Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEALS from judgments of the Superior Court of Los Angeles County No. BC277956, Mary Thornton House, Judge.
The Law Offices of Keith Alan and Keith Alan for Plaintiff and Appellant.
Edmund G. Brown Jr., Attorney General, W. Dean Freeman, Mark P. Richelson, Felix E. Leatherwood, Raymond B. Jue, and Lisa W. Chao, Deputy Attorneys General, for Defendants and Respondents.
Judge of the Los Angeles Superior Court assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
INTRODUCTION
In appeal number B189435, plaintiff Donald C. Morrow appeals from an order of dismissal following the sustaining of a demurrer without leave to amend entered in favor of defendants Business, Transportation and Housing Agency of the State of California, its Secretary, Sunne Wright McPeak, and its General Counsel, Edward Heidig; John R. Drews, General Counsel of the California Department of Financial Institutions; the Department of Justice of the State of California and former Attorney General Bill Lockyer.
In appeal number B190942, plaintiff appeals from a summary judgment in favor of defendants California Department of Financial Institutions (DFI) and its Commissioner, Donald R. Meyer at the time this action was filed.
In a previous appeal by plaintiff, we held that the trial court erred in sustaining a demurrer as to defendants Donald R. Meyer and the DFI and dismissing the action as to them. We upheld the dismissal of the action as to the State of California. (Morrow v. Meyer (Mar. 30, 2004, B164096) [nonpub. opn.].)
On this appeal, we affirm the judgment of dismissal in appeal number B189435. We reverse the summary judgment in appeal number B190942.
FACTUAL AND PROCEDURAL BACKGROUND
Where pertinent, we quote from our previous opinion.
“Plaintiff filed this action for declaratory relief and injunction on July 19, 2002. He alleged that he had been subjected to unlawful enforcement proceedings under section 6152, subdivision (a), of the Financial Code (section 6152(a)). He had succeeded in invalidating a cease and desist order issued pursuant to that section in Commissioner of the Department of Savings and Loan v. Morrow (L.A. Super. Ct. No. YC023661) (enforcement action). That action was consolidated with one he brought, Morrow v. Torrance Bank (L.A. Super. Ct. No. BS034650) (Torrance Bank action).
“Section 6152(a) provides: ‘A director shall automatically cease to be a director upon being adjudicated as bankrupt or upon conviction of a criminal offense involving dishonesty or a breach of trust.’” (Morrow v. Meyer, supra, B164096, typed opn. at p. 2.)
“Plaintiff had been the chairman of the board of directors and the chief executive officer of Torrance Bank, which he had founded in 1986. He also was the president and sole shareholder of Morrow Mortgage Company, Inc. (Morrow Mortgage). Due to the decline in the real estate market in the early 1990s, Morrow Mortgage experienced severe financial reversals. On February 7, 1995, plaintiff and Morrow Mortgage filed for protection from creditors under Chapter 7 of the Bankruptcy Code.
“Plaintiff alleged that the predecessors of defendants Donald R. Meyer and the Department of Financial Institutions, Keith Paul Bishop and the Department of Savings and Loan, took steps to enforce section 6152(a) against him. While this enforcement action and plaintiff’s Torrance Bank action were pending, the Court of Appeal denied plaintiff’s petition for a writ of supersedeas and the bankruptcy court declined to get involved (In re Morrow (C.D.Cal. 1995) 189 B.R. 793). Defendants then orchestrated the sale and demise of Torrance Bank.
“In the instant action, plaintiff alleged that section 6152(a) was preempted by section 525 of Title 11 of the United States Code (section 525). Defendants took the position that section 6152(a) was constitutional. They therefore continued to expend money to enforce that section.
“Section 525 provides: ‘[A] governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated, solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act . . . .’” (Morrow v. Meyer, supra, B164096, typed opn. at p. 3.)
“Plaintiff further alleged that he is a California resident and a taxpayer. He is eligible to participate as a director or committee member of any financial institution despite having filed a petition in bankruptcy. He is in the process of working to found a new financial institution in which he wishes to participate as a director and committee member. He desires a declaration of his rights with respect to the constitutionality of section 6152(a) and a declaration as to the validity and constitutionality of section 6152(a). He already had suffered irreparable harm due to defendants’ enforcement of section 6152(a) against him and would continue to suffer irreparable harm unless declaratory relief was granted and defendants were enjoined from enforcing the section. In addition to declaratory relief and an injunction, he sought attorney’s fees and costs.
“Appended to the complaint as an exhibit is a copy of the appellate opinion in the consolidated Torrance Bank and enforcement actions. In that opinion, Division Five of this court explained that plaintiff founded Torrance Bank in 1985. He served as a director and chairman of the board. He filed a Chapter 7 bankruptcy petition on February 17, 1995. Then on June 19, 1995, he filed the Torrance Bank action for declaratory and injunctive relief to enjoin the bank and its board of directors from barring him from acting as a director based upon his filing bankruptcy. (Morrow v. Torrance Bank (Oct. 28, 1997, B099054) [nonpub. opn.], p. 3.)
“On June 28, 1995, the commissioner of the Department of Savings and Loan issued a cease and desist order prohibiting plaintiff from further participation as a director of Torrance Bank. The commissioner filed an enforcement action against plaintiff on July 12, 1995. The following day, the superior court in the enforcement action ordered that plaintiff comply with the cease and desist order. (Morrow v. Torrance Bank, supra, B099054, p. 3.)
