Judge James C. Chalfant, Case 22STCV22817 2023-03-14 Tentative Ruling

Respondents Successor Agency to the Compton Community Redevelopment Agency (“Successor Agency”), the City of Compton (“City”), the City Council of the City of Compton (“City Council”), Mayor Emma Sharif (“Sharif”) in her official capacity (collectively, “Compton Respondents”), and Olson Urban Housing, LLC (“Olson”), demur to the Second Amended Petition (“SAP”) filed by Petitioner Malloy Family Partners, LP (“Malloy”).

The court has read and considered the moving papers, opposition,[1] and reply,[2] and renders the following tentative decision.

Petitioner Malloy filed the Petition against Respondents on July 15, 2022. The operative pleading is the SAP, filed on January 17, 2023, alleging (1) abuse of discretion as to disposition of public property and (2) violation of the California Public Records Act (“CPRA”) (Govt. Code section 6250 et seq.) The SAP alleges in pertinent part as follows.

Malloy is a limited partnership with its principal place of business in Riverside County. SAP, ¶3. It transacts business and operates within the City. SAP, ¶3.

In March 2008, the Compton Redevelopment Agency purchased 2.55 acres of land at 250 N. Central Compton, California, 90220 (“Property”) for $3,750,000. SAP, ¶28. Under Health & Safety (“H&S”) Code section 34172 et seq., the Successor Agency inherited all assets of Compton Redevelopment Agency, including the Property. SAP, ¶12.

On September 15, 2015, Malloy purchased property at 206 Central Avenue, Compton, CA. SAP, ¶11.

On August 25, 2017, Malloy, as the owner of adjoining land, offered to purchase the Property for $2,606,000. SAP, ¶¶ 11, 13, Ex. A. On March 29, 2018, the City Manager’s Office advised Malloy that the Property was available for acquisition and development. SAP, ¶14, Ex. B. The City Manager’s Office included a link to its Request for Proposals (“RFP”) to purchase the Property and informed Malloy that the deadline for a responsive proposal was May 1, 2018 at 3:00 p.m. SAP, ¶14, Ex. B.

The RFP required that any proposal be to acquire and develop the Property as a commercial-retail development, a mixed-use commercial, retail and residential development, or ‘for-sale’ housing that results in a multi-family unit development. SAP, ¶14, Ex. D. The RFP’s goal was to select the bidder that would build a development yielding the greatest combination of financial and community benefits for the City community. SAP, ¶14, Ex. D. The RFP explained that the Successor Agency would dispose of the Property at 100% fair market value within six months from the date of the appraisal identifying that fair market value. SAP, ¶14, Ex. D. The bidder also needed to demonstrate a history of at least five successful projects. SAP, ¶14, Ex. D.

The key factors in deciding which the Successor Agency would select a bidder would include: (1) optimal site development that maximizes land use and yielding financial returns to the City in the form of property taxes, sales taxes, utility user fees, and other financial benefits to the community; (2) relevant experience and qualifications of the development team to perform completion of the development project; (3) demonstrated capacity and proof of capability to finance the construction and completion of the proposed development; (4) the demonstrated ability to develop and lease spaces (commercial or retail) in urban communities with demographics similar to the City or, alternatively, a housing development; and (5) proven ability to expedite the sale of the developed housing units. SAP, ¶14, Ex. D. The Successor Agency would favor mixed-income development with at least 50% of units to be sold at market rates. SAP, ¶14, Ex. D. After evaluating all proposals, the Successor Agency reserved the right to reject all proposals. SAP, ¶14, Ex. D.

On April 29, 2018, Malloy submitted a proposal to purchase the Property in response to the RFP. SAP, ¶16, Ex. E. Malloy’s proposal was to expand its adjacent business on the Property with employee parking and develop a commercial center. SAP, ¶16, Ex. E. The City acknowledged receipt of Malloy’s proposal on May 17, 2018. SAP, ¶16, Ex. F.

