Gananian v. Wagstaffe

199 Cal.App.4th 1532

132 Cal.Rptr.3d 487

273 Ed. Law Rep. 346

11 Cal. Daily Op. Serv. 13,046

2011 Daily Journal D.A.R. 15,513

Jeffrey S. GANANIAN, Plaintiff and Appellant,

v.Stephen M. WAGSTAFFE, as San Mateo County District Attorney Defendant and Respondent.

No. A127698.

Court of Appeal, First District, Division 1, California.

Oct. 21, 2011.

Limited on Constitutional Grounds

West's Ann.Cal.Educ. Code § 15288

Law Offices of Jeffrey S. Gananian, Jeffrey S. Gananian, Pescadero, for Plaintiff and Appellant.

John C. Beiers, County Counsel, Ceide Zapparoni, Deputy County Counsel, for Defendant and Respondent.

MARGULIES, J.

Jeffrey S. Gananian appeals from a judgment dismissing his cause of action for declaratory relief against former San Mateo County District Attorney James P. Fox. Gananian sought a declaration that Education Code section 15288 required Fox to investigate and prosecute alleged violations of law associated with the expenditure of voter-approved school bond funds. We disagree, and affirm the judgment.

I. BACKGROUND

In April 2009, Gananian filed his original complaint against the La Honda–Pescadero Unified School District (the District) and its former superintendent, Timothy Beard, alleging waste and misuse of bond proceeds obtained pursuant to a district-wide school construction bond measure known as “Measure I.” The suit was filed under Education Code section 15284, which authorizes taxpayer suits to enjoin the misuse of bond funds obtained for school construction and rehabilitation from bond measures approved by voters under the provisions of Proposition 39. Proposition 39, known as the “Smaller Classes, Safer Schools, and Financial Accountability Act,” amended the California Constitution in 2000 to, among other things, “reduce from two-thirds to 55 percent the number of voters required to approve any bonded indebtedness proposed to be incurred by a school district for the ‘construction, reconstruction, rehabilitation, or replacement of school facilities.’ ” ( Ridgecrest Charter School v. Sierra Sands Unified School Dist. (2005) 130 Cal.App.4th 986, 993, 30 Cal.Rptr.3d 648.)Education Code section 15264 et seq. (the School Bond Act), including section 15284, in part codify Proposition 39. ( Committee for Responsible School Expansion v. Hermosa Beach City School Dist. (2006) 142 Cal.App.4th 1178, 1185, 48 Cal.Rptr.3d 705.)¹

After filing the suit, Gananian wanted to add allegations and claims that Beard and the District had violated the Political Reform Act of 1974(PRA) (Gov.Code, § 81000 et seq.) by having financial conflicts of interest and seeking to hide them by violating PRA reporting requirements. On April 24, 2009, Gananian sent a letter to the San Mateo County District Attorney, James P. Fox, requesting permission, as required by Government Code section 91007,² to pursue civil claims under the PRA. ³ As a statement of the grounds for believing a cause of action existed, Gananian's letter attached a letter written the previous day by an associate of Gananian's, Bryan Burns, to the chair of the Measure I Bond Oversight Committee (BOC) ⁴ asserting (1) Burns had reviewed all of the “Form 700's” ⁵ filed with the county for the past four years; (2) members of the BOC and a separate “Parcel Tax Committee” had not filed form 700's, nor had any District contractors; and (3) the failure to file the forms was “a big red flag that there may have been conflicts-of-interest ... intentionally hidden from public view.”

On May 13, 2009, Fox responded to Gananian by letter advising him, through a deputy, his office could “find no adequate basis [in Gananian's letter and attachment] for either filing a cause of action or granting permission to do so.” ⁶ The response explained that although Burns stated he had reviewed the form 700's, no specific information was provided regarding the individuals involved, the committees on which they served, or what each was alleged to have done or failed to do. Fox further noted there was no indication why the contractors would have been required to file form 700's since they were not government employees or officials.