“On July 14, 1995, plaintiff filed an ex parte application in the Torrance Bank action to quash or stay the cease and desist order issued in the enforcement action. He identified the Department of Savings and Loan as a fictitiously named defendant. The superior court in the Torrance Bank action denied plaintiff’s application without prejudice. It transferred the case to the court in which the enforcement action was pending, so that the application could be heard there. The two actions were consolidated. Plaintiff renewed his application to quash the cease and desist order; it was denied. (Morrow v. Torrance Bank, supra, B099054, pp. 3-4.)
“The superior court considered the propriety of the cease and desist order on August 24, 1995. On September 20, it issued a judgment upholding the order as lawful. Plaintiff’s subsequent motion to vacate and modify the judgment was heard and denied on December 15. (Morrow v. Torrance Bank, supra, B099054, p. 4.)
“After the hearing in the superior court, but before judgment, on September 8, 1995, plaintiff filed an adversary proceeding in bankruptcy court. He sought a temporary restraining order and preliminary injunction to prevent the enforcement of the cease and desist order. On November 22, 1995, the court dismissed the proceeding based on a lack of subject matter jurisdiction (In re Morrow, supra, 189 B.R. at pp. 801-811). (Morrow v. Torrance Bank, supra, B099054, pp. 4-5.)
“Plaintiff filed a notice of appeal from the judgment in the consolidated Torrance Bank/enforcement action on January 3, 1996. On April 5, he filed a petition for writ of supersedeas and request for stay. This petition was denied. (Morrow v. Torrance Bank, supra, B099054, p. 5.)
“In the opinion on appeal, the court held that the commissioner’s application of section 6152(a) to plaintiff violated section 525. For this reason, the cease and desist order violated the supremacy clause of the federal Constitution. The court therefore reversed the judgment upholding the cease and desist order. (Morrow v. Torrance Bank, supra, B099054, pp. 18-19.)
“Shortly after filing the instant action, plaintiff filed notice of related actions. He notified the trial court of the Torrance Bank and enforcement actions. He also notified the court that all private parties had been dismissed from the Torrance Bank action, leaving only the state and its officials and agencies as defendants. In conjunction with this notice, he filed copies of the complaints filed in the instant action and the Torrance Bank action, as well as the application for the cease and desist order.
“Defendants filed a demurrer to the complaint in the instant action. The bases of the demurrer were that the action was barred by the doctrine of res judicata, no actual controversy existed between the parties, the action was untimely and barred by the statute of limitations set forth in Code of Civil Procedure section 342, there existed no right to declaratory or injunctive relief against the State of California, and plaintiff’s attempt to collect attorney’s fees and costs for his previous actions was untimely and barred by rule 870.2 of the California Rules of Court. In conjunction with the demurrer, defendants requested that judicial notice be taken of the complaint in the Torrance Bank action, the amendment to the complaint which added the State of California and the Department of Savings and Loan as fictitiously named defendants, the appellate opinion in the consolidated Torrance Bank/enforcement action, and the appellate court’s remittitur notice.
“Thereafter, the court found that the Torrance Bank and enforcement actions were not related cases within the meaning of Los Angeles Superior Court Local Rule No. 7.3(f), in that court records indicated the cases no longer were pending. Plaintiff moved for reconsideration of this ruling. In support of his motion, plaintiff requested that the court take judicial notice of the complaints in the two prior cases, the appellate opinion, and the statement of the commissioner of the Department of Savings and Loan in the enforcement action of the reason for not giving plaintiff notice of the proceeding.
“According to the commissioner, Financial Code section 8200, subdivision (f), permitted an application for an enforcement order without notice to the affected party.” (Morrow v. Meyer, supra, B164096, typed opn. at p. 6.)
“While plaintiff’s motion for reconsideration was pending, he filed a motion for summary judgment or, in the alternative, summary adjudication of issues. He claimed he was entitled to a judgment under Code of Civil Procedure section 526a (section 526a). He had standing as a taxpayer to bring the action to prevent defendants from enforcing section 6152(a), which was unconstitutional. Plaintiff further claimed defendants have no res judicata defense, in that there was no final judgment on the merits in the consolidated Torrance Bank/enforcement action. Additionally, defendants have no statute of limitations defense, in that Code of Civil Procedure section 342 is inapplicable to an action under section 526a.
“Section 526a provides that ‘[a]n action to obtain a judgment, restraining and preventing any illegal expenditure of, waste of, or injury to, the estate, funds, or other property of a county, town, city or city and county of the state, may be maintained against any officer thereof, or any agent, or other person, acting in its behalf, either by a citizen resident therein, or by a corporation, who is assessed for and is liable to pay, or, within one year before the commencement of the action, has paid, a tax therein. . . .’” (Morrow v. Meyer, supra, B164096, typed opn. at p. 6.)
“Plaintiff also filed a motion to strike defendants’ demurrer. He claimed it was procedurally defective.
“Thereafter, the court granted plaintiff’s motion for reconsideration, finding the Torrance Bank and enforcement actions to be related cases. It ordered those two cases transferred to the judge before whom the instant action was pending.
“Following a hearing on defendants’ demurrer, the trial court sustained the demurrer without leave to amend. It found the issue raised in the instant action should have been raised in the Torrance Bank/enforcement action, citing Bernhard v. Bank of America (1942) 19 Cal.2d 807, 810-811. The court denied plaintiff’s motion to strike the demurrer, finding plaintiff waived his objections to the demurrer by arguing the matter on its merits. The court also ordered plaintiff’s motion for summary judgment off calendar.
