Rev.
186, 200 (“Either the public agency itself or a taxpayer may seek the relief afforded under
Section 1092 by way of having the contract declared void, or seek restitution of any
amounts paid out by the public agency”). In dictum contrary to the statutory
interpretation later adopted in San Diegans, we stated Government Code section 1092’s
“term ‘any party’ is not restricted to parties to the contract.” (Davis I, supra, at p. 297,
fn. 20; see San Diegans, supra, 8 Cal.5th at p. 744.)

                                             31.
an inquiry involves an assessment of the gravamen of the complaint and the nature of the
right sued upon. (Ibid.; see Abercrombie, supra, at p. 308.)
       Second, the defendants’ contentions suggest a taxpayer’s action is not
“appropriate” in the circumstances of this case. Specifically, Contractor argues this case
is moot because (1) disgorgement is not an available remedy and (2) disgorgement is not
available because the Construction Contracts fall within the ambit of Government Code
section 53511 and the validation statutes. Varying this contention slightly, Fresno
Unified argues that Davis’s conflict of interest claims are subject to validation and,
therefore, he cannot obtain effective relief through disgorgement.
       Defendants support their arguments by citing McGee II, a case in which the
Second District concluded “section 526a taxpayer claims alleging violations of
[Government Code] section 1090 may still fall within the validation statutes.” (McGee II,
supra, 49 Cal.App.5th at p. 826, italics added.) The court determined McGee’s conflict
of interest claims relating to lease-leaseback agreements in that case were subject to
validation and, therefore, “McGee cannot obtain effective relief through disgorgement.”
(Id. at p. 828.)
       In McGee II, the parties disputed whether the lease-leaseback agreements between
a school district and construction contractor were subject to the validation statutes.
(McGee II, supra, 49 Cal.App.5th at p. 823.) The court stated “the applicable law is
Government Code section 53511, which declares the validation statutes apply to “ ‘an
action to determine the validity of [a local agency’s] bonds, warrants, contracts,
obligations or evidences of indebtedness.’ (Gov. Code, § 53511, subd. (a), italics
added.)” (McGee II, supra, at p. 823.) McGee argued the lease-leaseback agreements
were not “contracts” for purposes of Government Code section 53511. (Ibid.)
       Government Code section 53511’s reference to “contracts” is construed narrowly.
(Kaatz, supra, 143 Cal.App.4th at p. 35; see Ontario, supra, 2 Cal.3d at pp. 343–344.)
“Although ‘contracts’ could be read to reach all contracts, the courts have defined it by

                                             32.
reference to the clause in which it has been used, and thus to reach only those contracts
‘that are in the nature of, or directly relate to a public agency’s bonds, warrants or other
evidences of indebtedness.’ (Kaatz, supra, 143 Cal.App.4th at pp. 40, 42[.)]” (Castaic
Lake, supra, 1 Cal.App.5th at p. 1099.) Thus, only contracts “involving financing and
financial obligations fall” within subdivision (a) of Government Code section 53511—the
relevant validation statute for purposes of this appeal. (Friedland, supra, 62 Cal.App.4th
at p. 842.)
       The court in McGee II analyzed whether the lease-leaseback agreements in that
litigation were involved in financing and financial obligations by stating (1) it previously
determined Education Code section 17406 authorizes lease-leaseback agreements without
competitive bidding, (2) that statute had been characterized as providing a method of
financing school construction, and (3) the use of validation actions was a common
practice for school construction projects structured as a lease-leaseback arrangement.
(McGee II, supra, 49 Cal.App.5th at p. 824.) Based on these statements and its earlier
determination that McGee had failed to state a claim for a violation of the Education
Code,14 the court concluded “the lease-leaseback agreements involved the District’s
financial obligations and were inextricably bound up in the District’s bond financing,
bringing them within the scope of ‘contracts’ covered by Government Code section
53511.” (McGee II, supra, at p. 824.) This determination led to the further conclusion
that, “[b]ecause his conflict of interest claims [we]re subject to validation, McGee cannot
obtain effective relief through disgorgement.” (Id. at p. 828.)

14     In McGee v. Balfour Beatty Construction, LLC (2016) 247 Cal.App.4th 235, the
court concluded the trial court properly sustained demurrers to McGee’s causes of action
alleging violations of competitive bidding requirements and provisions of the Education
Code. (McGee, supra, at p. 249.) In contrast, the court concluded the demurrers should
have been overruled as to the conflict of interest cause of action. (Ibid.)

