COOPER v. LESLIE SALT COMPANY (1968)

Plaintiff Walter S. Cooper appeals from judgments of dismissal  ¹ which followed the sustaining of general demurrers without leave to amend in an action attacking the manner in which respondents have caused municipal improvements and services to be financed by the Estero Municipal Improvement District, of which appellant is a taxpayer.

The district was established by special act of the Legislature.  (Stats.1961, First Ex.Sess.1960, ch. 82, p. 459.)   The act prescribed the boundaries, organization and powers of the district, as well as methods for its operation, management, financing, change of boundaries, and dissolution.   Provision is made in section 121 of the act for an in rem proceeding to establish the validity of “the creation of the district and any annexations thereto” or to determine its right to issue bonds.   A judgment purporting to establish the constitutionality of the act creating the district and the validity of the district's bonds was rendered in an uncontested in rem proceeding in the Superior Court of San Mateo County on June 20, 1961.

The statute recited that “The land in the district is not owned by residents.   the owners are the ones primarily concerned with the district and the ones who will be supporting the district.   The owners should therefore hold the voting power.”  (§ 215, subd. (f.))  Thus is was provided that voting was to be upon the basis of assessed valuation of land, excluding improvements (§ 17), and that the district was to be governed by three directors” (§ 28).   The statute places a broad array of municipal functions within the powers of the district, including provision of street lighting, sewerage, storm drainage, garbage service, water service, parks and playgrounds, and reclamation of submerged land (§ 77).   The district is also empowered to construct small craft harbors (§ 78), provide fire protection (§ 79), and “make and enforce all necessary and proper regulations, not in conflict with the laws of this State, for the * * * supplying of * * * police protection service.   A violation of a regulation of the district is a misdemeanor punishable as such.”  (§ 97.)   The statute includes elaborate financial provisions, including authorization for the directors to issue general obligation bonds (§§ 105–123) and other types of securities to raise money for development of the raw land included within the district so that the owners thereof, who absolutely control the operations of the district,² can cause the various improvements to be made which are necessary to make the land fit for marketing as a residential tract.  (See Willoughby, The Quiet Alliance, (1965) 38 So.Cal.L.Rev. 72, for a review of several comparable special statutes under which governmental powers have been made serviceable to land developers.)

Appellant's complaint, alleging four causes of action upon various theories, was amended twice before a general demurrer was sustained without leave to amend.   Because the four causes of action contain overlapping allegations, and the dismissal was upon a general rather than a special demurrer, we shall analyze as a whole all of the factual allegations of the complaint to determine (1) whether any cause of action was stated, and (2) whether the trial court committed an abuse of discretion in cutting off further amendment.

There is no allegation that the formation and operation of the district failed to conform to the provisions of the Estero Act;  rather it is charged that the act itself is void in that it purports to create a corporation for municipal purposes by special act of the Legislature in violation of Article XI, section 6, of the California Constitution.³

Respondents contend that Code of Civil Procedure, section 803 precludes appellant from contesting the validity of proceedings leading to the formation of the district.  Section 803 provides:

“An action may be brought by the attorney-general, in the name of the people of this state, upon his own information, or upon a complaint of a private party, against any person who usurps, intrudes into, or unlawfully holds or exercises any public office, civil or military, or any franchise, or against any corporation, either de jure or de facto, which usurps, intrudes into, or unlawfully holds or exercises any franchise, within this state.   And the attorney-general must bring the action, whenever he has reason to believe that any such office or franchise has been usurped, intruded into or unlawfully held or exercised by an person, or when he is directed to do so by the governor.”

In San Ysidro Irr. Dist. v. Superior Court (1961) 56 Cal.2d 708, 16 Cal.Rptr. 609, 365 P.2d 753, the Supreme Court held that, absent constitutional or statutory regulations providing otherwise, quo warranto is the only proper remedy in cases in which it is available.   Therefore, it is the exclusive remedy for testing the legality of the existence of an irrigation district.   As those districts are delegated agencies of the state government their existence should not be subject to attack at the caprice of private interests, but should be open to question only in a direct proceeding controlled by an officer charged with protecting the public interest.   The court therefore held that the superior court would not have jurisdiction of an action challenging the lawful existence of a special district unless brought by the Attorney General.

In City of San Diego v. Otay Municipal Water Dist. (1962) 200 Cal.App.2d 672, 19 Cal.Rptr. 595, the city brought an action to enjoin the district from furnishing water to its inhabitants.   Three landowners intervened seeking a determination of the validity of proceedings resulting in the formation of the district.   The court held that the intervenors had no authority to bring the action to annul the existence of the district on the grounds that it was invalidly formed or that the statute under which it was formed was unconstitutional.   Such it is within the exclusive province of the Attorney General through a quo warranto action.  (Accord Wilson v. City of San Bernardino (1960) 186 Cal.App.2d 603, 9 Cal.Rptr. 431;  41 Cal.Jur.2d, Quo Warranto, § 5, p. 614;  74 C.J.S. Quo Warranto § 5, p. 183;  74 C.J.S. Quo Warranto, § 4, pp. 179–181.