“Plaintiff moved for reconsideration of the order sustaining defendants’ demurrer without leave to amend. He also requested that the instant action be consolidated with the Torrance Bank/enforcement action. Before this motion was heard, the trial court entered an order of dismissal.
“The trial court then denied plaintiff’s motion for reconsideration, finding no new law or facts had been presented. The court further explained that it ‘did not find or determine that there was a final determination in the underlying case. Rather, the court believes that a party may not split his relief (damages/equity and attorney’s fees) into two separate lawsuits.’” (Morrow v. Meyer, supra, B164096, typed opn. at pp. 2-7.)
Plaintiff appealed, contending his action was not barred by res judicata, the rule against splitting a cause of action, or the statute of limitations. We agreed with these contentions. We also agreed with his contentions that he need not be presently subject to the challenged statute in order to maintain a taxpayer’s representative action and the question of his entitlement to attorney’s fees was not subject to demurrer. However, we disagreed with his claim that the State of California was a proper party to this action.
Specifically, we pointed out that “‘[s]ection 526a permits a taxpayer to bring an action to restrain or prevent an illegal expenditure of public money. No showing of special damage to a particular taxpayer is required . . . for bringing a taxpayer suit. [Citation.] Rather, taxpayer suits provide a general citizen remedy for controlling illegal governmental activity. [Citation.]’” (Morrow v. Meyer, supra, B164096, typed opn. at p. 12, quoting from Connerly v. State Personnel Bd. (2001) 92 Cal.App.4th 16, 29.)
“A taxpayer action brought under section 526a is brought by a taxpayer as a representative of all other taxpayers. (Gates v. Superior Court (1986) 178 Cal.App.3d 301, 307.) The taxpayer seeks not to recover damages for injury to himself but to prevent illegal government activity. (Connerly v. State Personnel Bd., supra, 92 Cal.App.4th at p. 29.) Thus, what plaintiff sought here was ‘a declaration that Section 6152(a) is not valid because and to the extent that it conflicts with, is contrary to or is otherwise preempted by Section 525,’ and ‘a permanent injunction perpetually restraining Defendants and each of them from enforcing or seeking to enforce Section 6152(a) because and to the extent that it conflicts with, is contrary to or is otherwise preempted by Section 525.’” (Morrow v. Meyer, supra, B164096, typed opn. at p. 12.)
This was different than the damages plaintiff sought for injury to himself in the Torrance Bank action. For this reason, the instant action was not barred by the Torrance Bank action. (Morrow v. Meyer, supra, B164096, typed opn. at pp. 12-13.)
We also held that “plaintiff’s assertion that he need not be presently subject to section 6152(a) in order to bring a taxpayer’s representative action under section 526a is correct. Section 526a does not require an actual controversy (Connerly v. State Personnel Bd., supra, 92 Cal.App.4th at p. 29), i.e., it does not require that the plaintiff ‘have a personal interest in the litigation’ or make a ‘showing of special damage’ to himself in order to bring the action (Blair v. Pitchess (1971) 5 Cal.3d 258, 269-270).” (Morrow v. Meyer, supra, B164096, typed opn. at p. 13.)
We therefore reversed the order of dismissal as to defendants Donald R. Meyer and DFI. We directed the trial court to vacate its order sustaining defendants’ demurrer without leave to amend as to these defendants and to enter a new and different order overruling the demurrer. (Morrow v. Meyer, supra, B164096, typed opn. at p. 18.)
The case was returned to the trial court, where defendants Commissioner of Financial Institutions and DFI answered the complaint. At some point, plaintiff named the Business, Transportation and Housing Agency of the State of California, its Secretary, Sunne Wright McPeak, and its General Counsel, Edward Heidig; John R. Drews, General Counsel of the California Department of Financial Institutions; the Department of Justice of the State of California and former Attorney General Bill Lockyer as Doe defendants. The newly-added defendants then filed a demurrer to the complaint.
Howard Gould was substituted into the litigation in place of Donald R. Meyer as Commissioner of the Department of Financial Institutions, but to avoid confusion it was stipulated and ordered that the case caption and title remain the same.
On August 30, 2005, plaintiff filed a first amended complaint. The allegations concerning his status as a taxpayer and the unlawful enforcement of section 6152(a) against him were similar to those of the original complaint. As to the newly-added defendants, plaintiff alleged that DFI was a sub-agency of the Business, Transportation and Housing Agency. It and its Secretary, Sunne Wright McPeak, and General Counsel, Edward Heidig, were charged with enforcement of section 6152(a). Also charged with enforcement of section 6152(a) was John R. Drews, General Counsel of DFI. These defendants acted through the Department of Justice of the State of California and the Attorney General.
Plaintiff sought a declaration that section 6152(a) is invalid and unconstitutional, and a permanent injunction against its enforcement. He also sought a declaration that section 525 is applicable to defendants’ regulatory activities and a permanent injunction prohibiting defendants from violating section 525.
The newly-added defendants filed a demurrer to plaintiff’s first amended complaint. They claimed plaintiff had no standing to bring a taxpayer representative action. They also claimed they should be dismissed, because they have no authority to enforce and do not directly enforce section 6152(a). Plaintiff opposed the demurrer, based in large part on our opinion in the previous appeal after the sustaining of the original defendants’ demurrer.
The trial court sustained the demurrer without leave to amend. It explained that the complaint failed to state a cause of action, in that (1) plaintiff failed to allege that the newly-added defendants ever enforced section 6152(a) against plaintiff; (2) the newly-added defendants are not authorized by Financial Code section 8050 to enforce section 6152(a); and (3) plaintiff failed to allege that the newly-added defendants ever threatened to expend moneys to enforce section 6152(a). Thereafter, the trial court dismissed the action as to the newly-added defendants.
