Delays in constructing roads and utilities funded by Mello-Roos bonds do not absolve property owners of paying Mello-Roos assessments, the Fourth District Court of Appeals ruled in a recently published opinion. In a case from Riverside County, the unanimous three-judge panel found that property owners have an obligation to bondholders that is independent of any dispute over how bond proceeds are used. The County created Community Facilities District 88-8 under the Mello-Roos Community Facilities Act of 1982 (Gov. Code §53311 et seq.). The CFD covered a slice of land along the west side of Interstate 215 north of Perris. More than two-thirds of landowners within the CFD voted to authorize the county's proposed sale of Mello-Roos bonds to fund roads and utilities to encourage industrial development. Improvements were scheduled to be finished by April 1992, but various problems delayed completion until mid-1996. John and Barbara Harvill, owners of 12 parcels within the CFD, defaulted on payment of special taxes related to the Mello-Roos bonds for the 1994-95 tax year. The CFD then foreclosed on behalf of bondholders. The Harvills did not dispute the unpaid taxes. Instead, they contended that the special election authorizing the bond sale created a contractual relationship between them and the CFD, and that the CFD failed to live up to that contract. San Diego Superior Court Judge Herbert Hoffman issued summary judgement for the CFD, and the appellate court affirmed the decision. "Harvills' claim CDF failed to perform contractual obligations, thereby excusing nonpayment of special taxes, is not a defense to this type of action," wrote San Diego Superior Court Judge E. Mac Amos, sitting on assignment to the Fourth District, Division One. The CFD brought the foreclosure action on behalf of bondholders, and the Harvills provided "no evidence bondholders had any obligation to them related to construction of the improvements by CFD or County," Amos wrote. Even if a contract exists between the Harvills and the CFD, bondholders are not party to it. "We further note that as a matter of public policy, a municipal bondholder's right to repayment cannot be frustrated by disputes between the issuing entity and the property owners regarding the use of bond proceeds," Amos continued. The court rejected the Harvills' argument that special taxes are invalid because of alleged construction irregularities. "Where, as here, it is undisputed Harvills' special taxes remain unpaid, the court cannot prevent or enjoin the collection of those taxes," Amos wrote. The appellate court also upheld the trial court's award of attorneys' fees to the county, and ordered the Harvills to pay attorneys' costs on the appeal. The Case: Community Facilities District No. 88-8 v. John Harvill, Nos. D029328, D029926, 99 C.D.O.S. 7309, 1999 Daily Journal D.A.R. 9303, filed August 6, 1999, modified and ordered published September 2, 1999. The Lawyers: For CFD 88-8: Susan Feller, Sherman & Feller, (510) 452-3222. For Harvill: Henry Heater, Endeman, Lincoln, Turek & Heater (619) 544-0123