On May 27, 2009, Gananian filed his first amended and supplemental complaint (FAC). It contained four causes of action. The first two realleged violations of the School Bond Act by Beard and the District, and sought to prevent waste and misuse of Measure I bond funds. The third cause of action alleged a controversy existed between Gananian and Fox over whether Gananian's letter of April 24, 2009 constituted a “written request with a sufficient statement of the grounds for believing that a cause of action exist[ed] under [Government Code sections 91004 or 91005],” and sought a declaration Gananian had set forth a sufficient written request and had permission to proceed with an action under the PRA. The fourth cause of action—made conditional on the outcome of the third cause of action—sought civil penalties and other relief under the PRA based on allegations that Beard and unnamed Doe defendants violated the PRA by filing fabricated form 700 statements, failing to determine whether required documents had been filed, and failing to take various steps to ensure that members of the BOC and Parcel Tax Committee filed statements of economic interests when required to do so.

On August 24, 2009, Fox demurred to the FAC and his office wrote a second letter responding to Gananian's letter of April 24. The demurrer argued there was no controversy between the parties because Fox had declined to pursue a PRA lawsuit and, therefore, Government Code section 91007 expressly granted Gananian permission to proceed with his own civil law suit for violations of the PRA. Fox asked the court to take judicial notice of the August 24 letter, which reiterated his office's decision not to proceed with a civil prosecution, but omitted any assertion—which would have been contrary to Government Code section 91007—that Gananian was not free to or did not have “permission” to file his own civil action.

In his opposition to the demurrer, Gananian made no argument there was an actual controversy over whether he was free to proceed with his own PRA action. Instead, he pivoted to a new theory as to the nature of his justiciable controversy with Fox's office. He asserted the parties' actual controversy was over whether or not Fox had an affirmative, nondiscretionary duty to investigate and prosecute his allegations concerning the failure of school personnel and contractors to file form 700's. Gananian maintained section 15288 of the School Bond Act created such a duty: “It is the intent of the Legislature that upon receipt of allegations of waste or misuse of bond funds authorized in this chapter, appropriate law enforcement officials shall expeditiously pursue the investigation and prosecution of any violation of law associated with the expenditure of those funds.” ⁷ ( Ed.Code, § 15288.) According to Gananian, because all of his form 700 allegations were “associated with the expenditure of” Measure I funds, Fox had a mandatory duty under Education Code section 15288 to expeditiously investigate and prosecute them, notwithstanding the permissive terms of Government Code section 91007. Far from ending the parties' controversy, Gananian insisted Fox's letter of August 24 proved Fox was declining to perform a duty Gananian contended was required of him by law.

The trial court granted Fox's unopposed request for judicial notice and sustained his demurrer without leave to amend. At oral argument, the trial court rejected Gananian's claim that Proposition 39 took away the district attorney's discretion over whether to prosecute. In its written order, the court noted the district attorney's office's concessions that (1) it had declined to prosecute the PRA action as requested by Gananian, and (2) the only prerequisite for Gananian to proceed with his own action under Government Code section 91007 had therefore also been satisfied. Since there was no controversy, the court found Gananian's third cause of action was moot, and sustained the demurrer on that basis without leave to amend. Gananian timely appealed from the ensuing judgment of dismissal.

II. DISCUSSION

On appeal, Gananian contends the facts alleged in his third cause of action support a cause of action for equitable relief to enjoin and compel the district attorney to investigate and prosecute any alleged violations of law associated with the expenditure of Measure I funds, including not only his claims of PRA violations, but also any other allegations of which the district attorney has notice.⁸ He contends his right to relief arises under Education Code section 15288.

“On appeal from a judgment of dismissal entered after a demurrer has been sustained without leave to amend, unless failure to grant leave to amend was an abuse of discretion, the appellate court must affirm the judgment if it is correct on any theory. [Citations.] If there is a reasonable possibility that the defect in a complaint can be cured by amendment, it is an abuse of discretion to sustain a demurrer without leave to amend. [Citation.] The burden is on the plaintiff, however, to demonstrate the manner in which the complaint might be amended.” ( Hendy v. Losse (1991) 54 Cal.3d 723, 742, 1 Cal.Rptr.2d 543, 819 P.2d 1.) “Mistaken labels and confusion of legal theory are not fatal; if [the] complaint states a cause of action on any theory.... [Citations.] [the] action cannot be defeated merely because it is not properly named.” ( Porten v. University of San Francisco (1976) 64 Cal.App.3d 825, 833, 134 Cal.Rptr. 839.)

In our view, the appeal in this case presents two distinct issues of statutory interpretation. First, does Education Code section 15288 create an affirmative, nondiscretionary duty on the part of district attorneys to investigate and prosecute alleged crimes related to the expenditure of Proposition 39 bond funds? Second, assuming for the sake of...