Court Opinion

ID: 6340710
Source: CourtListenerOpinion
Date Created: 2022-05-13 19:02:20.290688+00
Date Added: 2024-06-11T09:03:10.619958
License: Public Domain

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                                           NOT TO BE PUBLISHED

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 This opinion has not been certified for publication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

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                                      THIRD APPELLATE DISTRICT
                                                     (Sacramento)
                                                            ----

CITY OF FRESNO et al.,

                   Plaintiffs and Respondents,                                               C091324

         v.                                                                       (Super. Ct. No. 34-2015-
                                                                                   80002174CUWMGDS)
DEPARTMENT OF FINANCE et al.,

                   Defendants and Appellants.

         California laws dissolving redevelopment agencies (RDAs) and providing for their
winding-down also provided that loans from a city to its former RDA were

                                                             1
unenforceable. (Health & Saf. Code, § 34171, subd. (d)(2).)1 But some loans to a former
RDA may be reinstated and paid if they were “loans for money” with a “required
repayment schedule.” (§ 34191.4, subd. (b)(2)(A).)
       In this case, the Department of Finance (Finance) disapproved reinstatement of
13 loans from the City of Fresno (Fresno) to its former RDA.2 However, the trial court
granted Fresno’s petition for writ of mandate, finding the loans could be reinstated under
section 34191.4, subdivision (b).3
       Finance now contends the loans cannot be reinstated because (1) the loans were
not “loans for money,” and (2) there was no “required repayment schedule” for the loans.
Considering first whether there was a “required repayment schedule” for the disputed
loans, we conclude the record supports a determination there was no such schedule.
Accordingly, we conclude the trial court erred by finding the loans could be reinstated
under 34191.4, subdivision (b).
       We will reverse the judgment.
                                     BACKGROUND
                                             A
       Before June 2011, the Community Redevelopment Law (§ 33000, et seq.)
authorized RDAs to remediate urban decay and revitalize blighted communities.
(California Redevelopment Assn. v. Matosantos (2011) 53 Cal.4th 231, 246
(Matosantos).) To finance their activities, RDAs relied on “tax increment” financing --

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

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

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

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tax revenue attributed to the increased value of property in the redevelopment project
area. (Ibid.)
       In June 2011, the Legislature passed Assembly Bill No. 26 (2011-2012 1st Ex.
Sess.) (Assembly Bill XI 26), which dissolved RDAs and turned over the winding-down
process to successor agencies. (Matosantos, supra, 53 Cal.4th at pp. 250-251.) The
Legislature later adopted additional relevant provisions. (Stats. 2012, ch. 26, § 6
(Assembly Bill No. 1484 (2011-2012 Reg. Sess.).) We will refer to the legislation
dissolving RDAs, collectively, as the “Dissolution Law.”4
       The Dissolution Law generally made agreements between an RDA and its
sponsoring agency (here, the city that created the former RDA) unenforceable. However,
in some instances, an oversight board for a successor agency could reinstate such loans.
Section 34191.4, subdivision (b)(1), which provides for approval of loans from the
sponsoring agency to the RDA, states, in part: “[U]pon application by the successor
agency and approval by the oversight board, loan agreements entered into between the
[RDA and the sponsoring agency] shall be deemed to be enforceable obligations provided
that the oversight board makes a finding that the loan was for legitimate redevelopment
purposes.” Section 34191.4, subdivision (b)(2)(A) provides that “loan agreements”
include “[l]oans for money . . . where the former redevelopment agency was obligated
to repay the money it received pursuant to a required repayment schedule.” (Italics
added.)
                                              B
       As did the parties and the trial court, we will limit our analysis to two of the loans,
with the understanding those two loans are representative of the remaining 11 loans.
The analyzed loans were labeled “Loans 3 and 4” or, collectively, the “Central

4 For a summary of the Dissolution Law, see Matosantos, supra, 53 Cal.4th at pp. 250-
251 and City of Brentwood v. Campbell (2015) 237 Cal.App.4th 488, 494.