DFI and the Commissioner answered plaintiff’s first amended complaint. They then filed a motion for summary judgment or in the alternative summary adjudication. The basis of this motion was the lack of evidence that they had continued to expend or threatened to expend public moneys to enforce section 6152(a).
Plaintiff also filed a motion for summary judgment against DFI and the Commissioner. The basis of plaintiff’s motion was that section 6152(a) requires that the defendants enforce it, and the defendants had already expended public moneys to do so.
The trial court granted the defendants’ motion for summary judgment and denied plaintiff’s motion for summary judgment. It explained that the defendants’ evidence “established (a) there is no actual or threatened expenditure of public funds for the purpose of enforcing California Financial Code Section 6152(a) . . ., as there are no existing State-chartered savings associations in California; (b) there is no reason to believe that a State-chartered savings association will sometime in the near future be formed, and (c) that if a State-chartered savings association is formed, the Defendants intend to abide by the Court of Appeal’s holding in Howard C. Morrow v. Torrance Bank, 2d Civ No B099054, that Section 6152(a) is unconstitutional and may not be enforced.”
The court added that “[a]s Plaintiff’s only ‘evidence’ of a future possibility of enforcement of the statute is a theoretical possibility that in the distant future he or some unknown group of persons might form a State-chartered savings bank, and for some inexplicable reason some unknown person might attempt to enforce the statute, there is no actual or threatened expenditure of public funds. As there is no real possibility of expenditures of public funds for the purpose of enforcing Section 6152(a), there is no need whatsoever for the maintenance of this action.”
DISCUSSION
I
No. B189435—Demurrer Sustained and Dismissal of Newly-added Defendants
As we stated in our previous opinion, a demurrer tests the sufficiency of the plaintiff’s complaint, i.e., whether it states facts sufficient to constitute a cause of action upon which relief may be based. (Code Civ. Proc., § 430.10, subd. (e); Friedland v. City of Long Beach (1998) 62 Cal.App.4th 835, 841-842.) In determining whether the complaint states facts sufficient to constitute a cause of action, the trial court may consider all material facts pleaded in the complaint and those arising by reasonable implication therefrom; it may not consider contentions, deductions or conclusions of fact or law. (Moore v. Conliffe (1994) 7 Cal.4th 634, 638; Montclair Parkowners Assn. v. City of Montclair (1999) 76 Cal.App.4th 784, 790.) The trial court also may consider matters of which it may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 459.) However, it may not consider in making its ruling the available evidence, the plaintiff’s ability to prove the allegations in the complaint or other extrinsic matters. (Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, 922; see City of Atascadero, supra, at p. 459.) A demurrer should not be sustained if the complaint, liberally construed, states a cause of action under any theory. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967; Jager v. County of Alameda (1992) 8 Cal.App.4th 294, 297.)
On appeal, we review the trial court’s sustaining of a demurrer de novo, exercising our independent judgment as to whether a cause of action has been stated as a matter of law. (Montclair Parkowners Assn. v. City of Montclair, supra, 76 Cal.App.4th at p. 790; Hernandez v. City of Pomona (1996) 49 Cal.App.4th 1492, 1497.) Plaintiff bears the burden of proving the trial court erred in sustaining the demurrer. (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc., supra, 68 Cal.App.4th at p. 459; Coutin v. Lucas (1990) 220 Cal.App.3d 1016, 1020.)
As stated above, the trial court sustained the newly-added defendants’ demurrer on three grounds: (1) plaintiff failed to allege that the newly-added defendants ever enforced section 6152(a) against plaintiff; (2) the newly-added defendants are not authorized by Financial Code section 8050 to enforce section 6152(a); and (3) plaintiff failed to allege that the newly-added defendants ever threatened to expend moneys to enforce section 6152(a).
The trial court rejected plaintiff’s arguments “that the Department of Business, Transportation and Housing, acts through its subsidiary agencies, including the Department of Financial Institutions”; that the Department of Justice and the Attorney General are also agents of the Department of Financial Institutions”; and “the [Department of Justice’s] and Attorney General’s status as legal advocates for state agencies and [their] employees in judicial proceedings (Gov. Code[, §] 11040) [under] statutes which authorize them to bring actions under [section] 6152(a). Government Code [section] 955.4 requires service of actions on the Attorney General and requires that the Attorney General act to defend the state. It does not confer on the Attorney General authority to enforce in its own name [section 6152(a)]. Even if it did, there are no allegations that any of the defendants have ever done so or will ever do so.”
Section 6152(a) falls within Division 2 of the Financial Code, Savings Association Law. The section provides that “[a] director shall automatically cease to be a director upon being adjudicated as bankrupt or upon conviction of a criminal offense involving dishonesty or a breach of trust.” Financial Code section 8050, also part of Division 2, provides: “(a) The commissioner shall have general supervision over all (1) associations, (2) savings and loan holding companies, (3) service corporations, (4) finance subsidiaries, and (5) other persons that are subject to the provisions of this division. [¶] (b) The commissioner shall enforce the purposes of this division by use of the powers conferred by it and by an action in any court of competent jurisdiction if required.” Section 8050 “delegates to the commissioner the administration and enforcement of the Savings . . . Association Law.” (Beverly Hills Fed. S. & L. Assn. v. Superior Court (1968) 259 Cal.App.2d 306, 321.)
