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Item 2 - City Additional Briefing
City of San Luis Obispo, City Attorney’s Office, 990 Palm Street, San Luis Obispo, CA, 93 401-324 9, 805.781.7 140, slocity.org DATE: January 13, 2021 TO: Administrative Review Board FROM: Mark Amberg, Assistant City Attorney Advisor to City Code Enforcement Staff SUBJECT: Additional Briefing, Administrative Citation #23027 The Board has requested briefing from the parties on the issue of what constitutes a “lawful rule or regulation” issued pursuant to City Municipal Code Section 2.24.100 B. which provides that is shall be a violation of City Code to: Do any act forbidden by any lawful rule or regulation issued pursuant to this chapter, if such act is of such a nature as to give, or be likely to give, assistance to the enemy or to imperil the lives or property of inhabitants of this city, or to prevent, hinder or delay the defense or protection thereof. The City’s position was and is that a resolution duly adopted by City Council constitutes a “lawful rule or regulation” under Municipal Code Section 2.24.100 B (and otherwise). Although the City could have elected to adopt the directives contained in Resolutions 11099 and 11106 by a lesser or lower method (for example, by a rule issued by the Emergency Services Director under his rulemaking authority or a minute order issued by Council), or even by ordinance, which is the highest rule making authority for the City, City Council elected to issue the applicable directives by the “higher” and more formal method of a Council resolution. 1.On January 19, 2021, City Council Will Consider an Urgency Ordinance That Will Conclusively Clarify Council’s Intent That “Lawful Rule or Regulation” Under Chapter 2.24 Includes a Resolution Before analyzing the Board’s specific question, the City needs to make the Board aware that it has taken the step, through a proposed urgency ordinance, to clarify the meaning of “lawful rule or regulation” for purposes of Chapter 2.24 and, specifically for the Board’s decision in this case, that a “lawful rule or regulation” includes (but is not limited to) a resolution duly adopted by Council. A copy of the draft urgency ordinance and accompanying staff report are attached to this memorandum as Exhibit A for reference. The urgency ordinance will be considered by Council at its next meeting on January 19, 2021 so should be in effect before the Board meets again on January 20. If adopted, the urgency ordinance will conclusively establish that Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 1 Page 2 a duly enacted Council resolution, constitutes a “rule or regulation” for purposes of Chapter 2.24. A City Council acts as the legislative body of the City (Cal. Const. art XI, Sec. 5; Government Code Sec. 37100) and can enact legislation that “retroactively” clarifies the intent of a City Code provision. As discussed in Western Security Bank v. Superior Court (1997) 15 Cal.4th 232: One such circumstance is when the Legislature promptly reacts to the emergence of a novel question of statutory interpretation: “An amendment which in effect construes and clarifies a prior statute must be accepted as the legislative declaration of the meaning of the original act, where the amendment was adopted soon after the controversy arose concerning the proper interpretation of the statute. If the amendment was enacted soon after controversies arose as to the interpretation of the original act, it is logical to regard the amendment as a legislative interpretation of the original act . . . . . . [A] subsequent expression of the Legislature as to the intent of the prior statute, although not binding on the court, may properly be used in determining the effect of a prior act.” . . . Moreover, even if the court does not accept the Legislature’s assurance that an unmistakable change in the law is merely a “clarification,” the declaration of intent may still effectively reflect the Legislature’s purpose to achieve a retrospective change. . . Whether a statute should apply retrospectively or only prospectively is, in the first instance, a policy question for the legislative body enacting the statute. . . . . . Thus, where a statute provides that it clarifies or declares existing law, “[i]t is obvious that such a provision is indicative of a legislative intent that the amendment apply to all existing causes of action from the date of its enactment. In accordance with the general rules of statutory construction, we must give effect to this intention unless there is some constitutional objection thereto. Id at 242-244, citations omitted. Assuming the urgency ordinance is passed, it will conclusively clarify that Council Resolutions 11099 and 11106 constitute “rules or regulations” adopted pursuant to Chapter 2.24. Leaving aside the effect of the urgency ordinance if passed, the following analysis is provided for the Board’s consideration. Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 2 Page 3 2. Definition of “Rules” and “Regulations” a. Issuance of a “Rule” or “Regulation” Under Chapter 2.24, While it Could Include an Ordinance, Does not Require an Ordinance In their arguments, counsel for Appellant have stated, without any supporting authority, that “resolutions, by definition, are not laws or regulations” and suggest that only an ordinance satisfies the requirements of a “rule or regulation” under Code Section 2.24.100 B. First, it simply is not correct that a resolution cannot constitute a law or regulation. In the absence of a statutory or charter provision to the contrary, a legislative act of a City may be either by resolution or ordinance. (Crowe v. Boyle, (1920) 184 Cal. 117, 149; Central Mfg. Dist., Inc. v. Board of Sup’rs of Los Angeles County (1980) 176 Cal.App.2d 850, 860). Any decision within a city’s police powers may be evidenced by resolution unless there is a statutory or other requirement providing otherwise. (Pollok v. San Diego (1897) 118 Cal. 593. While there are provisions in City Charter and Code that do specifically require an ordinance, Code Section 2.24.100 B is not one of them. If Council had intended for “rules and regulations” issued under Chapter 2.24 to require an ordinance, the Code would say so. The City does not dispute counsels’ argument that there are significant differences between ordinances and resolutions; just that Code Section 2.24 B, whatever it requires, does not require an ordinance.1 b. The Terms “Rule” and “Regulation,” for Purposes of City Code, are not Defined Under California law or in the City’s Charter or Code First, California does not have an administrative procedure act that applies to cities. The California Administrative Procedure Act (Government Code Sections 11340, et. seq.) sets forth rule making procedures for State agencies but does not apply to cities or other local agencies. (Allen v. Humboldt County Bd. Of Sup’rs (1963) 220 Cal.App.2d 877, 833 “The Administrative Procedure Act applies only to those state agencies enumerated therein and does not apply to local agencies.” See, also, Henry George School of Social Science of San Diego v. San Diego Unified School Dist. (1960) 183 Cal.App.2d 82, 85-86). There is no similar act or law that applies to cities in California. 1 As noted in Central Manufacturing: “The enactments of a city’s legislative branch are known as ordinances and resolutions. Strictly speaking, there is a difference between the two. An ordinance in its primary and usual sense means a local law. It prescribes a rule of conduct prospective in operation, applicable generally to persons and things subject to the jurisdiction of the city. ‘Resolution’ denotes something less formal. It is the mere expression of the opinion of the legislative body concerning some administrative matter for the disposition of which it provides. Ordinarily it is of a temporary character, while an ordinance prescribes a permanent rule of conduct or of government. However, for many purposes the two words are equivalent terms.’ Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 3 Page 4 The City of San Luis Obispo is a charter city, formed under the authority of Cal. Const. art XI, Sec. 3. Pursuant to Cal. Const. art XI, Sec. 5, as a charter city, the City of San Luis Obispo has supreme authority over its “municipal affairs” which allows the City to conduct its own business and control its own affairs (Fragley v. Phelan, (1899) 126 Cal. 383, 387), subject only to exceptions, with regard to state law, for conflicting provisions of the state constitution or matters of statewide concern that have been preempted by state law (Cal. Const. art XI, Sec. 7). Subject only to these exceptions, the legislative power of the City under Cal. Const. art XI, Sec. 7 as to matters within the City’s jurisdiction is as broad as the state legislature (Candid Enters., Inc. v. Grossmont Union High School Dist. (1985) 39 Cal. 3d 878, 885; Birkenfeld v. City of Berkeley, (1976) 17 Cal. 3d 129, 140).2 The City charter is the City’s “constitution” that outlines how the City is governed (Johnson v. Bradley, (1992) 4 Cal. 4th 389, 399). This includes the exercise of the City’s police power to promote public health, morals, safety and general welfare (Carlin v. City of Palm Springs, (1971) 14 Cal. App. 3d 706, 711). Neither the City Charter nor any current provision of the City Municipal Code define “rule or regulation” (as noted above, on January 19, 2021, Council will consider an urgency ordinance that will define these terms for purposes of Chapter 2.24). Further, neither the City Charter nor any applicable provision of the City Municipal Code require any particular process for enacting “rules or regulations.”3 Municipal Code Section 1.08 does provide some guidance regarding the interpretation of Code language: Unless the provisions of the context otherwise require, the general provisions, rules of construction and definitions set out in this chapter shall govern the construction of this code. The provisions of this code and all proceedings under it are to be construed with a view to effect its objects and to promote justice. There are no “general provisions, rules of construction and definitions” that relate to the terms “rules and regulations” contained in Code Section 2.24.100 B. However, as mandated by Code Section 1.08, “this code and all proceedings under it” are to be construed “with a view to effect its objects and to promote justice.” The City submits that the clear objective of Chapter 2.24 in general, and of Code Section 2.24.100 B in particular, is to provide the City with broad authority to act quickly and efficiently to protect City residents when the City is faced with a declared local emergency such as the COVID-19 pandemic. In this particular case, given the importance and weight of the emergency declaration and the impact on the City and its residents, City Council elected to issue certain regulatory directives by resolution rather than at some “lower level.” 2 Legislative actions of Council are governed by City Code Art. VI, Sec. 601. 3 There are procedures defined in the City’s zoning code – Title 17 of the Municipal Code – but they are not applicable here since this case does not involve zoning. Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 4 Page 5 c. Guiding Law Counsel for the City has found little guiding case law concerning what constitutes a “rule” or “regulation” in the context of the City’s municipal code. There are cases that provide some guidance concerning the meaning of at least “regulation” (the terms “rule” and “regulation” are frequently intermixed or used interchangeably) in the context of federal administrative agencies and State of California agencies but those cases do not address and have no binding authority with respect to the City since, as discussed below, there is no administrative procedure act that applies to cities in California and there are no requirements for rulemaking or issuance of regulations for California cities. Additionally, and more importantly, no applicable provision of the City Charter or the City Municipal Code defines these terms or mandates any procedure for the adoption of rules or regulations by the City. Even if they did, the failure by a city to follow specific procedural rules is not jurisdictional and does not invalidate an otherwise valid action. (City of Pasadena v. Paine (1954) 126 Cal.App.2d 93, 96). While not applicable to cities, for some guidance, the California Administrative Procedure Act does contain a definition of “regulation” (but not “rule”). Government Code Section 11342.600 provides: “Regulation” means every rule, regulation, order, or standard of general application or the amendment, supplement, or revision of any rule, regulation, order, or standard adopted by any state agency to implement, interpret, or make specific the law enforced or administered by it, or to govern its procedure. First, as is frequently the case, the terms “rule” and “regulation” are used interchangeably and are conflated. Secondly, the definition is very broad and includes “every rule, regulation, order, or standard of general application . . . adopted by any state agency to implement, interpret or make specific the law enforced or administered by it . . .” No specific form of regulation is prescribed. Merriam Webster defines “rule” and “regulation” as including the following: Rule: A prescribed guide for conduct or action, a regulation or bylaw governing procedure or controlling conduct. Regulation: An authoritative rule dealing with details or procedure, a rule or order issued by an executive authority or regulatory agency of a government and having the force of law. Regulations are sometimes referred to as “delegated authority” since they interpret and direct how a statute (or, in this case, City code) is to be implemented. In the City, City Council is the ultimate authority for legislating and directing City actions. With few limitations that don’t apply her, while Council could delegate some function – such as the authority given to the Emergency Services Director to issue rules and regulations in an Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 5 Page 6 emergency – that doesn’t mean that Council has to delegate that function or that Council can’t choose, as it sees fit, to exercise that function itself. Additionally, while Council could authorize actions to be taken at a “lower” and less formal level – such as, in this case, taking steps to implement a declared emergency through “rules and regulations” rather than at a “higher level” by resolution or ordinance – this doesn’t mean that Council, as the ultimate authority to direct City action, couldn’t choose to take an action at a higher level than is required. That is what has happened in this case – Council elected to require compliance with public health orders by Council resolution rather than through some lower level of action - e.g. “rules and regulations” issued by the Emergency Services Director. 3. Conclusion The term “rules and regulations,” for purposes of City Code Section 2.24.100 B. is not defined under State law or under City Charter or Code. To the extent there is guidance regarding a definition, the term is broad and doesn’t require any particular form or procedure to adopt. It is clear from the language of Code Section 2.24.100 B. that an ordinance isn’t required to enact a “rule or regulation” under the code section. While the City could have issued its emergency services directives in some other form, Council wasn’t precluded from issuing them itself in the form of resolutions. Finally, as noted, for purposes of Code Section 2.24.100 B, the urgency ordinance to be considered by Council on January 19, 2021, if passed, will remove any question that a “rule or regulation” can be in the form of a resolution. Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 6 Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 7 Department Name: City Attorney Cost Center: 1500 For Agenda of: January 19, 2021 Placement: Public Hearing Estimated Time: 30 minutes FROM: Christine Dietrick, City Attorney SUBJECT: EMERGENCY ENFORCEMENT AUTHORITY MUNICIPAL CODE AMENDMENTS AND CLARIFICATIONS RECOMMENDATION Adopt an emergency ordinance clarifying City emergency enforcement authority and amending Chapter 2.24 (Emergency Services) and chapter 9.22 (Safety Enhancement Zones) of the Municipal Code to provide expressly for direct enforcement of local, state and federal emergency rules, regulations, orders, directives, or other enactments related to the declaration of a local, state or federal emergency affecting the City of San Luis Obispo and further clarifying the meaning of the phrase “any lawful rule or regulation issued pursuant to this Chapter” as used in Chapter 2.24. DISCUSSION Background The City Council took prior action via Council Resolution 11099 and 11106 (2020 Series) to declare a local emergency and to enact emergency measures for the administrative enforcement of violations of any COVID-19 related public health and emergency orders against persons and businesses that failed or refused to comply with public health orders (see specifically Section 6 of Reso. 11106). As the infection rate, hospitalizations and deaths throughout the nation, state, County and City have continued to rise, the City has issued administrative citations with enhanced penalties of $1,000 per violation for violations of state Purple Tier business operations and social gathering restrictions, pursuant to the administrative enforcement authority enacted by the Council. No citations were issued prior to extensive city publication of information regarding requirements and intent to enforce public health orders and, in the case of businesses, none were cited prior to extensive outreach and education efforts. Since the City began issuing citations, the number of administrative citation appeals has risen significantly. Most of the appeals are heard by volunteer hearing officers and the outcomes of appeals have been inconsistent among hearing officers. A review of appeals outcomes suggests that some of the outcomes clearly resulted from simple variations in underlying facts from case to case and some resulted from persuasive information presented by appellants at hearing suggesting that no violation had been sufficiently established. However, following review of hearing officer outcomes and a recent COVID violation appeal hearing before the City’s Administrative Review Board, it became clear that the City’s enforcement approach and regulatory structure could be amended and clarified to ensure direct municipal code enforcement authority of relevant public health measures. Item 11 Packet Page 151Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 8 Policy Context The City has consistently tried to educate and support the community in complying with public health measures to mitigate or stop the spread of COVID-19 in order to advance the health and safety of the community and to mitigate against the adverse economic impacts of long -term restrictions and closures that were inevitable if the pandemic could not be adequately managed and contained. Chapter 2.24 of the City’s municipal code provides the Disaster Council (City Council) is empowered “…to review and approve the emergency operations plan and mutual-aid plans and agreements and such ordinances and resolutions and rules and regulations as are necessary to implement such plans and agreements.” The Emergency Services Director (City Manager) is authorized to “Request the city council to proclaim the existence or threatened existence of a local emergency” if the city council is in session, or to issue such proclamation if the city council is not in session”, and, thereafter, “To make and issue rules and regulations on matters reasonably related to the protection of life and property as affected by such emergency; provided, however, such rules and regulations must be confirmed at the earliest practicable time by the city council.” In this instance the Emergency Services Director recommended that the Council act directly, via Resolution 11106, to adopt measures to authorize direct administrative enforcement authority for violations of public health orders in order to compel compliance with public health orders designed to mitigate and prevent the spread of COVID-19. Concerns Raised by Administrative Citation Appeal At an administrative appeal hearing held on January 7, 2021 on a citation issued to Kennedy Club Fitness (KCF) in SLO for violation of state indoor gym operations restrictions, the City’s three-member Administrative Review Board heard arguments raised by the Appellant’s (KCF’s) legal counsel, continued the hearing to January 20, 2021, and requested further briefing from the parties on the following: 1. Were the Resolutions adopted by the City Council “rules or regulations” as contemplated under Chapter 2.24? (Counsel for the City argued that the resolutions were valid “rules and regulations” pursuant to emergency authority; and legal counsel for the Appellant argued that such rules and regulations could be enacted by ordinance but were not validly enacted by resolution). 2. If the Resolutions are valid emergency “rules or regulations” under Chapter 2.24, are there any rule making requirements, similar to those for federal rulemaking under the federal Administrative Procedures Act, applicable to emergency rules and regulations issued pursuant to Chapter 2.24. (Counsel for the appellant did not take a position on this question from the ARB and the City argued that no such requirements apply to the Council’s adoption of emergency rules and regulations via resolution or otherwise. It remains the City’s position that Council action via resolution is an appropriate exercise of emergency regulatory authority, either under Chapter 2.24 or its otherwise applicable general police powers for the protection of public health and safety). Item 11 Packet Page 152Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 9 3. Do the Governor’s Emergency Orders and those of the State Public Health Officer constitute enforceable emergency measures? (Appellant’s counsel argued that they do not. The City asserted that the ARB lacks jurisdiction to invalidate the orders and any such objections or legal challenges are properly directed to the State; the City is merely enforcing State orders intended to curb the spread of COVID-19, as currently enacted). Counsel for Appellant and the City will be providing further briefing to the ARB in advance of the hearing on January 20, 2021 at which time the ARB will deliberate and provide direction to ARB legal counsel regarding its findings and conclusions supporting its final decision. Thereafter, legal counsel for the ARB will prepare a proposed decision, which will have to be reviewed, revised, and finalized at a yet a third public meeting of the ARB in compliance with the Brown Act. The supplemental briefing submitted to the ARB will be provided to the Council prior to its January 19 meeting so that the Council has a more thorough understanding of the arguments and authority the ARB will be considering. However, the pending appeal raises issues with the enforceability of the City’s current emergency regulatory structure that may not be resolved for some time, creating uncertainty regarding the City’s enforcement authority that may not be resolved for several weeks, in the height of a continuing COVID-19 surge. Because staff believes that collective compliance with public health measures is the most efficient, effective, and expedient path to relief from the current state restrictions, and clear enforcement authority supports collective compliance, staff is recommending emergency amendments to clarify and enhance the City’s enforcement tools. Recommendations for Clarification and Enhancement of Code Enforcement Authority Staff is recommending amendments to two Chapters of the municipal code, Chapter 2.24, governing emergency powers and authority, and Chapter 9.22 establishing certain pre- determined safety enhancement zone timeframes and providing the authority for council to enact additional safety enhancement zones, by resolution, as necessary to address “…unique conditions and circumstances during a specific period of time that create the potential for a significant threat to public health and safety and that the threat would be reduced by enhanced penalties for violations of provisions of the San Luis Obispo Municipal Code.” In effect, the recommended amendments more clearly state and expressly codify in the municipal code the authority of the Council and the Emergency Services Director to directly enforce violations of any orders, directives and measures enacted by the County, State and Federal governments that are applicable to the City and issued pursuant to a declared emergency. Staff believes that authority is implicit in the emergency powers and can be made explicit via the expedited issuance of emergency rules and regulations during an emergency, but staff believes the express inclusion of that authority in the ordinance itself is beneficial for expedience, clarity, and ease of communication of enforcement authority, so that no ambiguity remains in circumstances where time is often of the essence. Item 11 Packet Page 153Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 10 Similarly, the amendments to the safety enhancement zone provisions expressly designate violations of Chapter 2.24, or validly enacted County, State or Federal emergency or Public Health emergency measures issued under that Chapter, as subject to $1000 fines immediately upon declaration of emergency and for the duration of a declared emergency. The latter amendment essentially makes the safety enhancement zone related to declared emergencies self - executing, rather than requiring a Council resolution to activate the enhanced penalties associated with a safety enhancement zone. The provision is intended to recognize the volatile and fluid circumstances that are normally in play during declared emergencies, as well as the reality that violations of emergency and public health orders, by definition, present a unique, elevated, and immediate risk of harm to public health, safety, and welfare. Previous Council or Advisory Body Action The City Council took prior action via Council Resolution 11099 and 11106 (2020 Series) to declare a local emergency and to enact emergency measures for the administrative enforcement of violations of any COVID-19 related public health and emergency orders against persons and businesses that failed or refused to comply with public health orders (see specifically Section 6 of Reso. 11106). Public Engagement The January 19, 2021 City Council meeting was duly noticed, and emergency or urgency ordinances do not require additional pre-adoption notice or publication pursuant to California Government Code §§ 36933 and 36937. CONCURRENCE The Emergency Services Director concurs with the recommended actions in this report. ENVIRONMENTAL REVIEW The California Environmental Quality Act does not apply to the recommended action in this report, because the action does not constitute a “Project” under §21065 of the California Public Resources Code because the clarifications in the ordinance do not create any direct or indirect physical change in the environment. The ordinance simply clarifies sections for purposes of existing enforcement and educational efforts for COVID-19 state and local health orders. FISCAL IMPACT The recommended amendments are not anticipated to have any fiscal impact, as the City’s position remains that the current enforcement mechanisms are valid and, therefore, penalty amounts assessed would be the same under either approach. The amendments are recommended for clarity and ease of communication of enforcement authority and for elimination of ambiguity of enforcement in emergency situations. Item 11 Packet Page 154Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 11 ALTERNATIVES 1. Decline to adopt the emergency ordinance, await ARB decision and maintain current enforcement approach if upheld. Not recommended as this approach risks continuing ambiguity and delay in enforcement during the current COVID-19 surge. 2. Decline to adopt the emergency ordinance and direct staff to return with a non-emergency ordinance. Not recommended because this approach leaves the City’s enforcement approach in question for approximately two months pursuant to meeting schedules and normal ordinance introduction and adoption timelines in the midst of a COVID-19 surge. 3. Direct changes to the emergency ordinance and adopt as amended. Attachments: a - Draft Emergency Ordinance Item 11 Packet Page 155Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 12 O ______ ORDINANCE NO. _____ (2021 SERIES) AN EMERGENCY ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, AMENDING CHAPTER 2.24 EMERGENCY SERVICES) AND CHAPTER 9.22 (SAFETY ENHANCEMENT ZONES) OF THE MUNICIPAL CODE TO PROVIDE EXPRESSLY FOR DIRECT ENFORCEMENT OF LOCAL, STATE AND FEDERAL EMERGENCY RULES, REGULATIONS, ORDERS, DIRECTIVES, OR OTHER ENACTMENTS RELATED TO THE DECLARATION OF A LOCAL, STATE OR FEDERAL EMERGENCY AFFECTING THE CITY OF SAN LUIS OBISPO AND FURTHER CLARIFYING THE MEANING OF THE PHRASE “ANY LAWFUL RULE OR REGULATION ISSUED PURSUANT TO THIS CHAPTER” AS USED IN CHAPTER 2.24 WHEREAS, the City of San Luis Obispo is currently subject to local, state and federal declarations of emergency related to the pandemic COVID-19; and WHEREAS, the City and County have experienced increasing and significant rates of infection, hospitalization, and death of residents within the City and County due to COVID-19; and WHEREAS, the City and County are currently subject to State Public Health and Executive orders enacting limitations on certain activities and business operations that increase the risk of transmission of COVID-19; and WHEREAS, clear enforcement authority of public health and emergency measures directly by the City is imperative to mitigating against the spread of COVID-19 and continuing increases in illness, loss of life and extended economic damage associated with extended limitations on and closures of businesses. WHEREAS, there is an immediate and urgent need for clarification and amendment of the City’s emergency and administrative enforcement provisions to ensure clear and consistent enforcement of COVID-19 emergency and public health measures necessary to mitigate against the risk of serious harm to citizens of the City as the result of COVID-19. WHEREAS, failure to enact the provisions below as emergency measures could result in the invalidation of City enforcement of urgent emergency rules and regulations intended to mitigate and prevent the spread of COVID-19 within the City, resulting in the increase of activities within the City that present a risk of continuing and increasing illness and death of residents in the City due to COVID-19; and Item 11 Packet Page 156Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 13 Ordinance No. _____ (2021 Series) Page 2 O ______ WHEREAS, failure or refusal of businesses within the city to comply with COVID-19 public health and safety requirements, and uncertainty regarding the City’s ability to enforce such measures, may unfairly disadvantage businesses acting in good faith to abide by applicable health and safety measures and result in an unfair advantage to businesses who violate or disregard such measures, NOW, THEREFORE, BE IT ORDAINED by the Council of the City of San Luis Obispo as follows: SECTION 1. Findings. The Council hereby finds and declares the following: a. During the existence of a declared local, state, or federal emergency, it is necessary for the Emergency Services Director, the Disaster Council or the City Council to have clear authority to act quickly and directly to enact such measures as are deemed necessary to protect the health, safety and welfare of City operations and the residents of the City. b. Express and unambiguous authority to enforce emergency and public health measures, orders or directives issued by County, State and federal authorities will permit the City to respond effectively to rapidly evolving emergency situations and take direct and expedient action to implement and enforce emergency and public health and safety measures necessary to protect the City organization and residents of the City. c. It is the intent of the City Council that nothing herein is intended to or shall require the City to undertake the direct enforcement of any emergency or public health measure, order or directive issued by any County of San Luis Obispo, State of California or Unites States jurisdictional authority authorized to issue or enact such measures, orders or directives, but that the Emergency Services Director, the Disaster Council or the City Council shall be empowered to enforce such measures, orders or directives, either criminally or administratively, as a violation of the municipal code upon declaration, order or resolution of the Emergency Services Director, the Disaster Council or the City Council pursuant to Chapter 2.24 and their local emergency powers. d. The addition of Section 2.24.060 A.6.f as set forth below is a declaration and clarification of existing city law and, as such, the declaration of otherwise existing emergency authority shall be applied in all instances, both prospectively and retroactively. e. The addition of Sections 2.24.100 D and E, as set forth in Section 3 below, is a declaration and clarification of existing city law and, as such, the meaning of the phrase rule or regulation issued pursuant to this chapter” as set forth in section D and as used elsewhere in this Chapter shall be applied in all instances, both prospectively and retroactively. f. The addition of Sections 2.24.100 F, as set forth in Section 3 below, is a declaration and clarification of existing city law and, as such, the declaration and clarification of existing emergency and legislative authority as set forth in Section F shall be applied in all instances, both prospectively and retroactively. Item 11 Packet Page 157Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 14 Ordinance No. _____ (2021 Series) Page 3 O ______ SECTION 2. Section 2.24.060 (Officers – Powers and Duties), subsection A.6, shall be amended to add subsection f to read as follows: f. Nothing herein shall limit or otherwise preclude the Disaster Council or City Council from directly enacting measures or directing enforcement of measures in furtherance of this Chapter or as deemed necessary by the City Council to protect the public health, safety, and welfare, pursuant to any declared