 Appellant contends that quo warranto is not the exclusive remedy here because the Estero district is neither de facto nor de jure a corporation, citing Brandestein v. Hoke (1894) 101 Cal. 131, 35 P. 562.   There the court found patently unconstitutional, a statute under which a levee district was formed.   The court considered that because there was no valid statute under which the purported corporation could have been created, no de facto corporation could exist.   But later cases have held that without regard to the claimed unconstitutionality of any statute, it is only where proceedings to create a district have not been fully completed that a private citizen can question their validity.  (Alden v. Superior Court (1963) 212 Cal.App.2d 764, 769–770, 28 Cal.Rptr. 387;  City of Colton v. City of Rialto (1964) 230 Cal.App.2d 174, 40 Cal.Rptr. 766;  Hazelton v. City of San Diego (1960) 183 Cal.App.2d 131, 6 Cal.Rptr. 723.)   The following elements are prerequisite to be facto corporate status:  (1) there must be a charter or general law under which a corporation may be formed;  (2) there must be a good faith attempted compliance with the statute;  (3) there must be a colorable compliance with the statutory requirements;  and (4) there must be an assumption of the corporate powers.  (1 McQuillan, Municipal Corporations, § 3.48, p. 587;  City of Colton v. City of Rialto, supra, 230 Cal.App.2d 174, 182, 40 Cal.Rptr. 766.)   There is no allegation that the Estero District has not satisfied all these requirements;  thus it would at least be a corporation de facto.   Moreover, since the act is not patently unconstitutional, the rule of Hoke v. Brandenstein, supra, does not apply.   Once the district's existence is established, either de facto or de jure, it follows that a private person may not contest the validity of proceedings leading to its formation.  (Hazelton v. City of San Diego, supra, 183 Cal.App.2d 131, 135, 6 Cal.Rptr. 723.)   In the present case the prior validation judgment declared that the district was validly created.   While we question whether that judgment could foreclose the Attorney General from contesting the constitutional validity of the statute in a quo warranto action, the decree established that the district's existence is otherwise not subject to the attack.

 Appellant advances a subsidiary contention that he ought to be allowed to attack the constitutionality of the Estero Act because, in one of the causes of action, he seeks a judicial declaration that the statute is unconstitutional.   But in San Ysidro Irr. Dist. v. Superior Court, supra, 56 Cal.2d 708, 715, 16 Cal.Rptr. 609, 365 P.2d 753, it was held that because the declaratory judgment law was not designed to undermine the policy of the quo warranto statute, the existence of municipal corporations is not open to attack by private individuals.  “The existing authorities in California support the view that declaratory relief would not be available to a party in these circumstances which could not maintain a quo warranto action in its own name.”  (56 Cal.2d at 715, 16 Cal.Rptr. at 612, 365 P.2d at 756.)

 The complaint alleges that $30,000,000 of the district's funds was spent to improve the dry private lands of the Foster respondents.   Appellant contends that this money could not have been lawfully spent for reclamation because the district was not a reclamation district and the expenditure actually benefited private property of the Fosters.   In his capacity as a district taxpayer, he therefore seeks recovery of such sums in behalf of the district.   The character of the land to be reclaimed is not critical.   (Islais Creek Reclamation Dist. v. All Persons (1927) 200 Cal. 277, 252 P. 1043.)   Although appellant alleges that the expenditures were for the benefit of private property, cases have held that reclamation of land benefits the community at large.  (Islais Creek Reclamation dist. v. All Persons, supra;  In re Madera Irrigation District (1891) 92 Cal. 296, 28 P. 272, 14 L.R.A. 755.)   Putting alside the question of the wisdom of the legislation, there is nothing in the complaint to suggest that the reclamation to be accomplished is inconsistent with the purposes of the statute.   Section 77 of the act provides for the “reclamation of submerged or other land by watering or dewatering.”   Therefore the attack upon the district's reclamation program must stand or fall upon the basic validity and constitutionality of the district.   Thus, contrary to appellant's contention, the district does have the power to spend money for reclamation, assuming as we must, for purposes of this action, that the statute is valid.

 The complaint then sets forth miscellaneous general allegations hinting at sinister activities on the part of certain of the respondents:

(a) It is alleged that the Foster respondents “have secured for themselves the bookkeeping of said District for a compensation * * *.”