We decided a similar issue in our prior opinion, addressing plaintiff’s contention that the trial court erred in sustaining the demurrer as to the State of California. As in the prior appeal, the newly-added “[d]efendants rely on State of California v. Superior Court (1974) 12 Cal.3d 237 for the proposition that their demurrer properly was sustained without leave to amend . . ., in that [they have] no responsibility for the enforcement of section 6152(a). . . . [¶] In State of California v. Superior Court, supra, real parties in interest filed a petition for writ of mandate against the California Coastal Commission (Commission), its members and employees, and the State of California, after the Commission denied their development permit. (12 Cal.3d at p. 243.) The court ruled that a demurrer properly was sustained as to the state, in that real parties’ ‘petition contain[ed] no allegations establishing any right to declaratory relief against the state (as distinguished from the Commission acting as its agent).’ (Id. at p. 255.)
“Plaintiff contend[ed on the prior appeal] that his complaint does contain allegations establishing his right to declaratory relief and an injunction against the state, in that section 6152(a) operates ‘automatically’; it requires no action on the part of the Department of Financial Institutions or its commissioner to enforce it. Further, plaintiff claim[ed], because its operation is automatic, he ‘may not be able to obtain complete relief unless he obtains relief generally against the State per se; otherwise, he could be required to name each and every State agency in existence’ to preclude their enforcement of the statute.” (Morrow v. Meyer, supra, B164096, typed opn. at p. 16.)
We stated that “[s]ection 6152(a) applies only to financial institutions, and its enforcement lies with the Commissioner of Financial Institutions and the Department of Financial Institutions. It does not apply to any other agencies. Plaintiff’s claim that he can obtain complete relief only if the State of California itself is a defendant in the action therefore is without merit.” (Morrow v. Meyer, supra, B164096, typed opn. at pp. 16-17.)
In an effort to avoid resolution of his appeal against him under the foregoing principle, plaintiff puts forth a number of claims. First is that the action against the newly-named defendants is authorized by section 526a. This section provides that “[a]n action to obtain a judgment, restraining and preventing any illegal expenditure of, waste of, or injury to, the estate, funds, or other property of a county, town, city or city and county of the state, may be maintained against any officer thereof, or any agent, or other person, acting in its behalf . . . .” (Italics added.) Plaintiff argues that since he pleaded that the newly-named defendants are agents of DFI and its Commissioner, he has stated a cause of action against them under section 526a.
As stated above, on demurrer the court is not bound by plaintiff’s pleadings, but also may consider matters of which it may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc., supra, 68 Cal.App.4th at p. 459.) The court may take judicial notice of the fact that only DFI and the Commissioner have authority to enforce section 6152(a), i.e., to authorize the illegal expenditure of state funds (Fin. Code, § 8050; see Morrow v. Meyer, supra, B164096, typed opn. at pp. 16-17). (Evid. Code, §§ 451, subd. (a), 452, subd. (a).) It therefore is only against DFI and the Commissioner that an action may be brought under section 526a. None of the newly-added defendants is authorized to act on their behalf to enforce section 6152(a).
Plaintiff next contends that he stated a cause of action against the newly-added defendants under section 525. However, plaintiff cites no authority for the proposition that section 525 provides a cause of action to enjoin future enforcement of a state statute which conflicts with it. Neither does he demonstrate how the allegations of his first amended complaint state a cause of action under that section. In re Begley (Bankr. E.D. Pa. 1984) 41 B.R. 402, cited by plaintiff, involved a claim in bankruptcy proceedings that an administrative agency’s decision violated section 525. In re Morrow, supra, 189 B.R. at page 804, footnote 12, only stated that “the state court is of equal and competent jurisdiction to hear and determine Morrow’s claim pursuant to § 525.” It did not hold that plaintiff had an independent cause of action under section 525. Plaintiff thus has failed to meet his burden of demonstrating that the trial court erred in sustaining defendants’ demurrer on the ground he stated a cause of action under section 525. (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc., supra, 68 Cal.App.4th at p. 459; Coutin v. Lucas, supra, 220 Cal.App.3d at p. 1020.)
Plaintiff also claims that the trial court’s ruling violates the law of the case doctrine, in that, on the last appeal, we rejected defendants’ argument that section 526a requires “ongoing or future expenditures of public funds.” To the contrary, we did not address that issue.
Under the law of the case doctrine, where an appellate court in deciding an appeal “‘states in its opinion a principle or rule of law necessary to the decision, that principle or rule becomes the law of the case and must be adhered to throughout its subsequent progress, both in the lower court and upon subsequent appeal . . . .’” (People v. Shuey (1975) 13 Cal.3d 835, 841; accord, Clemente v. State of California (1985) 40 Cal.3d 202, 211.) The doctrine will only be applied, however, where the point of law involved was necessary to the prior decision, as well as actually presented to and determined by the court, and application of the doctrine will not result in an unjust decision. (Shuey, supra, at p. 842.) Since, on the last appeal, we did not actually decide whether or not section 526a requires “ongoing or future expenditures of public funds,” the law of the case doctrine did not apply to preclude the trial court from ruling as it did on the question.
In summary, the trial court did not abuse its discretion in sustaining the newly-added defendants’ demurrer, in that the newly-added defendants have no authority to enforce section 6152(a), plaintiff has not stated a cause of action against them under section 526a or section 525, and the law of the case doctrine does not preclude the sustaining of the demurrer. Additionally, since plaintiff has not shown how he could amend his first amended complaint to state a cause of action, the trial court did not abuse its discretion in denying him leave to amend and dismissing the action as to them. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349; J.B. Aguerre, Inc. v. American Guarantee & Liability Ins. Co. (1997) 59 Cal.App.4th 6, 18.)