local, state, or federal emergency by any lawful means otherwise available to them, including but not limited to, declaration, proclamation, motion, minute order, resolution, or ordinance. SECTION 3. Section 2.24.100 (Violation – Penalty) of the San Luis Obispo Municipal Code shall be amended to read as follows: It shall be a misdemeanor, punishable by a fine not in excess of five hundred dollars or by imprisonment for a period not to exceed six months, or both, for any person, during an emergency, to engage in the actions set forth in subsections A-C below: A. Willfully obstruct, hinder, or delay any member of the emergency organization in the enforcement of any lawful rule or regulation issued pursuant to this chapter, or in the performance of any duty imposed upon him or her by virtue of this chapter. B. Do any act forbidden by any lawful rule or regulation issued pursuant to this chapter, if such act is of such a nature as to give, or be likely to give, assistance to the enemy or to imperil the lives or property of inhabitants of this city, or to prevent, hinder or delay the defense or protection thereof. Any violation of any duly enacted public health measure to mitigate or prevent the transmission of a communicable disease that presents a risk of serious illness or death to City residents or of any emergency measure enacted to prevent the exposure of residents to shall be presumed “to imperil the lives or property of inhabitants of this city”; and failure to remedy such violation after direction by any authorized city personnel charged with enforcing such measures shall be presumed “to prevent, hinder or delay the defense or protection thereof” for purposes of this Chapter. C. Wear, carry or display, without authority, any means of identification specified by the emergency agency of the state. (Prior code § 2430.7) D. As used in this Chapter 2.24, “rule or regulation issued pursuant to this chapter” means, in addition to any duly adopted ordinance of the City, any duly adopted resolution, proclamation, declaration or order of the City Council, the Disaster Council or the Emergency Services Director in furtherance of their respective emergency powers pursuant to a declared local (City or County), state or federal emergency affecting the City of San Luis Obispo. Item 11 Packet Page 158Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 15 Ordinance No. _____ (2021 Series) Page 4 O ______ E. As used in this Chapter 2.24, “rule or regulation issued pursuant to this chapter” shall also include any emergency or public health measure, order or directive applicable in the City and issued by any County of San Luis Obispo, State of California or Unites States jurisdictional authority authorized to issue or enact such emergency or public health measures, orders or directives, where the City Council, Disaster Council and/or Emergency Services Director has authorized or directed the enforcement of such measures pursuant to their powers under this chapter or their otherwise applicable authority to take actions in furtherance of the health, safety and welfare of the city organization and residents. F. In addition to misdemeanor prosecution, nothing herein shall preclude enforcement of violations of this Chapter by any means otherwise permitted by the San Luis Municipal Code or other applicable law, including but not limited to administrative or civil enforcement. SECTION 4. Section 9.22.020 B (Safety Enhancement Zone Violations) of Chapter 9.22 Safety enhancement zone penalties and violations) is amended to read as follows: B. Safety Enhancement Zone Violations. Fines for violations committed in the safety enhancement zone shall apply to the following provisions: Chapter 9.04 (possession of open containers or consumption of alcoholic beverages in public places), Chapter 9.05 hosting a gathering where underage persons consume alcohol), Chapter 9.12 (noise control), Chapter 9.13 (unruly gatherings), Chapter 9.16 (dangerous and deadly weapons), and Chapter 9.20 (urination in public). Violations of Chapter 2.24 Emergency Services), or of any duly enacted rule or regulation pursuant to Chapter 2.24, or of any local (City or County of San Luis Obispo), State of California, or United States emergency or public health emergency measure, order or directive issued pursuant to any declared local, state, or federal emergency applicable within the City shall be subject to enforcement throughout the geographic limits of the City under this section immediately upon declaration of the emergency, and for the duration of the declared emergency, and shall be subject to an immediate $1,000 penalty as an immediate threat to public health or safety. A separate offense shall be deemed to have been committed whenever a person repeats the act that constitutes the violation. SECTION 5. All prior ordinances affecting the provisions herein are superseded to the extent inconsistent herewith but shall otherwise remain in full force and effect. SECTION 6. Urgent Need. Based on the foregoing recitals and findings, all of which are deemed true and correct, this ordinance is urgently necessary as an emergency measure for the immediate preservation of the public peace, health, or safety and, therefore, shall take effect immediately upon adoption in accordance with the provisions of Article VI, Section 605 of the City Charter and Section 36937(b) of the Government Code. Item 11 Packet Page 159Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 16 Ordinance No. _____ (2021 Series) Page 5 O ______ SECTION 7. Publication. Within 15 days after its passage, the City Clerk shall cause a summary of this Ordinance to be published at least once, with the names of those City Council Members voting for and against the Ordinance, in a newspaper of general circulation published and circulated in the city. SECTION 8. Severability. If any provision of this Ordinance is held invalid by a court of competent jurisdiction, such provision shall be considered a separate, distinct, and independent provision and such holding shall not affect the validity and enforceability of the other provisions of this Ordinance. INTRODUCED and ADOPTED on the ____ day of ___________, 2021, by the Council of the City of San Luis Obispo, on the following vote: AYES: NOES: ABSENT: Mayor Heidi Harmon ATTEST: Teresa Purrington City Clerk APPROVED AS TO FORM: J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, on ____________________________. Teresa Purrington City Clerk Item 11 Packet Page 160Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 17 Cases Cited Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 18 Allen v. Humboldt County Bd. of Sup’rs, 220 Cal.App.2d 877 (1963) 34 Cal.Rptr. 232 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 1 KeyCite Yellow Flag - Negative Treatment Distinguished by Foster v. Civil Service Com., Cal.App. 2 Dist., April 27, 1983 220 Cal.App.2d 877 District Court of Appeal, First District, Division 1, California. George H. ALLEN, Plaintiff and Appellant, v. HUMBOLDT COUNTY BOARD OF SUPERVISORS, Humboldt County Planning Commission, and A. G. Brisack, Defendants and Respondents. Civ. 21033. | Oct. 7, 1963. Synopsis Proceeding on petition for administrative mandamus against county planning commission for revocation and annulment of commission’s grant of a variance from the county zoning ordinance. The Superior Court, Humboldt County, Harold Underwood, J., held that the action was barred because the petition had been filed more than thirty days after the board’s denial of administrative appeal and the plaintiff appealed. The District Court of Appeal, Sullivan, J., held that the action was not governed by the thirty-day period applicable to proceedings under the Administrative Procedure Act but was governed by the four-year period applicable to actions for relief not otherwise provided for. Reversed. West Headnotes (6) [1]Mandamus Proceedings to procure and grant or revoke licenses, certificates, and permits Zoning and Planning Certiorari County planning commission, in hearing and deciding application for variance from county zoning ordinance, exercises judicial or quasi-judicial powers so that either certiorari or mandamus is an appropriate remedy to review its action. 3 Cases that cite this headnote [2]Mandamus Nature and scope of remedy in general Use of writ of mandate to review administrative action taken by county planning commission in granting variance from county zoning ordinance invoked the remedy of administrative mandamus rather than the traditional action in mandamus. West’s Ann.Code Civ.Proc. §§ 1085, 1094.5. 3 Cases that cite this headnote [3]Mandamus Officers subject to mandamus in general Remedy of administrative mandamus to review administrative action is not limited to the administrative agencies specified in the Administrative Procedure Act but is applicable to all administrative agencies, both state-wide and local. West’s Ann.Gov.Code, §§ 11370–11528; West’s Ann.Code Civ.Proc. § 1094.5. 6 Cases that cite this headnote [4]Administrative Law and Procedure Agencies and proceedings affected Administrative Procedure Act applies only to those state agencies enumerated therein and does not apply to local agencies. West’s Ann.Gov.Code, §§ 11370–11528, 11500(a), 11501, 11523. 6 Cases that cite this headnote Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 19 Allen v. Humboldt County Bd. of Sup’rs, 220 Cal.App.2d 877 (1963) 34 Cal.Rptr. 232 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 2 [5] Limitation of Actions Actions or Proceedings Not Specially Provided for Proceeding on petition for administrative mandamus against county planning commission for revocation and annulment of commission’s grant of a variance from county zoning ordinance was not governed by thirty-day limitation for review under Administrative Procedure Act but was governed, rather, by four-year period applicable to actions not otherwise provided for. West’s Ann.Gov.Code, § 11523; West’s Ann.Code Civ.Proc. § 343. 3 Cases that cite this headnote [6] Limitation of Actions Actions to which statute applies Limitation of Actions Civil proceedings other than actions Proceedings in mandamus are subject to statutes of limitation, with the applicable statute being determined from the nature of the right asserted. 5 Cases that cite this headnote Attorneys and Law Firms **232 *878 Rader & Truitt, by Richard E. Rader, Arcata, for appellant. Thomas M. Montgomery, County Counsel, County of Humboldt, John D. Cook, **233 Asst. County Counsel, Eureka, for respondents Humboldt County Bd. of Supervisors and Humboldt County Planning Commission. Edward V. Marouk, Eureka, for respondent A. G. Brisack. Opinion SULLIVAN, Justice. George H. Allen appeals from a judgment denying his petition ‘for writ of mandate or writ of review’ seeking to compel respondents Humboldt County Board of Supervisors and Humboldt County Planning Commission1 to revoke and annul the granting to respondent A. G. Brisack of a variance from the provisions of a county zoning ordinance. The basi c facts are not in dispute. Appellant Allen is the owner and occupant of certain real property located in an area zoned as R–1A, a combination of one family residential and agricultural. Respondent Brisack owns 20 acres of land near the center of such R–1A zone and in the immediate vicinity of appellant’s property. On October 4, 1961, at Brisack’s request, the Planning Commission granted him a variance for the construction of a trailer park on his 20-acre *879 tract.2 On October 24, 1961, appellant and sixty or more persons residing within the above-mentioned R–1A zone, acting pursuant to county ordinance No. 333, appealed to the Board of Supervisors, asking that the decision of the Planning Commission be overruled.3 The Board of Supervisors denied such appeal on November 7, 1961. A little more than four months thereafter and on March 12, 1962, appellant, on his own behalf and on behalf of more than sixty other families4 owning real property in the above R–1A zone, filed the instant petition in the court below. The petition alleged in substance the foregoing background facts and further asserted that the granting of the variance was not warranted by the facts, was illegal, unjust, arbitrary, capricious, unauthorized and contrary to section 3.22 of ordinance No. 333 and was violative of sections 65800–65853 (particularly of section 65853, subds. (b)(1) and (b)(2)) of the Government Code. With his petition, appellant filed in the court below a reporter’s transcript of the proceedings had at the hearing before the Planning Commission on September 27, 1961, upon which hearing the Commission based its subsequent decision of October 4, 1961, granting the variance. The prayer of the petition was for the following relief: (1) The issuance of an alternative writ of mandate or a writ of review cancelling and revoking the variance; (2) the issuance of a preliminary stay of the variance; and (3) the issuance of a preliminary injunction enjoining construction of the *880 trailer park pending judgment on the petition. The answer of respondent Brisack, in addition to denying any invalidity in the variance, raised affirmative **234 defenses of the statute of limitations, laches and estoppel. After a separate trial on the affirmative defenses, the trial court found that the petition was filed more than four months after the denial of the appeal by the Board of Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 20 Allen v. Humboldt County Bd. of Sup’rs, 220 Cal.App.2d 877 (1963) 34 Cal.Rptr. 232 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 3 Supervisors and concluded that, under the provisions of section 1094.5 of the Code of Civil Procedure and section 11523 of the Government Code,5 the petition had to be filed within 30 days ‘after the last day on which reconsideration by the agency could be ordered ’ and that the action was therefore barred. Judgment was rendered accordingly. This appeal followed.6 Appellant contends that the Administrative Procedure Act has no application to the case before us and that under section 343 of the Code of Civil Procedure, made applicable by section 1109 of the Code of Civil Procedure,7 the period prescribed for the commencement of the instant action was *881 four years ‘after the decision of the agency.’ The single question, therefore, presented to us for decision is whether the instant proceeding was required to be commenced within the 30-day period prescribed by Government Code, section 11523 or within the four-year period prescribed by Code of Civil Procedure, section 343. In raising this narrow issue before us, the parties appear to take the position that if the granting of the variance is to be judicially reviewed at all, such review must be had by administrative mandamus. (Code Civ.Proc. § 1094.5.)8 Although, as we have pointed out, appellant’s petition in the court below sought either a writ of mandate or a writ of review, no issue has been raised here on the granting of a writ of review and the briefs of the parties are silent on that aspect of the instant petition. **235 Indeed the instant record discloses that the parties confined themselves in the court below to the question whether or not a writ of mandate would issue and apparently advanced no contentions relating to the issuance of a writ of review. [1] [2] [3] The county Planning Commission, in hearing and making its decision upon respondent Brisack’s application for a variance, was a local board or agency exercising judicial or quasi-judicial powers under the county zoning ordinance. (Livingston Rock & Gravel Co. v. County of Los Angeles (1954) 43 Cal.2d 121, 128, 272 P.2d 4; North Side Property Owners’ Ass’n. v. Hillside Memorial Park (1945) 70 Cal.App.2d 609, 616, 161 P.2d 618; Greif v. Dullea (1944) 66 Cal.App.2d 986, 1009, 153 P.2d 581; Cantrell v. Board of Supervisors (1948) 87 Cal.App.2d 471, 474–475, 197 P.2d 218; see 5 U.C.L.A.L.Rev. 179, 181–182.) Where a local board exercises quasi-judicial powers, either certiorari or mandamus is an appropriate remedy to review its action *882 and test the proper exercise by it of the discretion with which it is invested. (Walker v. City of San Gabriel (1942) 20 Cal.2d 879, 881, 129 P.2d 349, 142 A.L.R. 1383; La Prade v. Department of Water & Power (1945) 27 Cal.2d 47, 53, 162 P.2d 13; Livingston Rock & Gravel Co. v. County of Los Angeles, supra; 3 Witkin, Cal.Procedure, p. 2485.) Such use of the writ of mandate to review administrative action invokes the remedy of ‘administrative mandamus’ pursuant to Code of Civil Procedure, section 1094.5 rather than the traditional action in mandamus under Code of Civil Procedure, section 1085. (Triangle Ranch, Inc. v. Union Oil Co. (1955) 135 Cal.App.2d 428, 436, 287 P.2d 537; 2 Cal.Jur.2d 324–326, 340; see 2 Stan.L.Rev. 285; 12 Stan.L.Rev. 554.)9 Although the Administrative Procedure Act provides for the use of the writ of mandate to review the proceedings of certain administrative agencies specified therein (Gov.Code, § 11523), the remedy of administrative mandamus and the procedure relative to it prescribed by Code of Civil Procedure, section 1094.5 are not limited to agencies enumerated in the Administrative Procedure Act or those adopting the procedure of the act, but are applicable to any administrative agency. (Temescal Water Co. v. Department of Public Works (1955) 44 Cal.2d 90, 100–101, 280 P.2d 1.) In short, section 1094.5 is applicable to both statewide and local administrative agencies. [4] [5] However, it does not necessarily follow that all agencies whose adjudicatory actions are reviewable by administrative mandamus fall within and are governed by the Administrative Procedure Act, including those provisions thereof requiring the filing of a petition for writ of mandate within the 30-day period prescribed by *883 Government Code, section 11523. The Administrative Procedure Act applies only to those state agencies enumerated therein and does not apply to local agencies. (Gov.Code, §§ 11500, subd. (a), 11501; Hansen v. Civil Service Board (1957) 147 Cal.App.2d 732, 734, 305 P.2d 1012; Henry George School of Social Science of San Diego v. San Diego Unified School Dist. (1960) 183 Cal.App.2d 82, 85–86, 6 Cal.Rptr. 661.) Indeed the act nowhere states or even implies that it covers all state administrative agencies. (See **236 Chas. L. Harney, Inc. v. State of California (1963) 217 A.C.A. 102, 124, fn. 16, 31 Cal.Rptr. 524.) While there is some language in Temescal Water Co. v. Department of Public Works, supra, 44 Cal.2d 90, 100–101, 280 P.2d 1, indicating that the act may be applicable as well to other agencies which have voluntarily complied with it or formally adopted it, the parties agree, and indeed so stipulated in the court below, that there was no adoption of the Administrative Procedure Act either by the Planning Commission or the Board of Supervisors. We therefore conclude that the provisions of the act do not govern the proceedings here under review and that Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 21 Allen v. Humboldt County Bd. of Sup’rs, 220 Cal.App.2d 877 (1963) 34 Cal.Rptr. 232 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 4 appellant’s petition for a writ of mandate was not subject to the requirement of the act that ‘such petition shall be filed within 30 days after the last day on which reconsideration can be ordered.’ (Gov.Code, § 11523 .) In support of its position that the 30-day period of limitation prescribed by Government Code, section 11523 is here applicable, respondents rely on Crow v. City of Lynwood (1959) 169 Cal.App.2d 461, 337 P.2d 919 and Housing Authority of City of Needles v. City Council (1962) 208 Cal.App.2d 599, 25 Cal.Rptr. 493. Crow involved a proceeding in mandamus to review the dismissal of a city employee by a city personnel board. It was there held that since the petitioner sought a writ of mandate pursuant to, and at all times proceeded in the trial court under, the provisions of the Government Code, he could not contend otherwise for the first time on appeal and was therefore bound by the 30-day period of limitation prescribed in Government Code, section 11523. Contrary to respondents’ interpretation of the case, we do not think that the court in Crow announced a rule of law that section 11523 governed all local agencies. The rationale of the court seems to have been not that the statute was applicable but that the petitioner-appellant was foreclosed from urging for the first time on appeal that it was inapplicable. Housing Authority involved a proceeding in mandamus to compel the *884 reinstatement of housing commissioners by a city council. Respondents seek support in the following language of the opinion: ‘Government Code, § 11523 states that mandate is the proper procedure as to administrative adjudications.’ (P. 608 of 208 Cal.App.2d, p. 499 of 25 Cal.Rptr.) Apparently the point attempted to be made is that, in the above language, the court was holding that section 11523, and thus the 30-day period of limitation prescribed therein, applied to the city council, respondent therein. It is not clear to us that the sentence quoted above is susceptible of such a conclusion. But, beyond that, a reading of the Housing Authority case convinces us that no problem of the statute of limitations was involved and that the applicability of the Administrative Procedure Act was actually not in issue. We are not persuaded that either of the foregoing cases should be followed in the case at bench. [6] Since, as we have concluded, the 30-day period of limitation is inapplicable in the instant case, what, if any, statute of limitation governs? Although it has been said that proceedings for a writ of certiorari are not subject to statutes of limitation (Estate of Glassgold (1950) 97 Cal.App.2d 859, 863, 218 P.2d 149; 10 Cal.Jur.2d 123) the rule is settled that a proceeding in mandamus is subject to statutes of limitation, the applicable statute and period of limitation being determined by the nature of the right asserted. (Barnes v. Glide (1897) 117 Cal. 1, 48 P. 804; 1 Witkin, Cal.Procedure, p. 665.) The basis for the foregoing rule is that Code of Civil Procedure, section 1109 which, as we have pointed out (see footnote 7, ante), is found in that portion of the code dealing with the special proceedings of certiorari, mandamus and prohibition, declares that ‘[e]xcept as otherwise provided in this Title’ all the provisions of part 2 of said code (§§ 307–1062a) are applicable to and constitute the rules of practice in such special proceedings. Included among the above sections comprising part 2 are sections 312–363 governing the time of commencing civil actions. All of **237 this is further confirmed by Code of Civil Procedure, section 363 which provides that ‘[t]he word ‘action’ as used in this Title is to be construed, whenever it is necessary so to do, as including a special proceeding of a civil nature.’ We conclude, therefore, that the instant petition for a writ of mandate is subject to the statutes of limitations prescribing the time for the commencement of civil actions and that while the right involved does not fall within the *885 compass of any specific statute of limitation, the proceeding before us must be subject to the provisions of Code of Civil Procedure, section 343 which states that an action for relief ‘not hereinbefore provided for must be commenced within four years after the cause of action shall have accrued.’ (W. R. Grace & Co. v. California Employment Comm. (1944) 24 Cal.2d 720, 728, 151 P.2d 215; Taketa v. State Board of Equalization (1951) 104 Cal.App.2d 455, 458, 231 P.2d 873.) In the case at bench, the Board of Supervisors denied appellant’s appeal from the granting of the variance on November 7, 1961. The petition for the writ was filed on March 12, 1962, approximately four months later and well within the applicable four-year period of limitations. The record does not disclose any determination by the trial court that there was any laches on appellant’s part. Respondents argue that all petitions for administrative mandamus whether they seek to review the action of state or local agencies must be subject to the 30-day period of limitations prescribed by Government Code, section 11523 and that to apply a four-year period of limitations in situations like the present one would be to defeat prompt and timely review and cause the rights of litigants to remain in a state of uncertainty for long periods of time. Whatever may be the advantages of a shorter period of limitations, we do not believe they would justify us in holding that the Administrative Procedure Act covers administrative agencies clearly not within its ambit. If therefore, in the case of local agencies, the applicable Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 22 Allen v. Humboldt County Bd. of Sup’rs, 220 Cal.App.2d 877 (1963) 34 Cal.Rptr. 232 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 5 periods of limitation for the seeking of a writ of mandate are excessive and accordingly obstruct the prompt and clear determination of the rights of litigants, the taking of any corrective measures must remain a matter for the legislature rather than the courts. The judgment is reversed. BRAY, P. J., and MOLINARI, J., concur. All Citations 220 Cal.App.2d 877, 34 Cal.Rptr. 232 Footnotes 1 For brevity, hereafter referred to as Board of Supervisors and Planning Commission, respectively. 2 More specifically, the Planning Commission granted the variance from the requirements of county ordinance No. 333 (adopting a zoning enabling plan for the county) and ordinance No. 409 (establishing the R–1A zone for the area in question). 3 § 3.22 of ordinance No. 333 provides that ‘[t]he Planning Commission, subject to the approval and confirmation of the Board of Supervisors * * * shall have power to grant * * * variances * * *,’ requires a written application therefor, a public hearing thereon, and the giving of public notice of such hearing. The section thereupon provides that: ‘The Commission shall make its decision upon the said application and shall report such decision to the Board of Supervisors within forty-five (45) days after the filing of the application. ‘Any person who is dissatisfied with any decision or ruling of the Planning Commission may within thirty (30) days after the date of such decision or ruling appeal therefrom in writing to the Board of Supervisors, who shall have power to over-rule such decision or ruling.’ 4 Obviously a reference to the ‘sixty or more persons’ who appealed to the Board of Supervisors. We do not consider this slight variation (persons to families) of any consequence. 5 Government Code, § 11523, found in the Administrative Procedure Act (Gov.Code, §§ 11370–11528) provides in relevant part that judicial review of administrative adjudications ‘may be had by filing a petition for a writ of mandate in accordance with the provisions of the Code of Civil Procedure. Except as otherwise provided in this section any such petition shall be filed within 30 days after the last day on which reconsideration can be ordered.’ In its memorandum of decision, the court below stated that the instant proceeding was one ‘authorized by and instituted under the Administrative Procedure Act to which C.C.P. 1094.5 applies as the rules of procedure’ and that the ‘petition not having been filed within 30 days after the last day on which reconsideration could have been ordered, the court concludes that the period of limitation set forth in section 11523 of the Government Code is a bar to this action.’ The court also stated that it was ‘also of the opinion that the defenses of laches and estoppel are not established by the evidence’ but notably made no findings on these last two affirmative defenses. In the judgment the court ordered that ‘the Petition * * * is barred by the period of limitations * * *.’ 6 All three respondents have joined in a single brief on appeal. 7 Code of Civil Procedure, § 1109, found in title 1 of part 3 of said code dealing with the writs of review, mandate and prohibition, provides as follows: ‘Except as otherwise provided in this Title, the provisions of Part 2 of this Code are applicable to and constitute the rules of practice in the proceedings mentioned in this Title.’ Code of Civil Procedure, § 343 found in part 2 of said code provides as follows: ‘An action for relief not hereinbefore provided for must be commenced within four years after the cause of action shall have accrued.’ 8 We note some deviation from this position. Appellant advised us on oral argument that he assumed but did not fully Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 23 Allen v. Humboldt County Bd. of Sup’rs, 220 Cal.App.2d 877 (1963) 34 Cal.Rptr. 232 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 6 concede that section 1094.5 applied. This is similar to his position before the trial court where he asserted that his remedy was pursued under Code Civ.Proc. § 1085. Respondents Planning Commission and Board of Supervisors, although joining with respondent Brisack in a single brief urging that Code Civ.Proc. § 1094.5 is applicable, advise us by letter that the record does not reflect a proceeding falling within § 1094.5 and assert that the proceedings being legislative in nature were not within the section under the ruling in Steiger v. Board of Supervisors (1956) 143 Cal.App.2d 352, 300 P.2d 210. We will dispose of both of these arguments hereafter. 9 ‘Although administrative mandamus was created by the courts to meet the need for judicial review of state-wide agencies, where certiorari had been ruled out, it is now a recognized alternate in fields where certiorari is still available. This means that administrative mandamus will lie to review the ‘normal quasi-judicial power’ of local administrative agencies, as well as the ‘limited quasi -judicial power’ of state-wide agencies. It has also been settled that constitutionally authorized state-wide agencies, which may exercise normal quasi-judicial power and whose decisions are reviewable by certiorari, are subject as well to administrative mandamus. The cases decided in the past decade make it apparent that administrative mandamus has nearly superseded the older remedy completely in these areas where both writs can be used.’ (‘Certiorarified Mandamus Reviewed,’ Kleps, 12 Stan.L.Rev., 554, 555–556.) End of Document © 2021 Thomson Reuters. No claim to original U.S. Government Works. Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 24 Central Mfg. Dist., Inc. v. Board of Sup’rs of Los Angeles County, 176 Cal.App.2d 850... 1 Cal.Rptr. 733 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 1 176 Cal.App.2d 850 District Court of Appeal, Second District, Division 2, California. CENTRAL MANUFACTURING DISTRICT, INC., a corporation; Lawrence A. Harvey, an Individual; Leo M. Harvey, an individual; and Homer M. Harvey, an individual, Petitioners and Respondents. v. BOARD OF SUPERVISORS OF The COUNTY OF LOS ANGELES, Defendant and Appellant. No. 23953. | Jan. 4, 1960. | Rehearing Denied Feb. 2, 1960. | Hearing Denied Feb. 24, 1960. Synopsis Mandamus proceeding to annul incorporation of area on ground that incorporation proceeding was initiated six months after voters had rejected incorporation of substantially the same area. From a judgment of the Superior Court, Los Angeles County, Ellsowrth Meyer, J., annulling the incorporation proceeding, the county board of supervisors appealed. The District Court of Appeal, Ashburn, J., held that where 2.7 square miles of area was common to two proposed cities and a total of 3.8 square miles was not in common to the proposed cities, the incorporation of one city did not constitute the incorporation of the same or ‘substantially the same area’ sought previously to be incorporated in other city, within contemplation of statute providing that if majority of votes cast is against incorporation no further proceedings for incorporation of same or substantially the same area shall be initiated for two years after date of election. Judgment reversed with instructions. West Headnotes (11) [1] Statutes Presumptions A substantial amendment to a statute implies legislative intent to make a change in the law. [2] Municipal Corporations Proceedings for Incorporation Under statute providing that if majority of votes cast in election for incorporation of an area is against incorporation, no further proceedings for incorporation of the same or “substantially the same area” shall be initiated for two years after date of election, mere comparison of acreages is the proper approach to the application of the quoted phrase. West’s Ann.Gov.Code, § 34325.1. 2 Cases that cite this headnote [3] Municipal Corporations Review Question of whether substantially the same area was included in an incorporation election as was included in a prior election becomes one of law to be determined independently by appellate court when evidence upon that phase of the case is not in conflict, and appellate court will respect but is not bound by ruling of court below. West’s Ann.Gov.Code, § 34325.1. [4] Municipal Corporations Proceedings for Incorporation The phrase “substantially the same” as used in statute providing that if majority of votes cast in incorporation election is against incorporation no further proceedings for incorporation of the same or substantially the same area shall be initiated for two years after date of the election has no precise connotation and there is no formula or measuring rod by which to test it. Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 25 Central Mfg. Dist., Inc. v. Board of Sup’rs of Los Angeles County, 176 Cal.App.2d 850... 1 Cal.Rptr. 733 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 2 West’s Ann.Gov.Code, § 34325.1. 1 Cases that cite this headnote [5] Municipal Corporations Proceedings for Incorporation Where 2.7 square miles of area was common to two proposed cities and a total of 3.8 square miles was not in common to the proposed cities, incorporation of one city did not constitute the incorporation of the same or “substantially the same area” sought previously to be incorporated in other city within contemplation of statute providing that if majority of votes cast is against incorporation no further proceedings for incorporation of same or substantially the same area shall be initiated for two years after date of election. West’s Ann.Gov.Code, § 34325.1. [6] Appeal and Error Theory and Grounds of Decision Below and on Review A respondent may assert a legal theory which, if found to be sound, should result in affirmance notwithstanding appellant’s contentions. West’s Ann.Code Civ.Proc. § 956. 