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

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       (2) A Cash Account Report. This report showed transactions in the former RDA’s
bank account, including deposits and disbursements. It reflected the following three
deposits, labeled as loan proceeds on the Central Business District project: $192,100 on
January 26, 1996; $200,000 on October 14, 1996; and $46,700 on January 24, 1997.
This report was audited as part of the former RDA’s audited financial statements. The
entries do not state the source of the funds other than “LOAN PROCEEDS.” Fresno
submitted an additional document purporting to show that the deposits of loan proceeds
in the Cash Account Report were from Loans 3 and 4, but the trial court did not rely on
it because Fresno did not explain who prepared the report and when it was prepared.
The additional document also did not establish Fresno was the source of the funds
received.
       (3) A Reconciliation Statement. This document, identified as for “Tax Year 1997-
98,” reflects seven rows of amounts purporting to show indebtedness based on
promissory notes. As the trial court noted, however, there is no proof these purported
promissory notes actually existed because Fresno did not produce promissory notes. The
Reconciliation Statement also does not identify who holds the promissory notes, to whom
the former RDA is indebted, or payment terms and interest rates for the promissory notes.
       (4) Fiscal Year 1997 and 1998 Budget Reports. The reports reflect receipt of
“Loan Proceeds” for the Central Business District project matching the amounts for
Loans 3 and 4. However, as the trial court observed, the budget reports do not identify
the lender or the terms relating to the loan proceeds.
       (5) Financial Statements/Auditor’s Report for fiscal year ending June 30, 1998.
In this audited report showing advances received from Fresno, two entries appear to be
consistent with Loans 3 and 4. One entry states: “Central Business District - $192,100
advance of January 26, 1996, interest rate at 5.49%.” And another entry states: “Central
Business District - $246,700 advance [of] June 30, 1997, bearing interest at 6.0%.”

                                              5
       In a similar report, however, for the fiscal year ending June 30, 1996, the
statement included the Central Business District advance of January 26, 1996, for
$192,000 in a list of cash advances to the former RDA from Fresno. At the bottom of the
list, the report stated: “The above advances are payable on demand and secured by and
payable from the incremental property tax revenues of the redeveloped properties.
Payments on the advances and related interest expenditures are based on budgetary
priorities as approved by the [former RDA].” (Italics added.)
       At the end of its analysis of the Financial Statements/Auditor’s Report for fiscal
year ending June 30, 1998, the trial court wrote: “When combined with the Cash
Account Report and the Budget Reports, this is strong evidence that it was indeed the
City that loaned $192,100 and $246,700, in cash, to the RDA on the dates and pursuant to
the terms listed in the financial statements.” In a footnote, the trial court added: “In
other words, the financial statements supply the information on the source of the loans
that was missing from the Cash Account Report, the Reconciliation Statement, and the
Budget Report.”
       Having found that Fresno successfully established it made Loans 3 and 4 as “cash
loans” to the former RDA, the trial court proceeded to address whether there was a
“required repayment schedule.” Even though the 1963 Agreement required that the loans
to the former RDA be reflected in promissory notes and the interest rates for Loans 3
and 4 did not match the 4-percent rate stated in the 1963 Agreement, the trial court
looked to the 1963 Agreement to establish the repayment terms. The trial court
concluded that, because the 1963 Agreement required the former RDA to pay to
Fresno all tax-increment revenues it received after having satisfied the former RDA’s
bond indebtedness obligations, the 1963 Agreement provided a “required repayment
schedule.”
       Having analyzed two of the 13 loans, the trial court entered a judgment that
granted the petition for writ of mandate in part and remanded the matter to [Finance] to

