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Lawsuit Over Assessment District Subjected To Validation Procedures

An appellate court has thrown out a property owners' lawsuit claiming that the Town of Tiburon's special assessment to pay for undergrounding utilities violated Proposition 218. The court ruled that the lawsuit was actually a "reverse validation action," and that the property owners failed to meet procedural deadlines.

The property owners contended that they should be able to contest the assessment as a violation of Proposition 218 and not be bound by the strictures of the validation statutes. But a unanimous three-judge panel of the First District Court of Appeal, Division Three, disagreed.

"The validation statutes and Proposition 218 address different concerns. Whereas Proposition 218 mandates compliance with certain procedures before a special assessment may be levied, the validation statutes provide rules of procedure for legal actions challenging an assessment after its adoption," Presiding Justice William McGuiness wrote for the court.

Four years ago, the Tiburon Town Council decided to start putting together the Del Mar Valley Utility Undergrounding Assessment District based on the Municipal Improvement Act of 1913. A subsequent engineer's report found that placing the utility lines underground would provide aesthetic, service reliability and safety benefits to owners of about 220 properties. In May 2005, the town conducted an election in which 71% of property owners approved the proposed assessment district.

On June 16, 2005, the owners of two properties in the district including Jean Bonander, city manager of nearby Larkspur sued Tiburon. They argued the assessment of $31,146 was excessive, there was no substantial evidence that placing utility lines underground would benefit their properties, and the city's process was faulty. The property owners sought to invalidate the town's approval of the district.

Fifty-nine days later, the property owners' attorney "discovered" that validation statutes may apply. Those laws require litigants to follow special procedures, including preparing a summons directed to "all persons interested" and publication of the summons in a newspaper of general circulation within 60 days of filing the suit.

The property owners made a last-minute attempt to comply but missed the 60-day deadline. The town then filed a motion to dismiss the lawsuit, which a Marin County Superior Court granted. The court found that the lawsuit was subject to the validation statutes, that the property owners did not comply with the statutes, and that there was no "good cause" for the failure to comply. On appeal, the First District upheld the lower court.

The Legislature approved the validation statutes (Code of Civil Procedure 860 et seq.) during the early 1960s. Under the laws, a public agency may bring a lawsuit to get a court ruling on whether the agency's action is legal. Any "interested person" may bring a similar suit, which is called a "reverse validation action." A ruling in such suits is intended to preclude further litigation over the action.
Proposition 218, meanwhile, was a 1996 follow-up to Proposition 13 and requires a vote on tax increases, special assessments and fees.

There was little dispute that the Tiburon property owners failed to comply with the validation statutes' requirements relating to summons and publication. The real question, according to the First District, was whether the validation statutes applied. Not all local government actions are subject to validation. However, an assessment based on a 1913 Municipal Improvement Act district qualifies, the court ruled.

The property owners argued that they sought a remedy for only their properties and not a ruling on the entire assessment district but the court rejected this contention. "The special assessment on appellants' properties was not levied in isolation and without regard to other properties in the district," Justice McGuiness wrote.

The fact that they were contesting the assessment as a violation of Proposition 218 did not matter, McGuiness added.

"A property owner may seek to invalidate a special assessment on the ground the procedures leading to the assessment's adoption violated Proposition 218. The nature of the action is dictated by the statutory scheme, such as the 1913 Act, under which the assessment was levied," McGuiness wrote. "In the case of the 1913 Act, such a proceeding must be filed as a reverse validation action. This is so regardless of whether the challenge is premised on asserted violations of Proposition 218 or any other constitutional provision."

The property owners argued that because the issue of whether the validation statutes applied was "complex and debatable," the property owners had good cause for failing to comply with procedural requirements. But the court said, "The issue is neither complex nor debatable. It is well settled."

Although the First District ruling apparently ends one round of litigation over the Tiburon assessment district, a second suit was filed in 2006 over a supplemental assessment district formed to cover rising costs. According to the city, 56% of property owners approved the supplemental district; however, a suit filed by about 30 property owners alleges vote tampering by the city. In the meantime, the undergrounding project remains on hold.

The Case:
Bonander v. Town of Tiburon, No. A112539, 07 C.D.O.S. 1935, 2007 DJDAR 2463. Filed January 31, 2007. Ordered published February 22, 2007.
The Lawyers:
For Bonander: Frank I. Mulberg, (415) 388-0605.
For Tiburon: Thomas R. Curry, McDonough, Holland & Allen, (510) 273-8780.

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