II
No. B190942—Summary Judgment in Favor of Original Defendants
A. Summary Judgment
Summary judgment properly is granted if there is no question of fact and the issues raised by the pleadings may be decided as a matter of law. (Code Civ. Proc., § 437c, subd. (c); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) To secure summary judgment, a moving defendant may show that one or more elements of the cause of action cannot be established or that there is a complete defense to the cause of action. (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar, supra, at p. 849.) Once the moving defendant has met its burden, the burden shifts to the plaintiff to show that a triable issue of fact exists as to the cause of action or the defense thereto. (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar, supra, at p. 849.) All doubts as to the propriety of granting the motion are resolved in favor of the opposing party. (Hamburg v. Wal-Mart Stores, Inc. (2004) 116 Cal.App.4th 497, 502.)
On appeal, we exercise our independent judgment in determining whether there are no triable issues of material fact and the moving party thus is entitled to judgment as a matter of law. (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334-335.) We must uphold the judgment if it is correct on any ground, regardless of the reasons the trial court gave. (Biljac Associates v. First Interstate Bank (1990) 218 Cal.App.3d 1410, 1419.)
Plaintiff raises a number of contentions in his appeal from the summary judgment in favor of the original defendants that he raised in connection with his appeal from the dismissal of the newly-added defendants. To the extent the contentions are the same and we have resolved them against plaintiff, we need not address them a second time.
Plaintiff claims that, as a matter of law, defendants’ summary judgment motion was an improper motion for reconsideration of their demurrer. The trial court had no jurisdiction to grant the motion, he claims, because defendants did not comply with Code of Civil Procedure section 1008. The basis of this claim is that, throughout the motion, defendants refer to plaintiff’s allegations and his ability to allege the requisite facts.
A motion for summary judgment should not be used to test the sufficiency of the pleadings but is intended to test the sufficiency of the evidence to prove the allegations of the pleadings. (Hejmadi v. AMFAC, Inc. (1988) 202 Cal.App.3d 525, 536.) A summary judgment motion which is used to test the sufficiency of the allegations of the complaint will be treated as a demurrer or motion for judgment on the pleadings. (American Airlines, Inc. v. County of San Mateo (1996) 12 Cal.4th 1110, 1118.)
While defendants may have referred in their summary judgment motion to the allegations of plaintiff’s complaint and the merits of his causes of action, the gravamen of the motion was that “there is no evidence that defendants have continued to expend, or have threatened to expend, public monies to enforce Financial Code § 6152(a) against any person.” In support of there motion, they presented evidence that, pursuant to and since the decision in the Torrance Bank action, DFI “has not enforced Financial Code § 6152(a), is not enforcing said statute, and will not enforce said statute against anyone.” The “DFI currently has no conversion or new savings association license applications pending.”
They presented evidence from plaintiff’s deposition that plaintiff had no knowledge of facts leading him to believe that defendants were threatening to spend money to enforce section 6152(a). He had no personal knowledge of defendants’ enforcement of section 6152(a) against anyone other than himself.
As to the new state-chartered savings and loan association that plaintiff alleged he was “in the process of working to found,” defendants presented evidence from plaintiff’s deposition that he had “had numerous meetings with numerous people, investors primarily with the idea of starting a new state savings and loan,” starting about a “couple of years ago.” Plaintiff had not actually formed or incorporated the new financial institution. He had no written business plan or other documents relating to the formation of the new financial institution. No one had invested in the new institution. Plaintiff had merely had discussions and thought about it.
The trial court determined that the defendants’ evidence “established (a) there is no actual or threatened expenditure of public funds for the purpose of enforcing California Financial Code Section 6152(a) . . ., as there are no existing State-chartered savings associations in California; (b) there is no reason to believe that a State-chartered savings association will sometime in the near future be formed, and (c) that if a State-chartered savings association is formed, the Defendants intend to abide by the Court of Appeal’s holding in Howard C. Morrow v. Torrance Bank, 2d Civ No B099054, that Section 6152(a) is unconstitutional and may not be enforced.”
The trial court further determined that “Plaintiff’s only ‘evidence’ of a future possibility of enforcement of the statute is a theoretical possibility that in the distant future he or some unknown group of persons might form a State-chartered savings bank, and for some inexplicable reason some unknown person might attempt to enforce the statute, there is no actual or threatened expenditure of public funds.” There thus was “no real possibility of expenditures of public funds for the purpose of enforcing Section 6152(a).” On this basis, the court granted summary judgment.
In summary, defendants’ summary judgment motion was based on evidence, not merely the pleadings. The trial court decided the motion based on the evidence. It was not an improper motion for reconsideration of the trial court’s ruling on defendants’ demurrer, defendants were not required to comply with Code of Civil Procedure section 1008, and the trial court was not without jurisdiction to rule on the motion.
The question thus becomes whether the trial court’s grant of summary judgment was correct. In Waste Management of Alameda County, Inc. v. County of Alameda (2000) 79 Cal.App.4th 1223, the court held that a taxpayer action under section 526a “must involve an actual or threatened expenditure of public funds. [Citation.] [¶] General allegations, innuendo, and legal conclusions are not sufficient [citation]; rather, the plaintiff must cite specific facts and reasons for a belief that some illegal expenditure or injury to the public fisc is occurring or will occur. [Citations.]” (Id. at p. 1240.)
