City of Anaheim v. Cohen
C081918A
| Cal. Ct. App. | Dec 19, 2017Background
- Anaheim (City), as successor to its Redevelopment Agency (RDA), sought Redevelopment Property Tax Trust Fund (RPTTF) disbursements to: (1) reimburse the City for construction payments on parking/alley work the former RDA owed under the LAB agreement ("Packing District"); and (2) fund Anaheim Housing Authority payments to Related under a revitalization agreement ("Avon/Dakota").
- To complete the Packing District work quickly the City executed a loan agreement with the City-as-successor (per former H&S Code §34173(h)), the City paid the contractor directly, and successor later sought RPTTF to repay the City. DOF denied reimbursement, citing lack of successor receipt of funds, nonparty status to the construction contract, and missing prior oversight‑board approval.
- For Avon/Dakota, the Authority and Related had a revitalization agreement; separately the City and RDA agreed to fund the Authority (funding agreement). DOF denied RPTTF claims because §34171(d)(2) renders agreements between a former RDA and its creator unenforceable.
- Plaintiffs (City, City-as-successor, Authority, Related) sued for mandamus and declaratory relief; trial court denied relief. Plaintiffs appealed.
- The Court of Appeal reversed: (1) the loan agreement created an enforceable obligation eligible for RPTTF repayment despite direct payment to the contractor and later oversight‑board approval; and (2) applying §34171(d)(2) to invalidate the RDA→Authority funding agreement, as applied, unconstitutionally impaired Related’s contract rights under the revitalization agreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the City–successor loan (Packing District) created an enforceable obligation eligible for RPTTF repayment | Loan form permitted direct disbursement to contractor; substance was a loan to successor so repayment from RPTTF is an enforceable obligation under §34173(h) | No enforceable obligation because successor never actually received loan proceeds and was not party to the construction contract | Court: The loan agreement created an enforceable obligation; direct payment to contractor did not defeat successor’s repayment obligation or status as borrower |
| Whether failure to obtain oversight‑board approval before entering the loan made the obligation unenforceable | Even if prior approval required, oversight board later reviewed and approved ROPS and separately approved the loan; oversight retained supervisory control via ROPS process | Failure to obtain prior oversight approval invalidates the loan and justifies DOF denial | Court: Retroactive oversight review and ROPS inclusion meant oversight exercised control; lack of prior approval did not justify denial |
| Whether §34171(d)(2) invalidating agreements between an RDA and its creator can be applied to bar RPTTF payments here without violating contract clauses (Avon/Dakota) | Enforcing §34171(d)(2) to defeat the funding agreement would unconstitutionally impair Related’s vested contract rights under the interdependent revitalization agreement | Statute validly invalidates such agreements to effect the statewide policy of RDA dissolution and revenue reallocation; no contract impairment here | Court: As applied, invalidation of the RDA→Authority funding agreement substantially impaired Related’s contractual rights and exceeded constitutional bounds; DOF’s denial unconstitutional in this case |
| Whether plaintiffs are entitled to prejudgment interest on withheld RPTTF sums | Plaintiffs seek prejudgment interest under Civ. Code §3287 on sums wrongfully withheld | DOF opposes; trial court did not reach the issue | Court: No prejudgment interest awarded — relief is mandamus to compel DOF determinations (not monetary judgment by DOF), and plaintiffs failed to show a vested, certain monetary obligation for interest purposes |
Key Cases Cited
- California Redevelopment Ass'n v. Matosantos, 53 Cal.4th 231 (Cal. 2011) (describing dissolution of RDAs and transfer to successor agencies)
- City of Torrance v. Workers' Comp. Appeals Bd., 32 Cal.3d 371 (Cal. 1982) (contract‑clause analysis begins with whether obligations were impaired)
- United States Trust Co. v. New Jersey, 431 U.S. 1 (U.S. 1977) (heightened scrutiny where state impairs contract obligations to advance fiscal interests)
- Home Building & Loan Ass'n v. Blaisdell, 290 U.S. 398 (U.S. 1934) (impairment may occur without total destruction of contract rights)
- Teachers' Retirement Bd. v. Genest, 154 Cal.App.4th 1012 (Cal. Ct. App. 2007) (discussion of impairment and balancing under contract clause)
- City of Galt v. Cohen, 12 Cal.App.5th 367 (Cal. Ct. App. 2017) (no impairment found where challenged determinations did not affect bondholders' contractual rights)