Wednesday, April 3, 2019
Court of Appeal:
Third District Says Lawmakers’ Attempt to Confirm Validity of Finance Director’s Re-Routing Of Funds From National Mortgage Special Deposit Fund to General Fund Was Ineffective
By a MetNews Staff Writer
The Third District Court of Appeal yesterday declared ineffective an effort at legislative abrogation of its July 10, 2018 opinion ordering the re-routing of $331 million from general coffers to the National Mortgage Special Deposit Fund.
SB 861, signed into law on Sept. 10 by then-Gov. Jerry Brown, does not negate the impermissibility of funds having been shifted to the General Fund from the separate fund set up as a repository of California’s share of proceeds from the National Mortgage Settlement (“NMS”) with major lenders, blamed for the mortgage crisis that started in 2007, Justice Andrea Lynn Hoch wrote.
California received about $410 million from the $2.5 billion 2012 settlement, and a special deposit fund was set up pursuant to Government Code §12531. Under the NMS, “[e]ach State Attorney General shall designate the uses of the funds” and “[t]o the extent practicable, such funds shall be used for purposes intended to avoid preventable foreclosures, to ameliorate the effects of the foreclosure crisis, to enhance law enforcement efforts to prevent and prosecute financial fraud, or unfair or deceptive acts or practices and to compensate the States for costs resulting from the alleged unlawful conduct” of the defendants.
Last Year’s Opinion
The Court of Appeal last year affirmed the determination by Sacramento Superior Court Judge Timothy M. Frawley that $331,044,084 was unlawfully diverted by the director of finance from the special fund and directed the trial court, on remand, to issue a writ ordering restoration of the moneys. The state petitioned the California Supreme Court for review and, while the petition was pending, SB 861 was enacted and signed into law.
The high court granted review and remanded the matter to the Third District for consideration in light of the passage of SB 861.
That measure proclaims an intent to “confirm that allocations and uses of funds made by the Director of Finance from the National Mortgage Special Deposit Fund” were valid and “were made for purposes consistent with the National Mortgage Settlement.” It expresses an intent “to abrogate the holding of the Court of Appeal in the case of National Asian American Coalition v. Brown.”
The legislation changes nothing, Hoch wrote. It does not alter the court’s determination, she said, that §12531 “was intended to effectuate the terms of the National Mortgage Settlement, including the former Attorney General’s instructions.”
She declared that “the fact that the Legislature believes the director of finance’s allocations were consistent with section 12531 and the NMS” is not binding on her court, noting that the interpretation of statutes and settlement agreements is within the province of the judiciary.
The opinion provides:
“The portion of the judgment declining to issue the requested writ of mandate is reversed and the matter is remanded to the trial court with directions to issue a writ of mandate directing defendants, Gavin C. Newsom, Governor (successor to Edmund G. Brown, Jr.), Keely Bosler, Finance Director, and Betty Yee, Controller, to retransfer from the General Fund to the National Mortgage Settlement Deposit Fund the sum of $331,044,084. Plaintiffs, National Asian American Coalition, COR Community Development Corporation, and National Hispanic Christian Leadership Conference, are awarded costs on appeal.”
The case is National Asian American Coalition v. Newsom, C079835.
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