                                              6
conduct its analysis of the remaining 11 loans in a manner consistent with the trial court’s
analysis of Loans 3 and 4. Finance filed a notice of appeal, but this court dismissed the
appeal because it was from an interlocutory remand, not a final judgment. (City of
Fresno v. Department of Finance (C083084, June 5, 2019) [nonpub. opn.].) Finance
then conceded that, in applying the trial court’s analysis of Loans 3 and 4 to the
remaining 11 loans, Finance would be constrained to conclude that all of the loans were
enforceable obligations under section 34191.4. The trial court entered judgment granting
the petition for writ of mandate as to all 13 loans.
                                STANDARD OF REVIEW
       “Courts exercise limited review in ordinary mandamus proceedings. They may
not reweigh the evidence or substitute their judgment for that of the agency. They uphold
an agency action unless it is arbitrary, capricious, lacking in evidentiary support, or was
made without due regard for the petitioner’s rights. [Citations.] However, courts must
ensure that an agency has adequately considered all relevant factors, and has
demonstrated a rational connection between those factors, the choice made, and the
purposes of the enabling statute. [Citation.] Because trial and appellate courts perform
the same function in mandamus actions, an appellate court reviews the agency’s action de
novo. [Citation.]” (Sequoia Union High School Dist. v. Aurora Charter High School
(2003) 112 Cal.App.4th 185, 195 (Sequoia Union).)
       “In a petition for writ of mandate brought pursuant to Code of Civil Procedure
section 1085 . . . , the petitioner bears the burden of pleading and proving the facts on
which the claim for relief is based. (Code Civ. Proc., § 1109; Evid. Code, § 500;
[citations].)” (California Correctional Peace Officers Assn. v. State Personnel Bd.
(1995) 10 Cal.4th 1133, 1153-1154.) Therefore, Fresno bore the burden of pleading and
proving facts in the trial court to establish Fresno loaned money to the former RDA with
a required repayment schedule. The trial court’s task in this regard was to determine
whether substantial evidence supported Finance’s determination. This is just another way

                                              7
of saying the trial court’s task was, without reweighing the evidence, to determine
whether Finance’s determination was “lacking in evidentiary support.” (Sequoia Union,
supra, 112 Cal.App.4th at p. 195.) In other words, a mandamus proceeding is not a
species of trial de novo in the trial court; instead, it is only a review of an agency’s action
whether it was “arbitrary, capricious, lacking in evidentiary support, or was made without
due regard for the petitioner’s rights. (Ibid.)
       Fresno asserts Finance denied reinstatement of Loans 3 and 4 based solely on the
absence of promissory notes to support the loans. With this assertion, Fresno attempts to
limit Finance’s arguments and our review to whether the loans could be reinstated
without promissory notes. (See Southern Cal. Edison Co. v. Public Utilities Com. (2000)
85 Cal.App.4th 1086, 1111 [“We may not affirm an agency’s action on a basis not
embraced by the agency itself.”].) However, we conclude Fresno’s attempt to thus limit
Finance’s arguments and our review is unavailing because Finance’s denial of
reinstatement of the loans was not so limited. While the correspondence between
Finance and Fresno shows that Finance asked repeatedly for the promissory notes
supporting Loans 3 and 4, it appears Finance requested the promissory notes because they
would provide evidence to support reinstatement of the loans, not necessarily that
promissory notes were the sine qua non of an agreement. Furthermore, the 1963
Agreement stated the former RDA would provide a promissory note for the cash
advances received from Fresno each fiscal year, so it is understandable that Finance
would look for promissory notes as evidence of loans. In the end, Finance denied
reinstatement of the loans because Loans 3 and 4 did not meet the requirements of
section 34191.4, subdivision (b) for reinstatement. We will not, therefore, limit our
review to whether a loan may be reinstated under 34191.4, subdivision (b) without a
promissory note evidencing the loan.
       Fresno notes that Finance denied reinstatement of Loans 3 and 4, which did not
have promissory notes, but approved reinstatement of other loans that were evidenced by