14 Cases that cite this headnote [7] Appeal and Error Substantial evidence Where there is a substantial conflict in the evidence it is duty of appellate court to resolve that conflict in support of trial court’s finding. 1 Cases that cite this headnote [8] Statutes General and specific statutes Statutes Earlier and later statutes If there is any inconsistency between a statute which is later in point of time and is special in nature and an earlier statute general in nature, the former must prevail. [9] Municipal Corporations Proceedings for Incorporation Municipal Corporations Proceedings Where prior to date set for hearing on annexation city council passed a resolution terminating annexation proceedings, the resolution terminated the annexation, and annexation proceeding was not a bar to a subsequent proceeding for incorporation of the area. West’s Ann.Gov.Code, §§ 35007, 35300-35326, 35303, 35308, 35314, 35315; St.1955, p. 3248, § 8. 1 Cases that cite this headnote [10] Municipal Corporations Territory which may be included Municipal Corporations Submission of question to inhabitants or property owners Where there were more than 12 registered voters in area sought to be annexed by city, the annexation proceeding was void and did not preclude the subsequent incorporation of the area. West’s Ann.Gov.Code, §§ 34325.1, 35303. [11] Municipal Corporations Attacking validity of incorporation Finding by city council in annexing city that Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 26 Central Mfg. Dist., Inc. v. Board of Sup’rs of Los Angeles County, 176 Cal.App.2d 850... 1 Cal.Rptr. 733 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 3 territory sought to be annexed had less than 12 registered voters residing therein did not preclude trial court in a subsequent proceeding challenging incorporation of the area from finding that area had 12 or more registered voters and finding of city council did not preclude exercise of jurisdiction over that subject by courts when the finding was attacked in the incorporation proceeding. West’s Ann.Gov.Code, §§ 34325.1, 35303. 3 Cases that cite this headnote Attorneys and Law Firms **734 *852 Harold W. Kennedy, County Counsel, and David D. Mix, Deputy County Counsel, Los Angeles, for appellant. O’Melveny & Myers, Sidney H. Wall, William D. Moore, Robert W. Walker, John J. Balluff, Louis C. Viereck, Los Angeles, for respondents. Opinion ASHBURN, Justice. Appeal from judgment in mandamus which annuls a proceeding for incorporation of an area to be known as City of Mirada Hills because it was initiated six months after the voters rejected incorporation of City of La Mirada Knolls, held to be in violation of § 34325.1 of the Government Code: ‘If a majority of the votes cast is against incorporation, no further proceedings for the incorporation of the same or substantially the same area shall be initiated for two years after the date of the election.’ (Emphasis added.) The trial court held that the proposed Mirada Hills included substantially the same area as the rejected La Mirada Knolls. The Board of Supervisors **735 of the County of Los Angeles appeals from the judgment. Respondents’ brief says: ‘Immediately following this unsuccessful incorporation election, the proposed city was redesigned. A small area along the eastern boundary and a small area along the western boundary were deleted. A small area adjoining the southwestern boundary was added. (This parcel is owned by the individual respondents, the Harveys.) A larger area of predominantly agricultural land adjoining the northeastern boundary was also added. The remainder of the proposed La Mirada Knolls, being the central and major part of that proposed city, remained undisturbed. When these deletions and additions had been made, the named was changed from ‘La Mirada Knolls’ to ‘Mirada Hills.” This is substantially accurate, as is shown by map received in evidence as Exhibit 2. However, the ‘small’ areas mentioned by counsel prove to be quite substantial in the aggregate. It was stipulated that the area of La Mirada Knolls was 4.4 square miles; *853 that of Mirada Hills 4.8 square miles, which included 60 per cent of the area of La Mirada Knolls; omitted from the new proposal were 1.7 square miles which had been in the first one; 2.1 square miles of Mirada Hills were never within La Mirada Knolls; the result is an area of 2.7 square miles common to both cities and an area of 3.8 square miles which is not common. In determining whether the proposed new city would be the incorporation of ‘the same or substantially the same area’ as the rejected La Mirada Knolls, the trial judge confined the inquiry to ‘an acre by acre comparison of the two areas’ as counsel phrase it, and excluded evidence of other factors such as those suggested in respondents’ brief, viz.: ‘Respondents believe that the determination might well include a consideration of all those essential factors which are normally connected with the formation of new cities. A comparison of such factors as assessed valuation, population and registered voters would certainly shed some light on the problem. Was the same community the subject of both proceedings? Were the proponents the same? Has there been any substantial change in the residential areas? Is the central business district the same in both proceedings? In view of the many important factors involved in the formation of cities, a comparison of these other factors, in addition to the number of acres, would appear to be of great benefit in determining whether the two proposals involve the same thing.’ [1] [2] The statutory history shows the trial court’s procedure to have been correct. Section 34325.1, as originally enacted in 1955, contained the same language as the present section, except that it provided a waiting period of one year instead of two. It was amended in 1957 (Chap. 922, p. 2131; approved by Governor on June 8, 1957) to read: ‘If a majority of the votes cast is against incorporation, no further proceedings for the incorporation of the same or substantially the same area shall be initiated for one year after the date of the election. In determining whether the same or substantially the same area is involved the board of supervisors shall Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 27 Central Mfg. Dist., Inc. v. Board of Sup’rs of Los Angeles County, 176 Cal.App.2d 850... 1 Cal.Rptr. 733 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 4 consider and compare the total acreage, assessed value, registered voters, and estimated number of inhabitants, of each area and the factors common to both such areas.’ (Emphasis added.) As a substantial amendment to a statute implies legislative intent to make a change in the law (In re Estate of Todd, 17 Cal.2d 270, 274, 109 P.2d 913; *854 Olivas v. Weiner, 127 Cal.App.2d 597, 599, 274 P.2d 476), the quoted amendment broadened the inquiry beyond mere comparison of acreages. That was in June, 1957, but the legislature changed its mind in July of the same year, took this new language out of the statute and restored it to its original form except that the waiting period was changed from one year to two years (1957 Stats., Ch. 2363, p. 4096, approved by Governor on July 10, 1957). Of course the last amendment thus became the only change in the original section (45 Cal.Jur.2d § 63, p. 585). We think this history shows, and we hold, that the mere comparison of acreages **736 is the proper approach to the application of the statutory phrase ‘substantially the same area.’ [3] There is no conflict in the evidence upon this phase of the case and the question of whether ‘substantially the same area’ was included in the Mirada Hills proceeding becomes one of law to be determined independently by the appellate court, which will respect but not be bound by the ruling below. Thus we are brought to the necessity of reading the maps (of which Exhibit 2 is a reliable exemplar) and considering the stipulated acreage stated in terms of square miles as above set forth, and deciding whether the trial judge was mistaken in his appraisal of the same. [4] Persuasive precedents are practically non-existent. The phrase ‘substantially the same’ has no precise connotation and there is no formula or measuring rod by which to test it. In Atchison, Topeka & Santa Fe Ry. Co. v. Kings County Water Dist., 47 Cal.2d 140, 302 P.2d 1, the court dealt with the question of exclusion from a water district of the Santa Fe right-of -way which ran through the district. The alleged right to exclusion depended upon a showing ‘that the land will not be substantially and directly benefited by its continued inclusion in the district’ (47 Cal.2d at page 143, 302 P.2d at page 3). The court, after quoting the generalities of dictionary and like definitions of the words ‘substantially’ and ‘substantial’ said, at page 144 of 47 Cal.2d, at page 3 of 302 P.2d: “Substantial’ is a relative term, its measure to be gauged by all the circumstances surrounding the matter in reference to which the expression has been used.’ The phrase ‘substantially the same’ is an elusive one which presents a case to case problem. In Adams v. Edwards, 1 Fed.Cas. pages 112, 114, No. 53, a patent case, the judge instructing the jury said: ‘And I do not say, as one of my brethren upon the bench has said, that there is no definite signification to the word ‘substantial.’ When we say a thing is substantially the same, we mean it is *855 the same in all important particulars. It must be of the same material, when the material is important; it must be of the same thickness, when thickness is important; it must be applied in the same way, condition, and extent, to the doors as well as the sides, when either of these circumstances makes an essential difference.’ Rachford v. City of Port Neches, Tex.Civ.App., 46 S.W.2d 1057, 1059, was an action for foreclosure of a tax lien and the defendant resisted upon the ground that the city was not legally incorporated. Without deciding the question of collateral attack, the court ruled as follows upon the matter in which we are interested: ‘On September 11, 1926, an election was held to incorporate the ‘City of Port Neches.’ The incorporation was defeated in this election. This proposed incorporation included the town of Port Neches and also the town of Nederland, two miles from Port Neches, with all the territory between these two towns. The ‘City of Port Neches,’ appellee herein, was incorporated as the result of an election held on July 26, 1927. It includes no part of the town of Nederland and only about one-half the territory included in the 1926 election. Appellant insists that the 1927 election was in violation of article 1134, R.S.1925, regulating the holding of elections for incorporation, which expressly provides that ‘a new election shall not be ordered in less than one year.’ The material change in the proposed boundaries of the city of Port Neches authorized the 1927 election, though it was in fact held in less than one year from the 1926 election.’ State ex rel. Hunt v. Montgomery County Board of Elections, Ohio App., 135 N.E.2d 882, upon which respondents rely, dealt with a petition for writ commanding board to order an election upon a petition for detachment of relator’s property from the Village of Kettering. At page 883: ‘The territory described in the petition incorporates 1,882 acres of land, 1,368 of which were included in a proposal to detach 3,090 acres **737 from the Village of Kettering voted upon at an election held April 21, 1953. At this election the proposal to detach territory was defeated. The Board bases its refusal to call an election, as requested, solely on that part of R.C. § 709.39 which provides: ‘If a majority of the ballots cast at such election are cast against detachment, no further proceedings shall be had in relation thereto for a period of Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 28 Central Mfg. Dist., Inc. v. Board of Sup’rs of Los Angeles County, 176 Cal.App.2d 850... 1 Cal.Rptr. 733 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 5 two years.’ We are of opinion that the Board correctly interpreted the quoted part of R.C. § 709.39, and properly refused to order the *856 election sought by the petitioners.’ The ruling: ‘It is urged by relator that the territory included in the present petition is not the same, or substantially the same, as incorporated in the election proposal of 1953, and, therefore, the election now requested should proceed. Of course it is not the same territory as it includes about 500 acres outside of that presented to the voters in the 1953 election for detachment of territory. However, 1,368 acres of the territory included in the description in the present petition is the same as voted upon in 1953. This acreage represents over 44%, or a substantial part, of the 3,090 acres voted upon in 1953; a substantial part being affected, the statutory bar operates.’ At page 883. It is to be noted that the statute there under consideration does not use the phrase ‘same or substantially the same,’ but says, ‘in relation thereto.’ The holding that a ‘substantial part’ was affected by the inclusion in the second detachment proceeding of one-half of a previously defeated detachment was predicated upon a statute which did not contain the phrase ‘same or substantially the same’ and that was the language of counsel. The cited case of Johnson v. City of San Pablo, 132 Cal.App.2d 447, 283 P.2d 57, throws no light upon our present problem. [5] We have concluded that the identity of 2.7 square miles of area in the two proposed cities, with a total area of 3.8 square miles not in common, does not warrant a holding that the incorporation of Mirada Hills would constitute the incorporation of the same or substantially the same area as La Mirada Knolls, and that the trial court erred in ruling that it offends the statute. Respondents assert error in the trial court’s rejection of their claim that the Mirada Hills incorporation proceeding was precluded by the pendency of an annexation proceeding instituted by the city of Santa Fe Springs and including a portion of the Mirada Hills territory. Reliance is placed upon § 35308 Government Code, which reads: ‘When a valid and sufficient petition for the annexation of any territory to a city has been received by its legislative body or its legislative body has initiated proceedings as hereinafter provided and until an ordinance disapproving such annexation becomes effective (a) no notice of intention to incorporate a new city shall be filed which includes any of the territory described in the annexation proceedings; (b) no notice of intention to *857 circulate a petition for the annexation of any such territory under the Annexation Act of 1913 shall be filed or consented to by the legislative body of any city; (c) no petition shall be filed with, and no proceedings shall be instituted by, the legislative body of any city for the annexation of any such territory under this division.’ [6] [7] Appellant objects to consideration of this argument upon the ground that a respondent may not be heard to urge error against him. That is the general rule but not a universal one. Section 956, Code of Civil Procedure, as amended in 1957, reads: ‘Upon an appeal from a judgment the court may review the verdict or decision, and any intermediate ruling, proceeding, order or decision which involves the merits or necessarily affects the judgment, or which substantially affects the rights of a party. The court may also on such appeal review any order on motion for a new trial. The respondent, or party in whose favor the judgment was given, may, without appealing from such judgment, request the court to and it may review any of the foregoing matters for the purpose of determining whether or not the appellant was prejudiced **738 by the error or errors upon which he relies for reversal or modification of the judgment from which the appeal is taken. The provisions of this section do not authorize the court to review any decision or order from which an appeal might have been taken.’ (Italicized matter inserted in 1957.) This new matter seems to be a codification of the existing rule established by court decisions; they recognize that a respondent may assert a legal theory which, if found to be sound, should result in affirmance not-withstanding appellant’s contentions. Mott v. Horstmann, 36 Cal.2d 388, 393, 224 P.2d 11; Sears v. Rule, 27 Cal.2d 131, 140, 163 P.2d 443; City of Glendale v. Crescenta Mutual Water Co., 135 Cal.App.2d 784, 798, 288 P.2d 105. Necessarily, respondent is bound by findings of fact based upon substantially conflicting evidence. Metzehbaum v. Metzenbaum, 115 Cal.App.2d 395, 404, 252 P.2d 31, 966. Respondents here contend that the Santa Fe Springs annexation was still pending and preclusive of the Mirada Hills annexation because it had not been terminated by ordinance in accordance with said § 35308, Government Code (quoted supra), the city having attempted to accomplish that result by mere resolution. The setting in which this question arises should be understood. The Santa Fe Springs annexation proceeding was brought *858 under the Annexation of Uninhabited Territory Act of 1939 (Govt.Code §§ 35300–35326). Section 35303 prescribes that: ‘For purposes of this article territory shall be deemed uninhabited if less than twelve registered voters reside within it at the time of the filing of the petition for annexation or the institution of Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 29 Central Mfg. Dist., Inc. v. Board of Sup’rs of Los Angeles County, 176 Cal.App.2d 850... 1 Cal.Rptr. 733 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 6 proceedings on motion of the city legislative body.’ The initiatory Resolution No. 124, passed on January 21, 1958, contains a finding that the territory proposed to be annexed has less than twelve registered voters residing therein.’ It also set March 13, 1958, at 7:30 p.m. as the time for hearing of objections. On February 13, 1958, before the time for hearing had arrived, the City Council adopted Resolution No. 144 which, after certain recitals, says: ‘Now, Therefore, The City Council of The City of Santa Fe Springs Does Resolve, Determine and Order As Follows: Section 1: All annexation proceedings of the City of Santa Fe Springs regarding Annexation No. 23 are hereby terminated pursuant to the authority contained in Section 350071 of the Government Code.’ Respondents’ amended petition for mandamus alleges in paragraph 9 that ‘on the day said Resolution No. 124 was adopted there were less than twelve registered voters residing within the boundaries of the territory described in said resolution.’ Also: ‘14. Prior to the hour set for hearing objections to said Southside No. 23 annexation, protests against said annexation were filed with the City Council of the City of Santa Fe Springs. * * * 15. From and after January 21, 1958 to and including the date of filing this amended petition, said City Council of said City of Santa Fe Springs did not adopt and has not adopted an ordinance disapproving said Southside No. 23, and no ordinance disapproving said **739 annexation *859 has ever become effective; and said annexation has not been terminated.’ At the trial these issues were opened by respondents who called witnesses and offered other evidence in support of the allegations. Appellant joined in trying these issues and made no objection to canvassing the same. The court found that the averments of said paragraph 9 (re number of registered voters in area) were untrue, thus removing that area from the possibility of annexation as uninhabited territory. This finding was based upon substantially conflicting evidence. The court also found to be true the allegations of paragraph 15 re termination of annexation by resolution instead of ordinance, but concluded that ‘[t]he annexation of the City of Santa Fe Springs known as ‘Southside No. 23’ was terminated by Resolution No. 144, and said annexation did not prohibit or interfere with the incorporation proceedings for said proposed City of Mirada Hills.’ [8] Respondents’ reliance upon said § 35308 proves to be misplaced. It was enacted in 1955 (Ch. 915, § 14, p. 1544) effective June 6, 1955, and operative on July 1, 1955. But § 35007 was enacted later in the same session by Chapter 1757, § 3, page 3247, approved by Governor on July 6, 1955. Section 8 of this latter amending act says: ‘The right of a city to terminate annexation proceedings prior to the date set for the hearing of protests without prejudice to a new proceeding filed within a year is the existing law. However, the provisions regarding filing and hearing of protests pursuant to the provisions of Section 35007 shall hereafter apply.’ P. 3248. If there be any inconsistency between §§ 35007 and 35308, the former must prevail for it is later in point of time and is special in nature, thus controlling within its narrow field the general provisions of § 35308 (cf. City of Port Hueneme v. City of Oxnard, 52 Cal.2d 385, 341 P.2d 318). In other words, § 35007 relates only to termination prior to the date set for hearing of protests, while § 35308 is general in its breadth and operation; the time for an ordinance arrives after the hearing has been had. See, §§ 35314, 35315. Resolution No. 144 of the City of Santa Fe Springs specifically states that the action terminating the annexation is taken pursuant to § 35007. Although § 35308 requires action to be taken by ordinance and, if applicable in the present situation, a resolution probably would not suffice (McQuillin Municipal Corporations *860 (2d Ed.), Vol. 2, § 664, p. 661; Reed v. Wing, 168 Cal. 706, 712, 144 P. 964), § 35007 does not specify the form of action to be taken and hence settled principles dictate the sufficiency of a resolution. The difference between an ordinance and a resolution is well stated in 35 Cal.Jur.2d § 392, page 200: ‘The enactments of a city’s legislative branch are known as ordinances and resolutions. Strictly speaking, there is a difference between the two. An ordinance in its primary and usual sense means a local law. It prescribes a rule of conduct prospective in operation, applicable generally to persons and things subject to the jurisdiction of the city. ‘Resolution’ denotes something less formal. It is the mere expression of the opinion of the legislative body concerning some administrative matter for the disposition of which it provides. Ordinarily it is of a temporary character, while an ordinance prescribes a permanent rule of conduct or of government. However, for many purposes the two words are equivalent terms.’ See, also, 37 Am.Jur. § 142, page 755. Crowe v. Boyle, 184 Cal. 117, 149, 193 P. 111, 124: ‘But in the absence of statutory or charter provision to the contrary, a legislative act may be either in the form of a resolution or of an ordinance. [Citations.] For many purposes resolutions and ordinances are equivalent terms. [Citations.] ‘And it has been held that even where the Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 30 Central Mfg. Dist., Inc. v. Board of Sup’rs of Los Angeles County, 176 Cal.App.2d 850... 1 Cal.Rptr. 733 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 7 statute or municipal charter requires the municipality to act by ordinance, if a resolution is passed in the manner and with the statutory formality required in the enactment of an ordinance, it will be binding and effective as an ordinance.’ [Citations.] The charter of San Francisco, although **740 providing that all legislative action shall be by ordinance * * * expressly authorizes in section 13 the passage of resolutions providing for the appropriation or disposition of public property or the expenditure of public money. It is thus provided that this particular form of legislative action may be had by either ordinance or resolution * * *’ [9] The trial court correctly concluded that the use of a resolution instead of an ordinance to terminate the annexation under § 35007 was permissible and that the annexation proceeding was not a bar to the Mirada Hills incorporation. [10] There is another equally sound reason for the same result. Because there were more than twelve registered voters in the area the Santa Fe annexation proceeding was void. [11] *861 Counsel for respondents argue in effect that they are entitled to challenge the court’s finding of 12 or more registered voters in the annexation area because as a matter of law that question is concluded by the finding of the City Council in Resolution No. 124 ‘that said territory has less than twelve registered voters residing therein’; that this is a political question; the finding of the City Council is conclusive and it precludes the exercise of jurisdiction over that subject by the courts when the attack is collateral as at bar. People ex rel. Pennington v. City of Richmond, 141 Cal.App.2d 107, 296 P.2d 351, refutes this argument decisively. It was a proceeding in quo warranto to test an annexation under the same Uninhabited Territory Act involved in the instant case. The lower court held the proceeding to be void because it found there were more than 11 registered voters in the territory to be annexed. Concerning the claim that the City Council had determined the area to be uninhabited, that that was a political question and the council’s decision conclusive, the court said: ‘Richmond claims that in the absence of fraud the findings of the city council (including its finding that the territory was uninhabited) were final; that there was no proof of fraud; hence, it was incompetent for the trial court to make findings contrary to those made by the city council. * * * Section 35303 of the Government Code defines ‘uninhabited’ but is silent as to who determines the inhabited or uninhabited character of land proposed for annexation. Section 35313 may by inference confer such a power as an incident to the exercise of the power it gives the local legislative body to ‘hear and pass upon all protests.’ * * * ‘Even if the city had power to decide whether this territory was uninhabited, we must not forget this presents a jurisdictional question, upon which depends the very power of the city to act. A discussion of the judicial nature of an inquiry concerning the existence of facts upon which the jurisdiction, the very capacity of an agency to act depends, will be found in 4 Cal.Jur. 1110–1113, section 71; in 10 Cal.Jur.2d 163–165, section 85; in 5 A.L.R.2d 675; and in cases cited in each. ‘Finally, the city (as a special defense pleaded in its answer) presented these very questions for decision by the court de novo, not by way of review of a decision by the city. * * * ‘The city then proceeded to and did try these issues on that theory, clear through to the end of the trial, including the *862 arguments of counsel after the taking of the evidence. The parties put in their evidence on these issues just as in any other trial before a court of first instance, just as if there had been no determination by the city or by any other tribunal subordinate to the superior court. It would be strange indeed if a party could thus tender material issues to the superior court, present evidence to that court on those issues an suffer, indeed induce, the opposite party to do likewise, and then, confronted with an adverse decision, claim upon appeal that this was all a mistake, that the entire trial in the superior **741 court should have been conducted as if a mere review of an earlier trial and determination by the city council, a mere agent of the very party defendant who thus tendered these issues to and tried them de novo before the superior court. No one questions the competency of the city thus to ignore the decision of its own agent and relitigate these issues before the superior court, a court of unquestionably competent jurisdiction. * * * ‘The doctrine which requires an appellant to stay with the theory upon which he tried the case, clearly applies here. See 3 Witkin, California Procedure 2264–2267. Quite recently, we made similar disposition of a like contention by the City of San Pablo, involving annexation proceedings by that city and the City of Richmond. See Johnson v. City of San Pablo, supra, 132 Cal.App.2d 447, footnote on page 454, 283 P.2d 57. ‘It necessarily follows that the defendant city was without jurisdiction to proceed under the Annexation of Uninhabited Territory Act and that the judgment must be affirmed.’ 141 Cal.App.2d at pages 116, 117, Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 31 Central Mfg. Dist., Inc. v. Board of Sup’rs of Los Angeles County, 176 Cal.App.2d 850... 1 Cal.Rptr. 733 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 8 118–119, 296 P.2d at pages 357, 358–359. The note on page 454 of the opinion in Johnson v. City of San Pablo, 132 Cal.App.2d 447, 283 P.2d 57, at page 63, reads as follows: ‘Appellants further state that the San Pablo city council, when it gave consent to the commencement of annexation proceedings, impliedly found that all of the territory in question was inhabited and that such a finding was ‘final and conclusive in the absence of a showing that there was an abuse of discretion or fraud on the part of the * * * council in making such finding.’ ‘If appellants are thereby claiming that the character of that territory (inhabited or uninhabited) is not the subject of judicial inquiry in the current actions, they are mistaken. It is an issue under the pleadings. The parties treated it as an issue during the trial. The fact that the 2,800 acre tract of *863 submerged land is an uninhabited, separable and distinguishable portion of the area, appears upon the face of the record. The additional evidence taken by the court (including the testimony of Mr. Finley) went in without objection. ‘Under the circumstances, it is clear that the issue under discussion is justicable and that the trial court was entitled to consider all of the evidence introduced thereon. [Citations.]’ To the same effect see, People v. Cardiff Irr. Dist., 51 Cal.App. 307, 314, 315, 197 P. 384. The questions here discussed were not involved in People ex rel. Strong v. City of Whittier, 133 Cal.App. 316, 24 P.2d 219, and People ex rel. Chapman v. City of Garden Grove, 165 Cal.App.2d 794, 332 P.2d 841. Those cases are not opposed to the views expressed in the Richmond case, supra. In Richmond, as in this case, the party who sought to invoke the conclusive determination rule had raised in its pleading the issue of whether the area was uninhabited, had pursued the matter by evidence and otherwise throughout the trial, the opponent had joined in contesting that issue, and that same party upon appeal had tried to shift theories, arguing that there was no jurisdiction to try the question at all. The situation suggests, as does the Richmond opinion, the analogy of the law of res judicata. Hill v. City Cab & Transfer Co., 79 Cal. 188, 191, 21 P. 728, speaking of the rule that a party cannot collaterally assail a judgment unless it is void on its face, says: ‘But this rule is not that a judgment which is void will be enforced as if it were valid, but that it cannot be shown to be void except in certain ways. If the party, however, should admit the facts which show the judgment to be void, or if he should allow them to be established without opposition, then, as a question of law, upon such facts, we do not see why the case is not like that where a judgment is void upon its face. In the present case, the findings establish the fact that there was no service of summons **742 upon or authorized appearance by the defendant.’ Brockway Land & Water Co. v. County of Placer, 124 Cal.App.2d 371, 376, 268 P.2d 524, 528: ‘In 15 Cal.Jur., pp. 61, 62, it is said: ‘The public policy underlying the doctrine of collateral attack is not such as to prevent the interested parties from waiving the protection of the rule limiting collateral inquiries to the face of the record. The rule is not that a judgment which is void will be enforced as if it were valid, but that it cannot be shown to be void except in certain ways. *864 And if the parties admit or stipulate, or fail to object to the evidence of, the facts showing a lack of jurisdiction, it is then established that the judgment is void as effectively as shown by the record; and whenever such fact is brought to the attention of the court, it is the duty of the court to so declare as a matter of law.’ (Italics supplied.) ‘In Thompson v. Cook, 20 Cal.2d 564, 569, 127 P.2d 909, 912, the Supreme Court states the rule as follows: ‘* * * [A]lthough the judgment or order is valid on its face, if the party in favor of whom the judgment or order runs admits facts showing its invalidity, or, without objection on his part, evidence is admitted which clearly shows the existence of such facts, then it is the duty of the court to declare the judgment or order void.’ * * * ‘There is nothing sacred about the rule limiting collateral attack; it is a rule of convenience designed to bring an end to litigation when parties have had an opportunity to have their day in court.’ See also, 29 Cal.Jur.2d § 190, page 147. Other points raised in the briefs require no separate discussion. The judgment is reversed iwth instructions to the trial court to deny the peremptory writ of mandate. FOX, P. J., and HERNDON, J., concur. Hearing denied; SCHAUER, J., dissenting. All Citations 176 Cal.App.2d 850, 1 Cal.Rptr. 733 Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 32 Central Mfg. Dist., Inc. v. Board of Sup’rs of Los Angeles County, 176 Cal.App.2d 850... 1 Cal.Rptr. 733 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 9 Footnotes 1 Govt.Code § 35007: ‘The legislative body shall have power to terminate annexation proceedings at any time prior to the date set for the hearing of protests. However, if protests against the annexation of the election are filed with the legislative body prior to the hour set for hearing objections thereto, the city legislative body shall proceed to hear and pass upon all protests so made in the manner provided for in Section 35121 or 35313, whichever is applicable to the proceedings, even though the proceedings have been terminated. If the city legislative body finds that a majority protest as therein provided is made, no further proceedings for the annexation of any of the territory shall be taken for one year after the finding. If the city legislative body finds that a majority protest as therein provided for is not made or it finds that no protests have been filed, new proceedings for the annexation of all or part of the same territory to the city may be instituted and proceeded with as provided in this chapter at any time after the date of such finding.’ End of Document © 2021 Thomson Reuters. No claim to original U.S. Government Works. Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 33 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 1 KeyCite Yellow Flag - Negative Treatment Distinguished by Dairy Belle Farms v. Brock, Cal.App. 1 Dist., April 25, 1950 184 Cal. 117 Supreme Court of California. CROWE et al. v. BOYLE, Auditor of City and County of San Francisco, et al. S. F. 9545. | Oct. 16, 1920. | Rehearing Denied in Bank Nov. 15, 1920. Synopsis In Bank. Action by James W. Crowe and James E. Lennon against Thomas F. Boyle, as auditor of the City and County of San Francisco, and the Construction Company of North America. From judgment for defendants, plaintiffs appeal. Affirmed. Rehearing denied in bank; Angellotti, C. J., and Shaw and Olney, JJ., dissent. West Headnotes (18) [1] Municipal Corporations Incurring indebtedness or expenditure If a contract between the city and county of San Francisco and a construction company for the construction of an aqueduct was illegal, taxpayers have a right to prevent such illegal expenditure under the contract, legally constituting a loss to the city, though injunction may result in the abandonment of the whole project and consequent business losses. 15 Cases that cite this headnote [3] Municipal Corporations Authority to contract in general Public Contracts Formation of Contract Under Charter of City and County of San Francisco, art. 6, c. 1, §§ 9, 14. the supervisors are authorized by ordinance to regulate the method of entering into contracts for the work described in section 9, subd. 8—that is, the construction of public utilities—notwithstanding the general scheme for entering into contracts for public work contained in section 14. [4] Municipal Corporations Conformity to provisions of charter, act, or ordinance authorizing improvement Public Contracts Validity and Sufficiency of Contract Bidding and letting of contract for construction of aqueduct in furtherance of the Hetch Hetchy project by the board of public works of the city and county of San Francisco, the contract being on a cost plus basis, held in compliance with the ordinance of the board of supervisors of March 22, 1920, No. 5007, authorizing such contract, a “cost-plus” form of contract being characterized by payment by the city of the cost of the work. 3 Cases that cite this headnote [5] Municipal Corporations Requisites and validity Public Contracts Requisites and sufficiency in general Where a contract by the city and county of San Francisco for the construction of an aqueduct in furtherance of the Hetch Hetchy project merely required that the guaranty of the bond should be the amount of the unpaid cost-plus fee to the Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 34 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 2 contractor in the hands of the city, a bond expressly providing that it was not intended as a guaranty of the estimated maximum cost substantially complied with the ordinance requirement. 2 Cases that cite this headnote [6] Municipal Corporations Requisites and validity Public Contracts Qualification and approval of surety If provisions with reference to method of procedure in letting a contract contained in the ordinance enacted by the board of supervisors of the city and county of San Francisco required that bond for the performance of the contract be signed by two sureties instead of one, the supervisors had power to provide in the ordinance for only one surety, as is provided by Pol.Code, § 955 (repealed. See Govt.Code, §§ 1502, 1530, 1532), in case of corporate sureties, and had power, after execution of the contract, to waive requirement of more than one surety. [7] Municipal Corporations Requisites and validity Public Contracts Qualification and approval of surety What supervisors of the city and county of San Francisco had a right to provide for in the first instance by ordinance, as that a single surety to the city’s construction contract should be sufficient, they could authorize by way of ratification. 1 Cases that cite this headnote [8] Municipal Corporations Mode of action in general In the absence of statutory or charter provision to the contrary, a legislative act by city may be either in the form of a resolution or of an ordinance. 4 Cases that cite this headnote [10] Municipal Corporations Liabilities of Sureties Public Contracts Construction of bond and surety’s liability in general A single surety on contract for construction work for a city is bound by its bond though two sureties are required. [11] Municipal Corporations Misapplication of Funds A taxpayer of a city cannot maintain action to enjoin payments under a contract for construction work based on the mere informality of the bond in that there is only one surety where two are required by the charter, in the absence of showing made as suggested of injury either to the public or the taxpayer. 7 Cases that cite this headnote [12] Municipal Corporations Formal requisites of contract Public Contracts Formal requisites Board of supervisors of city and county of San Francisco held to have legally followed the authority vested in them with reference to the sale of bonds to pay for construction of an aqueduct in furtherance of the Hetch Hetchy project, and the auditor, in respect of his indorsement on the contract, to have complied with the requirements of the Charter, art. 3, c. 1, § 10, essential to the validity of the contract. Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 35 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 3 1 Cases that cite this headnote [13] Evidence Of municipalities and officers in general All presumptions of law are in favor of the good faith of public officials, as those of a city in issuing bonds for the cost of a water project without subterfuge by way of an arrangement for an advance fee to take care of discount and market the bonds. 2 Cases that cite this headnote [14] Municipal Corporations Sale or Other Disposition of Bonds by Municipality It is not illegal for a contractor with a city on a cost-plus basis to use part of his fee in the purchase of bonds sold to raise funds for the work. 2 Cases that cite this headnote [13] Constitutional Law Giving effect to entire instrument Effect should be given to all the language of a Constitution. [14] Municipal Corporations Special charters or acts Effect should be given to all language of city charter. [15] Municipal Corporations Construction of charters and statutory provisions A charter must be considered in its entirety. 1 Cases that cite this headnote [16] Municipal Corporations Approval by council or other body or officer Public Contracts Manner of making contract Proceedings of board of public works of city and county of San Francisco in letting contract for construction of aqueduct in furtherance of Hetch Hetchy project, and taking of bond from contractor, held ratified by subsequent resolutions of board of supervisors of the city in the appropriate manner for such ratification—that is, by the appropriation of the money for the purpose of carrying out the contract—the resolutions in question being adopted in accordance with the charter and approved by the mayor, and equivalent to ordinances for the same purpose, if they did not in fact become ordinances by reason of such approval and in accordance with the charter of the city, art. 2, c. 1, § 16. 6 Cases that cite this headnote [17] Municipal Corporations Sale or Other Disposition of Bonds by Municipality Board of supervisors of city and county of San Francisco held to have legally followed the authority vested in them with reference to the sale of bonds to pay for construction of an aqueduct in furtherance of the Hetch Hetchy project. [18] Statutes Superfluousness Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 36 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 4 In construing a statute, effect must be given to all its provisions. 5 Cases that cite this headnote **112 *120 Appeal from Superior Court, City and County of San Francisco; Frank J. Murasky, Judge. Attorneys and Law Firms Jared How and Richard C. Harrison, both of San Francisco, for appellants. George Lull, Robert M. Searls and Lent & Humphrey, all of San Francisco (Edward I. Wolfe, of San Francisco, of counsel), for respondents. Opinion WILBUR, J. [1] This is an action brought by taxpayers to enjoin the defendant auditor from paying $276,000, due under a contract between the city and county of San Francisco, which will hereafter be referred to as ‘the city,’ and the Construction Company of North America, for the construction of about 16 miles of aqueduct on what is known as the mountain division of the Hetch Hetchy project. The plaintiffs allege that the contract is void. The trial court, upon stipulated facts, denied the injunction, and plaintiffs appeal. It is conceded by appellants that the contract was let in accordance with the ordinance of the board of supervisors, enacted for the purpose of regulating that matter, except in certain particulars, which will be hereafter noted. Appellants contend that the procedure prescribed by such ordinance is in violation of the charter. It is admitted by the respondents that if the charter provisions regulating the letting of contracts for public work by the board of public works (article 6, § 14 et seq.) apply to the contract in question, the contract is unauthorized and void. The contract is of the type *121 known as ‘cost-plus-a-fee contract’; that is, a contract by which the city pays for all labor and material used in the prosecution of the work, and, in addition, pays the contractor a fee for its services in superintending and managing the same. The contract was let after advertisement for bids. The fee of the Construction Company of North America under the contract is $1,190,329.20, and the aggregate cost of the work to the city, including the contractor’s fee, is estimated and guaranteed at $7,802,952.80. Respondents contend that the method selected by the city authorities is the only possible one for getting the work done at a reasonable cost because of the uncertain and fluctuating cost of labor and material. In support of this contention they point out that the lowest flat contract bid made in response to the call for bids on that basis contained in the same notice calling for bids on the cost-plus-a-fee was $9,674,208, and the only other bid on that basis was $16,250,263. It is also stated that the issuance of an injunction against the respondents in this case would necessarily result in the stopping of the work now in progress, and that the delay in the Hetch Hetchy project incident to the disbandment of forces, which will be necessary in the event this case is decided in favor of the plaintiffs, will mean a loss to the city of at least $2,000,000. But, if we assume that the contract is illegal, calling, as it does, for an expenditure of nearly $8,000,000, the taxpayers have a right to prevent such illegal expenditure, which, in the legal sense, constitutes a loss to the city, although the injunction might result in the abandonment of the whole Hetch Hetchy project and the consequent business losses involved. The business exigencies which confront the city cannot justify the illegal expenditure of public money, even though such expenditure might result in a great profit to the city. We must, therefore, confine our investigation to the question of the legality of the contract. The contract departs from the charter plan. It provides for the payment at the beginning of each year of a large installment of the fee, the first payment of which is the amount involved in this case. The charter provision in regard to installment payments during the progress of the work requires that no more than 75 per cent. of the value of the labor done and materials furnished and used *122 shall be paid for as the work progresses. Article 6, c. 1, § 21. It follows that if these charter provisions apply to this contract it is illegal and void. That question will now be considered. Does the charter authorize the supervisors to adopt the cost-plus-fee plan? A bond issue of $45,000,000 was voted by the people of San Francisco in January, 1910, **113 for the construction of the Hetch Hetchy project for the bringing of water from the Tuolumne river to the city. At the time to bonds were voted the charter authorized the city to acquire, construct, or complete public utilities from funds derived from the sale of bonds issued for that purpose. Article 12, §§ 1, 10, 14, 15. These powers were to be exercised by the board of supervisors; but by an Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 37 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 5 amendment to the charter, adopted by the people of San Francisco, November 5, 1918 (article 6, c. 1, § 9, subd. 8), approved by the Legislature January 17, 1919 (Stats. 1919, p. 1390), it was provided that the construction of all public utilities should be in charge of the board of public works of the city. Respondents claim that the full authority of the board of public works to contract for the construction of public utilities is controlled only by the ordinance of the supervisors enacted for that purpose. On the other hand, the appellants claim that section 14 of the same chapter (1 of article 6) with reference to the performance of all public work must control the action of both the supervisors and the board of public works, and that the provisions of section 14 and succeeding sections concerning the method of contracting are the measure of the power of both; that, such charter provisions having been disregarded, the contract is void, as is expressly provided in section 17: ‘Any contract made in violation of any of the foregoing provisions, and in the case of improvement of streets any assessment for the work done under such contract, shall be absolutely void.’ [2] [3] We will now consider the provisions of the charter involved in the determination of the question in issue, contained in sections 9 and 14 et seq. of article 6, c. 1, so far as material to the inquiry. Section 9, supra, provides: ‘The board of public works shall have charge, superintendence and control, under such ordinances as may from time to time be adopted by the board of supervisors * * * *123 8. Of the construction, maintenance and operation of any and all public utilities, owned, controlled or operated by the city and county, or which may hereafter be so constructed, owned, controlled or operated. Full authority is vested in the board of public works to carry out the powers granted in this paragraph, and it may, in accordance with such ordinance as the supervisors may enact, contract for work to be performed, or materials or equipment to be furnished, or for expert, technical or professional services to be rendered, wherever such work, services, materials or equipment are certified by the city engineer to be necessary in connection with the construction, maintenance or operation of such utilities.’ (Italics ours.) Section 14 provides: ‘All public work authorized by the supervisors to be done under the supervision of the board of public works shall, unless otherwise determined by the board of public works, be done under written contract, except in case of urgent necessity hereinafter provided; and except as otherwise specifically provided in this charter, the following proceedings shall be taken in all cases in the matter of letting of contracts by said board. Before the award of any contract for doing any work authorized by this article, the board shall cause notice to be posted conspicuously in its office for not less than five days, and published for the same time, inviting sealed proposals for the work contemplated; except, however, that when any repairs or improvement, not exceeding an estimate cost of five hundred dollars, shall be deemed of urgent necessity by the board, such repairs or improvement may be made by the board under written contract or otherwise, without advertising for sealed proposals.’ (Italics ours.) Section 14 was in the charter when originally adopted. At that time the charter did not authorize the construction of public utilities by the city. That authority has subsequently been conferred by amendment. The respondents contend that, although the phrase ‘public work’ as used in section 14 is broad enough to cover all work controlled by the board of public works, whether done by the city in its proprietary or in its governmental capacity, the words should, in the light of the legislative history, be held to apply only to work done by the city in its governmental capacity. It is true that in Vale v. Boyle, 179 Cal. 180, 175 Pac. 787, attention was called to the difference between the governmental and *124 proprietary powers of the city in determining whether or not certain sections of the charter regulating the purchase of supplies (section 1, art. 2) applied to supplies purchased for public utilities. What was said on that subject was only to reinforce the construction of the language of the charter fully determined by other rules of construction and was wholly incidental to the question. This is made clear by the following language of the opinion, to wit: ‘While it is true that this general consideration alone should not control the express language of section 1, chapter 3, article 2 of the charter, if applicable thereto, it aids us in construing such general provisions of the charter concerning the purchase of supplies, etc., to consider that they were adopted for the purpose of regulating the conduct of the board of supervisors, acting in their governmental capacity.’ The point at issue must be determined by the language of the charter, and not by the fact that in its ownership and control of public utilities the city acts in a proprietary capacity. Returning, then, to a consideration of the language of the charter, we find that section 14, supra, first deals with ‘public work authorized by the supervisors to be done under the supervision of the board of public **114 works,’ and provides that such work, ‘unless otherwise determined by the board of public works,’ must Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 38 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 6 ‘be done under written contract, except in the case of urgent necessity.’ The board of public works thus have a right to determine whether such work shall be done under written contract. The first exception is in the case of ‘urgent necessity.’ The next clause, ‘and except as otherwise specifically provided in this charter, the following proceedings shall be taken in all cases in the matter of the letting of contracts by said board’ (italics ours), would seem to include not only the matter of letting the contracts authorized by the supervisors, but also the letting of contracts directly authorized by the charter; in other words, ‘all cases.’ The next sentence confirms this view: ‘Before the award of any contract for doing any work authorized by this article, the board shall cause to be posted,’ etc. While the clause, ‘and except as otherwise specifically provided in this charter the following proceedings shall be taken in all cases in the matter of the letting of contracts by said board,’ is in a sentence dealing with only these clauses of contracts ‘authorized by the board of supervisors to be done under *125 the supervision of the board of public works,’ it is evidently intended to have a broader application, namely, to apply to ‘all cases’ where contracts are let by the board. The clause represents a break in the line of thought equivalent to the beginning of a new sentence, introducing the method of procedure to be followed as outlined in the next and succeeding sentences, which provide for ‘* * * the award of any contract for doing any work authorized by this article, * * *’ etc., so that all work contracted for by the board of public works, whether authorized by the board of supervisors or by article 6 of the charter, is to be contracted for in accordance with section 14, ‘unless otherwise specifically provided in the charter.’ The contention of the respondents is thus narrowed down to this proposition, namely, that the matter of contracting for the constructin of public utilities is expressly regulated by subdivision 8 of section 9, and therefore comes within the above exception contained in section 14, to wit: ‘And except as otherwise specifically provided in this charter.’ The argument, then, is that the matter of letting of contracts for public utilities is controlled not by section 14 of the charter, but by the ordinances of the supervisors upon that subject, enacted by authority of the charter (section 9, subd. 8, supra), which provide that the board of public works ‘* * * may in accordance with such ordinances * * * contract for work to be performed. * * *’ It seems fairly apparent that the effect of this section, construed in connection with section 9, subd. 8, supra, is to require all contracts let by the board of public works to be let in accordance with the procedure prescribed by sections 14 et seq., except in case of those contracts concerning public utilities where the procedure to be followed is regulated by ordinances enacted by the board of supervisors. It will be helpful, in determining the intent of the people in adopting these charter provisions, to consider the history of the adoption of section 9, subd. 8, supra. Such history is uniformly considered in dealing with kindred subjects, such as the interpretation of the Constitutions. At the time of the formulation of the amendment of section 9, subd. 8, of chapter 1 of article 6, the action of Vale v. Boyle, supra, was pending. The limitations upon the power of the board of public works to deal with public utilities was raised by the plaintiff in that case, which was begun January 15, *126 1918. On May 27, 1918, the superior court of San Francisco granted a temporary injunction, holding that the board of public works was required to invite bids for supplies in accordance with section 1, c. 3, art. 2, of the charter. The charter amendment to section 9, subd. 8, supra, was formulated and by ordinance submitted to the people of San Francisco October 21, 1918, to be voted for at the next general election (November 5, 1918). Four days later this court reversed the decision of the trial court in Vale v. Boyle, supra, and held that section 1, c. 3, art. 2, did not apply to such purchase of supplies. At the election the proposed amendment was carried, and was approved by the Legislature January 17, 1919 (Stats. 1919, p. 1376). The controversy in that case was as to whether or not the board of public works was required to follow the charter provisions for the purchase of supplies, or to follow the ordinance of the supervisors regulating the purchase of the automobile busses for the purpose of conducting a public utility. The existence of this controversy over the power of the board of public works to purchase supplies, in any other manner than in accordance with the charter provisions regulating the purchase of supplies, so seriously affecting, as it was claimed in that case, the power of the board to effectively operate the public utilities then owned, and to contract for supplies for the Hetch Hetchy project then under construction, shows that the purpose of the amendment was to exempt the board of public works when purchasing supplies for such utilities from following the routine method provided by the charter and held by the trial court to apply to purchases for the municipal street railroad. This purpose is readily deducible from the language used in the amendment, to wit: ‘Full authority is vested in the board of public works to carry out the powers granted in this paragraph, and it may in accordance with such ordinances as the supervisors may enact contract for work to be performed or materials or equipment to be furnished,’ etc. (Italics ours.) It is to be observed that the same provision is made concerning ‘materials or equipment’ and concerning contracts ‘for work to **115 be performed.’ Both are to Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 39 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 7 be done in accordance with the ordinances of the board of supervisors. If it was the intent to relieve the board of public works from the charter provisions applying generally *127 to the purchase of ‘all supplies,’ it would seem equally clear that the purpose was to also relieve them from similar restrictions concerning the making of contracts for public work. That this court, after the language of the charter amendment was formulated and submitted, held such charte r provisions concerning the purchase of supplies not to be applicable, does not change the intent of the framers of the charter amendment. An examination of the language of the amendment, as well as a consideration of the circumstances under which it was formulated, tends to confirm this conclusion. The clause ‘full authority is vested in the board of public works to carry out the powers granted in this paragraph’ has no force unless it relieves the board of public works of restrictions upon their authority contained in other portions of the charter. The expression ‘full authority’ indicates a purpose to remove limitations upon authority and an intention to remove such general restrictions as might otherwise be deemed applicable. It focuses the attention upon the particular paragraph in which the powers are granted and to the limitations upon that power contained in that paragraph as alone applicable. This paragraph, in effect, reads thus: ‘Full authority is hereby vested in the board of public works over the construction, maintenance, and operation of all public utilities, and it may in accordance with such ordinances as the supervisors may enact, contract for work to be done,’ etc. The subdivision clearly deals with the method of contraction for public utility construction, and authorizes contracts therefor ‘in accordance with such ordinances as the supervisors may enact.’ Under sections 14 and 22, c. 1, art. 6, the method of contracting for public work is rigidly prescribed. Those provisions may be summarized as follows: Notice inviting proposals for the work shall be posted and published for not less than five days. The notice must fix the day and hour when the bids are to be received. They must be sealed. The notice must contain the general description of the work, the time within which it shall be commenced and when completed, the amount of bonds to be required, and refer to plans and specifications on file in the office of the board for full detail and description of the work. They must be upon printed forms, accompanied by an affidavit of noncollusion. The bids must be clearly and distinctly written, without any *128 erasure or interlineation. They must be accompanied by a certified check; only one bid to be presented by each bidder. The method of opening and considering the bids; the method of signing the contracts; the execution of the bond; the provision in regard to the method of payment of the contractor—are all regulated in great detail. The award must be to the lowest bidder. It is apparent that, if these charter provisions concerning the letting of contracts for public work by the board of public works control the letting of contracts for constructing public utilities, the whole field of regulation is quite fully covered, and there is nothing of importance left for the supervisors to provide for by any ordinance regulating the method of contracting. It is true that the phrase in subdivision 8 of section 9, ‘in accordance with such ordinances as the supervisors may enact,’ might be given some effect by construing it as authorizing the board of supervisors to determine what portions of the work are to be let by contract, leaving the method of advertising for and entering into contracts to be regulated by the charter. But this result is already fully accomplished by the opening clause of section 9: ‘The board of public works shall have charge, superintendence and control, under such ordinances as may from time to time be adopted by the supervisors; * * * 8. Of the construction,’ etc. This general introductory phrase in section 9 in regard to the ordinances of the board of supervisors relates to and affects every portion of subdivision 8 of section 9, and the above phrase in subdivision 8 of section 9, to wit, ‘in accordance with such ordinances as the board of supervisors may enact,’ is wholly unnecessary and redundant, unless we construe it to apply to the method of entering into contracts for work to be performed and to direct that such ordinance is to control upon that subject. If the phrase under consideration is eliminated from section 9, subd. 8, and it is thus made to read, ‘and it may * * * contract for work to be performed or materials or equipment to be furnished,’ such contracting would still be under the general power and supervision of the board of supervisors by virtue of the opening clause of section 9, giving the board of public works control, etc., ‘under such ordinances as may from time to time be adopted by the supervisors.’ The authority to let contracts in accordance with the method prescribed in the charter would be *129 in the board of public works, and would be subject to the general regulatory power of the supervisors. In order to change the method of letting contracts it was essential that other and additional language should be employed in subdivision 8, supra, and this we think was done in a very direct and effective manner by the declaration that the board of public works might contract for work ‘in accordance with such ordinances as the supervisors may enact’ for that purpose. It is a fundamental rule of construction that effect should be given to all the language of a charter, constitution, or **116 statute, and unless this last-mentioned phrase accomplishes this much it accomplishes nothing, and the charter is to be construed exactly as it would be without such phrase. The use of this phrase in connection with the emphatic provision that ‘full authority is vested in the Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 40 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 8 board of public works to carry out the powers granted in this paragraph’ makes it plain that the supervisors are authorized by ordinance to regulate the method of entering into contracts for the work described in subdivision 8 of section 9, namely, the construction of public utilities, notwithstanding the general scheme for entering into contracts for public work contained in section 14 of that article (6). Another consideration tends to the same conclusion. Previous to the amendment of the charter of 1919, supra, the power to acquire or construct public utilities was vested in the city. Article 12, § 14. No express provision being contained therein with reference to the construction of such utilities, the power to make provision for such construction would be vested in the legislative body of the city. The provisions requiring contracts for public work to be let by the board of public works, contained in the charter at that time in sections 14 et seq., supra, related solely to contracts executed by them, and had no application to contracts let by the supervisors, and therefore had no application to contracts for the construction of public utilities. Prior to the amendment of 1919, therefore, the supervisors by ordinance could provide the method of entering into contracts for the construction of public utilities, and when this power was taken from them, and vested by the charter amendment in the board of public works, it was not unreasonable to provide for the retention by the supervisors of the power of regulating the method of entering into contracts for such construction, and *130 that is, in effect, what was done by the charter, which authorized contracts to be let under ordinance adopted by the board of supervisors regulating that subject. As has been pointed out, section 14 expressly excepted from its operation contracts otherwise specifically provided for in the charter. The provision for the letting of contracts in accordance with the ordinances of the supervisors in subdivision 8 of section 9, c. 1, art. 6, was no doubt intended to be such a specific provision therefor as was excepted from the operation of section 14. What did the supervisors mean by the cost-plus-fee plan with a guaranty? [4] Appellants contend that the board of public works failed to conform to this ordinance in advertising for bids and in letting the contract. We will next examine such contention. The ordinance of the board of supervisors, No. 5007, passed March 22, 1920, authorized the board of public works ‘to call for and receive sealed proposals and to enter into contracts on the basis of such proposals for the construction of one or more or all portions of said water supply and works, said proposals and contracts to be based on the so-called cost-plus-a-fee-plan with a guaranty by the contractor that the total cost to the city shall not exceed a specified maximum price per unit.’ With reference to the letting of such a contract it is provided, in section 2, ‘that after comparing proposals received for doing the work the board of public works may in its discretion award the contract either to the bidder submitting the lowest maximum cost guaranty, or to the bidder proposing to do the work for the lowest contractor’s fee.’ The ordinance also contained the following provision: ‘Sec. 3. All such contracts shall provide that inasmuch as the city and county is to pay the actual cost of doing the work, within the guaranteed limit, no expenditures chargeable to the city and county shall be incurred for labor, material, supplies or equipment required for such work, except upon the prior written authorization of the city engineer and board of public works, and only to the extent of such authorization. Said contracts may also provide for progressive payments of the contractor’s fee. * * * ‘Sec. 4. The provisions of the charter requiring the retention by the city and county of 25 per cent. of the *131 amount of contractor’s payment’s until completion of the work shall not be held applicable to such annual advance payments allowed contractors, but shall apply to all other payments on account of the contractor’s fee. The provisions of the charter applicable to general contracts by the city requiring a bond for the protection of laborers and material men shall not be considered as applicable to cost plus a fee contracts where all labor and material bills are paid directly by the city and county, and no such bond shall be required.’ Purporting to act under the authority of this ordinance, the board of public works, on April 6, 1920, advertised for bids ‘for the construction of aqueduct tunnels in the mountain division of the Hetch Hetchy project, on a cost-plus-fee basis. Contract No. 77C, Hetch Hetchy water supply.’ It was provided in this notice that ‘the amount of bond for faithful performance of contract has been fixed at $100,000.’ In pursuance of this proposal the Construction Company of North America made its bid, wherein it proposed and agreed, if its proposal was accepted, ‘to take charge of and superintend the work mentioned in said advertisement and described in the specifications referred to in said advertisement, and to furnish the necessary organization for carrying out said work in accordance with the specifications, * Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 41 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 9 * * and subject to all conditions contained in said specifications, for the total sum of $1,190,329.20. * * * The undersigned, in further consideration of the acceptance of this proposal, hereby guarantees that the unit costs to the city of said work, determined in the manner provided **117 for in the specifications, including the total sum above mentioned, but excluding the general overhead costs of the city’s engineering and administrative offices in San Francisco and at Groveland, will not exceed the sum named in the schedule of guaranteed maximum unit costs attached to and forming part of this proposal, and agrees that if the actual unit costs to the city of San Francisco, so determined, exceed such guaranteed costs, the total amount of such excess on all work to which the same applies may be deducted from any payments due to, or withheld from, the undersigned under the contract.’ The award of contract followed the language of the proposal, awarding the contract No. 77C to the respondent Construction Company of North America—— ‘to take charge of and superintend the work mentioned in the advertisement *132 for the abovementioned contract, and described in the specincations referred to in said advertisement, and to furnish the necessary organization for carrying out said work in accordance with the specifications therefor, * * * for the total sum of $1,190,329.20.’ It contains the same provisions with reference to guaranty of unit cost contained in the bid. Apparently the bids were made on blanks furnished by the board of public works. Contract No. 77C, executed in accordance with these proceedings, provided that the respondent contractor—— ‘promises and agrees * * * that it will do and perform all of the following work * * * for the construction of aqueduct tunnels in the mountain division of the Hetch Hetchy project on a cost-plus-fee basis, with guaranteed maximum units costs, and awarded to the contractor above named by the board of public works. * * *’ It also contained the same guaranty with reference to unit cost contained in its proposal and in the award of the contract hereinabove quoted. The board of public works on behalf of San Francisco, subject to the provisions of the specifications, agreed to pay a fee of $1,190,329.20. The specifications provide for payment of the contractor’s fee as follows: ‘First. In the event that the contractor has submitted a bid requiring annual advance payments, as soon as the contract has been signed and the contractor has undertaken the work, in order to cover the initial cost and expense to which the contractor estimates he will be put in undertaking his work for the first year, the city will pay to him the amount specified in his bid as his advance payment for the first year. ‘Second. At the expiration of each successive period of three months succeeding the date on which the contract is signed, and during which the contract is in force, or until ten such payments have been made, the city will pay to the contractor one-eleventh of the entire amount of his bid fee (excluding the contractor’s estimated annual advance payments, if they are required by his bid), less twenty-five per cent. of said one-eleventh, and also less the amount of any excess of actual unit costs over guaranteed unit costs, determined as hereinabove set forth. ‘Third. At the commencement of the second and this years, respectively, succeeding the date of signing the contract, *133 the city will pay to the contractor the entire amount of the advance payment estimated by the contractor for that particular year, if such an estimate is included in his bid, plus such addition or minus such deduction as the board of public works may find proper, to make such advance payment equal to the contractor’s actual advance costs for that year. The finding of the board of public works as to the extent to which these annual advance payments shall be modified, if at all, shall be binding and conclusive; and if said finding is not acceptable to the contractor, or if he does not express his acceptance or rejection of said finding within ten days Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 42 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 10 from the date at which he is notified of the same, the contract shall be declared terminated by the board of public works and shall be of no further force or effect. ‘Fourth. When the contract shall have been completed to the satisfaction of the board of public works, or at the termination of the same if due to the failure of the contractor to accept the board’s modification of his second or third annual advance payment, as above provided, the city will pay to the contractor the total sums withheld under the twenty-five per cent. retention clause in paragraph second of this section, plus the unpaid one-eleventh of the bid fee, less any deductions which the city engineer may find necessary or proper under the terms of this contract, either on account of the maximum guaranty clause or otherwise. The decision of the city engineer as to the items, amounts, and propriety of any such deductions shall be binding and conclusive upon both parties hereto. Acceptance of such final payment by the contractor shall constitute a complete settlement of all obligations of the city under this contract and a release of the city from the obligation to pay any further sums whatever. ‘The contractor, in fixing the amount of the annual advance payment in his proposal, shall include in the amount of such payment only the initial cost and expense to which he considers he will be put in undertaking his work for each year, and not any current expenses or profit, which should be distributed through the year.’ In considering the contention of the appellants that this contract and award does not comply with the ordinance, it will be necessary to further consider the terms of the ordinance. The fundamental inquiry is, what is meant by the *134 ‘so-called cost-plus-a-fee’ plan and guaranty, etc. The phrase ‘cost-plus-a-fee,’ disassociated from the other parts of the ordinance and construed solely with reference to its language, and not with reference to any technical significance attached to the term, would seem clearly to indicate that the city was to pay the cost of doing the work—that is, for labor and material and other expenses of the contractor—and to pay the contractor **118 a fee for his services. The term is used to distinguish the plan of contracting by which the services of the contractor are secured for the management and oversight of the work in accordance with the usual custom of contractors, but without obligation on the part of the contractor to insure that the building will cost no more than the contract price, or, on the other hand, without an opportunity for him to make more than his previously agreed percentage or fee. This type of contract, we understand, is largely an outgrowth of war conditions. In a paper presented before the American Society of Engineers, printed in the proceedings, vol. 45, No. 46, pp. 443–449, and also printed in the Canadian Engineer, vol. 38, p. 183, Ernest W. Clarke discusses the distinction between ordinary contracts for the construction of buildings and improvements, which he refers to as ‘lump-sum contracts,’ and the ‘cost-plus’ type of contract. He makes the following statement: ‘The usual methods of paying for work are by lump sum, by item charges, and by cost plus a percentage. Under the first two methods the contractor takes the engineers’ or architects’ specifications and estimates of the quantities, possibly checks the latter by his own computation, guesses at the interpretation which will be placed by the owner’s representatives on the terms of the specifications, and from his knowledge of cost of materials and cost of labor makes up a bid. In a lump sum contract the preliminary estimate of quantities is final, as are also the original plans of foundations, details, etc. Any changes must be a matter of settlement between the owner and the contractor. The latter takes all the gamble, and if conditions or quantities turn out more favorably than was anticipated he wins; otherwise he loses, or is tempted to decrease the cost to himself by some method which generally means a poorer grade of work than that contemplated in the specifications. If conditions turn out much worse than acticipated *135 by the contractor, he may forfeit whatever bond he put up and leave the owner and bondsmen to settle.’ The tendency of such contracts, Mr. Clarke points out, ‘is to remove responsibility from the owner and his representatives and place it on the contractor; also, all the gamble on the weather, foundations, changes in labor and material market, and every other unknown or unknowable factor is carefully unloaded on him. The contractor accepts all this, but the owner pays. * * * In ‘cost-plus’ contracts, the owner accepts all risks, all costs, and receives the benefit of all favorable conditions; each job carries its own load only, without the addition of losses on other jobs, and without the percentage added by the contractor to offset possibly unfavorable conditions, ambiguous specifications, or captious owners. * * * The contractor furnishes the plant, organization, and expert knowledge of construction and buying; the owner supervises the work and pays the bills. * * * The sliding percentage with maximum fee, as used on government work, could be applied to any contract, large or small. Contracts could be let on the basis of fee demanded, both percentage and maximum, on the size, adaptability, and condition of the plant controlled by the bidder, and on his experience, reputation, and the size and character of his organization. It is true that the interest of the owner to keep down the cost, and that of the contractor to receive a large fee, would clash; but that is controlled by the sliding percentage, which can be arranged to give an actually larger fee for smaller total Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 43 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 11 cost, and by the maximum fee, which is based on the owner’s estimate of total cost.’ Mr. A. E. Wells, president of a Chicago construction company, in The Heating and Ventilating Magazine for October, 1919, vol. 16, p. 27, under the title ‘Building Construction under the Cost-Plus-Fixed-Fee Contract,’ calls attention to the distinction between the lump-sum contract and the cost-plus-a-fee contract. ‘The question being asked to-day is ‘Should the contractor insure the owner that his structure will not exceed a definite contract price?’ In competitive bidding the cost of this insurance is paid generally by the low bidder out of profits, or, as frequently happens, out of his capital, for the reason that he is more likely to get the contract as he scales down his allowances for contingencies. In fact, the man whose bid includes a safe allowance for *136 insurance against higher costs cannot expect to obtain work under the competitive bidding system. The inevitable result is the bankruptcy of many contractors and an additional cost to the owner or the surety company to complete the unfinished contract. This situation has come to such a point that surety companies are refusing to write surety bonds on fixed price contracts except under especially favorable conditions and they frequently recommend to owners the cost-plus-a-fixed-fee contract. But from the owner’s standpoint is it not preferable to know in advance what a certain project will cost? It is true that a careful estimate is due him. It should be made by a reliable contractor and checked by owner’s architect and engineer. Such a figure should be more satisfactory than a competitive bid, which does not necessarily show the cost of the building, but only what some contractor is willing to gamble is the cost of the job.’ Mr. Wells concludes as follows: ‘Unquestionably the contractor is called in because he is an expert in building and not to absorb the risk entailed in the lump sum contract. If it is not the purpose of the owner to buy price insurance along with his building, then cost-plus-fixed-fee is a better basis.’ In support of this conclusion, an address of Brigadier-General R. C. Marshall, Jr., chief of the construction division of the U. S. War Department, given before the Associated General Contractors of America, November 21, 1918, at Chicago, is quoted from. General Marshall said that as a result of war conditions ‘there was developed a form of contract known as the cost-plus-sliding-scale -fee contract.’ He had secured the opinion of a committee of eminent business men unqualifiedly indorsing this form of contract. General Marshall made the following statement: **119 ‘No contractor should be called upon nor permitted to undertake the performance of any contract that within the four corners of the paper upon which it appears is or may be written the financial bankruptcy of the contractor. It is unjust, it is inequitable, it is uneconomic. The great lesson of this war on the subject of the relationship between the contractor and the owner is the ‘cost-plus’ contract. This represents the only equitable basis under which a contractor may perform constructive and economic services for the owner. It is the only form of contract which affords protection to both parties. To me all the energies, the thought, and experience *137 of this country within its own continental lines during the past year and one-half of this world struggle shall have been in vain unless out of it shall grow, as a permanent institution, solidifying the economic relationship between the contractor and owner, the ‘cost-plus’ contract.’ Mr. Wells further stated in his article: ‘Our standard contract calls for a return to the owner of 90 per cent. of such savings, all of which would have accrue d wholly to the contractor under the lumpsum plan. We believe 10 per cent. of the savings to be an adequate incentive for the contractor.’ George W. Fuller, consulting engineer, New York City, in Municipal and County Engineering for July, 1920, discusses the ‘cost-plus-a-fee’ contract, and states: ‘Prior to the great war, the ‘cost-plus’ form of payment on contracts in the waterworks held was limited to a relatively few large projects built as a whole under this type of contract for private corporations, and to numerous small, unexpected features of enterprises executed under municipal contracts where ‘extra -work’ clauses were attached to either lump-sum (bulk) or unit-price contracts. During the war a large amount of emergency government work which had to be performed in the shortest possible time gave great impetus to the ‘cost-plus’ form of contract. The unstable condition of the market for labor and materials now found in many places causes this form of handling construction work to come up repeatedly for discussion. Such discussion results from the necessity for finding expedients to meet present emergencies which, while not comparable with those of the war period, are nevertheless present during this reconstruction period to an extent which is perhaps not generally recognized. At this time when contractors are sorely puzzled to know how to bid on construction materials on which quotations are made by dealers only on the basis or changes in price contingent on the actual date of future deliveries, and when labor is uncertain in quantity and of reduced and somewhat uncertain efficiency as to output of work per hour, it is obviously necessary to look conditions squarely in the face. Add to this the difficulties in transportation of construction materials and the loss incident to the contractor having a substantial payroll for labor when materials to work with are lacking, and it is readily seen Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 44 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 12 that this is a time for considering fundamental principles in handling construction *138 work to an extent that would not be of interest under normal conditions. * * * Some waterworks construction must go forward. With conditions as they are at present the contractor, if he bids on a lump-sum or unitprice basis, he is bound to name a price which in his opinion will protect him from loss, and if possible assure a reasonable return on his capital investment and for the work of himself and his organization. Under these circumstances it is inportant to discuss briefly the cost-plus form of contract with a view to seeing if the burden of uncertainty in some respects cannot be shifted from the contractor to the owner to the advantage of all concerned. In fact, if construction work is to go forward there are some projects where such steps seem imperative. * * * It is claimed that under the cost-plus method a contractor has little inventive to keep down the cost of the work. This is frequently true of the cost-plus-percentage but need not be of the cost-plus-lump-sum type. In any case it must be remembered that a contractor who will deliberately be inefficient on a cost-plus project is equally sure to attempt improper or inadequate construction on lump-sum or unit-price agreements. There have been a great many variations of the cost-plus contract applied to construction work, but the more important are: ‘(1) Actual proved cost with labor and material furnished without restriction by the contractor, plus a fixed percentage or lump sum, to represent profit, supervision, financing, use of tools, and plant, or any or all of these. ‘(2) Actual proved cost of labor furnished by the contractor and with materials furnished by, the owner, with a fixed percentage or lump sum, as above. ‘(3) Actual proved total cost for specified work, plus a percentage for specified or unexpected extra or unforeseen work in connection with lump-sum or unit-price contracts. ‘(4) Actual proved total cost to the contractor, plus a sliding scale fee and upset maximum fee. ‘(5) Actual proved cost to the contractor, plus a fixed charge and fixed construction fee.’ Under the head of ‘Advantages Claimed for Cost-Plus Contracts,’ 10 specifications are given by Mr. Fuller. The eighth one is as follows: ‘(8) Cost-plus contracts do away with the substantial sums usually added in lump-sum or *139 unit-price contracts to cover the following uncertainties: (a) Weather; (b) foundations; (c) changes and shortages in labor market; (d) changes and shortages in material market; (e) delayed deliveries of materials.’ Under the head of ‘Disadvantages’ he gives 11 specifications, the first of which is as follows: ‘(1) There is no way of determining the approximate cost in advance, and this upsets budgets where definite appropriations have been made or are required.’ Mr. Fuller’s paper, from which the above quotations are taken, was presented before the annual convention of the American Waterworks Association on June 24, 1920, at Montreal, Quebec. See, also, Engineering News Record, vol. 85, p. 78, July, 1920. In **120 Engineering and Contracting, vol. 52, p. 728, a form of cost-plus contract used by Bent Bros. in Los Angeles is published. It appears from this contract that the constructor agrees to a definite estimated cost which it is stipulated is based upon certain unit prices, some of which are specified in the contract. It is agreed that the estimated cost may be increased or reduced by reason of the increase or decrease in price of the items. The constructor’s fee is a percentage of the estimated cost and is known as the estimated fee. If the actual cost of the work is less than the estimated cost, the constructor, in addition to his estimated fee, is paid one-half of the amount saved over the estimated cost. If the cost of the work is more, the constructor pays half of the loss, ‘except that in no event shall the constructor be paid less than one-third of the constructor’s estimated fee.’ These quotations clearly indicate the distinction between the flat contract basis and the cost-plus-a-fee basis of construction contracts. It is apparent from the whole scheme that the purpose of the supervisors in authorizing this form of contract was to make a contract less hazardous to the contractor than the flat-price contract. If we accept the appellants’ contention, that the guaranty of maximum unit cost places all the cost over that amount upon the contractor, it is difficult to conceive of a contract less favorable than this to the contractor. Without any hope of profit, he agrees to assume all possible loss. If the work costs less than the maximum guaranty he does not profit by that fact, but if it costs more he pays such additional cost. Not only that, if there is an advance in any one item of cost over the estimate *140 the contractor suffers the loss, while if there is a lowering of cost on any other item the city gets the benefit of it. For instance, if the cement costs $1,000,000 more than the estimate, the contractor pays it. If there is a saving of $1,000,000 on labor and other items of cost, the city gets the advantage of this saving. The estimated or guaranteed cost would be the actual cost, but the contractor would suffer a loss of Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 45 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 13 $1,000,000. Such a construction of the ordinance absolutely ignores the fact that the whole purpose of the cost-plus-a-fee contract is to shift the burden of market fluctuations upon the owner instead of on the contractor. Whatever name may be appropriate to the form of contract said to be devised by the board of supervisors of San Francisco, it certainly is not a ‘so-called cost-plus-a-fee contract’; that is, a contract ‘generally styled’ a ‘cost-plus-a-fee contract’ (Webster). The form of contract which shifted the hazard of increased cost upon the owner resulted from the fact that millions of young men were being withdrawn from industrial pursuits, that the government was calling millions of men to service and planning to call all the available men to service needed to overcome an enemy whose victories had already cost the world millions of lives Our attention has been called to no contract approximating in character to that contended for by the appellants. The report of the United States Shipping Board of December 1, 1918, shows the letting of contracts aggregating over $2,000,000,000 for ships. The nearest approach to the contract here involved, as construed by appellants, is, to quote from the report, that on ‘a fee basis by which the bidder submitted a proposal to build for a sum not to exceed a certain figure, and to take a certain fee in return for his services, with provision for bonus shared between builder and corporation in case cost fell below the estimated cost.’ A consideration of this form of contract at once discloses that it does not purport to be on a ‘cost-plus-a-fee basis,’ and that the contractor has a chance of an additional profit over his fee. And it further appears from the report that the government pays any additional cost due to increased cost of labor or material. It should be noted, too, that the employés in such work were in the preferred service list, and thus the industry was relieved from the hazard of having its men called to service, *141 and that every shipyard was given all the contracts it could possibly carry out, and that the government taxed excess profits. Such a contract could not be appropriately styled a cost-plus-a-fee contract, but rather ‘estimated cost plus a fee plus increased cost,’ or ‘estimated cost plus estimated profit plus a fee plus increased cost.’ The interpretation of the ordinance contended for by appellants ostensibly throws the hazard of all loss on the contractor, but in fact it throws it on the materialmen and laborers. The laborers are employed and paid only with the consent of the city. The material is purchased and paid for only by such consent. The contractor is, in effect, the agent of the city up to the guaranteed maximum price unit. If this is the limit of the power of the board of public works and the contractor to bind the city, thereafter the contractor must pay all labor and material. The work then has arrived at a point where all future cost is a loss to the contractor and to be paid from his fee or from his private resources. There is no bond to protect the laborers or materialmen. Such a bond is expressly waived by the supervisors (Ordinance, § 4, supra), although ordinarily they would require a bond of over $4,000,000 on a contract of this amount. There is no retention of 25 per cent. (over $2,000,000) for the benefit of laborers or materialmen. In short, the facts that the supervisors waived this bond, that they provided for advance payments of actual cost, that they fixed no amount of bond for the faithful performance **121 of the contract, that they made no provision for the payment of labor and material after the maximum guaranteed cost had been exceeded, except for payment direct by the city, and waived the usual bond to secure them, lead to the conclusion that it was their intention that in any event the city should pay the actual cost, and that the contract price should be such ‘cost plus a fee.’ The contract and specifications involved here seem to combine several features of the cost-plus-a-fee contract described by George W. Fuller, supra. The fourth form of such a contract provides for ‘an upset maximum fee.’ Unless the innovations provided on the cost -plus-a-fee plan by the supervisors in their ordinance absolutely destroy the fundamental basis of such a plan, and substitute in lieu thereof a peculiar plan of their own, the guaranty of the contractor *142 referred to in the ordinance must relate to and bear upon the amount of his fee. It must have been intended that the contractor was to agree that the maximum cost should be a certain amount, and that his fee was to be affected and limited by that agreement. The provision of section 3 that the contract shall recite ‘that inasmuch as the city is to pay the actual cost of the work, within the guaranteed limit, no expenditures’ shall be incurred except upon the prior written authorization of the city engineer and board of public works might indicate otherwise. But the statement of the guaranteed limit contained in this provision is a mere recital as a basis for the agreement that the city engineer is to have supervisory power over the incurring of expenses. This recital ought not to control the fundamental basis of the whole scheme contemplated by the adoption of the cost-plus-a-fee plan. If the contractor instead of bidding a lump sum had specified a percentage of the cost as a basis of his compensation—and he might have bid on that basis—and if we substitute for the word ‘guarantee’ the word ‘agreement’—for that is what is intended—we have an agreement that the contractor shall receive a certain percentage of the cost of the work coupled with an agreement that the work shall not exceed a certain maximum, and an implication that if it does exceed that maximum his percentage of profit shall be limited to the agreed miximum. If we assume there is any basis for the appellants’ contention, we have to consider Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 46 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 14 the additional fact that the board of public works received proposals upon the same basis from all contractors bidding on the cost-plus-a-fee basis; that these bids were a great deal less than the flat contract basis; that the contract was let in accordance with the proposal in the bids; and that afterwards the board of supervisors passed a resolution setting aside bonds for the payment of this contract, and, in effect, ratifying and confirming it. With reference to the subsequent action of the board of supervisors, the rule is thus stated in Black on Interpretation of Laws, § 95: ‘A construction put upon a statute by the Legislature itself, by a subsequent act or resolution, cannot control the judgment of the courts; but it is entitled to weight and consideration in case of doubt or obscurity. * * * Thus, while the Legislature cannot, by resolution, change the obligation of a contract made under a previous act, yet, if *143 they instruct a public officer as to his duties under the contract, such legislative expression of opinion as to what has been done, and the resulting duties of the officer, may be resorted to in determining the intention of the Legislature in passing the act,’ citing Georgia Penitentiary Co. v. Nelms, 65 Ga. 67. See, also, State ex rel. Lamkin v. Hackmann, 275 Mo. 47, 204 S. W. 513; Board of Commissioners v. Alexander, 58 Okl. 128, 159 Pac. 311, 316. The fact that the board of supervisors, within a few weeks after the adoption of this ordinance authorizing the board of public works to solicit proposals for the performance of this work, in effect ratified and approved the contracts entered into by the board of public works under the authority of that ordinance, points significantly to the fact that in using the comparatively recent phrase ‘cost-pl us-a-fee’ they did not intend to throw upon the contractor all the hazards due to an increased cost of the work, and that the guaranty therein referred to had relation to the amount of the contractor’s fee, and that the guaranty with reference to such maximum unit cost contained in the contract actually entered into was the kind of a guaranty they intended to secure in enacting the ordinance. In the resolution set up as Exhibit J to the complaint, adopted by the supervisors and approved by the mayor, appropriating $2,719,000 to be expended out of the proceeds of water bonds, it is stated: ‘Which proceeds are to be placed in the water construction fund for the purpose of paying the estimated expenses of executing contract No. 77C, board of public works, for the construction of mountain division aqueduct tunnels on the Hetch Hetchy project, on a cost-plus-a-fee basis, with guaranteed maximum unit prices during the year commencing with and following the date of said contract.’ This is an express declaration by the board of supervisors and the mayor that the contract in question was one ‘on a cost-plus-a-fee basis, with graranteed maximum unit prices.’ If in the ordinance the supervisors had used terms of fixed legal significance, their subsequent interpretation would not be binding on the courts. But they have used a parase in the formative stage, and we think accurately. But if these phrases lack precision, **122 the subsequent conduct of the supervisors is sufficient, under the circumstances, to justify the interpretation which we place on the ordinance, namely, that *144 it authorizes the contract entered into by the board of public works. To recapitulate the argument bearing upon the proper construction of the ordinance of the board of supervisors authorizing the board of public works to advertise for bids on the basis of the so-called cost-plus-a-fee contract: (1) The sine qua non of the cost-plus form of contract is the payment by the city of the cost of the work. (2) Section 4 of the ordinance declares that in the cost-plus form of contract the city is to pay for all labor and material. (3) There is no express provision in the ordinance that the contractor is to reimburse the city for the cost of labor and material paid to laborers and materialmen. (4) No bond is required to secure laborers and materialmen, such a bond being expressly waived. (5) The usual 25 per cent. of money due under the contract retained to secure laborers and materialmen and to secure the city in the faithful performance of the contract, is waived. (6) No provision is made for an adequate bond to secure the city for the repayment to it of money paid to laborers and materialmen. While the usual bond for the performance of the contract would cover this agreement, the amount of such bond is not fixed by the supervisors, but is left to the discretion of the board of public works. (7) The purpose of the guaranty of maximum unit cost by the contractor is to form a basis of his fee if the bid is on a percentage basis, or, if not, in such manner as the board of public works may determine by its form of proposals and contract. (8) The board of supervisors have themselves interpreted the ordinance to mean esactly what the board of public works construed it to mean, and in case of doubt we Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 47 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 15 should follow this interpretation. As an answer to the foregoing considerations it is suggested that the guaranty contemplated that the contractor was to pay all cost over and above the agreed maximum; in other words, that the sine qua non of the guaranty is that the contractor pays the cost of the work. We would thus have the supervisors in one sentence using two irreconcilable terms, one phrase requiring the city at all hazards and in all events to pay the cost of the work, and the other requiring *145 the contractor at all hazards and in all events to pay the cost of the work. On the one hand, we have a construction of the ordinance which resolves the ambiguities thereof in favor of the cost-plus basis, and, on the other, a construction which resolves the ambiguities in favor of the payment of the cost by the contractor. In response to the considerations which point to the conclusion that the supervisors were seeking a practical solution of a practical problem, and were endeavoring to secure bids from contractors upon a basis more favorable to the city than the lump-sum contract, and that the contract which throws all the hazard upon the contractor and removes from him all hope of profit resulting from decreased cost is less favorable to him than a lump-sum contract, it is answered that the contractor will protect himself by making an outside estimate which will make it practically certain that he will not suffer loss. To this argument we reply that the imputation of such an intent to the board of supervisors is to assume that the provision in the ordinance in regard to a guaranty was considered by them to be absolutely valueless, because to secure a buaranty of a certainty would be of no value to the city; that is to say, if it was assumed that a contractor would bid two or three times the estimated cost of the work as his maximum guaranty, so as to be certain that he would suffer no loss, the guaranty becomes valueless. The guaranty is only valuable on any theory when it is assumed that it is possible, and even probable, that the actual cost will exceed the guaranteed maximum. If we assume that each bidder will fix an exorbitant maximum—say forty of fifty million dollars—then it is obvious that the only real competition in bidding would be as to the amount of the fee, for the maximum guaranty would be of no value to the city. We are thus brought by this process of reasoning to the very conclusion that we reached by the opposite course of reasoning, namely, that the intent of the board of supervisors was to secure competition in the amount of the fee bid. The difference in the two courses of reasoning is that by the former we uphold the validity of the contract here involved and permit the construction of the Hetch Hetchy project, as was clearly contemplated by the supervisors, and by the latter we hold the contract invalid and temporarily retard or permanently destroy the Hetch Hetchy project. *146 We have assumed in the foregoing discussion that the city attorney has correctly interpreted the contract entered into for the performance of this work, and that the provision in such contract for a guaranty that the maximum unit price should not exceed the amount therein specified was so far modified by the contract, with reference to the retention of parts of the fee due the contractor, that the maximum security of the city is $112,000. Mr. Justice SLOANE has taken a different view of the contract, and we do not enter into that discussion for the reason that we prefer to base our decision upon **123 the interpretation adopted by the parties in the case. Upon this basis, if we assume that the aggregate of the maximum unit cost cannot exceed the amount of the respondent contractor’s bid, to wit, $7,802,952.80, the contract should have been awarded to R. C. Storrie & Co., whose bid fee was $1,074,285.60, because in each case the city pays the cost of the work and the fee of the contractor, and the difference between the two fees is $116,044 in favor of R. C. Storrie & Co. It is only when we assume that the actual cost of the work would be $112,000 more than $7,802,952.80 that the basis of the two bids becom es at all equal, for the bid of the respondent contractor abates as the cost exceeds its guaranty, and it is for the reason that it was contemplated that the maximum unit cost would affect the compensation of the contractor, that the supervisors, in section 2 of the ordinance, provided that the contract might be awarded ‘either to the bidder submitting the lowest maximum cost guaranty, or to the bidder proposing to do the work for the lowest contractor’s fee’; for, as has been said, if the maximum bid is so great that it bears no real relation to the cost, the bid should be let on the basis of the lowest contractor’s fee. Ratification. The question as to whether or not the resolutions adopted by the board of supervisors subsequent to the execution of the contract, in furtherance thereof, constituted a ratification of the contract so as to bind the city is not discussed in the briefs. It is clear that the board of supervisors, having power to prescribe the method of entering into the contract, would have power to ratify a contract executed without the formalities prescribed by them, as distinguished from such *147 formalities as might be required by the charter. The resolutions adopted by the supervisors are not only significant as pointing to Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 48 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 16 the proper interpretation of the ordinance prescribing the method of the letting of the contract, but are also significant as legislative action ratifying the contract. There can be no question that if the resolutions passed by the board of supervisors subsequent to the letting of the contract are proper expressions of the legislative will, equal in effect to an ordinance, that the subsequent ratification makes immaterial the original intention of the board of supervisors as expressed in the ordinance authorizing the letting of the contract, and we see no escape from the proposition that under the charter of San Francisco the ordinance in question, having been enacted with the formality prescribed by the charter for both ordinances and resolutions, is equivalent to an ordinance in its effect. This matter will be more fully discussed in the consideration of the next point. Does the Contractor’s Bond Comply with the Ordinance? [5] [6] [7] [8] Appellants contend that the bond given by the contractor does not comply with the charter provisions regulating that subject (section 21, c. 1, art. VI), for the reason that it is not a bond for the faithful performance of the contract, and that, although signed by a surety company, there is only one surety instead of two. In this connection it is pointed out that although the Political Code authorizes the acceptance of one corporate surety company instead of two individual sureties, such section does not apply to the letting of contracts by a city, which is a municipal affair. Section 21, supra, provides as follows: ‘At the same time with the execution of the contract, the contractor shall execute to the city and county and deliver to the secretary of the board a bond in the sum named in the notice for proposals, with two or more sufficient sureties to be approved by the board, or shall deposit with the secretary a certified check upon some solvent bank for that amount, for the faithful performance of the contract. No surety upon any bond other than the lawfully authorized surety companies shall be taken unless,’ etc. The claim that the bond is not one for the faithful performance of the contract results from the fact that in the bond it is expressly provided that it is not intended as a guaranty of the estimated maximum cost. Inasmuch *148 as the contract itself on that subject merely requires that the guaranty shall be the amount of the unpaid fee in the hands of the owner, the bond substantially complies with the requirements of a bond for the faithful performance of the contract. The respondents’ only answer to the claim that the bond should have been signed by two sureties is that the universal practice of the city has been to require only one surety company, and that the point was not raised in the court below, but is raised for the first time on appeal. With reference to the latter point it is sufficient to raise the question in this court that the pleadings and stipulation of the parties and findings of the trial court show that the contract was signed by only one surety company. Nor would the proof of a contrary custom, directly in the face of the charter requirements, be of any value. If, as we have held, the board of supervisors have control over the subject of letting of contracts for public utilities, they also have control of the corollary matter of the execution of a bond for the faithful performance of the contract. In the ordinance providing for the letting of this contract by the board of public works no specific provision was made with reference to the giving of the bond for the performance of the contract. It was merely provided in the ordinance **124 that the procedure outlined in sections 14 et seq. of article 6, c. 1, should control. The language of the ordinance is as follows: ‘Sec. 2. The procedure to be followed in soliciting proposals for and letting such contracts shall be, so far as applicable, that prescribed in article 6, chapter 1, of the charter for general contracts let by the city,’ with certain exceptions whic h need not now be considered. Assuming that the provision with reference to the method of procedure in letting a contract, contained in the ordinance enacted by the board of supervisors, required that the bond for the performance of the contract be signed by two sureties instead of one, the supervisors had the power to provide in the ordinance for only one surety, as is provided by general law in case of corporate sureties. Pol. Code, § 955. They also had power after the execution of the contract to waive the requirement of more than one surety. What they had a right to provide for in the first instance they could authorize by way of ratification. Chase v. Trout, 146 Cal. 350, 80 Pac. 81. The resolution of the board of *149 supervisors of May 3, 1920 (No. 17872), approved by the mayor on that date, reciting the execution of the contract in question, setting aside $8,000,000 in bonds to carry it out, appropriating $2,719,000 for the first year, accepting the bid of the Construction Company of North America, was a formal ratification of the contract. This ratification was repeated on the same date by a resolution setting aside and appropristing $2,719,000 from the proceeds of the sale of said bonds authorized by the foregoing resolution, and directing that the ‘proceeds are to be placed in the water construction fund, for the purpose of paying the estimated expenses of executing contract No. 77C of the board of public works and for the construction of mountain division aqueduct tunnels on the Hetch Hetchy project on Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 49 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 17 a cost-plus-a-fee basis, with guaranteed maximum unit prices during the year commencing with and following the date of said contract’; and on the same date, by another resolution, appropriating $276,776.40, ‘in payment to the Construction Company of North America as the first annual advance payment contract 77C Hetch Hetchy water works supply construction (claim dated May 3, 1920).’ It is suggested that these resolutions were not effective to ratify the letting of the contract, for the reason that the charter required the supervisors to act by ordinance in providing a method of letting of contracts (section 8, c. 1, art. 6, supra), and that a ratification by resolution would therefore not be effective. McCracken v. San Francisco, 16 Cal. 591; Grogan v. San Francisco, 18 Cal. 608, 610, 614; Pimental v. San Francisco, 21 Cal. 362, 363. But in the absence of statutory or charter provision to the contrary, a legislative act may be either in the form of a resolution or of an ordinance. San Francisco Gas Co. v. San Francisco, 6 Cal. 190; note, 34 Am. Dec. 631; Ann. Cas. 1913C, 1921; Ruling Case Law, 19, § 194. For many purposes resolutions and ordinances are equivalent terms. Los Angeles v. Waldron, 65 Cal. 283, 3 Pac. 890; Pollok v. City of San Diego, 118 Cal. 593, 50 Pac. 769; Hellman v. Shoulters, 114 Cal. 136, 157, 44 Pac. 915, 45 Pac. 1057; Jacobs v. Board of Supervisors, 100 Cal. 121, 34 Pac. 630; Hopping v. City of Richmond, 170 Cal. 605, 150 Pac. 977. ‘And it has been held that even where the statute or municipal charter requires the municipality *150 to act by ordinance, if the resolution is passed in the manner and with the statutory formality required in the enactment of an ordinance, it will be binding and effective as an ordinance.’ 19 Ruling Case Law, § 194, p. 895; Gleason v. Barnett, 115 Ky. 890, 61 S. W. 20; Barre v. Perry, 82 Vt. 301, 73 Atl. 574; McGilvery v. Lewiston, 13 Idaho, 338, 356, 90 Pac. 348: Steenerson v. Fontaine, 106 Minn. 225, 119 N. W. 400. The charter of San Francisco, although providing that all legislative action shall be by ordinance (article 2, c. 1, § 8), espressly authorizes in section 13 the passage of resolutions providing for the appropriation or disposition of public property or the expenditure of public money. It is thus provided that this particular form of legislative action may be had by either ordinance or resolution. After providing the identical procedure for the passage of ordinances and resolutions, it is provided that bills and resolutions of the type specifically described in section 13, which includes resolutions for the ‘appropriation or disposition of public property or the expenditure of public moneys,’ etc., shall after passage be presented to the mayor for approval. It is then provided: ‘The mayor shall return such bill or resolution to the board within ten days after receiving it. If he approve it he shall sign it and it shall then become an ordinance.’ With reference to the passing of such ordinance or resolution over the veto of the mayor, it is provided that after such passage ‘the presiding officer shall certify that fact on the bill or resolution, and when so certified the bill shall become an ordinance with like effect as if it had been approved by the mayor. If the bill or resolution shall fail to receive the vote of fourteen members of the board, it shall be deemed finally lost.’ The only difference that we have noted concerning the passage and authentication of ordinances and resolutions is that relating to the enacting clause of an ordinance. It is provided in the charter (section 8, c. 1, art. 2) as follows: ‘Every legislative act of the city and county shall be by ordinance. The enacting clause of **125 every ordinance shall be in these words: ‘Be it ordained by the people of the city and county of San Francisco as follows:’ No ordinance shall be passed except by bill, and no bill shall be so amended as to change its original purpose.’ But the provision in regard to the enacting *151 clause has ben held to be directory. City of Napa v. Easterby, 76 Cal. 222, 18 Pac. 253. [9] We see no escape from the proposition that the proceedings of the board of public works in the letting of the contract and the taking of the bond were ratified by the subsequent resolutions of the board of supervisors in the appropriate manner for such ratification; that is, by the appropriation of the money for the purpose of carrying out of the contract. Such appropriations were made in accordance with the provisions of the charter. The resolutions in question were adopted in accordance with the charter and approved by the mayor, and were equivalent to ordinances for the same purpose, if they did not in fact become ordinances by reason of such approval and in accordance with the above-quoted provision of section 16, c. 1, art. 2. Taxpayer Cannot Complain of Informality in Bond. There is another reason why the judgment cannot be reversed, because there was only one surety on the bond. [10] [11] This action being by a taxpayer, the question is whether he is in a position to raise the point as to the insufficiency of the bond where it is executed by a surety company, and where the general law specifically provides that only one surety company is essential upon a bond in any case provided by law. Section 955, Pol. Code; section 1056, Code Civ. Proc. The appellants are no doubt correct in the contention that the giving of such bond was a Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 50 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 18 municipal affair, and therefore controlled by the city charter, but no allegation is made and no contention raised that the surety is not amply sufficient. The bond has been approved both by the board of public works, as required by section 21 of the charter, and inferentially by the board of supervisors. The bond would be binding upon the surety company, notwithstanding there was only one surety. Kurtz v. Forquer, 94 Cal. 91, 29 Pac. 413; Weir v. Mead, 101 Cal. 125, 35 Pac. 567, 40 Am. St. Rep. 46; Stimson Mill Co. v. Riley, 42 Pac. 1072.1 No case has been called to our attention in which it has been held that a contract such as this is invalid by reason of the failure to give a proper bond, and in a number of cases it has been assumed that the giving of a bond expressly required by statute is not essential to the *152 validity of the contract. Plummer v. Kennedy, 72 Mich. 295, 40 N. W. 433; Wells v. Board of Education, 78 Mich. 260, 44 N. W. 267; Huebner v. Nims, 132 Mich. 657, 94 N. W. 180; Smith v. Hubbell, 142 Mich. 637, 106 N. W. 547. In this state we have been very liberal in the application of the rule permitting taxpayers to bring a suit to prevent the illegal conduct of city officials, and no showing of special damage to the particular taxpayer has been held necessary. Gibson v. Trinity County Supervisors, 80 Cal. 359, 22 Pac. 225; Winn v. Shaw, 87 Cal. 631, 25 Pac. 968; Barry v. Goad, 89 Cal. 215, 26 Pac. 785; Santa Rosa Lighting Co. v. Woodward, 119 Cal. 30, 50 Pac. 1025; Clouse v. City of San Diego, 159 Cal. 434, 114 Pac. 573; Osburn v. Stone, 170 Cal. 480, 150 Pac. 307. The rule has now been crystallized into a statute (section 526a, Code Civ. Proc.). We think that our decisions point to the conclusion that the taxpayer should not be permitted to maintain an action based upon the mere informality of a bond, where no showing is made or suggested of injury either to the public or to the taxpayer. In Ransome-Crummey Co. v. Bennett, 177 Cal. 560, 171 Pac. 304, plaintiff sued upon a street assessment. The proceedings were in invitum. The charter provided that where a bond for the faithful performance of a contract for street work was executed by a surety company such company must be organized under the laws of the state of California. The bond given was not executed by a company so organized. The court said: ‘The question is whether under these circumstances the fact that the surety on these bonds, otherwise good and sufficient, was not of the class designated by the charter, is available as a defense in an action to foreclose the lien of the assessment. We think this question is correctly answered in the negative by what was said and held in Miller v. Mayo, 88 Cal. 568, 26 Pac. 364, and Greenwood v. Morrison, 128 Cal. 350, 60 Pac. 971, and on further consideration we are satisfied that Manning v. Den, 90 Cal. 610, 27 Pac. 435, decided nothing to the contrary. It follows that the facts embraced in this finding constitute no defense to plaintiff’s action.’ If in proceedings in invitum the failure to give the kind of bond required by the charter is insufficient to avoid the contract made in the exercise of the taxing power of the city, it follows irresistibly that a taxpayer ought not to be *153 allowed the extraordinary remedy of injunction to prevent the carrying out of a valid contract because of such informality, where no showing whatever is made of actual injury to the taxpayer. It has been said that injury will be presumed from a failure to comply with the law (Santa Rosa Lighting Co. v. Woodward, supra), but such presumption cannot be applied under the circumstances here shown. **126 The auditor’s Certificate Concerning Availability of Proceeds of Municipal Bonds. [12] Appellants contend that the indorsement by the auditor upon the contract in question was insufficient to comply with the requirements of article 3, c. 1, § 10, of the charter, and that the proceedings for the setting aside of the sale of the water bonds for the payment of the expenses of the contract does not conform to the charter provisions in that regard. The charter provision in regard to the indorsement upon the contract is as follows: ‘Provided, that where the expense of executing such contract is to be paid entirely from the proceeds of bond issues, the requirements of this section may be satisfied through an indorsement by the auditor that a sufficient number of bonds have been set aside to be sold as payments under the contract fall due, and from the proceeds of which sale the estimated expense of executing such contract may be paid, as certified by the board or officer making the same.’ The certificate of the auditor upon the contract is in the following language: ‘In accordance with the provision of article III, chapter 1, section 10 of the charter of the city and county of San Francisco, I hereby indorse upon the within contract my certificate that by Resolution No. 17872, New Series, of the board of supervisors of the city and county of San Francisco Water Bonds of the issue of 1910, in the amount of eight million ($8,000,000) dollars, have been set aside, to be sold as payments under the contract to Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 51 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 19 which this indorsement is attached fall due, from the proceeds of which sale the estimated expense of executing such contract may be paid; that said amount of bonds is sufficient for such purpose, according to the certificate of the board making such contract; that prior to this indorsement the contractor has agreed in writing to purchase such bonds, in such amount and at such periods of time, for par and accrued interest, as will enable the transurer *154 to make payments in cash under such contract as such payments fall due and are approved.’ The agreement of the contractor was to purchase on or before the day when each advance annual installment of the fee became due an amount of bonds sufficient to take care of the total amount of expenditures required under the contract for the next ensuing year, and the amount agreed to be purchased for the first year was $3,052,000, the bonds to be purchased at par and accrued interest. The contention of the appellants is that this arrangement for the sale of bonds did not conform to the charter provisions, and that therefore the certificate was in effect untrue. The contention is as follows: ‘The contract in question assumes to be one not for the present sale, but for the future sale in installments, upon the happening of future events, one of which may not happen within one year, and one which may not happen within two years, from the date of the contract. The sales assumed to have been consummated by this contract were not sales to the highest bidder, nor are the sales over the treasurer’s counter to any applicant at a price not less than par and accrued interest fixed by the supervisors, which are the only methods of sale prescribed by the charter.’ We think this position is not well taken. The purpose of requiring the auditor’s certificate was to submit to him the question of whether or not he would have in the treasury at the time payments were due under the contract sufficient funds to meet these payments. Under the agreement entered into between the contractor and the city he would have such funds on hand for the payment of the amounts due under the contract. The charter (section 10, supra) specifically provides: ‘If bonds are withheld, arrangements shall be made prior to the auditor’s indorsement for the sale of such bonds in such amounts and at such periods of time as will enable the treasurer to make payments in cash under such contract as such payments fall due and are approved.’ This provision of the charter specifically requires that the arrangement for the sale must be made before the auditor’s indorsement. It contemplates the future delivery of the bonds ‘in such amounts and at such periods of time as will enable the treasurer to make payments in cash under such contract as the payments fall due.’ The charter contemplates two things: First, an indorsement upon *155 the contract of the fact that there is a balance in the treasury available for the payment of the moneys to fall due under the contract. It matters not that this money may have been derived from the sale of bonds. If the bonds have been sold and the money is in the treasury, the certificate of the auditor is in accordance with the fact. Second, if, on the other hand, the bonds have not been sold and have been set apart by the supervisors to meet the obligation under the contract, it is essential that such arrangement be made for the sale of the bonds at future times and in such amounts as will make it certain that the city will have cash on hand to fulfill its obligation to pay cash. The mere setting aside of bonds would not take care of the obligation of the city, and there could be no assurance of the ability so to do in the absence of an actual arrangement or contract for the sale of the bonds at such times and in such amounts as is needed to meet its obligation under the contract. If the arrangements for the sale of bonds were violative of such fundamental provisions of the charter as that the bonds should be sold for not less than par and accrued interest, we should go behind the certificate of the auditor to inquire into the actual **127 facts in the suit of a taxpayer alleging those facts. So far as we can see no direct requirement of the charter is violated, and the very provision of the charter which requires the certificate of the auditor to be attached to the contract certifying that bonds have been set aside to be sold, and that ‘from the proceeds of which sale the estimated expense of executing such contract may be paid,’ implies a sale in advance of delivery. We think that the supervisors have regularly followed the authority vested in them with reference to the sale of bonds, and that the auditor has complied with the requirements of the charter essential to the validity of the contract. Fraud in Sale of Bonds not Charged. [13] [14] In the oral argument it was claimed that the arrangement for the advance fee each year was a subterfuge, to take care of the discount necessary to market the bonds. The argument is substantially as follows: That the court will take judicial notice of the fact that government bonds and other similar bonds bearing 4 1/2 or 5 per cent. interest cannot be sold on the market for par; that therefore *156 the agreement of the contractor to purchase the bonds at par is not in good faith for the reason that he could not afford to purchase the bonds at a loss, and hence it must be assumed that the advance Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 52 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 20 payment to be made before or at the time of the purchase of the bonds was intended as a discount on the bonds. The question of whether or not the form of the contract entered into by the city with the contractor was a subterfuge to avoid the provision of the charter requiring the bonds to be sold at par and accrued interest was not raised in the trial court. It is suggested, however, that the facts speak for themselves, and from the admitted facts it must be held that this was the purpose of the city and of the contractor. If there is any fraud or collusion in the matter it was not alleged and cannot be considered by us. All presumptions of law are in favor of the good faith of public officials, and there is nothing in the case other than the facts as stated which give color to any complaint of collusion. Assuming that it is true that the contractor will use a part of his fee in the purchase of bonds, it is no more illegal than it is for him to use any other money belonging to him for the purchase of the bonds. It is his money, and, in the absence of fraud or collusion, he can do with it as he pleases. We conclude that the contract was valid and that the injunction against the payment of the contract price should be denied. The judgment is affirmed. We concur: LAWLOR, J.; LENNON, J. SLOANE, J. (concurring). I concur in the conclusion reached by Mr. Justice WILBUR, but I do not agree with his opinion construing the contract of guaranty as specified in the ordinance. I cannot accept the construction placed upon ordinance 5107 that the requirement for a contractor’s guaranty that the ‘cost to the city shall not exceed a specified maximum cost per unit’ applies alone to the contractor’s fee. There are four references to this guaranty in the ordinance. First, the board of public works is authorized to invite proposals and let contracts ‘on the basis of cost-plus-fee with guaranteed maximum cost to the city and county.’ Second, the board is authorized to enter into contracts *157 for the construction of ‘said water supply and works, said proposals and contracts to be based on the so-called cost-plus-fee plan, with a guaranty by the contractor that the total cost to the city shall not exceed a specified maximum price per unit.’ Third, there is the provision that the board of public works may in its discretion award the contract to the bidder submitting the ‘lowest maximum cost guaranty, or to the bidder proposing to do the work for the lowest contractor’s fee.’ Whatever this last paragraph may mean, it seems clear that the maximum cost guaranty referred to in the first clause is not the contractor’s fee indicated in the second clause. The fourth reference is to the fact that ‘the city and county is to pay the actual cost of doing the work within the guaranteed limit,’ and providing that no expenditure chargeable to the city and county shall be incurred for labor and material, supplies, or equipment, required for such work, except on written authorization, etc. The cost and work here referred to as being within the guaranty are clearly the cost and work of the whole contract. It furthermore is an incontrovertible fact that all the parties to the proceedings under this ordinance, in the proposals, specifications, acceptances, and contract, have treated this required guaranty as applying to the total maximum cost of the entire work, including the contractor’s fee. These considerations are conclusive to my mind that the guaranty named in the ordinance was intended as a security against any excess unit cost of the entire construction work. But, with this interpretation of the ordinance, I concur in the conclusion of Justice WILBUR that the contract cannot be held invalid for failure of conpliance with either the charter or the ordinance—First, because, as pointed out in Justice WILBUR’S opinion, the resolutions adopted by the board of supervisors were in legal effect a ratification of the contract; and, second, because, if there was not a valid ratification, the acceptance of the contract rests upon a reasonable interpretation by all the parties of the guaranty requirement. This court is agreed upon the vital point of the opinion that the supervisors had the power under the amended charter to authorize **128 by ordinance a departure from the procedure therein prescribed for negotiating public contracts. They did by ordinance change the procedure not only in adopting the cost-plus-fee plan, but by demanding a guaranty *158 from the contractor where the charter required a surety bond. It is fair to presume that the contract of guaranty as executed and accepted was the security contemplated by the ordinance. The ordinance authorizes the board of public works to enter into a contract on the so-called cost-plus-a-fee plan, ‘with a guaranty by the contractor that the total cost to the city shall not exceed a specified maximum price limit.’ Pursuant to this requirement the contractor, in the contract as executed with the board of public works, agrees as follows: Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 53 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 21 ‘The contractor hereby guarantees that the unit costs to the city of such work determined in the manner provided in the specifications, including the contractor’s fee hereinafter mentioned, but excluding the general overhead costs of the city’s engineering and administrative offices in San Francisco and Groveland, will not exceed the sum named in the schedule of guaranteed maximum unit costs; and agrees that if the actual unit costs to the city of San Francisco, so determined, exceed such guaranteed costs, the total amount of such excess on all work to which the same applies may be deducted from any payments due or withheld from the contractor under the contract.’ Stopping with the words ‘unit costs’ preceding the semicolon, we have, so far as is necessary to bind the contractor, an express guaranty as required by the ordinance. I doubt if there is anything in the subsequent language which modifies the liability of the contractor. The added terms are not a limitation upon the guaranty, but a supplementary provision for securing the liability assumed to the extent of any unpaid moneys due the contractor. It is claimed that the bond which was given to secure performance of the contract expressly construes the above agreement, and exempts both the surety and the principal from any liability ‘on this bond ’ for the guaranty, and limits the liability of the principal to ‘a charge against said principal as provided in such specifications.’ The provisions of the specifications referred to do not contain any limitation upon the liability of the contractor under the guaranty, but it is the manner of ascertaining the amounts to be deducted from the contractor’s fee that is referred to as being ‘provided in the specifications.’ *159 This proviso in the bond, of course, destroys any recourse on the bond for such maximum excess costs, but it cannot, and does not purport to, construe the extent of the principal’s liability on the guaranty, but, on the contrary, refers to the contract for the measure of his liability; and, in my opinion, after having made an express guaranty covering any extent of excess maximum cost, it cannot be held to have been limited by a supplemental agreement in the nature of an assignment of moneys remaining in the hands of the debtor, as partial security for the promise. But even conceding, as seems to be the construction of the parties themselves, that the contract of guaranty limits the contractor’s liability thereon to such deductions as may be made from his stipulated fees, is there such a failure to comply with the requirement of the ordinance in this regard as to nullify the contract? There is at least a partial guaranty, and who shall say that it is not a full and complete protection to the city against its liability for any excess maximum unit costs that may happen or that were within the contemplation of the board of supervisors? In this consideration of the sufficiency of the guaranty most of the reasoning in the opinion of Mr. Justice WILBUR in his analysis of the nature and purposes of a cost-plus-a-fee contract applies. In determinig the character and extent of the guaranty required, we may properly consider the nature and limitations of the relation of the parties under the contract. All of the purchases and expenditures were to be made by the city and were under its immediate control. No greater liability need be assumed than the city approves. The specifications provided for frequent estimates of the progress of the work and the maximum unit costs indicated. The city reserved the right to curtail expenditures and suspend operations at any time it saw fit, and was empowered to hold out from the contractor’s fees 25 per cent. of all amounts other than the advance payments, and after the first year such portion of the yearly advance payments as the board of public works from its investigations finds necessary to cover any excess over the maximum unit costs. Before this contract was finally entered into it had been certified by the city engineer as his opinion that the work could be completed within the agreed maximum limits. The contract and guaranty was accepted and ratified by the city *160 with knowledge of the form of the guaranty. No question is raised in the pleadings as to there not having been a sufficient compliance with the terms of the ordinance in this respect. Indeed, the plaintiffs recite in their complaint that the board of public works, ‘acting under authority of ordinance No. 5107 and not otherwise,’ awarded this contract on the contractor’s bid, and that thereafter ‘a contract in writing in accordance with such proposal made by Construction Company of North America, and such acceptance thereof by the Board of Public Works, * * * was executed.’ This proposal referred to contained the same provision of guaranty as is incorporated in the contract. The answer of the city and county **129 of San Francisco avers that under the authority of ordinance No. 5107 the successful bidder was to assume charge and superintendence of the construction of said waterworks under the direction and control of the city engineer. All labor and material bills were to be paid directly by the city and county of San Francisco, ‘but no such expenditures were to be incurred except upon the previous written approval of the board of public works.’ Materials, supplies, and expenditures were to be purchased directly by the city in accordance with the Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 54 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 22 usual procedure. The contractor, however, was to guarantee that the unit costs of the various classes of work involved would not exceed the sums specified in the bids. It is further alleged in the answer that a bid was received from the defendant Construction Company of North America; that the guaranteed maximum price of the bid was approximately two million dollars less than any competing bid; that its acceptance was recommended by the city engineer; that it was accepted by the board of public works, and the contract ‘was finally awarded, under specification No. 76C, to the Construction Company of North America.’ It is stipulated in the record that all the allegations of the answer are to be taken as true. These recitals constitute an admission that the contract contained a guaranty as required under the ordinance. Even on this appeal no serious question is raised by appellants as to a sufficient compliance with the ordinance in the matter of this guaranty. Certainly, in the light of all these facts, there cannot be said to have been such a failure to comply with the requirements *161 of the ordinance as will render the contract void and inoperative at the petition of a taxpayer. The point is urged that the contractor’s guaranty should have been secured by the statutory bond required by section 21 of article 6, ch. 1, of the charter. It is there provided: ‘Every contract entered into by the board of public works shall be signed,’ etc.; ‘and at the same time with the execution of the contract the contractor shall execute to the city and county, a bond named in the notice for proposals, for the faithful performance of the contract.’ Ordinance No. 5107 directs that in soliciting proposals and letting such contract the provisions of the charter shall be followed so far as applicable. But the performance of the guaranty is not an obligation that comes within the terms of the charter provision quoted. The primary contract here was the agreement on the part of the contractor to organize, superintend, and carry on the work of construction, which was to be financed by the city itself. As security for the faithful performance of this service, he furnished a bond in the penal sum of $100,000 fixed by the board of public works. It was the city’s part of the obligation to authorize the expenditures, purchase the materials, employ the labor, and pay the bills. It was further required of the contractor in consideration of his employment that he secure the city against loss by a guaranty that the work would be completed for a specified maximum unit cost. This might have been accomplished by requiring the execution of a surety bond. Instead, the supervisors by ordinance elected to take as their security the personal guaranty of the contractor. They might have stipulated that he furnish the guaranty of John D. Rockefeller, or John Smith, in which event it would not be claimed that by virtue of the charter requirements he must supplement such guaranty by a bond for its faithful performance. His performance of the guaranty was no part of the original obligation of employment. It was a secondary obligation of indemnity against possible excess in cost in the city’s part of the contract. In the absence of this agreement, the burden of any excess cost would fall on the city. Let us suppose, again, that the ordinance had required the contractor to execute a mortgage, or place in escrow a sum *162 of money, to secure against this excess cost, would it be contended that he must secure the performance of this condition by a bond? On the contrary, the execution of the mortgage or escrow would be performance, just as here the contract of guaranty, with the creation of a lien on the contractor’s fee, was performance. Not performance of the secondary obligation to pay in the event of an excess cost, but performance of the agreement to pledge his credit as security against such excess, the agreement to guarantee. When the supervisors elected to take the contractor’s personal obligation for security rather than to exact a bond, they exercised the power possessed under subdivision 8 of section 9 of article 6, ch. 1, of the charter, empowering them to vary by ordinance the method of procedure in the matter of public utilities. The provision of the ordinance for the contractor’s guaranty was a modification in this respect of the charter procedure, and it may be fairly inferred was intended to supply such indemnity as would otherwise be required under the charter by a bond. It may be conceded that just what form of guaranty was contemplated does not appear from the ordinance. The board of public works, interpreting and acting upon this authorization, entered into this agreement with the contractor fixing the maximum unit costs and accepting in lieu of the charter bond this form of guaranty or indemnity against an excess cost. It certainly is some form of a guaranty. Both the board of public works and **130 the board of supervisors have recognized and ratified it as a compliance with the charter and the ordinance. It is a recognized rule of construction of a statute or ordinance that its contemporaneous interpretation by those charged with its execution is entitled to consideration. 25 R. C. L. 1043; Edwards v. Darby, 25 U. Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 55 Crowe v. Boyle, 184 Cal. 117 (1920) 193 P. 111 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 23 S. (12 Wheat.) 206, 209, 6 L. Ed. 603; U. S. v. Ala. G. S. R. R. Co., 142 U. S. 615, 12 Sup. Ct. 306, 35 L. Ed. 1134; Arnett v. State, 168 Ind. 180, 80 N. E. 153, 156, 8 L. R. A. (N. S.) 1192. Another salutary rule is that where a statute is uncertain as to its interpretation, or fairly susceptible of more than one construction, a construction to which it is fairly susceptible may be followed, which will avoid unreasonableness, hardship, or even inconvenience (25 R. C. L. 1018). *163 ‘If * * * the language is not clear, and it is obvious that, by a particular construction in a doubtful case, great public interests would be endangered or sacrificed, the court ought not to presume that such construction was intended by the makers of the law.’ Pickering v. Day, 3 Houst. [Del.] 474, 95 Am.Dec. 291; People v. Lambier, 5 Denio (N. Y.) 9, 45 Am. Dec. 273. I think in this case it sufficiently appears that the requirement of the guaranty was intended by the ordinance as a substitution for the bond, and that the guaranty executed was in substantial compliance with the ordinance. All Citations 184 Cal. 117, 193 P. 111 Footnotes 1 Reported in full in the Pacific Reporter; reported as a memorandum decision without opinion in 110 Cal. XViii. End of Document © 2021 Thomson Reuters. No claim to original U.S. Government Works. Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 56 Pollok v. City of San Diego, 118 Cal. 593 (1897) 50 P. 769 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 1 118 Cal. 593 Supreme Court of California. POLLOK v. CITY OF SAN DIEGO. L. A. 193. | Oct. 9, 1897. Synopsis Commissioners’ decision. Department 1. Appeal from superior court, San Diego county; W. L. Pierce, Judge. Action by Allan Pollok, as assignee of J. E. Deakin, against the city of San Diego. From a judgment for plaintiff, defendant appeals on the judgment roll. Reversed. West Headnotes (3) [1] Municipal Corporations Necessity for Approval or Signature A joint resolution of the common council to employ an attorney was void because the certificate of the auditor that the expense could be lawfully incurred was not indorsed thereon. The council, in pursuance of a provision in the resolution, passed an ordinance embodying the terms thereof, which had indorsed thereon the auditor’s certificate. The ordinance was vetoed by the mayor, and was never repassed. Held, that the ordinance did not have the effect of a joint resolution as to which the mayor’s veto was inoperative. 2 Cases that cite this headnote [2] Municipal Corporations Certificate as to Funds Though San Diego City Charter, c. 5, St.1889, p. 664, conferred on the common council power to employ special counsel, either by joint resolution or by ordinance, a resolution providing for such employment, and specifying the terms thereof, which was adopted without having indorsed thereon or attached thereto a certificate of the auditor that the liability thereby created could be incurred without violating any of the provisions of the charter, as required by charter provision, St.1889, p. 659, § 14, was void. 2 Cases that cite this headnote [3] Municipal Corporations Certificate as to Funds The provisions of San Diego city charter requiring a resolution involving expenditures to have indorsed thereon or attached thereto a certificate of the auditor that the liability thereby created can be incurred without violating any of the provisions of the charter, is constitutional. 1 Cases that cite this headnote Attorneys and Law Firms **769 *594 H E. Doolittle and T. L. Lewis, for appellant. Jas. E. Wadham and McDonald & McDonald, for respondent. Opinion **770 HAYNES, C. The plaintiff, Allan Pollok, as the assignee of J. E. Deakin, an attorney at law, recovered a judgment in the superior court against the city of San Diego for the sum of $1,631.25, found to be a balance due the plaintiff, as such assignee, for legal services rendered to said city by said Deakin; and from said judgment the city appeals on the Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 57 Pollok v. City of San Diego, 118 Cal. 593 (1897) 50 P. 769 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 2 judgment roll. Appellant’s contention is that the findings do not support the judgment. The court found that on March 10, 1891, the common council of said city employed Mr. Deakin as its special counsel and attorney in a certain action then pending against the city, by adopting and recording the following joint resolution: ‘Resolved, that Mr. Deakin be employed to conduct the case of the San Diego Water Company vs. City of San Diego, and to take sole charge, and that he be paid $500 retainer, $500 on completion in superior court, and $1,000 additional if taken to supreme court of state. That an ordinance be drawn to that effect, and in case of settlement before going to trial that the $500 retainer be allowed Mr. Deakin in full payment.’ It was further found: ‘That said joint resolution was never presented to the auditor of said city, and did not have at the time of its passage a certificate of said auditor, indorsed thereon or attached *595 thereto, that the liability thereby created against said city could be incurred without the violation of any of the provisions of the charter of said city.’ That on or about the 17th of March, 1891, the board of aldermen and board of delegates duly passed an ordinance embodying the terms of said resolution. That said ordinance at and before its passage had indorsed thereon a certificate of the auditor date d March 16, 1891, as follows: ‘I hereby certify that the indebtedness may be incurred without violation of the provisions of the charter, and that the same be paid out of the general fund of 1891.’ That said ordinance was vetoed by the mayor, and was never repassed by the common council. That Deakin accepted said employment and took charge of said case, and kept and performed all the duties on his part until on or about January 7, 1893, when defendant notified him that his services were not further required in said action. That Deakin was at all times ready, willing, and able to comply with the terms of said contract, and did not consent to said discharge. That said action was tried in the superior court in August, 1893, and was appealed to the supreme court in January, 1894. That Deakin was paid $500 by the defendant in May, 1891, and that there was due and unpaid $1,500, and interest from March 5, 1894. It is contended by appellant that said resolution did not constitute a contract on the part of the city: (1) Because the auditor had not certified that the liability mentioned therein could be incurred without violating any of the provisions of the city charter; and (2) that the resolution itself contemplated further action, by the passage of an ordinance to carry into effect the matters mentioned in the resolution. And it is also contended by appellant that the ordinance, though it bore the auditor’s certificate, did not consitute a contract, nor have any effect for any purpose, because it was vetoed by the mayor, and not repassed over his veto. I have no doubt that the common council has power to employ special counsel, and that this power may be exercised, either by the joint resolution of the two boards, or by ordinance, since the charter vests that power in the common council, and does not prescribe the mode in which it shall be exercised. That the common council has such power, see chapter 5 of the charter (St. 1889, p. 664); and, as to the mode in which it may be exercised, *596 see Board v. De Kay, 148 U. S. 591, 598, 13 Sup. Ct. 706, and cases there cited. It is contended by respondent, however, that the provision of the charter requiring the auditor’s certificate, above mentioned, is unconstitutional and void, and that, therefore, the resolution of March 10th is valid, and constitutes a contract with Deakin, when accepted and acted upon by him. The validity of said charter provision (St. 1889, p. 659, § 14), requiring the certificate of the auditor before such resolution is passed, was considered in Higgins v. City of San Diego (Cal.) 45 Pac. 824, and its validity sustained. Upon a rehearing granted in that case this portion of the opinion has been affirmed, and upon the authority of that case the resolution of March 10th must be held void and ineffectual to create a contract. That the ordinance afterwards passed by the council is of no force or effect as such, because vetoed by the mayor and not again passed or acted upon by the common council, is not controverted by respondent; but he contends that, conceding its invalidity as an ordinance, it may nevertheless operate as a joint resolution, and, as the proper certificate was indorsed thereon by the auditor before its passage, it is valid as such joint resolution, and constitutes a binding contract. The argument is that, as the charter does not provide that joint resolutions shall be approved by the mayor, his veto can have no operative effect, and as this ordinance ‘does not make or purport to make an appropriation of money, or ‘to allow and order paid’ any sum of money, it could properly take effect as a joint resolution.’ By subdivision 40 of section 1, c. 2, of the charter (St. 1889, p. 654), an ordinance ‘to allow and order paid’ the compensation of special counsel must be by ordinance, and cannot exceed in any one fiscal year the sum of $5,000. The supposed contract in this case did not fix definite dates for the different payments, but these, except the first, were to be made upon the happening of certain events, which might all have occurred within the year. The ordinance was presented to the auditor as required **771 by the charter, and he certified that the indebtedness could be incurred without violation of the provisions of the charter, ‘and that the same be paid out of the general fund of 1891.’ *597 This certificate, taken in connection with another provision of the charter, that ‘no Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 58 Pollok v. City of San Diego, 118 Cal. 593 (1897) 50 P. 769 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 3 expenditure, debt or liability shall be made, contracted or incurred during any fiscal year that cannot be paid out of the revenues for such fiscal year,’ made the ordinance operate as an appropriation of so much of the fund of that year as should be necessary to pay the sums named in the ordinance. Conceding that in ordinance such as that here in question may operate as a contract, and also as an appropriation of funds to meet the liability incurred by the contract, it may well be that the common council did not intend to enter into a contract unless at the same time an appropriation of funds should be made which would enable the city to comply with and perform its part of the contract; and that such was the intention of the common council seems reasonably clear. The common council must have known that a contract to pay for services incurred a liability against the city, and that no resolution which would operate to incur such liability could be passed, so as to become effective, without the auditor’s certificate; and such certificate was not applied for or obtained. Besides, the resolution, after specifying the purpose and terms of the proposed employment, directed ‘that an ordinance be drawn to that effect.’ These circumstances justify the conclusion that the common council did not intend to contract by resolution, but did intend to adopt that mode which would not only make a valid contract, but would operate as an appropriation of the necessary funds for its execution, and also as an order for its payment as the payments became due. The ordinance, as well as the prior resolution, provided that Deakin should be paid a retainer of $500, and without such payment he was not bound to perform any services or to enter in any manner upon the proposed employment; and, as it is conceded that money can only be appropriated or ordered paid by ordinance, the passage of an ordinance was essential to the payment of the retainer; and, as the ordinance was of no effect, for want of the mayor’s approval, there was no power to make the proposed contract effective, and the acquiescence of the common council in the veto, evidenced by its failure to take further action upon the ordinance, would indicate *598 its intention to abandon the proposed contract, rather than to consider the ineffective ordinance as its joint resolution. It is true, the record shows that the city afterwards paid Mr. Deakin $500, but it does not appear by what authority it was paid. If subsequent action had been taken by the city suthorities, authorizing his employment, or which might be held to constitute an affirmance of the alleged contract, it would doubtless have been shown. Several authorities are cited by respondent, some of them where ordinances are held to operate as, or be equivalent to, resolutions, and others where resolutions not acted upon by the mayor are held to be sufficient. In only one of these cases was the action of the legislative body of the municipality, which was in the form of an ordinance and which was submitted to and vetoed by the mayor, held operative as a resolution notwithstanding the veto. That was the case of Jacobs v. Board, 100 Cal. 121, 34 Pac. 630. The others were street-improvement cases, where the council were required to act by resolution, and the action was in the form of an ordinance approved by the mayor, or where the action was in form a resolution, and where the contention was that it should have been submitted to and approved by the mayor. It is obvious that in the first class of these cases, as the ordinance contained that which was required to be stated in the resolution, the mere form should not affect its validity, and, though the approval of the mayor was unnecessary, it was harmless, while the second class presented the question whether the action of the council in the form of a resolution, and without being presented to the mayor, was sufficient. In Jacobs v. Board, supra, the action of the board in fixing water rates was expressly authorized by the constitution to be by resolution or by ordinance. The board passed an ordinance which was vetoed by the mayor. There the duty of fixing water rates was positively enjoined, and was required by the constitution to be performed each year ‘in the month of February, to take effect on the first day of July thereafter,’ and for a failure to do so the board was subject to peremptory process to compel action, and liable for such penalties as the legislature might prescribe; and it was held that, as the power to fix rates was granted solely to the board, the order was valid notwithstanding *599 the veto. The only other California cases cited by respondent are City of Los Angeles v. Waldron, 65 Cal. 283, 3 Pac. 890, and Hellman v. Shoulters, 114 Cal. 136, 157, 44 Pac. 915, 921, and 45 Pac. 1057. These were both street-improvement cases, and come within the first class of cases above mentioned. In City of Los Angeles v. Waldron, one of the objections to the proceedings to condemn property for street purposes was that it was the duty of the council to do by resolution what it attempted to do by ordinance. This court disposed of the objection by saying, ‘The latter, in our opinion, is the equivalent of the former;’ and in Hellman v. Shoulters, under similar facts, the court said: ‘An ordinance is also a resolution, or, at least so far as this statute is concerned, they are equivalent,’ and cited the Waldron Case. In all these cases there was the power to act in some mode, and the intention **772 to act so as to effectuate the purpose in view. In the case at bar there was clearly no intention to act by resolution in making the alleged contract, and, as an ordinance was necessary to enable them to perform the contract, if one had been made by the resolution, we conclude that when the ordinance was vetoed the common council did not intend to enter into a contract they could not perform without the concurrence of the mayor. We Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 59 Pollok v. City of San Diego, 118 Cal. 593 (1897) 50 P. 769 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 4 conclude, therefore, that the evidence does not support the finding that the common council made or entered into a contract to employ Mr. Deakin, and the judgment appealed from should be reversed. We concur: SEARLS, C.; BELCHER, C. PER CURIAM. For the reasons given in the foregoing opinion, the judgment appealed from is reversed. All Citations 118 Cal. 593, 50 P. 769 End of Document © 2021 Thomson Reuters. No claim to original U.S. Government Works. Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 60 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 1 KeyCite Yellow Flag - Negative Treatment Declined to Follow by Greenwich Hosp. v. Gavin, Conn., September 2, 2003 15 Cal.4th 232 Supreme Court of California. WESTERN SECURITY BANK, N.A., Petitioner, v. The SUPERIOR COURT of Los Angeles County, Respondent; BEVERLY HILLS BUSINESS BANK et al., Real Parties in Interest. VISTA PLACE ASSOCIATES et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent; WESTERN SECURITY BANK, N.A., et al., Real Parties in Interest. No. S037504. | April 7, 1997. Synopsis Issuer of standby letters of credit given by debtors to real property lender as additional security for deed of trust loan filed action seeking declaration that it was not obliged to accept or honor real estate lender’s tender of letters of credit or, alternatively, that if it were required to honor letters, then debtors were obligated to reimburse issuer under their separate promissory notes. Debtors cross-complained against issuer for cancellation of promissory notes and for injunctive relief. Lender cross-complained against issuer for wrongful dishonor of letters of credit and against debtors for breach of letter agreement not to take legal action to prevent lender from drawing upon letters of credit. The Superior Court, Los Angeles County, No. BC031239, Ernest George Williams, J., denied motions for summary judgment, severed debtors’ cross-complaint against issuer for cancellation of notes, severed lender’s cross-complaint against debtors for breach of letter agreement, ruled that lender was entitled to recover from issuer, and that issuer was not barred from seeking reimbursement from debtors. Issuer and debtors appealed. On transfer from the Supreme Court, 37 Cal.Rptr.2d 840, 888 P.2d 234, the Court of Appeal denied writ on theory that lender’s claims against issuer were barred by antideficiency statute. On further review, the Supreme Court, Chin, J., held that statute providing that respective obligations of parties to a letter of credit transaction would remain unaffected by antideficiency laws applied retroactively to prevent issuer from raising antideficiency statute as defense. Reversed and remanded. Werdegar, J., concurred in part and dissented in part and filed opinion. Mosk, J., concurred in part and dissented in part and filed opinion, in which Kennard, J., joined. Opinion, 47 Cal.App.4th 1257, 45 Cal.Rptr.2d 664, superseded. Procedural Posture(s): On Appeal. West Headnotes (20) [1] Statutes Language and Intent; Express Provisions Statutes do not operate retrospectively unless legislature plainly intended them to do so. 30 Cases that cite this headnote [2] Statutes Nature and definition of retroactive statute Statute has retrospective effect when it substantially changes the legal consequences of past events. 33 Cases that cite this headnote [3] Statutes Nature and definition of retroactive statute Statute does not operate retrospectively simply because its application depends on facts or Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 61 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 2 conditions existing before its enactment. 15 Cases that cite this headnote [4] Constitutional Law Retrospective laws and decisions; change in law Statutes Language and Intent; Express Provisions When legislature clearly intends that statute will operate retrospectively, court must carry out that intent unless due process considerations prevent it from doing so. U.S.C.A. Const.Amend. 14. 19 Cases that cite this headnote [5] Statutes Declaratory, clarifying, and interpretive statutes Statute that merely clarifies, rather than changes, existing law does not operate retrospectively even if applied to transactions predating its enactment. 43 Cases that cite this headnote [6] Statutes Relationship to statute amended; clarification or change of meaning Court assumes that legislature amends statute for a purpose, but that purpose need not necessarily be to change law; surrounding circumstances can indicate that legislature made material changes in statutory language in effort only to clarify statute’s true meaning. 20 Cases that cite this headnote [7] Statutes Declaratory, clarifying, and interpretive statutes Amendment enacted merely to clarify law as it originally existed has no retrospective effect, as true meaning of statute remains the same. 21 Cases that cite this headnote [8] Statutes Amendatory statutes It is logical to regard amendment as legislative interpretation of original act, which does not operate retrospectively even if applied to transactions predating its enactment, where amendment was enacted soon after controversy arose as to interpretation of original act. 31 Cases that cite this headnote [9] Statutes Amendatory statutes If amendment makes substantial changes in existing statute, then even if amendment might ordinarily be classified as procedural, its operation on existing rights will be retroactive; such an amendment will be construed to operate only in futuro unless a legislative intent to the contrary clearly appears. 9 Cases that cite this headnote [10] Constitutional Law Construction of statutes in general Statutes Legislative Construction Legislative declaration of existing statute’s meaning is neither binding nor conclusive in construing statute; ultimately, interpretation of statute is exercise of judicial power which the Constitution assigns to courts. 26 Cases that cite this headnote Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 62 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 3 [11] Statutes Legislative Construction While not conclusive, legislature’s expressed views on prior import of its statutes is entitled to due consideration, and may properly be used in determining effect of prior act. 21 Cases that cite this headnote [12] Statutes Declaratory, clarifying, and interpretive statutes Even if the court does not accept legislature’s assurance that unmistakable change in the law is merely a “clarification,” such a declaration of intent may still effectively reflect legislature’s purpose to achieve retrospective change in law. 19 Cases that cite this headnote [13] Statutes Nature and definition of retroactive statute Whether statute should apply retrospectively or only prospectively is, in first instance, a policy question for legislative body enacting statute. 1 Cases that cite this headnote [14] Statutes Amendatory statutes Language indi cating that amendment clarifies or declares existing law is indicative of legislative intent that amendment apply to all existing causes of action from date of its enactment, and court must give effect to this intention unless there is some constitutional objection thereto. 26 Cases that cite this headnote [15] Finance, Banking, and Credit Justification for Dishonor Statute providing that respective obligations of parties to a letter of credit transaction would remain unaffected by antideficiency laws was plainly intended to abrogate prior judicial decision to the contrary, and to make certain parties’ obligations when letter of credit supports loan which is also secured by real property, regardless of whether those obligations arise before or after statute’s effective date; accordingly, statute would be applied retroactively, as clarification of existing law, to prevent antideficiency law from being raised as bar to prevent deed of trust lender, which had brought nonjudicial foreclosure proceedings, from looking to standby letter of credit for payment of deficiency. St.1994, c. 611, §§ 5, 6; West’s Ann.Cal.C.C.P. § 580d. 24 Cases that cite this headnote [16] Statutes Validity in relation to previous statutes If legislature acts promptly to correct perceived problem with judicial construction of statute, courts generally give legislature’s action its intended effect. 3 Cases that cite this headnote [17] Principal and Surety Nature of liability Generally, surety’s liability for obligation is secondary to, and derivative of, liability of principal. 1 Cases that cite this headnote [18] Finance, Banking, and Credit Relation to Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 63 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 4 underlying transaction; independence principle Liability of issuer of letter of credit to letter’s beneficiary, unlike liability of surety, is direct and independent of underlying transaction between beneficiary and issuer’s customer. 10 Cases that cite this headnote [19] Finance, Banking, and Credit Relation to underlying transaction; independence principle Issuer of letter of credit cannot refuse to pay based on extraneous defenses that might have been available to its customer; absent fraud, issuer must pay upon proper presentment regardless of any defenses customer may have against beneficiary based in underlying transaction. 9 Cases that cite this headnote [20] Finance, Banking, and Credit Letters of Credit Rules applicable to surety relationships do not govern relationships between parties to letter of credit transaction. 