On August 13, 2018, the Successor Agency invited all bidders on the Property to make formal presentations at a September 11, 2018 workshop. SAP, ¶18, Ex. G1. The email included a letter that the Successor Agency was rejecting all RFP bids and would accept unsolicited proposals, and that Malloy could elect that its proposal be retained as an open proposal for future consideration. SAP, ¶18, Ex. G2. Malloy requested that the Successor Agency treat its proposal as an offer to purchase. SAP, ¶18, Ex. G2.

On September 11, 2018, Malloy presented its proposal for the same $2,606,000 purchase price previously offered. SAP, ¶19, Ex. H. Olson also presented a proposal. SAP, ¶19.

On September 21, 2018, when Malloy asked the City about its decision, the City replied that it had directed staff to negotiate with Olson for sale of the Property. SAP, ¶20, Ex. I. The City’s email said that the parties were still in negotiation and that Malloy would receive a formal letter the next week. SAP, ¶20, Ex. I. The City sent such a letter on October 8, 2018. SAP, ¶21, Ex. J.

Malloy did not obtain a copy of the Purchase and Sale Agreement (“PSA”) between Olson, the Successor Agency, and the City until 2021. SAP, ¶22, Ex. K. The PSA was entered into in furtherance of the Long Range Property Management Plan (“LRPMP”) for the Successor Agency and for development of a for-sale residential project with residential three-story townhomes and other associated improvements. SAP, ¶22, Ex. K. The purchase price was $607,161, plus $25,750 for another parcel of land the City would try to acquire. SAP, ¶22, Ex. K.

In exchange for an agreement to restrict sale of three of the 57 project townhomes to low-income persons at affordable prices, the City also agreed to issue a $2,222,161 grant to Olson. SAP, ¶24, Exs. K, K3. Per a Grant Deed Rider, Olson is required to use the grant only for costs related to development of three low-income units. SAP, ¶24, Ex. K, K3. The construction and sale of those units shall comply with Health and Safety Code (“H&S Code”) section 33334.2(e)(5), and they must remain at an “Affordable Sales Price” for 45 years. SAP, ¶24, Ex. K3. Olson was required to apply good faith efforts to market and sell the units to eligible purchasers as soon as possible with the help of the City’s homebuyer interest list. SAP, ¶24, Ex. K3. The City would have the right to enforce the Grant Deed Rider. SAP, ¶24, Ex. K3.

The City recorded the Grant Deed to Olson for the Property in 2021. SAP, ¶23, Ex. L.

Malloy alleges that the Successor Agency failed to provide full and competitive bidding because it rejected a $2.6 million offer and instead subsidized Olson’s $600,000 offer with an illegal $2,222,161 gift. SAP, ¶26. The gift violated Cal. Const. Article XVI, section 6, which does not allow the legislature or any political subdivision to make any gift of public money. SAP, ¶¶ 27, 37.

The Compton Respondents made this gift without the knowledge and approval of the successor agency oversight board as required by H&S Code section 34181(f). SAP, ¶28. Under H&S Code section 34179, successor agencies must have oversight boards with seven members who are appointed pursuant to statute. SAP, ¶40. On information and belief, the Successor Agency has no such board. SAP, ¶41. Although the City Council acts in that capacity, it does not have seven members or provide oversight for most of the activities of the Successor Agency. SAP, ¶41.

On information and belief, the Successor Agency is tasked with disposing of property zoned for retail, commercial, and industrial development purposes while the Housing Successor Agency is responsible for residential development. SAP, ¶48. The Property was owned by the Successor Agency, which should not have conveyed it for residential purposes. SAP, ¶48.

On June 24, 2021, and March 22 and May 17, 2022, Malloy filed CPRA requests for (1) any records regarding the Property from January 1, 2017 thereafter, and (2) any records regarding the Property by or between the Successor Agency and any entity seeking to develop or purchase the Property from January 1, 2017 thereafter. SAP, ¶¶ 52-53, Ex. P. The City’s Public Records Center responded, suggesting that it would process the request within ten days. SAP, ¶54. As of July 5, 2022, the City has not produced the requested documents. SAP, ¶54.