In Connerly v. Schwarzenegger (2007) 146 Cal.App.4th 739, the court further explained that the goal of section 526a taxpayer standing is to allow “prompt action to ‘“prevent irremediable public injury”’ [citation], i.e., the unlawful or illegal expenditure of public funds [citation].” (Id. at p. 749.) That was the rationale behind the holding in Waste Management that a plaintiff must cite facts showing an illegal injury is occurring or about to occur. (Ibid.)
In his first amended complaint, plaintiff alleged that he had been subjected to unlawful enforcement proceedings under section 6152(a) in the past. He is now “in the process of working to found one or more new financial institutions, including a state-chartered savings and loan association within the State of California in which he wishes to participate as a director, Board member and committee member.” According to DFI and the Commissioner, under article III, section 3.5 of the California Constitution, defendants “lack[] the power not to enforce Section 6152 unless and until the courts rule that the statute is unconstitutional.”
These allegations are insufficient to support a belief that an illegal expenditure of public funds is occurring or about to occur. Even if defendants are bound to enforce section 6152(a), plaintiff’s allegations do not establish that there is anyone against whom they could enforce it. There is no “state-chartered savings and loan association within the State of California” with a “director, Board member and committee member” to which section 6152(a) applies. Plaintiff’s general allegation that he is “in the process of working to found” such an institution of which he would be a director and board member is insufficient to establish a need for “prompt action to ‘“prevent irremediable public injury.”’” (Connerly v. Schwarzenegger, supra, 146 Cal.App.4th at p. 749.)
This precludes an award of injunctive relief, which is available only to prevent threatened future expenditures of public funds. (Stanson v. Mott (1976) 17 Cal.3d 206, 223.) However, evidence that defendants have, in the past, authorized the improper expenditure of public funds entitles plaintiff to a declaratory judgment to that effect. (Id. at pp. 222-223.) “To achieve the ‘socially therapeutic purpose’ of section 526a, ‘provision must be made for a broad basis of relief. Otherwise, the perpetration of public wrongs would continue almost unhampered.’ [Citation.]” (Van Atta v. Scott (1980) 27 Cal.3d 424, 450.) In the instant case, because there is no threatened unconstitutional expenditure of public funds under section 6152(a), the only way to obtain a judgment stating that the statute is unconstitutional to the extent it conflicts with section 525 is through declaratory relief.
As to the need for such a declaratory judgment, plaintiff asserts that article III, section 3.5 of the California Constitution prevents defendants from refusing to enforce section 6152(a). Assuming that it does so, that defendants have stated that they will not enforce section 6152(a) in the future does not preclude its future enforcement.
Article III, section 3.5 of the California Constitution provides: “An administrative agency, including an administrative agency created by the Constitution or an initiative statute, has no power: [¶] (a) To declare a statute unenforceable, or refuse to enforce a statute, on the basis of it being unconstitutional unless an appellate court has made a determination that such statute is unconstitutional . . . .”
B. Discovery Rulings
1. Discovery
Plaintiff first challenges the trial court’s denial of his motion to compel further responses to, and compliance with, his second set of document requests and third set of interrogatories. The documents requested were generated by defendants in connection with the Torrance Bank action. The interrogatories concerned the time and money spent on the Torrance Bank action and identification of the individuals who worked on that action on behalf of defendants.
In denying the motion, the trial court ruled that the information plaintiff sought to obtain “is not sufficiently relevant to the issues presented by this action to allow discovery into matters which essentially reflect on the litigation strategy employed by the defendant in the underlying action.” The trial court noted that “[i]n this action, Plaintiff does not seek damages arising out of the previous actions, rather plaintiff seeks attorney fees incurred in this action. The amount of attorney fees and litigation expenses incurred in the prior action is relevant only to the extent that plaintiff maintains that taxpayers funds were and should not be used to enforce [section] 6152(a). In this case, there is no question that . . . defendant’s enforcement of the statute has resulted in expenditures by the State. Again, however, the amount of that expenditure is not at issue, because the amount of the litigation expenses and the type of litigation work undertaken to enforce the statute will not reflect on the enforceability of [section] 6152[a] or remedies that are available to plaintiff in this case.”
The trial court was correct. As discussed above, the critical question here was the threat of future expenditures to enforce section 6152(a). Past expenditures—which were undisputed—were irrelevant to determination of that question. That is, they had no tendency in reason to prove (Evid. Code, § 210) “an actual or threatened expenditure of public funds” (Waste Management of Alameda County, Inc. v. County of Alameda, supra, 79 Cal.App.4th at p. 1240).
Plaintiff argues that he needed to discover who worked on the prior enforcement action to determine who to depose in order to discover what defendants’ future actions will be. However, it is the Commissioner who is charged with enforcement of section 6152(a) (Fin. Code, § 8050; Beverly Hills Fed. S. & L. Assn. v. Superior Court, supra, 259 Cal.App.2d at p. 321), not the people who worked on the litigation in the Torrance Bank action.
Plaintiff also argues that the information he sought to discover was admissible as relevant to any motion for attorney’s fees he might bring. We fail to see how evidence as to the time and expenses defendants incurred in litigating the Torrance Bank action would be admissible to prove the amount of attorney’s fees plaintiff would be entitled to in this action if he were to prevail. The authority plaintiff cites applies to discovery of the opposing party’s expenditures in an action to help determine the prevailing party’s entitlement to attorney’s fees in the same action (Chalmers v. City of Los Angeles (9th Cir. 1986) 796 F.2d 1205, 1214).
