COOPER v. LESLIE SALT COMPANY (1968)

Plaintiff Walter S. Cooper appeals from judgments of dismissal¹ which followed the sustaining of general demurrers without leave to amend in an action attacking the manner in which respondent 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, monagement, 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 it was provided that voting was to be upon the basis of assessed valuation of land, including improvements (§ 17), and that the district was to be governed by three directors (§ 26) who must be ‘owners, or officers or legal representatives of owners' (§ 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 any 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 ex istence 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 interveners 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 a remedy is not available to a taxpayer; 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 Brandenstein 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 de 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; 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 Brandenstein v. Hoke, 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 establishes that the district's existence is otherwise not subject to 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 611, 365 P.2d at 756.)

The complaint alleges that $30,000,000 of the district's funds was ‘spent to improve and make saleable the real property of [the Foster defendants] under the claim that said expenditure is authorized as reclamation. * * *’ In his capacity as a district taxpayer appellant prayed for a judgment requiring restoration of that amount to the district. Appellant contends here that the district is not empowered to fill dry land. It is true that section 77 of the act, authorizing reclamation of ‘submerged or other land’ speaks of ‘watering or dewatering’ and does not specifically mention filling. It is also true that section 78, which authorizes reclamation by grading, excavation and filling, refers only to ‘small craft harbor purposes.’ Appellant seems to contend that filling of an area described only as ‘dry private land’ could never come within the scope of ‘watering or dewatering.’ The language of the statute does not suggest that conclusion; it is conceivable that land not actually submerged might be in need of reclamation by means of ‘watering or dewatering.’ The reclamation of private lands which are not all swamp and overflowed lands may be a valid public purpose. (Islais Creek Reclamation Dist. v. All Persons (1927) 200 Cal. 277, 283, 252 P. 1043.) Moreover, the complaint alleges that the work done was not reclamation at all because it was ‘for [other] improvement of dry private land of said defendants.’ That language is so broad as to bring into play the whole array of services mentioned in section 77 (e. g., sewerage, storm drainage, and ‘distribution of water for public and private purposes') which may be proper functions of a governmental entity even though private property is incidentally benefited. Appellant has never alleged any specific manner in which public monies of the district have been applied to private purposes. The allegations we have reviewed go no further than to hint at a general subject matter as to which plaintiff feels aggrieved; if all those allegations were accepted as true the court would have been unable to determine whether plaintiff was entitled to any recovery whatever in behalf of the district. The general demurrer was therefore correctly sustained as to the attempt to allege a taxpayer's cause of action.

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 power to control and administer 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 a 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. of 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; Starbird v. Lane (1962) 203 Cal.App.2d 247, 262, 21 Cal.Rptr. 280; 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 the legal effect of his pleading. (Saint v. Saint (1932) 120 Cal.App. 15, 23–24, 7 P.2d 374.) Here appellant has never advanced, either in the trial court or before us, any effective allegation which he could now make if further amendment to the complaint were to be permitted. 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.)

Appellant also contends that reversal is required by the recent holding of the United States Supreme Court, in Avery v. Midland County (1968) 390 U.S. 474, 88 S.Ct. 1114, 20 L.Ed.2d 45 that equal protection demands equal apportionment of constituencies in units of local government having general governmental powers. The complaint did make some attempt to raise issues regarding district elections. It alleged: ‘Said act and the purported district are in conflict with the Constitution of the United States of America in that, among other things, the power to vote in said district is divided according to assessed valuation rather than equally among persons.’ But no relief having to do with apportionment or district elections was sought; the prayer sought to enjoin the expenditure of district funds, the collection of district taxes, and the use of the district ‘for the private and special benefit of the FOSTER defendants.’ Appellant's contention seems to imply that if an agency of local government is found not to conform to the one man-one vote principle of Reynolds v. Sims (1964) 377 U.S. 533, 84 S.Ct. 1362, 12 L.Ed.2d 506, it should suffer the penalty of a kind of plenary writ of anathema to prevent it from carrying out its normal functions. It is as if in Silver v. Brown (1965) 63 Cal.2d 270, 46 Cal.Rptr. 308, 405 P.2d 132, the parties complaining of malapportionment of legislative representation in California, instead of seeking mandate to compel reapportionment, had sought to enjoin the state from collecting taxes or carrying on the normal functions of government. Here appellant made no attempt either in the original complaint or by amendment to ask for relief appropriate to an equal protection challenge. Hence we do not reach in this appeal a consideration of apportionment and district elections.

At oral argument appellant moved, pursuant to Rule 23, subd. (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 orderd the amended complaint dissed as sham⁴ and ‘whether there are additional facts not referred to in the complaint herein, which are within the subject matter of the complaint and as to which appellants should be allowed an opportunity to plead.’ We do not consider it a function of an order under Rule 23, subdivision (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.