Malloy seeks a writ of mandate that (1) directs all Respondents to rescind and set aside all actions taken for the Property, (2) enjoins them from granting any authority, permits, or entitlements as part of Olson’s project or with respect to the Property, and (3) commands them to immediately suspend all activities in furtherance of or implementation with respect to the Property. SAP Prayer for Relief ¶1. Malloy also seeks a preliminary and permanent injunction that enjoins Respondents from any further action pertaining to, or commencement of work on, the Property until they demonstrate compliance with the law. SAP Prayer for Relief ¶2.

Malloy further seeks orders that (1) declare the PSA, Grant Deed, and other documents in connection with the Property unenforceable, unlawful, and void ab initio, (2) enjoin Respondents from any action that recognizes the PSA or Olson’s claim to ownership of the Property, (3) compel Olson to reconvey the Property to the Successor Agency, and (4) declare the Successor Agency as the rightful owner of the Property. SAP Prayer for Relief ¶¶ 3-7. Malloy seeks attorney’s fees and costs for this action. SAP Prayer for Relief ¶¶ 8-9.

On July 18, 2022, Malloy served the Compton Respondents with the Petition and Summons. On July 19 and August 12, 2022, Malloy served Olson with the Petition and Summons.

On August 16, 2022, in lieu of a demurrer, the Compton Respondents filed a declaration that explained that the parties were still in the meet and confer process.

On September 14, 2022, the parties stipulated that Malloy would file an amended Petition by September 26, 2022 and that Respondents could use the filing date of the amended Petition to calculate the deadline for demurrer. The deadline for any Answer would be October 4, 2022.

On September 26, 2022, Malloy filed the First Amended Petition (“FAP”), having served it by email on September 24, 2022.

On October 12, 2022, the parties stipulated to transfer this action from Department 26 (Hon. Elaine Lu) to Department 1, which reassigned it to Department 85.

On December 13, 2022, the court sustained the demurrer to the FAP. The court’s tentative decision sustained the demurrer without leave to amend for all causes of action except the CPRA claim. Burns Decl., ¶5, Ex. 7. At the hearing, the court explained that an individual or entity does not have standing to enforce successor agency duties under H&S Code section 34177(a)(2), which only gives standing to taxing entities, the Department of Finance, and the auditor-controller. Burns Decl., ¶5, Ex. 8, p. 3. Thus, Malloy could not make a claim under the H&S Code. Id. Malloy might have standing for a public contract claim if it could argue that it would have been the winning bidder if the Successor Agency had followed the RFP. Burns Decl., ¶5, Ex. 8, p. 8. The court ruled that Malloy could not make a claim under the H&S Code but would have leave to amend to allege that it should have been the winning bidder on the RFP. Burns Decl., ¶5, Ex. 8, pp. 8-9. Malloy’s counsel replied that he would like to amend to make that argument. Id.

Demurrers are permitted in administrative mandate proceedings. CCP §§1108, 1109. A demurrer tests the legal sufficiency of the pleading alone and will be sustained where the pleading is defective on its face.

Where pleadings are defective, a party may raise the defect by way of a demurrer or motion to strike or by motion for judgment on the pleadings. CCP §430.30(a); Coyne v. Krempels, (1950) 36 Cal.2d 257. The party against whom a complaint or cross-complaint has been filed may object by demurrer or answer to the pleading. CCP §430.10. A demurrer is timely filed within the 30-day period after service of the complaint. CCP §430.40; Skrbina v. Fleming Companies, (1996) 45 Cal.App.4th 1353, 1364.

A demurrer may be asserted on any one or more of the following grounds: (a) The court has no jurisdiction of the subject of the cause of action alleged in the pleading; (b) The person who filed the pleading does not have legal capacity to sue; (c) There is another action pending between the same parties on the same cause of action; (d) There is a defect or misjoinder of parties; (e) The pleading does not state facts sufficient to constitute a cause of action; (f) The pleading is uncertain; (g) In an action founded on a contract, it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct; (h) No certificate was filed as required by CCP sections 411.35 or 411.36. CCP §430.10.