2. Sanctions
Plaintiff contends that the trial court erred in refusing to award monetary sanctions against defendants for their failure to meet and confer. Plaintiff claims that defendants’ failure to meet and confer was uncontroverted, so monetary sanctions against defendants were mandatory.
Former section 2023, subdivision (a)(9), of the Code of Civil Procedure provided that “[m]isuses of the discovery process include” “[f]ailing to confer in person, by telephone, or by letter with an opposing party or attorney in a reasonable and good faith attempt to resolve informally any dispute concerning discovery, if the section governing a particular discovery motion requires the filing of a declaration stating facts showing that an attempt has been made. Notwithstanding the outcome of the particular discovery motion, the court shall impose a monetary sanction ordering that any party or attorney who fails to confer as required pay the reasonable expenses, including attorney’s fees, incurred as a result of that conduct.”
Repealed by Statutes 2004, chapter 182, section 22, operative July 1, 2005.
Contrary to plaintiff’s claim that defendants’ failure to meet and confer was uncontroverted, defendants submitted a declaration by their attorney, Raymond B. Jue, in which he stated that he did telephone plaintiff’s attorney, Keith Alan, to discuss plaintiff’s pending discovery, albeit not immediately upon receiving the request to meet and confer. He left a message for Mr. Alan, but before Mr. Alan returned the call, Mr. Jue received the motions to compel discovery.
In the absence of any authority or additional citations to the record supporting plaintiff’s position that the imposition of monetary sanctions was mandatory under the circumstances, we decline to reverse the trial court’s refusal to award sanctions against defendants.
Notably, plaintiff cites nothing in the record showing that the trial court actually ruled on his request for sanctions or that he sought a ruling when the trial court failed to rule on his request. Absent a record demonstrating error, we must presume the judgment is correct. (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133; Fleishman v. Superior Court (2002) 102 Cal.App.4th 350, 357.)
Plaintiff also contends that the trial court erred in awarding discovery sanctions against him, in that it should not have ordered his deposition. Defendants moved to compel plaintiff’s deposition and sought sanctions against him, while plaintiff moved to quash defendants’ deposition notice and for sanctions against defendants. The trial court granted defendants motion and imposed sanctions against plaintiff and Attorney Alan. It denied plaintiff’s motion.
The trial court explained that “[p]laintiff’s contentions in this action define the parameters of the action, and defendants are entitled to know the specifics of those contentions in order to fully defend themselves. Defendants are entitled to know these factual bases of plaintiff’s conclusory contentions, including whether or not plaintiff has knowledge of whether there have been actual or threatened expenditures of public funds, and what, if any, evidence supports plaintiff’s knowledge. . . .
“For example, if plaintiff contends the only actual expenditure or threatened expenditure of public funds is from the litigation in these consolidated cases, then defendants are entitled to depose the plaintiff in order to determine that this is the scope of plaintiff’s contentions. [¶] Plaintiff cannot refuse to participate in discovery which seeks the exact allegations, facts and evidence which will be at issue in the trial of this action.”
Plaintiff argues that “it is improper to ask a party deponent to state or explain his or her legal contentions in the case,” citing Rifkind v. Superior Court (1994) 22 Cal.App.4th 1255, 1259. Rifkind notes, however, that “questions at a deposition asking the person deposed about the basis for, or information about, a factual conclusion or assertion, as distinguished from the basis for a legal conclusion,” are proper. (Ibid.) In context, it is clear that the trial court references to plaintiff’s contentions are to the factual bases of those contentions, not the legal bases. These are properly explored by deposition. (Ibid.)
Plaintiff asserts that he and his counsel had substantial justification for challenging the deposition notice, so the trial court erred in awarding sanctions against them. In the absence of any authority other than Rifkind to support plaintiff’s assertion that he had substantial justification for challenging the deposition notice, we conclude plaintiff has failed to demonstrate error in the award of sanctions.
C. Case Management Order
Plaintiff filed a motion for an order directing the sequence of litigation concerning recoverable attorney’s fees and costs. The motion apparently was a response to defendants’ motion for an order declaring that plaintiff may not recover in this action attorney’s fees incurred in the Torrance Bank action. Defendants’ motion was a response to plaintiff’s discovery requests, which sought information as to the costs incurred in litigating the Torrance Bank action. According to plaintiff, the trial court ruled that it had no power to make the order he requested.
Plaintiff cites nothing in the record showing the actual ruling.
Plaintiff claims on appeal that he should not be made to litigate the question as to whether he is entitled to attorney’s fees, and which attorney’s fees are recoverable, until he has prevailed in the litigation and filed a memorandum of costs or motion for attorney’s fees. He requests that we direct the trial court to make the order he sought.
As stated above, we hold that plaintiff’s discovery requests were improper, in that he may not recover in this action attorney’s fees incurred in the Torrance Bank action. If the trial court has not yet granted defendants’ motion for an order to that effect, the matter is now moot. Since the question of attorney’s fees and costs recoverable is limited to those incurred in this action, the trial court must, of necessity, wait to resolve the question until the litigation is concluded and a prevailing party can be determined.
DISPOSITION
The judgment in B189435 is affirmed. Defendants are awarded costs as to this appeal.
The judgment in B190942 is reversed. The trial court is directed to vacate its order granting defendants’ motion for summary judgment and to enter a new and different order, granting summary adjudication of plaintiff’s cause of action for injunctive relief and denying summary adjudication of plaintiff’s cause of action for declaratory relief. The parties are to bear their own costs as to this appeal.
We concur: MALLANO, Acting P. J. ROTHSCHILD, J.