Holloway v. Showcase Realty Agents, Inc.
22 Cal. App. 5th 758
| Cal. Ct. App. 5th | 2018Background
- San Lorenzo Valley Water District purchased real property from the Dildines in 2010; escrow closed in November 2010. Director Terry Vierra had a financial interest: he was a majority shareholder in the brokerage (Showcase) and his wife was the listing agent; Vierra received brokerage commissions when escrow closed.
- Bruce Holloway, a District taxpayer, learned of Vierra's involvement in 2013 and sued in 2014 (second amended complaint filed July 2015) alleging violations of Government Code § 1090 and seeking a declaration the contract was void and disgorgement.
- District, Showcase, and Vierra demurred, arguing (1) Holloway lacked standing under Gov. Code § 1092 and (2) Holloway’s claim was time-barred under validation statutes (Code Civ. Proc. §§ 860–863 / Water Code § 30066). The trial court sustained the demurrer as to the § 1090 claim and found Holloway lacked § 526a taxpayer standing, but overruled the demurrer on the Political Reform Act claim.
- On appeal, the court considered (a) whether validation statutes required a 60-day reverse-validation action and (b) whether Holloway had standing under Gov. Code § 1090 and CCP § 526a.
- The Court of Appeal rejected the defendants’ argument that the validation statutes applied, construing the term "contracts" narrowly and following precedent that conflict-of-interest suits under § 1090 are not subject to the 60‑day validation deadline.
- The court also held Holloway has standing: (1) taxpayer standing under CCP § 526a (he alleged he paid local taxes/fees) and (2) standing to bring a § 1090 conflict-of-interest claim under the weight of authority that permits litigants with an interest in the subject contract to sue. The judgment was reversed and costs awarded to Holloway.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Holloway was required to bring a validation (reverse‑validation) action within 60 days (CCP §§ 860–863 / Water Code § 30066) | Holloway: § 1090 conflict claim not governed by validation statutes; no 60‑day bar | District/Showcase: Water Code § 30066 authorizes validation of contracts, so Holloway’s challenge is time‑barred | Held: Validation statutes do not apply to § 1090 conflict claims here; no 60‑day requirement (narrow construction of "contracts") |
| Whether Holloway had standing to challenge the contract under Gov. Code § 1090 and as a taxpayer under CCP § 526a | Holloway: as a taxpayer who pays fees/taxes and as a litigant with an interest in the contract, he has standing to sue to void a contract tainted by an interested public official | District/Showcase: only parties to the contract may invoke § 1092; taxpayer standing under § 526a fails because the District had discretion to act | Held: Holloway has standing under CCP § 526a and under Gov. Code § 1090 (adopting the view that "any party"/"any party" includes litigants with sufficient interest); San Bernardino’s narrow rule rejected in favor of the weight of authority |
Key Cases Cited
- Kaatz v. City of Seaside, 143 Cal.App.4th 13 (Cal. Ct. App. 2006) (construing "contracts" narrowly for validation statutes)
- City of Ontario v. Superior Court, 2 Cal.3d 335 (Cal. 1970) (validation statutes meant for bonds, assessments, financing; "contracts" read narrowly)
- Santa Clarita Organization for Planning & Environment v. Abercrombie, 240 Cal.App.4th 300 (Cal. Ct. App. 2015) (conflict‑of‑interest claims under § 1090 not subject to validation statutes)
- San Bernardino County v. Superior Court, 239 Cal.App.4th 679 (Cal. Ct. App. 2015) (held only contract parties have § 1092 standing; criticized and distinguished)
- San Diegans for Open Government v. Public Facilities Financing Authority of City of San Diego, 16 Cal.App.5th 1273 (Cal. Ct. App. 2017) (construed § 1092 standing broadly to include litigants with interest; criticized San Bernardino)
- Thomson v. Call, 38 Cal.3d 633 (Cal. 1985) (public officers’ interested contracts are void; public‑policy rationale supporting enforcement)
- Gilbane Building Co. v. Superior Court, 223 Cal.App.4th 1527 (Cal. Ct. App. 2014) (contracts violating § 1090 are void; taxpayer standing principles discussed)
- McGee v. Balfour Beatty Const., LLC, 247 Cal.App.4th 235 (Cal. Ct. App. 2016) (taxpayer standing to challenge lease‑leaseback contracts under § 1090)
- California Taxpayers Action Network v. Taber Construction, Inc., 12 Cal.App.5th 115 (Cal. Ct. App. 2017) (endorsing McGee approach; taxpayers may have § 1090 standing)