A demurrer tests the sufficiency of a pleading, and the grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters. CCP §430.30(a); Blank v. Kirwan, (1985) 39 Cal.3d 311, 318. The face of the pleading includes attachments and incorporations by reference (Frantz v. Blackwell, (1987) 189 Cal.App.3d 91, 94), but it does not include inadmissible hearsay. Day v. Sharp, (1975) 50 Cal.App.3d 904, 914.

The sole issue on demurrer for failure to state a cause of action is whether the facts pleaded, if true, would entitle the plaintiff to relief. Garcetti v. Superior Court, (1996) 49 Cal.App.4th 1533, 1547; Limandri v. Judkins, (1997) 52 Cal.App.4th 326, 339. The question of plaintiff’s ability to prove the allegations of the complaint or the possible difficulty in making such proof does not concern the reviewing court. Quelimane Co. v. Stewart Title Guaranty Co., (1998) 19 Cal.4th 26, 47.

The ultimate facts alleged in the complaint must be deemed true, as well as all facts that may be implied or inferred from those expressly alleged. Marshall v. Gibson, Dunn & Crutcher, (1995) 37 Cal.App.4th 1397, 1403. This rule does not apply to allegations expressing mere conclusions of law, or allegations contradicted by the exhibits to the complaint or by matters of which judicial notice may be taken. Vance v. Villa Park Mobilehome Estates, (“Vance”) (1995) 36 Cal.App.4th 698, 709.

For all demurrers filed after January 1, 2016, the demurring party must meet and confer in person or by telephone with the party who filed the pleading for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer. CCP §430.31(a). As part of the meet and confer process, the demurring party must identify all of the specific causes of action that it believes are subject to demurrer and provide legal support for the claimed deficiencies. CCP §430.31(a)(1). The party who filed the pleading must in turn provide legal support for its position that the pleading is legally sufficient or, in the alternative, how the complaint, cross-complaint, or answer could be amended to cure any legal insufficiency. Id. The demurring party is responsible for filing and serving a declaration that the meet and confer requirement has been met. CCP §430.31(a)(3).

“[A] demurrer based on a statute of limitations will not lie where the action may be, but is not necessarily, barred. [Citation.] In order for the bar of the statute of limitations to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows that the action may be barred.” State ex rel. Metz v. CCC Information Services, Inc., (2007) 149 Cal.App.4th 402, 413.

If a demurrer is sustained, the court may grant leave to amend the pleading upon any terms as may be just and shall fix the time within which the amendment or amended pleading shall be filed. CCP §472a(c). However, in response to a demurrer and prior to the case being at issue, a complaint or cross-complaint shall not be amended more than three times, absent an offer to the trial court as to such additional facts to be pleaded that there is a reasonable possibility the defect can be cured to state a cause of action. CCP §430.41(e)(1).

Additional admissible facts from the judicially noticed documents and FAP exhibits are as follows.

On December 23, 2015, the County’s Second Supervisorial District Consolidated Oversight Board (“Oversight Board”) passed a resolution approving the LRPMP for the Successor Agency. Burns Decl., ¶2, Ex. 4. Exhibit B-6 to the LRPMP requires that the Successor Agency sell the Property at the fair market value as confirmed by appraisal. Burns Decl., ¶2, Ex. 4. The fair market value was $2,618,000 as of the resolution. Burns Decl., ¶2, Ex. 4.

On October 5, 2021, the City Council passed Resolution 25,565, which approved both the PSA and the grant of housing funds to Olson. Burns Decl., ¶2, Ex. 3.

On November 16, 2021, the Oversight Board approved the sale of the Property to Olson in Resolution No. OB-2021-04. Burns Decl., ¶2, Ex. 2.

The FAP includes an Agenda and Staff Report of the Successor Agency’s governing body dated October 5, 2021. FAP, Ex. D. It reflects the City Manager’s approval of the sale of the Property Olson for $607,161. FAP, Ex. D.

