Davis v. Fresno Unified School Dist., 528 P.3d 1

Fresno Unified sold Measure K and Q general obligation bonds in 2011, receiving ~ $108 million to fund school facility projects; debt service paid from ad valorem property taxes.
In Sept. 2012 the District executed a lease–leaseback (Ed. Code § 17406) with Harris Construction for a new middle school: District leased land for $1 (Site Lease); contractor built facilities and leased them back (Facilities Lease); final payment and title transfer occurred after Notice of Completion in 2014.
Plaintiff (a local property owner/contractor) sued in 2012 challenging the legality of the lease–leaseback and sought disgorgement; procedural history included demurrers, appeals, and a Court of Appeal reversal holding validation statutes did not apply.
Defendants argued the challenge was a reverse validation action that had to be brought under the validation statutes (Code Civ. Proc. § 860 et seq.) because Government Code § 53511 makes local agency “contracts” subject to validation.
The Supreme Court granted review limited to whether the lease–leaseback here is a “contract[]” within § 53511 and held it is not, because the project was already fully funded by prior general obligation bonds and bond payment did not depend on the lease–leaseback.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a lease–leaseback funded through bond proceeds (but where bonds were sold before the lease and debt service is paid from ad valorem taxes) is a “contract[]” under Gov. Code § 53511 and therefore subject to validation procedure	Davis: The lease–leaseback is not a § 53511 contract; validation statutes do not bar his in personam taxpayer/disgorgement claims	District/Contractor: § 53511 covers such contracts because they are bound up with bond financing, marketability, and federal tax consequences; reverse validation is required	Held: § 53511’s word “contracts” is limited to contracts inextricably bound up with government indebtedness (i.e., contracts on which debt financing directly depends). The lease–leaseback here is not such a contract because bonds pre-funded the project and debt service depended on property taxes, so § 53511 does not apply.

City of Ontario v. Superior Court, 2 Cal.3d 335 (Cal. 1970) (§53511 read in light of legislative history; validation 60‑day rule and scope)
Graydon v. Pasadena Redevelopment Agency, 104 Cal.App.3d 631 (Cal. Ct. App. 1980) (contracts must be “inextricably bound up with” indebtedness to fall within §53511)
Walters v. County of Plumas, 61 Cal.App.3d 460 (Cal. Ct. App. 1976) (loan guarantees necessary to obtain financing are subject to validation)
Friedland v. City of Long Beach, 62 Cal.App.4th 835 (Cal. Ct. App. 1998) (agency guarantees of third‑party debt required validation)
McLeod v. Vista Unified School Dist., 158 Cal.App.4th 1156 (Cal. Ct. App. 2008) (when challenged action is essential to bond financing, validation applies)
McGee v. Torrance Unified School Dist., 49 Cal.App.5th 814 (Cal. Ct. App. 2020) (held contrasted rule; partially disapproved by this Court)
Bonander v. Town of Tiburon, 46 Cal.4th 646 (Cal. 2009) (history and purpose of the validation statutes)
City of Los Angeles v. Offner, 19 Cal.2d 483 (Cal. 1942) (multiyear lease not a constitutional debt if annual consideration is received)
Davis v. Fresno Unified School Dist., 57 Cal.App.5th 911 (5th Dist. 2020) (Court of Appeal decision below holding §53511 inapplicable)
Weiss v. S.E.C., 468 F.3d 849 (D.C. Cir. 2006) (federal arbitrage/tax‑exempt bond issues; factual background considered on tax arguments)