                                             33.
       Based on the parties’ arguments and cases such as McGee II, Friedland and
Ontario, we consider whether the Construction Contracts between Fresno Unified and
Contractor constitute “contracts” for purposes of Government Code section 53511,
subdivision (a). Our analysis of this issue is short because of our detailed discussions and
conclusions in Davis I. In part II.A.2. of that opinion, we addressed the lease-leaseback
method of financing for the delivery of new school facilities. (Davis I, supra, 237
Cal.App.4th at pp. 276–280.) We concluded the primary purpose of the lease-leaseback
provisions in Education Code sections 17400 through 17425 was to authorize a new
source of school financing. (Davis, supra, at p. 280.) We also considered the variation
of the lease-leaseback arrangement used by Fresno Unified and Contractor in this case—a
variation in which “the school district pays for the construction (using local bond funds)
as it progresses, with the final payment being made when construction is completed. As
a result, the school district does not occupy and use the new facilities as a rent-paying
tenant for a set length of time.” (Ibid., italics added.) Based on our interpretation of the
Construction Contracts, we concluded that “[b]ecause the school district pays for the
construction as it is completed, this alternate approach cannot be characterized as a
method of financing the construction of new school facilities.” (Ibid.)15 In short, we
held that the Construction Contracts were not true leases, only a construction contract
with no element of financing included. We also held the leased property was not used by

15     This opinion’s earlier description of the Facilities Lease quotes its provisions
characterizing Fresno Unified’s obligation to make the lease payments as “a current
expense” and stating the lease payment “shall not in any way be construed as a debt of
[Fresno Unified] in contravention of any applicable constitutional or statutory limitations
or requirement concerning the creation of indebtedness of [Fresno Unified].”
       For a detailed analysis of Education Code section 17406 and its application to
Davis’s allegations (including the terms of the Construction Contracts, which were
attached to the FAC), see Parts II.B. through II.E of Davis I, supra, 237 Cal.App.4th at
pages 281 through 291.

                                             34.
the district during any portion of the lease period as required by Education Code section
17406, subdivision (a)(1).
       Based on our conclusion that “the [Construction] Contracts did not include a
financing component” (Davis I, supra, 237 Cal.App.4th at p. 291), which is consistent
with the terms of the Facilities Lease stating Fresno Unified’s obligations must not in any
way be construed as debt or creating an indebtedness, it follows that the Construction
Contracts are not “in the nature of, or directly relate[d] to a public agency’s bonds,
warrants or other evidences of indebtedness.” (Kaatz, supra, 143 Cal.App.4th at p. 42.)
Consequently, the Construction Contracts are not “contracts” for purposes of
Government Code section 53511, subdivision (a) and, thus, are not subject to the
validation statutes. Because the Construction Contracts are not subject to the validation
statutes, it is “appropriate” for Davis to challenge their legality in a taxpayer’s action
under section 526a. (San Diegans, supra, 8 Cal.5th at p. 746.) Stated another way, the
gravamen of the FAC and the nature of the rights and obligations being pursued by Davis
fall outside the boundaries of the validation statute relied upon by defendants. (See
Abercrombie, supra, 240 Cal.App.4th at p. 308.)
       Consequently, we conclude Davis may pursue a taxpayer’s action alleging the
illegal expenditure of public funds based on conflicts of interest and violations of
California’s competitive bidding laws and Education Code sections 17406 and 17417.16
Disgorgement of public funds is a remedy available under these theories asserted in a
taxpayer’s action and, therefore, Davis’s lawsuit is not moot.

16     Our analysis of the Construction Contracts is distinguishable from that adopted by
the court in McGee II. There, the court determined financing was a purpose of the lease-
leaseback agreements before it and, therefore, the court was “satisfied the lease-leaseback
agreement fell within Government Code section 53511, bringing them within the
validation statutes.” (McGee II, supra, 49 Cal.App.5th at p. 825.)

                                              35.
       C.     Other Arguments
              1.      Contractor’s Interpretation of Davis I
       Contractor interprets our opinion in Davis I as already deciding Davis’s lawsuit
was a reverse validation action. Contractor’s argument implies that this court’s earlier
opinion decided the FAC asserted only a reverse validation action and, moreover,
necessarily determined the Construction Contracts constitute “contracts” under
Government Code section 53511. Contractor’s interpretation is based on footnote 4 of
Davis I, which states in full:

               “Defendants could have avoided the uncertainty and risk associated
       with completing the project while this taxpayer challenge was pending by
       bringing a validation action under Code of Civil Procedure section 860
       prior to starting construction. ‘A validation action ... allows a public
       agency to obtain a judgment that its financing commitments are valid, legal,
       and binding. If the public agency has complied with statutory
       requirements, the judgment in the validation action binds the agency and all
       other persons.’ (Friedland v. City of Long Beach (1998) 62 Cal.App.4th
       835, 838 ….) The record in this case shows that the use of validation
       actions is a common practice for school construction projects structured as
       a lease-leaseback arrangement. (See fn. 5, post.)

               “Davis’s taxpayer suit is a timely ‘reverse validation’ action because
       it was filed within 60 days of the adoption of the resolutions authorizing the
       execution of the [Construction] Contracts. (See Code Civ. Proc., §§ 860,
       863.) Besides being a taxpayer, Davis is the president of Davis Moreno
       Construction, Inc., a general contractor that has handled construction
       projects for school districts. [Citations.]” (Davis I, supra, 237 Cal.App.4th
       at p. 273, fn. 4.)
       First, our statement that the record showed school districts commonly used
validation actions for construction projects structured as a lease-leaseback arrangement is
a statement of historical fact, not a conclusion of law about the nature of the specific
contracts at issue in the case. The fact that other lease-leaseback agreements have been
validated does not mean the particular variation of the lease-leaseback arrangement
adopted by Fresno Unified and Contractor qualifies for validation.