Malloy’s FAP also includes an appraisal of the Property by Roth & Associates dated February 10, 2021. FAP, Ex. J. The report appraised the fee simple fair market value of the Property as $610,000. FAP, Ex. J.

Respondents demur to both causes of action in the SAP. Petitioner Malloy acknowledges that the CPRA claim is moot and opposes the demurrer only for the first cause of action. Opp. at 14.

On February 8, 2023, Respondents’ counsel sent a meet and confer letter to Malloy’s counsel that outlined the SAP’s perceived deficiencies. Burns Decl., ¶2, Ex. 1. The letter included a request that Malloy provide for a list of times to meet and confer by February 10, 2023. Burns Decl., ¶2, Ex. 1. Respondents have demonstrated that they fulfilled the meet and confer requirement.

Respondents point out that the court granted leave to amend the FAP on a limited basis. The court ruled on the first demurrer that Malloy did not have standing to enforce successor agency duties under H&S Code[4] section 34177, as section 34177(a)(2) only gives standing to taxing entities, the Department of Finance, and the auditor-controller. Burns Decl., ¶5, Ex. 8. The court stated that Malloy could allege a breach of public contract duty in the Successor Agency’s failure to award the sale of the Property to Malloy pursuant to the RFP. Burns Decl., ¶5, Ex. 8. Yet, the SAP still relies on section 34177 in the first cause of action for Abuse of Discretion re: Disposition of Public Property. Dem. at 5, 8.

Respondents correctly argue that Malloy did not amend the FAP to state a claim to allege that the Successor Agency breached the RFP as its counsel stated he wanted to do. Malloy cannot make such an allegation in good faith because the Successor Agency exercised its right to reject all bids under the RFP and decided to dispose of the Property pursuant to its LRPMP, which requires only that the Property be sold for “fair market value confirmed by an appraisal.” RJN Ex. 4. The Successor Agency negotiated with Olson and agreed to a PSA that included three low-cost housing units. The sale price was supported by an appraisal (FAP, Ex. J) and funded in part by a grant supported by a Financial Gap Analysis. SAP, ¶36. As a result, Malloy cannot contend that it should have been awarded a contract from an RFP that was terminated. Dem. at 10-11.[5]

The demurrer must be sustained because Malloy filed the SAP’s first cause of action without leave of court. The question becomes whether the court should permit additional leave to present a new claim in a Third Amended Petition.

Malloy argues that the court’s ruling on the first demurrer only stated that Malloy lacked standing to bring a claim for violation of section 34177, and it did not preclude Malloy from relying on section 34177 or other provisions of the H&S Code as an element of an abuse of discretion cause of action. Specifically, the court did not prohibit Malloy from bringing a cause of action for abuse of discretion in awarding a contract to Olson with specifications that were illegal and invalid and fail to provide for full and fair competitive bidding. The very purpose of a mandamus action is to compel government agencies to adhere to the law even where the decisions are discretionary. Opp. at 6.

It is true that traditional mandamus lies to prevent an agency’s abuse of discretion. CCP §1085. While mandamus will not lie to compel the exercise of a public agency’s discretion in a particular manner (American Federation of State, County and Municipal Employees v. Metropolitan Water District of Southern California, (2005) 126 Cal.App.4th 247, 261), it is available to compel an agency to exercise discretion where it has not done so (Los Angeles County Employees Assn. v. County of Los Angeles, (1973) 33 Cal.App.3d 1, 8), and to correct an abuse of discretion actually exercised. Manjares v. Newton, (1966) 64 Cal.2d 365, 370-71.

However, the discretion to be corrected must have a source or basis of authority. The court previously ruled that Malloy does not have standing to enforce the Successor Agency’s statutory duties. Therefore, sections 34177-34177.5 cannot be the source of the Successor Agency discretion at issue in the first cause of action. If they were, the first cause of action would simply recast the cause of action based on section 34177 for which Malloy lacks standing.

