Kagan v. Victor Valley Community College Dist. CA4/2

California Court of Appeal

Kagan v. Victor Valley Community College Dist. CA4/2

DecidedJuly 21, 2016

DocketE065165

StatusUnpublished

This text of Kagan v. Victor Valley Community College Dist. CA4/2 (Kagan v. Victor Valley Community College Dist. CA4/2) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Kagan v. Victor Valley Community College Dist. CA4/2, (Cal. Ct. App. 2016).

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Opinion

Filed 7/21/16 Kagan v. Victor Valley Community College Dist. CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

MARSHALL KAGAN et al.,

Plaintiffs and Appellants, E065165

v. (Super.Ct.No. CIVDS1501060)

VICTOR VALLEY COMMUNITY OPINION COLLEGE DISTRICT et al.,

Defendants and Respondents.

APPEAL from the Superior Court of San Bernardino County. Gilbert G. Ochoa,

Judge. Affirmed.

Marshall J. Kagan, in pro. per., and Larry E. Hoover, in pro. per., for Plaintiffs and

Appellants.

Parker & Covert and Jonathan J. Mott for Defendants and Respondents.

I

INTRODUCTION

This appeal involves a dispute about college bond proceeds. Plaintiffs Marshall J.

1 Kagan and Larry E. Hoover brought an action against the Victor Valley Community

College District (the college district) and three individuals.1 The trial court denied

plaintiffs’ petition for writ of mandate.

On appeal, plaintiffs contend the trial court erred in ruling plaintiffs failed to

establish that bond proceeds were used for an illegal purpose; abused its discretion by not

allowing oral testimony; erred in its finding that plaintiffs did not submit new facts or law

at the motion for reconsideration; and erred in citing plaintiffs for contempt and awarding

$750 attorney’s fees as costs to defendants. We reject these contentions and affirm the

judgment.

II

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs are members of a citizen’s oversight committee, charged with reviewing

bond expenditures. Acting in propria persona, plaintiffs filed a second amended petition

in August 2015. In their petition, they allege the college district has violated the

California Constitution by spending $53 million in bond proceeds on payroll and

operating expenses instead of capital improvements, particularly for the construction of

new classrooms.2 Plaintiffs further allege the college district has a deficit budget of $4

1 Roger Wagner, the current college president, Peter Allan, a former college president, and G.H. Javaheripour, a college official.

2 California Constitution, Article 13A, Section 1, subdivision (b)(3), requires that bonded indebtedness be used for “the construction, reconstruction, rehabilitation, or replacement of school facilities, including the furnishing and equipping of school facilities, or the acquisition or lease of real property for school facilities, . . .”

2 million caused by faculty union contracts and resulting in the college being on probation

for accreditation. The first cause of action asserts that millions of bond dollars were

transferred to the general fund instead of being used for capital improvements. The

second cause of action alleges the three individual defendants are liable for misuse of the

bond money. Plaintiffs sought declaratory relief and an injunction. Plaintiffs did not

submit any legal argument or evidence supporting their claims.

In response, defendants filed an answer, opposing points and authorities,

declarations, and exhibits, and evidentiary objections. Defendants’ submissions trace an

accounting of college district funds, beginning in 1994, to show that no construction

funds were used improperly.

The 1994 COPs

Wagner’s declaration explains that, in 1994, the college district issued certificates

of participation (COPs) as a fundraising measure for campus construction projects. The

COPs are a form of borrowing by a public entity, secured by anticipated revenues. The

uses for the 1994 COPs were itemized in a private placement memorandum issued for the

1994 Capital Improvement Financing Project: “The Project comprises the acquisition

and construction of certain facilities or improvements to existing facilities on the campus

of Victor Valley Community College, . . .” When COPs are issued, a trust agreement is

created to hold the funds pending their use for the stated purposes. A trustee is appointed

in accordance with the trust agreement.

According to the declaration of Michael Ogburn, a financial adviser, a net amount

of $23,712,808.12 was raised from the 1994 COPs, designated as the “Acquisition and

3 Construction Fund” for the 1994 Project. The trustee then invested the Acquisition and

Construction Fund in a guaranteed investment contract referred to as Funding Agreement

No. 4464 with Sun Life Insurance Company (Sun Life GIC 4464). Sun Life GIC 4464

was a permitted investment under the 1994 Trust Agreement and Government Code

section 53601, subdivision (m). In that way, the Acquisition and Construction Fund

would generate interest while the 1994 Project was underway, as funds were gradually

withdrawn to pay for the 1994 Project. Sun Life GIC 4464 is not at issue in this case.

The Guaranteed Investment Contract

The college district was able to obtain state school construction funds from the

state to reimburse its construction expenses on the 1994 Project. The state

reimbursement was deposited in the general fund.

In accordance with the trust agreement, the college district entered into another

guaranteed investment contract, referred to as Funding Agreement No. 4463, with

Anchor National Life Insurance Company (Anchor GIC). The Anchor GIC was also a

permitted investment under the 1994 Trust Agreement and Government Code section

53601, subdivision (m). The source of funds for the Anchor GIC could be any funds of

the college district.

Once the college district certified that it would use the COP proceeds to complete

the 1994 Project, the district was able to invest an amount equal to the amount of the

Acquisition and Construction Fund, with accrued interest, into the Anchor GIC from its

general fund. No funds from the 1994 COPs were used to fund the Anchor GIC, as those

funds went into the Sun Life GIC 4464 and were expended for construction on the 1994

4 Project.

Since the college district obtained state reimbursement for the cost of the 1994

Project, the district was able to take an equal amount from its general fund and invest that

in the Anchor GIC. Dr. Javaheripour’s memo to the Board of Trustees, dated May 16,

2011, summarizes the amounts placed in the Anchor GIC in 1994-97 and reiterates that

they were “‘from the reimbursement of the 1994 COP issuance into a Guaranteed

Investment Contract (GIC) at 7.75% rate.’” The 1994 COPs would be repaid later from

the 1997 COPs.

The 1996 COPs

The college district planned a 1996 Capital Improvements Financing Project (the

1996 Project), to refund 1993 COPs and provide more construction funds for “the

remodeling of certain existing facilities into general purpose classrooms. The 1993

Project is expected to be completed in January 1998 and the 1996 Project is expected to

be completed by March 1998.”

The 1997 COPs and Measure JJ (2008 General Obligation Bonds)

In 1997 the District issued its 1997 COPs, which were used to refund both the

1994 and 1996 COPs, which were still outstanding at that time. The 1997 COPs were

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