(b) It is alleged that the Foster respondents have, by virtue of their control and domination of the district, “obtained great private monetary advantage * * *.”

(c) It is alleged that Innes, A Foster employee and a director of the district, caused the Associated Dredging Company to submit statements to the district pursuant to which two district checks totaling $860,218.05 were issued and delivered to Associated with the understanding that they would be endorsed to respondent Midwest Dredging Corporation, a Foster subsidiary.   It is alleged that Midwest received a further $1,667,183.80 upon claims it presented directly to the district.

None of these recitals states a cause of action.   There is no allegation that there was anything unlawful about the manner of contracting for bookkeeping services for the district;  neither is any showing of illegality alleged with regard to the payments to Associated Dredging and Midwest Dredging.   It is possible that appellant intended to allege fraudulent misappropriations of district funds, but fraud is never presumed—facts constituting fraud must be specifically pleaded.  (Gautier v. General Telephone Co. (1965) 234 Cal.App.2d 302, 308, 44 Cal.Rptr. 404.)   The court must be able to determine from the complaint that a prima facie case is alleged.  (Chadbourne, Grossman, Van Alstyne, 2 California Pleading, § 982.)   Here the complaint neglects to set forth any specific facts which would establish that Innes acted fraudulently.   For example, appellant does not allege that the work was poorly done or not done at all.   He does not allege facts to show that the $860,218.05 was a higher amount than some contract called for.   Appellant does not allege that there was anything fraudulent about the endorsement of the checks by Associated to the Foster subsidiary.   Possibly the two firms were joint venturers in the reclamation work.

 Generally it is an abuse of discretion to sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment.  (Temescal Water Co. v. Dept. Public Works (1955) 44 Cal.2d 90, 107, 280 P.2d 1.)   If one count of a complaint does state a cause of action, it is an abuse of discretion to sustain the demurrer as to that count.  (Western Title Ins. etc. Co. v. Bartolacelli (1954) 124 Cal.App.2d 690, 694, 269 P.2d 165.)   However, the burden is on the plaintiff to demonstrate that the trial court abused its discretion.  (Filice v. Boccardo (1962) 210 Cal.App.2d 843, 847, 26 Cal.Rptr. 789;  Schultz v. Steinberg (1960) 182 Cal.App.2d 134, 140, 5 Cal.Rptr. 890.)   Plaintiff must show in what manner he can amend his complaint and how that amendment will change that legal effect of his pleading.  (Saint v. Saint (1932) 120 Cal.App. 15, 23–24, 7 P.2d 374.)   Here appellant has made no attempt to demonstrate to this court how he could amend his complaint to state a cause of action.   Although he insinuates multiple wrongs by respondents, he never points out in what manner those insinuations could be combined to state a cause of action.  (See Schultz v. Steinberg, supra, 182 Cal.App.2d at 141, 5 Cal.Rptr. 890.)

 At oral argument appellant moved, pursuant to Rule 23(b), California Rules of Court, for an “Order Directing Taking of Evidence on Appeal” to assist this court in determining whether the superior court correctly ordered the amended complaint dismissed as sham ⁴ and “whether there are not additional facts not referred to in the complaint herein, which are within the subject matter of the complaint and to which appellants should be allowed an opportunity to plead.”   We do not consider it a function of an order under Rule 23(b), to afford a party the facilities of the appellate court for exploratory investigation to try to develop facts sufficient to enable him to state a cause of action.

The judgments are affirmed;  the motion to take evidence is denied.

FOOTNOTES

1.   Two judgments were entered on separate dates as to two groups of defendants.   Plaintiff appeals from both judgments;  the issues are identical and the appeals have been consolidated.

2.   After the dismissal of this action the act was amended, to enlarge the board of directors to five members, of which two represent landowners, two represent residents, and one is a “public member” appointed by the county board of supervisors.   After 1969, the “public member” will also be elected by the residents of the district.  (Stats.1967, ch. 1511, § 5).

3.   Article 11, § 6:  “Corporations for municipal purposes shall not be created by special laws;  but the Legislature shall, by general laws, provide for the incorporation, organization, and classification, in proportion to population, of cities and towns * * *.”

4.   The Foster respondents and some of the other respondents moved to strike the complaint as amended, on the ground that it was “sham, vexatious, scandalous, abusive, disrespectful, frivolous,” etc.   The order granting the motion to strike was concurrent with the order sustaining the demurrer.   The judgment of dismissal is adequately supported by the ruling upon the demurrer;  therefore we have not considered the propriety of the motion to strike.

CHRISTIAN, Associate Justice.

DEVINE, P.J., and TAYLOR, J., concur.