                                             36.
       Second, our statement that Fresno Unified and Contractor could have brought a
validation action simply means such a proceeding could have been filed. It does not
mean they would have been successful and obtained a judgment validating the
Construction Contracts or, more specifically, that the variation of the lease-leaseback
arrangement set forth in the Construction Contracts qualified for the exception to
competitive bidding contained in subdivision (a)(1) of the Education Code section 17406
or was untainted by a conflict of interest. Given our conclusions that the terms of the
Construction Contracts did not satisfy that provision of the Education Code, it is not
reasonable to interpret our statement as implying defendants would have been successful
in a validation proceeding.
       Third, our statement that Davis’s lawsuit is a timely reverse validation action—
when read in context of the issues and arguments presented in the first appeal—does not
imply that his lawsuit is exclusively a reverse validation action. It simply means Davis
asserted a reverse validation action and had done so in a timely manner. Whether the
Construction Contracts were subject to validation and, more specifically, whether they
were “contracts” for purposes of Government Code section 53511, was not raised,17
addressed or resolved in Davis I. Had we foreseen the arguments now raised, the first

17      Apparently in response to Davis I, the Legislature in 2016 amended Education
Code section 17406 to limit the amount of payments disgorged by construction
contractors in certain situations. (Stats. 2016, ch. 521, § 2.) An added provision stated
construction contractors who entered instruments determined to be invalid for failing to
fall within the requirements of Education Code section 17046, subdivision (a)(1) “may be
paid the reasonable cost, specifically excluding profit, of the labor, equipment, materials,
and services furnished” if specified conditions were met. (Ed. Code, § 17406, subd.
(d)(1).) As drafted, this provision appears to allow the disgorgement of profits and,
therefore, has not entirely eliminated disgorgement as a remedy. Consequently, the
discussion of mootness in the appellate briefing did not raise any issues about the
interpretation and application of the amendment to the facts pleaded in this case.
Accordingly, our analysis of mootness need not discuss it further.

                                            37.
sentence of the second paragraph of the footnote would have replaced “is” with
“includes.”
              2.       Delay and Public Policy
       Contractor contends Davis’s argument that disgorgement remains an available
remedy overlooks the policies underlying the validation statutes and, like the plaintiff in
McGee II, Davis did nothing to stop the construction even though injunctive remedies
were available.
       This argument might have been relevant if Davis’s lawsuit was exclusively a
reverse validation action. However, in the context of a taxpayer’s action, “the fact that
[the plaintiff] could have enjoined the illegal expenditure does not prevent [him] seeking
to recover on behalf of the [local agency] monies illegally expended.” (59 Cal.Jur.3d,
supra, Taxpayers’ Actions, § 7, pp. 192–193 [restoration of public funds], citing Osburn
v. Stone, supra, 170 Cal. 480.) Here, we have determined the Construction Contracts (1)
“did not include a financing component” (Davis I, supra, 237 Cal.App.4th at p. 291); (2)
are not “contracts” for purposes of Government Code section 53511; and (3) are not
subject to validation under the validation statutes. Consequently, the policy concerns
applicable to contracts subject to validation do not apply to the Construction Contracts.
(Cf. Wilson, supra, 191 Cal.App.4th at pp. 1580–1581.) As a result, defendants’
criticism of Davis for failing to obtain an injunction stopping construction of the middle
school is not a ground for concluding the remedy of disgorgement is unavailable in the
taxpayer’s action.18
       D.     Summary
       The FAC sets forth both a reverse validation action and a taxpayer’s action.
Davis’s taxpayer action consists of several legal theories or counts alleging funds were

18     Based on this conclusion, we do not reach Davis’s argument that he had an
adequate remedy at law (i.e., disgorgement) and, therefore, he could not have obtained
injunctive relief if he had tried.

                                            38.
illegally paid by Fresno Unified to Contractor. (See Osburn v. Stone, supra, 170 Cal. at
p. 486 [various “counts” in taxpayer’s complaint alleged illegal expenditure of public
funds].) The counts assert violations of California’s competitive bidding laws and
Education Code sections 17406 and 17417 along with conflicts of interest prohibited by
Government Code section 1090 and common law principles. The remedy of
disgorgement is available under these counts asserted in Davis’s taxpayer’s action even
though the Construction Contracts are fully performed. Consequently, the counts in
Davis’s taxpayer’s action seeking disgorgement are not moot.
                                     DISPOSITION
       The judgment is reversed. The trial court is directed to (1) vacate its order
granting the motion for judgment on the pleadings, (2) enter a new order granting the
motion as to the reverse validation portion of this lawsuit and denying the motion as to
the taxpayer action and its underlying counts or legal theories, and (3) conduct further
proceedings consistent with this opinion. Davis shall recover his costs on appeal.

                                                                             FRANSON, J.
WE CONCUR:

DETJEN, Acting P.J.

PEÑA, J.

                                            39.