                                                  8
promissory notes. We will not conclude from this circumstance that Finance must be
limited on judicial review to whether a loan may be reinstated even though it was not
supported by a promissory note. Finance has authority to ensure compliance with
section 34191.4, subdivision (b) for each loan. (§ 34179, subd. (h).) Thus, it was
justified in treating each loan separately, considering the differing evidence provided by
Fresno for the loans.
                                      DISCUSSION
       Finance contends Fresno did not establish that Loans 3 and 4 were for money and
that the former RDA was obligated to pay on a schedule. We will proceed directly to
whether the former RDA was obligated to repay Fresno “pursuant to a required
repayment schedule.” (§ 34191.4, subd. (b)(2)(A).)
       Fresno’s argument regarding a required repayment schedule depends entirely on
whether Loans 3 and 4 were made under the 1963 Agreement. According to Fresno, the
1963 Agreement provided that “revenues received by the [former RDA] pursuant to this
Agreement shall be paid to the City as soon as the same shall be received” by the former
RDA, but that “payment upon said note and each of them shall not commence until any
and all bond indebtedness of the Agency . . . shall have been repaid.” Thus, the former
RDA was obligated, under the 1963 Agreement, to use all of its revenue to pay its bonded
indebtedness then to repay the loans. The trial court also relied on this provision of the
1963 Agreement to conclude Loans 3 and 4 had a required repayment schedule.
       Even if we were to assume that the 1963 Agreement established a “schedule” for
repayment -- a question that seems debatable -- the repayment schedule would only assist
Fresno in this case if Loans 3 and 4 were made under the 1963 Agreement. If Loans 3
and 4 were not made under the 1963 Agreement, there was no required repayment
schedule.
       There is some evidence to support Fresno’s contention that Loans 3 and 4 were
made under the 1963 Agreement. For example, the 1963 Agreement referred to the

                                             9
Central Business District renewal project and stated that the former RDA would become
indebted to Fresno for “any and all sums which are advanced by the City in furtherance
of the development of the [Central Business District renewal project] whether such sums
be advanced by way of cash or the performance of services and the furnishing of
materials.” Fresno claims the explicit reference to the Central Business District renewal
project in the transfers for Loans 3 and 4 is sufficient evidence that the loans were, in
fact, made under the 1963 Agreement. According to this assertion, even though there are
no loan documents specifically referencing Loans 3 and 4, those loans were made for the
Central Business District renewal project, and the 1963 Agreement also referred to loans
made for the Central Business District renewal project.
       But under our standard of review, we do not review the record for sufficient
evidence to support the petitioner’s factual assertions; instead, we review the record
for sufficient evidence to support the Agency’s decision. (Sequoia Union, supra,
112 Cal.App.4th at p. 195.) Such a distinction makes a difference here, because although
there is evidence that Loans 3 and 4 were made under the 1963 Agreement, there is also
evidence that Loans 3 and 4 were not made under the 1963 Agreement.
       The following evidence would support a fact-finder in concluding that Loans 3
and 4 were not made under the 1963 Agreement. The 1963 Agreement was executed 33
years before Loans 3 and 4. There is no document stating that Loans 3 and 4 were made
under the 1963 Agreement. The 1963 Agreement provided for a 4 percent interest rate,
but Loans 3 and 4 had interest rates of 5.49 and 6 percent, respectively. The financial
statement and audit report for the fiscal year ending June 30, 1996 indicated that the cash
advances on that statement (including Loan 3) were payable “on demand,” “based on
budgetary priority as approved by the [former RDA],” which is not only inconsistent with
a “schedule” of repayment, but is also inconsistent with the requirement of the 1963
Agreement that “revenues received by the [former RDA] pursuant to this Agreement
shall be paid to [the] City as soon as the same shall be received,” subject only to “any and