There would be nothing wrong with the SAP referring to section 34177 or other H&S Code provisions if they were not the source of the Successor Agency’s discretion that Malloy contends was abused. Malloy points to no other source for the Successor Agency’s discretion and that is because there is none. Successor agencies are creatures of statute, and their powers and duties are exhaustively presented in sections 34177-34177.5.

Malloy does not have a basis to claim that the Compton Respondents abused their discretion by failing to provide for full and competitive bidding based on the Successor Agency’s abuse of discretion under sections 34177-34177.5.

4. Unlawful Gift and Violation of Successor Agency Oversight Board Requirements

Malloy argues that the City unlawfully gifted Olson with $2.2 million in public funds in violation of Cal. Const. Article XVI, section 6. SAP, ¶¶ 27, 37. This gift was made without the knowledge of and approval by a statutorily defined successor agency oversight board per sections 34179(a) and 34181. SAP, ¶¶ 28, 40. Malloy claims taxpayer standing under CCP section 526a and mandamus public interest standing to raise these claims. Opp. at 10-11.[6]

The SAP’s claims on the issues of the lack of a City oversight board under section 34179(a) and lack of public approval under section 34181 are made only on information and belief (SAP, ¶¶ 41, 48), and they are not allegations of ultimate fact that must be accepted as true on demurrer. See Aubry v. Tri-City Hospital District, (1992) 2 Cal.4^th 962, 966-67 (demurrer accepts all material facts properly pleaded, but not contentions, deductions, or conclusions of fact or law).

Respondents rebut Malloy’s arguments that a gift of public funds was made without the knowledge of and approval by a statutorily defined successor agency oversight board. While the City does not have an oversight board created pursuant to section 34179(a), the County has the Oversight Board created pursuant to section 34179(q)(1). The purpose of a county oversight board appears to be to address the workload where least 40 oversight boards have been created under section 34179(a). Nothing in section 34179 gives jurisdiction priority to a section 34179(a) oversight board over a section 34179(q)(1) oversight board. The County’s Oversight Board had jurisdiction to approve the sale of the Property. It also complied with the public approval requirement of section 34181(f). See RJN Ex. 2.

The SAP also alleges that the Successor Agency is tasked with disposing of property zoned for retail, commercial, and industrial development purposes while the Housing Successor Agency is responsible for residential development. SAP, ¶48. The Property was owned by the Successor Agency, which should not have conveyed it for residential purposes. SAP, ¶48.

Malloy does not defend this allegation and it is rebutted by Respondents’ demurrer. A successor agency’s purpose is to dispose of assets and properties of the former redevelopment agency as directed by the oversight board. §34177(e). There is no legal support for the SAP’s claim that this purpose is limited to retail, commercial, and industrial development and not residential development. Dem. at 11.

Malloy has no basis to allege that the Compton Respondents violated the statutory oversight board requirements.

Standing is a threshold issue necessary to maintain a cause of action, and the burden to allege and establish standing lies with the plaintiff. Mendoza v. JPMorgan Chase Bank, N.A., (2016) 6 Cal.App.5th 802, 810. As a general rule, a party must be “beneficially interested” to seek a writ of mandate. Friends of Oceano Dunes, Inc. v. San Luis Obispo County Air Pollution Control Dist., (2015) 235 Cal.App.4th 957, 962 (citing CCP §1086). “Beneficially interested” has been generally interpreted to mean that one may obtain the writ only if the person has some special interest to be served or some particular right to be preserved or protected over and above the interest held in common with the public at large. SJJC Aviation Services, LLC v. City of San Jose, (“SJJC”) (2017) 12 Cal.App.5th 1043, 1053.

CCP section 526(a) permits a taxpayer to bring suit to restrain or prevent an illegal expenditure of public money. Connerly v. State Personnel Board, (“Connerly”) (2001) 92 Cal.App.4^th 16, 29. A taxpayer suit is closely related to a citizen suit for mandamus in which standing is based on a public right to procure enforcement of a public duty. Id. The two types of suits are closely related, with the difference that a taxpayer suit seeks to prevent an illegal expenditure while a citizen suit in mandamus seeks to compel the performance of a public duty. Id.

