Friday, April 6, 2018
Page 1
Court of Appeal:
Taxpayer Has Standing to Seek Invalidation Of Contract Based on Conflict of Interest
Member of Water Board That Purchased Land Was an Owner of Realty Company
By a MetNews Staff Writer
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TERRY VIERRA Realtor |
A taxpayer has standing to challenge a purchase by a governmental entity that is tainted with a conflict of interest, the Court of Appeal held yesterday.
The decision reinstates two lawsuits brought by Bruce Holloway, a resident of the town of Boulder Creek in Santa Cruz County, in an effort to invalidate the San Lorenzo Valley Water District’s purchase of real property in that town from Gregory and Edwige Dildine.
A member of the water district’s board at the time of the purchase in 2010 was Terry Vierra (who is no longer a member of that body). He was a principal in Showcase Realty, which handled the transaction, and his wife was the listing agent.
Vierra received a broker’s commission of $13,050, plus a community property interest in his wife’s commission.
Holloway’s action was dismissed after a judge sustained demurrers without leave to amend. Justice Eugene Premo wrote the opinion reversing that action.
CCP §526a
At issue was the applicability of Code of Civil Procedure §526a which says, in part:
“An action to obtain a judgment, restraining and preventing any illegal expenditure of, waste of, or injury to, the estate, funds, or other property of a county, town, city or city and county of the state, may be maintained against any officer thereof, or any agent, or other person, acting in its behalf,…by a citizen resident therein…who is assessed for and is liable to pay, or, within one year before the commencement of the action, has paid, a tax therein.”
The district and Showcase argues that the section cannot be invoked by Holloway because taxpayer suits are only authorized where the governmental entity lacks discretion.
Supreme Court Opinion
Premo, in an unpublished opinion, pointed to the California Supreme Court’s 1985 decision in Thomson v. Call. There, Justice Otto Kaus (since deceased):
“A contract in which a public officer is interested is void, not merely voidable.”
Premo reasoned:
“Here, Vierra was a District director who had a personal financial interest in the real estate contract, making the contract “void, not merely voidable,” and District had a duty to act to avoid it….
“Our Supreme Court has specifically stated that taxpayers have standing to sue under Code of Civil Procedure section 526a to set aside void or illegal contracts.”
Government Code Section
The jurist also pointed to Government Code §1092, which provides:
“Every contract made in violation of any of the provisions of Section 1090 may be avoided at the instance of any party except the officer interested therein.”
Sec. 1090 says, in part:
“Members of the Legislature, state, county, district, judicial district, and city officers or employees shall not be financially interested in any contract made by them in their official capacity, or by any body or board of which they are members.”
Premo said there is a conflict among the districts but that “[w]e are persuaded by the weight of authority favoring standing to assert conflict of interest claims” pursuant to §1092.
The case is Holloway v. Showcase Realty Agents, Inc., H043492.
Copyright 2018, Metropolitan News Company