                                             10
all bonded indebtedness of the Agency . . . .” Fresno did not produce evidence showing
that the former RDA made payments on Loans 3 and 4 as soon as it received revenue not
required to satisfy its bond indebtedness obligations. And Fresno failed to produce
promissory notes supporting Loans 3 and 4, even though the 1963 Agreement required
the former RDA to deliver to Fresno a promissory note for loans made during each fiscal
year. With all these deviations from the 1963 Agreement, a factfinder would be justified
in concluding that Loans 3 and 4 were made under an agreement or multiple agreements
independent of the 1963 Agreement. Indeed, Fresno makes no argument that it could not
have loaned money to the former RDA under an agreement other than the 1963
Agreement.
       Another way of describing the state of the record is that the evidence does not
show, as a matter of law, that Loans 3 and 4 were made under the 1963 Agreement.
Therefore, we cannot say Finance’s denial of reinstatement of Loans 3 and 4 was lacking
in evidentiary support. On the other hand, we can say Fresno failed to carry its burden of
establishing that Finance’s determinations were lacking in evidentiary support. (Sequoia
Union, supra, 112 Cal.App.4th at p. 195.)
       Fresno makes several arguments that the deviations from the 1963 Agreement
do not preclude a finding that Loans 3 and 4 were made under the 1963 Agreement.
For the most part, these arguments lack merit because they do not recognize
that Fresno bore the burden of showing that Finance’s decision lacked evidentiary
support. (Sequoia Union, supra, 112 Cal.App.4th at p. 195.) We address each argument
in turn.
       Fresno argues the former RDA’s failure to perform on Loans 3 and 4 consistent
with the requirements of the 1963 Agreement is insignificant because, in Fresno’s words,
“failure to perform nonmaterial terms of an agreement is not a breach and does not
invalidate the contract.” This argument, however, misses the point that the
inconsistencies between the 1963 Agreement and Loans 3 and 4 constitute substantial

                                            11
evidence Loans 3 and 4 were not made under the 1963 Agreement. It is not a question of
breach or invalidation of a contract.
       Fresno also argues: “[T]he fact that the Successor Agency [Fresno] could not
locate any statements or promissory notes for [Loans 3 and 4], made decades ago, does
not mean that they did not exist at one time. [Finance] cannot use the absence of
evidence to infer that it never existed. Nor were promissory notes required to finalize
the Agreement. Indeed, the 1963 Agreement does not condition the [former] RDA’s
indebtedness on a promissory note.” Contrary to Fresno’s argument, the absence
of statements and promissory notes supports a conclusion Loans 3 and 4 were not
made under the 1963 Agreement. Fresno had the burden to produce evidence to the
contrary.
       Fresno further argues there was some evidence from which it can be inferred the
former RDA complied with the required repayment schedule in the 1963 Agreement.
But Fresno bore the burden of establishing that fact. And, even if it is true the former
RDA complied with the repayment provisions of the 1963 Agreement, there is other
evidence Loans 3 and 4 were not made under the 1963 Agreement -- for example, the
inconsistent interest rates, the inconsistent repayment requirements, and the absence of
promissory notes.
       Fresno additionally argues the difference in the stated interest rates is irrelevant
because the Dissolution Law provides for an interest rate of 3 percent on reinstatement of
a loan between a sponsoring agency and its former RDA. (See § 34191.4, subd. (b)(3).)
This argument also misses the legal point, which is that the difference in the interest rates
in the 1963 Agreement and the audited financial statements with respect to Loans 3 and 4
is evidence that Loans 3 and 4 were not made under the 1963 Agreement.
       Indeed, there is no evidence in this record that Fresno and the former RDA had the
1963 Agreement in mind when they entered into Loans 3 and 4.

                                             12
       We therefore conclude Finance’s determination that Loans 3 and 4 could
not be reinstated under 34191.4, subdivision (b) was not lacking in evidentiary support.
                                     DISPOSITION
       The judgment is reversed, and the matter is remanded with directions to enter
judgment denying the petition for writ of mandate. Appellants are awarded their costs on
appeal. (Cal. Rules of Court, rule 8.278(a).)

                                                    /S/
                                                 MAURO, J.

We concur:

    /S/
HULL, Acting P. J.

    /S/
DUARTE, J.

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