Respondents correctly noted in their demurrer to the FAP that taxpayer standing is prospective only; it cannot be used to confer standing to address an historical waste of public funds. See Connerly, supra, 92 Cal.App.4^th at 29. Malloy cannot rely on taxpayer standing to contest the City’s $2.2 million grant to Olson as an unlawful gift of public funds.

Where a plaintiff cannot satisfy the “over and above” test for private interest standing, California cases have still treated a plaintiff as beneficially interested for purposes of mandamus standing if the plaintiff satisfies the criteria for public interest standing. Asimow, et al., Administrative Law (2018), Ch. 14, §14:5. Public interest standing may be conferred “where the question is one of public right and the object of the mandamus is to procure the enforcement of a public duty.” Save the Plastic Bag Coalition v. City of Manhatten Beach, (2011) 52 Cal.4th 155, 166. This type of standing “promotes the policy of guaranteeing citizens the opportunity to ensure that no governmental body impairs or defeats the purpose of legislation establishing a public right.” Green v. Obledo, (1981) 29 Cal.3d 126, 144. In determining whether public interest standing applies, the court considers (1) whether “the public duty is sharp and the public need weighty” (SJJC, supra, 12 Cal.App.5^th at 1058), (2) whether the policy supporting public interest standing is outweighed by competing considerations of a more urgent nature (Reynolds v. City of Calistoga, (2014) 223 Cal.App.4th 865, 873), and (3) whether the claim of public interest standing is driven by personal objectives rather than broader public concerns (SJJC, supra, 12 Cal.App.5^th at 1057).

Other than Cal. Const. Art. XVI, section 6, Malloy has pointed to no public right violated by the City’s unlawful gift to Olson of $2.2 million in public funds. See Opp. at 12; SAP, ¶¶ 27, 37. Compton is a charter city and the constitutional prohibition against the gift of public funds does not apply to charter cities. See Sturgeon v. County of Los Angeles, (2008) 167 Cal.App.4^th 630, 637 (Cal. Const. Art. XVI, section 6 applies to counties and general law cities). There is no constitutional public duty of unlawful gift violated by the City.[7]

Respondents’ demurrer to the first cause of action is sustained because Malloy only had leave to amend to state a claim that the Successor Agency breached the RFP in failing to award it the contract. The demurrer to the second cause of action is also sustained because Malloy concedes that it is moot.

Although Malloy requests leave to amend (Opp. at 14), it does not demonstrate that it has a legitimate basis to do so. Malloy does not have a basis to claim that the Compton Respondents abused their discretion by failing to provide for full and competitive bidding based on the Successor Agency’s abuse of discretion under section 34177-34177.5. Malloy has no basis to allege that the Compton Respondents violated the statutory oversight board requirements. As for unlawful gift of public funds, Malloy does not have taxpayer standing to raise this historical claim and the City is not subject to the constitutional prohibition against the unlawful gift of public funds. Finally, mandamus public interest standing does not apply because Malloy cannot show that the City violated a the public duty that is sharp or that the public need is weighty. Leave to amend is denied. An OSC re: dismissal is set for April 6, 2023 at 9:30 a.m.

[1] Malloy opposes only as to the SAP’s first cause of action and concedes that the second cause of action is moot.

[2] Malloy failed to lodge a courtesy copy of its opposition in violation of the Presiding Judge’s First Amended General Order Re: Mandatory Electronic Filing. Its counsel is admonished to provide courtesy copies in all future filings.

[3] Respondents request judicial notice of (1) Resolution OB-2021-04, dated November 16, 2021 (Burns Decl., ¶2, Ex. 2); (2) City Council Resolution No. 25,565 authorizing the City Manager to enter into a PSA with Olson, dated October 5, 2021 (Burns Decl., ¶2, Ex. 3); (3) Resolution No. 2015.11 of the Oversight Board of the Successor Agency, dated December 23, 2015, adopting the LRPMP (Burns Decl., ¶2, Ex. 4); (4) a July 15, 2021 Memorandum re 250 N. Central - Financial Gap Analysis, from Keyser Marston Associates to Assistant City Manager Michael Antwine (Burns Decl., ¶2, Ex. 5); and (5) a Regulatory Agreement recorded on July 14, 2022 (Burns Decl., ¶2, Ex. 6).

The request for Exhibits 2-4 is granted under Evid. Code section 452(b), and the request for Exhibit 6 is granted under Evid. Code section 452(c). The request to judicially notice Exhibit 5 is denied. The memorandum is not an official agency act under Evid. Code section 452(c). The court also may review the court file for the current action, including the FAP’s exhibits.

[4] All further statutory references are to the H&S Code unless otherwise stated.

[5] Respondents also show that the three-year statute of limitations in CCP section 338 for such a claim has passed anyway. Malloy argues that the three-year statute did not accrue until 2021 when the Compton Respondents sold the Property to Olson. Opp. at 12; SAP, ¶¶ 22-23, Exs. K, L. A claim based on the Successor Agency’s failure to award Malloy the sale contract under the RFP would have accrued when the RFP was terminated, not when the Property was eventually sold. That occurred on August 13, 2018. SAP, ¶18, Ex. G2. The three-year statute of limitations passed.

[6] The SAP makes no allegation of taxpayer standing, which must be affirmatively alleged.

[7] Respondents argue that the City’s $2.2 million grant was not an illegal gift because it complied with all applicable laws. The City was expressly authorized by section 33334.2 to hold taxes allocated to it in a fund for purposes of improving low- and moderate-income housing, and by 33334.3(f) to use those funds for development of such housing subject to long-term affordability covenants. The City did just that. Olson only received this money if it agreed to restrict sale of three of the 57 townhomes to low-income persons at affordable prices for 45 years. SAP, ¶24, Exs. K, K3. Per a Grant Deed Rider, Olson could use the grant only for costs related to development of those units. SAP, ¶24, Ex. K, K3. Olson is required to apply good faith efforts to market and sell them to eligible purchasers as soon as possible with the help of the City’s homebuyer interest list. SAP, ¶24, Ex. K3. The City has the right to enforce the Grant Deed Rider. SAP, ¶24, Ex. K3. The City concludes that its compliance with H&S Code section 33334.3 means that the bargained-for grant of $2.2 million in exchange for 45-year affordability covenants is not a gift. Reply at 12-13.

Malloy argues that the gift of public funds is an issue of fact and that compliance with the law may not be dispositive of the unlawful gift issue. Opp. at 13-14. In determining whether an appropriation of public funds is a constitutionally proscribed gift, the fundamental inquiry is whether the money is to be used for a public purpose; if so, it is not a gift. Page v. MiraCosta Community College District, (2009) 180 Cal.App.4^th 471, 495. Whether a public purpose is served and whether an expenditure is so excessive as to not serve that public purpose is a question of fact. See id. at 496-97 (reversing summary judgment where agency’s settlement of claim may have been beyond its maximum exposure and akin to paying a wholly invalid claim). An expenditure of funds for a public purpose which incidentally benefits a private person is primarily a matter of legislative discretion that will not be disturbed if it has a reasonable basis. White v. State, (2001) 88 Cal.App.4^th 298, 311; Redevelopment Agency v. Shepard, (1977) 75 Cal.App.3d 453, 457. The sale of land from housing authority to a private party for construction of a housing project did not violate the prohibition against gift of public property since the transfer would promote a public purpose in encouraging the construction of low- or moderate-income housing. Winkleman v. City of Tiburon , (1973) 32 Cal.App.3d 834, 846.

Malloy points to no facts that the City’s grant, made in full compliance with the letter and purpose of a housing law for improving low- and moderate-cost housing, had no reasonable basis and therefore was an unlawful gift. Malloy’s allegation that the grant was an unconstitutional gift is a merely conclusion of law not accepted as true on demurrer. Vance, supra, 36 Cal.App.4th at 709.