2 Cases that cite this headnote Attorneys and Law Firms ***245 *236 **509 Ervin, Cohen & Jessup, Allan B. Cooper, Steven A. Roseman, Beverly Hills, and Garee T. Gasperian, Woodland Hills, for Petitioner and Real Parties in Interest Western Security Bank, N.A. William K. Wilburn, Saratoga, as Amicus Curiae on behalf of Petitioner and Real Parties in Interest Western Security Bank, N.A. Walker, Wright, Tyler & Ward, John M. Anglin and Robin C. Campbell, Los Angeles, for Petitioners Vista Place Associates et al. R. Stevens Condie, Oakland, and Charles T. Collett, Newport Beach, as Amici Curiae on behalf of Petitioners Vista Place Associates et al. No appearance for Respondent. Saxon, Dean, Mason, Brewer & Kincannon, La Jolla; Lewis, D’Amato, Brisbois & Bisgaard, Los Angeles; Arter & Hadden, Eric D. Dean, Steven J. Cote, Los Angeles; Robert S. Robinson and Michael L. Coates, Irvine, for Real Parties in Interest Beverly Hills Business Bank. Gibson, Dunn & Crutcher, Dennis B. Arnold, Los Angeles; Hill, Wynne, Troop & Meisinger, Neil R. O’Hanlon, Los Angeles; Cadwalader, Wickersham & Taft, Robert M. Eller, Joseph M. Malinowski, Kenneth G. McKenna, Michael A. Santoro, John E. McDermott, Kenneth G. McKenna, John C. Kirkland, Los Angeles; Stroock & Stroock & Lavan, Julia B. Strickland, Bennett J. Yankowitz, Chauncey M. Swalwell, Los Angeles; Brobeck, Phleger & Harrison, George A. Hisert, Jeffrey S. Turner, John Francis Hilson, G. Larry Engel, Frederick D. Holden, Jr., San Francisco, and Theodore W. Graham, San Diego, as Amici Curiae on behalf of Real Parties in Interest Beverly Hills Business Bank. Opinion CHIN, Justice. This case concerns the extent to which two disparate bodies of law interact when standby letters of credit are used as additional support for *237 loan obligations secured by real property. On one side we have California’s complex web of foreclosure and antideficiency laws that circumscribe enforcement of obligations secured by interests in real property. On the other side is the letter of credit law’s “independence principle,” the unique characteristic of letters of credit essential to their commercial utility. The antideficiency statute invoked in this case is Code of Civil Procedure section 580d. That section precludes a judgment for any loan balance left unpaid after the lender’s nonjudicial foreclosure under a power of sale ***246 **510 in a deed of trust or mortgage on real property. (See Roseleaf Corp. v. Chierighino (1963) 59 Cal.2d 35, 43–44, 27 Cal.Rptr. 873, 378 P.2d 97.)1 The independence principle, in summary form, makes the Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 64 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 5 letter of credit issuer’s obligation to pay a draw conforming to the letter’s terms completely separate from, and not contingent on, any underlying contract between the issuer’s customer and the letter’s beneficiary. (See, e.g., Cal.U.Com.Code, § 5114, subd. (1); San Diego Gas & Electric Co. v. Bank Leumi (1996) 42 Cal.App.4th 928, 933–934, 50 Cal.Rptr.2d 20.)2 The Court of Appeal perceived a conflict between the public policies behind Code of Civil Procedure section 580d and the independence principle under the facts of this case. Here, after nonjudicial foreclosure of the real property security for its loan left a deficiency, the lender attempted to draw on the standby letters of credit of which it was the beneficiary. Ordinarily, the issuer’s payment on a letter of credit would require the borrower to reimburse the issuer. (See § 5114, subd. (3).) The Court of Appeal considered that this result indirectly imposed on the borrower the equivalent of a *238 prohibited deficiency judgment. The court concluded the situation amounted to a “fraud in the transaction” under section 5114, subdivision (2)(b), one of the limited circumstances justifying an issuer’s refusal to honor its letter of credit. The Legislature soon acted to express a clear, contrary intent. It passed Senate Bill No. 1612 (1993–1994 Reg. Sess.) (hereafter Senate Bill No. 1612) as an urgency measure specifically meant to abrogate the Court of Appeal’s holding. (Stats.1994, ch. 611, §§ 5, 6.) In brief, the aspects of Senate Bill No. 1612 we address provided that an otherwise conforming draw on a letter of credit does not contravene the antideficiency laws and that those laws afford no basis for refusal to honor a draw. After the Legislature’s action, we returned the case to the Court of Appeal for reconsideration in light of the statutory changes. On considering the point, the Court of Appeal concluded the Legislature’s action was prospective only and had no impact on the court’s earlier analysis of the parties’ rights and obligations. Accordingly, the Court of Appeal reiterated its former conclusions. We again granted review and now reverse. The Legislature’s manifest intent was that Senate Bill No. 1612’s provisions, with one exception not involved here, would apply to all existing loans secured by real property and supported by outstanding letters of credit. We conclude the Legislature’s action constituted a clarification of the state of the law before the Court of Appeal’s decision. The legislation therefore has no impermissible retroactive consequences, and we must give it the effect the Legislature intended. I. FACTUAL AND PROCEDURAL BACKGROUND On October 10, 1984, Beverly Hills Savings and Loan Association, later known as Beverly Hills Business Bank (the Bank), loaned ***247 **511 $3,250,000 to Vista Place Associates (Vista), a limited partnership, to finance the purchase of real property improved with a shopping center. Vista’s general partners, Phillip F. Kennedy, Jr., John R. Bradley, and Peter M. Hillman (the Vista partners), each signed the promissory note. The loan transaction created a “purchase money mortgage,” as it was secured by a “Deed of Trust and Assignment of Rents” as well as a letter of credit. Vista later experienced financial difficulties, and the loan went into default. Vista asked the Bank to modify the loan’s terms so Vista could continue operating the shopping center and repay the debt. The Bank and Vista agreed to a loan modification in February 1987, under which the three Vista partners each obtained an unconditional, irrevocable standby letter of *239 credit in favor of the Bank in the amount of $125,000, for a total of $375,000. These were delivered to the Bank as additional collateral security for repayment of the loan. Under the modification agreement, the Bank was entitled to draw on the letters of credit if Vista defaulted or failed to pay the loan in full at maturity. Western Security Bank, N.A. (Western) issued the letters of credit at the Vista partners’ request. Each partner agreed to reimburse Western if it ever had to honor the letters. Under the agreement, each Vista partner gave Western a $125,000 promissory note.3 In December 1990, the Bank declared Vista in default on the modified loan. The Bank recorded a notice of default on February 13, 1991, and began *240 nonjudicial foreclosure proceedings. (Civ.Code, § 2924.) It then filed an action against Vista seeking specific performance of the rents and profits provisions in the trust deed and appointment of a receiver. On June 11, 1991, attorneys for the Bank and Vista signed a letter agreement settling the Bank’s lawsuit. In that agreement, Vista promised it would “not take any legal action to prevent [the Bank’s] drawing upon [the letters of credit] after the Trustee’s Sale of the Vista Place Shopping Center, ... provided that the amount of the draw by [the Bank] ***248 **512 does not exceed an amount equal to the difference between [Vista’s] indebtedness and the successful bid of the Trustee’s Sale.” Vista promised as well not to take any draw-related legal action against the Bank after the Bank’s draw on the letters of credit. Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 65 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 6 On June 13, 1991, the Bank concluded its nonjudicial foreclosure on the shopping center under the power of sale in its deed of trust. The Bank was the only bidder, and it purchased the property. The sale left an unpaid deficiency of $505,890.16. That same day, the Bank delivered the three letters of credit and drafts to Western and demanded payment of their full amount, $375,000. The Bank never sought to recover the $505,890.16 deficiency from Vista or the Vista partners. About the time that Western received the Bank’s draw demand, it also received a written notice from the Vista partners’ attorney. The notice asserted that Code of Civil Procedure section 580d barred Western from seeking reimbursement from the Vista partners for any payment on the letters of credit, and that if Western paid, it did so at its own risk. Western did not honor the Bank’s demand for payment on the letters of credit. Instead, on June 24, 1991, Western filed this declaratory relief action against the Bank, as well as Vista and the Vista partners (collectively, the Vista defendants). Western’s complaint sought: (1) a declaration that Western is not obligated to accept or honor the Bank’s tender of the letters of credit; or, alternatively, (2) a declaration that, if Western must pay on the letters of credit, the Vista partners must reimburse Western according to the terms of their promissory notes. The Vista defendants cross-complained against Western for cancellation of their promissory notes and for injunctive relief. In July 1991, the Bank filed a first amended cross-complaint, alleging Western wrongfully dishonored the letters of credit, and the Vista defendants breached the agreement not to take legal action to prevent the Bank’s drawing on the letters of credit. The Bank, Western, and the Vista defendants each sought summary judgment. After several hearings and discussions with counsel, which produced a stipulation on the key facts, the court issued its decision on January *241 23, 1992. By its minute order of that date, the court (1) denied the three motions for summary judgment, (2) severed the Vista defendants’ cross-complaint against Western for cancellation of the promissory notes, (3) severed the Bank’s amended cross-com plaint against the Vista defendants for breach of the letter agreement, and (4) issued a tentative decision on the trial of Western’s complaint for declaratory relief and the Bank’s amended cross-complaint against Western for wrongful dishonor of the letters of credit. The trial court signed and filed the judgment on March 26, 1992. The court decreed the Bank was entitled to recover $375,000 from Western, plus interest at 10 percent from June 13, 1991, the date of the Bank’s demand, and costs of suit. The court further decreed Western could seek reimbursement from the Vista partners severally, and each Vista partner was obligated to reimburse Western, pursuant to the promissory notes in favor of Western, for its payment to the Bank. Western appealed, and the Vista defendants cross-appealed. The Court of Appeal, after granting rehearing and accepting briefing by several amici curiae, issued an opinion reversing the trial court on December 21, 1993. In that opinion, the court concluded: “We hold that, under section 580d of the Code of Civil Procedure, an integral part of California’s long-established antideficiency legislation, the issuer of a standby letter of credit, provided to a real property lender by a debtor as additional security, may decline to honor it after receiving notice that it is to be used to discharge a deficiency following the beneficiary-lender’s nonjudicial foreclosure on real property. Such a use of standby letters of credit constitutes a ‘defect not apparent on the face of the documents’ within the meaning of California Uniform Commercial Code section 5114, subdivision (2)(b), and therefore such permissive dishonor does no offense to the ‘independence principle.’ ” (Original italics, fn. omitted.) ***249 **513 In that first opinion, the Court of Appeal also solicited the Legislature’s attention: “To the extent that this result will present problems for real estate lenders with respect to the way they now do business (as the Bank and several amici curiae have strongly suggested), it is a matter which should be addressed to the Legislature. We have been presented with two important but conflicting statutory policies. Our reconciliation of them in this case may not prove as satisfactory in another factual context. It is therefore a matter which should receive early legislative attention.” (Fn.omitted.) We granted review, and while the matter was pending, the Legislature passed Senate Bill No. 1612, an urgency statute that the Governor signed on *242 September 15, 1994. Senate Bill No. 1612 affected four statutes. Section 1 of the bill amended Civil Code section 2787 to state that a letter of credit is not a form of suretyship obligation. (Stats.1994, ch. 611, § 1.) Section 2 of the bill added Code of Civil Procedure section 580.5, explicitly excluding letters of credit from the purview of the antideficiency laws. (Stats.1994, ch. 611, § 2.) Section 3 of the bill added Code of Civil Procedure section 580.7, which declares unenforceable letters of credit issued to avoid defaults on purchase money mortgages for owner-occupied real property containing one to four residential units. (Stats.1994, ch. 611, § 3.) Secti on 4 of Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 66 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 7 the bill made “technical, nonsubstantive changes” to section 5114. (Stats.1994, ch. 611, § 4; Legis. Counsel’s Dig., Sen. Bill No. 1612 (1993–1994 Reg. Sess.).) The Legislature made its purpose explicit: “It is the intent of the Legislature in enacting Sections 2 and 4 of this act to confirm the independent nature of the letter of credit engagement and to abrogate the holding [of the Court of Appeal in this case].... [¶] The Legislature also intends to confirm the expectation of the parties to a contract that underlies a letter of credit, that the beneficiary will have available the value of the real estate collateral and the benefit of the letter of credit without regard to the order in which the beneficiary may resort to either.” (Stats.1994, ch. 611, § 5.) The same purpose was echoed in the bill’s statement of the facts calling for an urgency statute: “In order to confirm and clarify the law applicable to obligations which are secured by real property or an estate for years therein and which also are supported by a letter of credit, it is necessary that this act take effect immediately.” (Stats.1994, ch. 611, § 6.) After the Legislature enacted Senate Bill No. 1612, we requested the parties’ views on its effect. On February 2, 1995, after considering the parties’ responses, we transferred the case to the Court of Appeal with directions to vacate its decision and reconsider the cause in light of the Legislature’s action. On reconsideration, the Court of Appeal determined Senate Bill No. 1612 constituted a substantial change in existing law. Believing there was no clear evidence that the Legislature intended the statute to operate retrospectively, the Court of Appeal thought Senate Bill No. 1612 had only prospective application. Therefore, Senate Bill No. 1612 did not affect the Court of Appeal’s prior conclusions on the parties’ rights and obligations. The Court of Appeal filed its second opinion on September 29, 1995, mostly repeating its prior reasoning and conclusions. We granted the Bank’s petition for review. II. DISCUSSION [1] [2] [3] [4] As the Court of Appeal recognized, we first must determine the effect on this case of the Legislature’s enactment of Senate Bill No. 1612. *243 A basic canon of statutory interpretation is that statutes do not operate retrospectively unless the Legislature plainly intended them to do so. (Evangelatos v. Superior Court (1988) 44 Cal.3d 1188, 1207–1208, 246 Cal.Rptr. 629, 753 P.2d 585; Aetna Cas. & Surety Co. v. Ind. Acc. Com. (1947) 30 Cal.2d 388, 393, 182 P.2d 159.) A statute has retrospective effect when it substantially changes the legal consequences of past events. (Kizer v. Hanna (1989) 48 Cal.3d 1, 7, 255 Cal.Rptr. 412, 767 P.2d 679.) A statute does not operate retrospectively simply because its application depends on facts or conditions existing before its enactment. (Ibid.) Of course, when the Legislature clearly intends a statute to operate retrospectively, we are obliged to carry out that intent unless due process considerations prevent us. ***250 **514 (In re Marriage of Bouquet (1976) 16 Cal.3d 583, 587, 592, 128 Cal.Rptr. 427, 546 P.2d 1371.) [5] [6] [7] A corollary to these rules is that a statute that merely clarifies, rather than changes, existing law does not operate retrospectively even if applied to transactions predating its enactment. We assume the Legislature amends a statute for a purpose, but that purpose need not necessarily be to change the law. (Cf. Williams v. Garcetti (1993) 5 Cal.4th 561, 568, 20 Cal.Rptr.2d 341, 853 P.2d 507.) Our consideration of the surrounding circumstances can indicate that the Legislature made material changes in statutory language in an effort only to clarify a statute’s true meaning. (Martin v. California Mut. B. & L. Assn. (1941) 18 Cal.2d 478, 484, 116 P.2d 71; GTE Sprint Communications Corp. v. State Bd. of Equalization (1991) 1 Cal.App.4th 827, 833, 2 Cal.Rptr.2d 441; see Balen v. Peralta Junior College Dist. (1974) 11 Cal.3d 821, 828, fn. 8, 114 Cal.Rptr. 589, 523 P.2d 629.) Such a legislative act has no retrospective effect because the true meaning of the statute remains the same. (Stockton Sav. & Loan Bank v. Massanet (1941) 18 Cal.2d 200, 204, 114 P.2d 592; In re Marriage of Reuling (1994) 23 Cal.App.4th 1428, 1440, 28 Cal.Rptr.2d 726; Tyler v. State of California (1982) 134 Cal.App.3d 973, 976–977, 185 Cal.Rptr. 49.) [8] [9] One such circumstance is when the Legislature promptly reacts to the emergence of a novel question of statutory interpretation: “ ‘An amendment which in effect construes and clarifies a prior statute must be accepted as the legislative declaration of the meaning of the original act, where the amendment was adopted soon after the controversy arose concerning the proper interpretation of the statute.... [¶] If the amendment was enacted soon after controversies arose as to the interpretation of the original act, it is logical to regard the amendment as a legislative interpretation of the original act—a formal change—rebutting the presumption of substantial change.’ (1A Singer, Sutherland Statutory Construction Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 67 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 8 (5th ed. 1993) § 22.31, p. *244 279, fns. omitted.)” (RN Review for Nurses, Inc. v. State of California (1994) 23 Cal.App.4th 120, 125, 28 Cal.Rptr.2d 354.)4 [10] [11] Even so, a legislative declaration of an existing statute’s meaning is neither binding nor conclusive in construing the statute. Ultimately, the interpretation of a statute is an exercise of the judicial power the Constitution assigns to the courts. (California Emp. etc. California Employment Stabilization Com’n v. Payne (1947) 31 Cal.2d 210, 213, 187 P.2d 702; Bodinson Mfg. Co. v. California E. Com. (1941) 17 Cal.2d 321, 326, 109 P.2d 935; see Del Costello v. State of California (1982) 135 Cal.App.3d 887, 893, fn. 8, 185 Cal.Rptr. 582.) Indeed, there is little logic and some incongruity in the notion that one Legislature may speak authoritatively on the intent of an earlier Legislature’s enactment when a gulf of decades separates the two bodies. (Cf. Peralta Community College Dist. v. Fair Employment & Housing Com. (1990) 52 Cal.3d 40, 51–52, 276 Cal.Rptr. 114, 801 P.2d 357.) Nevertheless, the Legislature’s expressed views on the prior import of its statutes are entitled to due consideration, and we cannot disregard them. [12] [13] [14] “[A] subsequent expression of the Legislature as to the intent of the prior statute, although not binding on the court, may properly be used in determining the effect of a prior act.” (California Emp. etc. Com. v. Payne, supra, 31 Cal.2d at pp. 213–214, 187 P.2d 702.) Moreover, even if the court does not accept the Legislature’s assurance ***251 **515 that an unmistakable change in the law is merely a “clarification,” the declaration of intent may still effectively reflect the Legislature’s purpose to achieve a retrospective change. (Id. at p. 214, 187 P.2d 702.) Whether a statute should apply retrospectively or only prospectively is, in the first instance, a policy question for the legislative body enacting the statute. (Evangelatos v. Superior Court, supra, 44 Cal.3d at p. 1206, 246 Cal.Rptr. 629, 753 P.2d 585.) Thus, where a statute provides that it clarifies or declares existing law, “[i]t is obvious that such a provision is indicative of a legislative intent that the amendment apply to all existing causes of action from the date of its enactment. In accordance with the general rules of statutory construction, we must give effect to this intention unless there is some constitutional objection thereto.” *245 (California Emp. etc. Com. v. Payne, supra, 31 Cal.2d at p. 214, 187 P.2d 702; cf. City of Sacramento v. Public Employees’ Retirement System (1994) 22 Cal.App.4th 786, 798, 27 Cal.Rptr.2d 545; City of Redlands v. Sorensen (1985) 176 Cal.App.3d 202, 211, 221 Cal.Rptr. 728.) [15] With respect to Senate Bill No. 1612, the Legislature made its intent plain. Section 5 of the bill states, in part: “It is the intent of the Legislature in enacting Sections 2 and 4 of this act5 to confirm the independent nature of the letter of credit engagement and to abrogate the holding in [the Court of Appeal’s earlier opinion in this case], that presentment of a draft under a letter of credit issued in connection with a real property secured loan following foreclosure violates Section 580d of the Code of Civil Procedure and constitutes a ‘fraud ... or other defect not apparent on the face of the documents’ under paragraph (b) of subdivision (2) of Section 5114 of the Commercial Code.... [¶] The Legislature also intends to confirm the expectation of the parties to a contract that underlies a letter of credit, that the beneficiary will have available the value of the real estate collateral and the benefit of the letter of credit without regard to the order in which the beneficiary may resort to either.” (Stats.1994, ch. 611, § 5.) [16] The Legislature’s intent also was evident in its statement of the facts justifying enactment of Senate Bill No. 1612 as an urgency statute: “In order to confirm and clarify the law applicable to obligations which are secured by real property or an estate for years therein and which also are supported by a letter of credit, it is necessary that this act take effect immediately.” (Stats.1994, ch. 611, § 6.) The Legislature’s unmistakable focus was the disruptive effect of the Court of Appeal’s decision on the expectations of parties to transactions where a letter of credit was issued in connection with a loan secured by real property. By abrogating the Court of Appeal’s decision, the *246 Legislature intended to protect those parties’ expectations and restore certainty and stability to those transactions. If the Legislature acts promptly to correct a perceived problem with a judicial construction of a statute, the courts generally give the Legislature’s action its intended effect. (See, e.g., ***252 **516 Escalante v. City of Hermosa Beach (1987) 195 Cal.App.3d 1009, 1020, 241 Cal.Rptr. 199; City of Redlands v. Sorensen, supra, 176 Cal.App.3d at pp. 211–212, 221 Cal.Rptr. 728; Tyler v. State of California, supra, 134 Cal.App.3d at pp. 976–977, 185 Cal.Rptr. 49; but see Del Costello v. State of California, supra, 135 Cal.App.3d at p. 893, fn. 8, 185 Cal.Rptr. 582 [courts need not accept Legislature’s interpretation of statute].) The plain import of Senate Bill No. 1612 is that the Legislature intended its provisions to apply immediately to existing loan transactions secured by real property and supported by outstanding letters of credit, including those in this case. Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 68 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 9 We next consider whether Senate Bill No. 1612 effected a change in the law, or instead represented a clarification of the state of the law before the Court of Appeal’s decision. As mentioned earlier, Senate Bill No. 1612 amended two code sections (§ 5114; Civ.Code, § 2787) and added two sections to the Code of Civil Procedure (§§ 580.5, 580.7). The two code sections Senate Bill No. 1612 amended plainly made no substantive change in the law. The amendments to section 5114, which concerns the issuer’s duty to honor a draft conforming to the letter of credit’s terms, were “technical, nonsubstantive changes,” as the Legislative Counsel’s Digest correctly noted. (See Legis. Counsel’s Dig., Sen. Bill No. 1612 (1993–1994 Reg. Sess.).) [17] In the other section amended, Civil Code section 2787, Senate Bill No. 1612 added a statement reflecting an established formal distinction: “A letter of credit is not a form of suretyship obligation.” (Stats.1994, ch. 611, § 1.) Civil Code section 2787 defines a surety or guarantor as “one who promises to answer for the debt, default, or miscarriage of another, or hypothecates property as security therefor.” Generally, a surety’s liability for an obligation is secondary to, and derivative of, the liability of the principal for that obligation. (See, e.g., Civ.Code, § 2806 et seq.) [18] [19] By contrast, the liability of the issuer of a letter of credit to the letter’s beneficiary is direct and independent of the underlying transaction between the beneficiary and the issuer’s customer. (See San Diego Gas & Electric Co. v. Bank Leumi, supra, 42 Cal.App.4th at pp. 933–934, 50 Cal.Rptr.2d 20; Paramount Export Co. v. Asia Trust Bank, Ltd. (1987) 193 Cal.App.3d 1474, 1480, 238 Cal.Rptr. 920; Lumbermans Acceptance Co. v. Security Pacific Nat. Bank (1978) 86 Cal.App.3d 175, 178, 150 Cal.Rptr. 69.) Thus, as the amendment to Civil Code section 2787 made clear, existing law viewed a *247 letter of credit as an independent obligation of the issuing bank rather than as a form of guaranty or a surety obligation. (See, e.g., Dolan, The Law of Letters of Credit: Commercial and Standby Credits (rev. ed. 1996) § 2.10[1], pp. 2–61 to 2–63 (Dolan, Letters of Credit); 3 White & Summers, Uniform Commercial Code (4th ed. 1995) Letters of Credit, § 26–2, pp. 112–117.) The issuer of a letter of credit cannot refuse to pay based on extraneous defenses that might have been available to its customer. (San Diego Gas & Electric Co. v. Bank Leumi, supra, 42 Cal.App.4th at p. 934, 50 Cal.Rptr.2d 20.) Absent fraud, the issuer must pay upon proper presentment regardless of any defenses the customer may have against the beneficiary based in the underlying transaction. (Ibid.) Senate Bill No. 1612’s remaining statutory addition with which we are concerned,6 Code of Civil Procedure section 580.5, specified that letter of credit transactions do not violate the antideficiency laws contained in ***253 **517 Code of Civil Procedure sections 580a, 580b, 580d, or 726. (Code Civ. Proc., § 580.5, subd. (b)(3).) In particular, the new section specifies that a lender’s resort to a letter of credit, and the issuer’s concomitant right to reimbursement, do not constitute an “action” under Code of Civil Procedure section 726, or a failure to proceed first against security, regardless of whether they come before or after a foreclosure. (Code Civ. Proc., § 580.5, subd. (b)(1).) Similarly, letter of credit draws and reimbursements do not constitute deficiency judgments “or the functional equivalent of any such judgment.” (Code Civ. Proc., § 580.5, subd. (b)(2).) The Court of Appeal saw Code of Civil Procedure section 580.5 as a change in the law, in large part, because of the analogy it employed to examine the use of standby letters of credit as additional support for loans also secured by real property. The Bank argued a standby letter of credit was the functional equivalent of cash collateral. The Court of Appeal disagreed, instead analogizing standby letters of credit to guaranties and emphasizing the similarities of purpose and function: “No matter how it may be regarded *248 by the beneficiary, a standby letter is certainly not cash or its equivalent from the perspective of the debtor; in reality, it represents his promise to provide additional funds in the event of his future default or deficiency, thus confirming its use not as a means of payment but rather as an instrument of guarantee.” (Original italics.) The Court of Appeal relied on Union Bank v. Gradsky (1968) 265 Cal.App.2d 40, 71 Cal.Rptr. 64 (Gradsky ) and Commonwealth Mortgage Assurance Co. v. Superior Court (1989) 211 Cal.App.3d 508, 259 Cal.Rptr. 425 (Commonwealth Mortgage ). Gradsky held that a creditor, after nonjudicial foreclosure of the real property security for a note, could not recover the note’s unpaid balance from a guarantor. (Gradsky, supra, 265 Cal.App.2d at p. 41, 71 Cal.Rptr. 64.) Significantly, the court did not find Code of Civil Procedure section 580d’s prohibition of deficiency judgments barred the creditor’s claim on the guarantor: “It is barred by applying the principles of estoppel. The estoppel is raised as a matter of law to prevent the creditor from recovering from the guarantor after the creditor has exercised an election of remedies which destroys the guarantor’s subrogation rights against the principal debtor.” (Gradsky, supra, 265 Cal.App.2d at p. 41, 71 Cal.Rptr. 64.) Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 69 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 10 The court noted that the guarantor, after payment, ordinarily would be equitably subrogated to the rights and security formerly held by the creditor. (Gradsky, supra, 265 Cal.App.2d at pp. 44–45, 71 Cal.Rptr. 64; cf. Civ.Code, §§ 2848, 2849.) However, where the creditor first resorts to nonjudicial foreclosure, the guarantor could not acquire any subrogation rights from the creditor because under Code of Civil Procedure section 580d, the nonjudicial sale eliminated both the security and the possibility of a deficiency judgment against the debtor. (Gradsky, supra, 265 Cal.App.2d at p. 45, 71 Cal.Rptr. 64.) Because the creditor has a duty not to impair the guarantor’s remedies against the debtor, the court held the creditor is estopped from pursuing the guarantor after electing a remedy—nonjudicial foreclosure—that eliminated the security for the debt and curtailed the possibility of the guarantor’s reimbursement from the debtor. (Id. at pp. 46–47, 71 Cal.Rptr. 64.) [20] However, the rules applicable to surety relationships do not govern the relationships between the parties to a letter of credit transaction. (See Dolan, Letters of Credit, supra, § 2.10[1], pp. 2–62 to 2–63.) At the time of this case’s transactions, a majority of courts did not grant subrogation rights to an issuer that honored a draw on a credit; the issuer satisfied its own primary obligation, not the debt of another. (Tudor Dev. Group, Inc. v. U.S. Fid. & Guar. Co. (3rd Cir.1992) 968 F.2d 357, 361–363; see 3 White & Summers, Uniform Commercial Code, supra, Letters of Credit, § 26–15, pp. 211–212; but see Cal. U. Com.Code, § 5117; fn. 2, ante, at pp. 245–246 of 62 Cal.Rptr.2d, at pp. 509–510 of 933 P.2d.) Nor does the *249 beneficiary of a credit owe any obligations to the issuer; literal compliance with the letter of credit’s terms for payment is all that is required. (Cf. Paramount Export Co. v. Asia Trust Bank, Ltd., supra, 193 Cal.App.3d at p. 1480, 238 Cal.Rptr. 920; Lumbermans ***254 Acceptance **518 Co. v. Security Pacific Nat. Bank, supra, 86 Cal.App.3d at p. 178, 150 Cal.Rptr. 69.) Gradsky contains additional language suggesting a much broader rule than its holding and analysis warranted. Going beyond the subrogation theory underlying its holding, the court observed: “If ... the guarantor ... can successfully assert an action in assumpsit against [the debtor] for reimbursement, the obvious result is to permit the recovery of a ‘deficiency’ judgment against the debtor following a nonjudicial sale of the security under a different label. It makes no difference to [the debtor’s] purse whether the recovery is by the original creditor in a direct action following nonjudicial sale of the security, or whether the recovery is in an action by the guarantor for reimbursement of the same sum.” (Gradsky, supra, 265 Cal.App.2d at pp. 45–46, 71 Cal.Rptr. 64.) The court also said: “The Legislature clearly intended to protect the debtor from personal liability following a nonjudicial sale of the security. No liability, direct or indirect, should be imposed upon the debtor following a nonjudicial sale of the security. To permit a guarantor to recover reimbursement from the debtor would permit circumvention of the legislative purpose in enacting section 580d.” (Id. at p. 46, 71 Cal.Rptr. 64.) In view of the reasoning of the court’s holding, these additional observations were unnecessary to the case’s determination. Commonwealth Mortgage followed Gradsky to hold a mortgage guaranty insurer could not enforce indemnity agreements to obtain reimbursement from the debtors for the insurer’s payment to the lender after the lender’s nonjudicial sale of its real property security. (Commonwealth Mortgage, supra, 211 Cal.App.3d at p. 517, 259 Cal.Rptr. 425.) The court said the mortgage guaranty insurance policy served the same purpose as the guaranty in Gradsky, and thus Gradsky would bar the insurer from being reimbursed under subrogation principles. (Commonwealth Mortgage, supra, 211 Cal.App.3d at p. 517, 259 Cal.Rptr. 425.) The court found the substitution of indemnity agreements for subrogation rights did not distinguish the case from Gradsky. Relying on the rule that a principal obligor incurs no additional liability on a note by also being a guarantor of it, the court said the agreements added nothing to the debtors’ existing liability. (Commonwealth Mortgage, supra, 211 Cal.App.3d at p. 517, 259 Cal.Rptr. 425.) Thus, the court said the indemnity agreements could not be viewed as independent obligations. (Ibid.) Instead, the court concluded they were invalid attempts to have the debtors waive in advance the statutory prohibition against deficiency judgments. (Ibid.) As did Gradsky, Commonwealth Mortgage also inveighed against subterfuges that thwart the purposes of Code of Civil Procedure section 580d. *250 (Commonwealth Mortgage, supra, 211 Cal.App.3d at pp. 515, 517, 259 Cal.Rptr. 425.) “Although section 580d applies by its specific terms only to actions for ‘any deficiency upon a note secured by a deed of trust’ and not to actions based upon other obligations, the proscriptions of section 580d cannot be avoided through artifice [citation].... In determining whether a particular recovery is precluded, we must consider whether the policy behind section 580d would be violated by such a recovery. [Citation.]” (Commonwealth Mortgage, supra, 211 Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 70 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 11 Cal.App.3d at p. 515, 259 Cal.Rptr. 425.) Thus, as did the Gradsky court, the Commonwealth Mortgage court augmented its opinion with concepts unnecessary to its determination of the case.7 The Court of Appeal in this case extrapolated from the Gradsky and Commonwealth Mortgage precedents a rule that swept far beyond their origins in guaranty and suretyship relationships: “Not only is a creditor prevented from obtaining a deficiency judgment ***255 **519 against the debtor, but no other person is permitted to obtain what would, in effect, amount to a deficiency judgment.” (Original italics.) The Court of Appeal apparently concluded a transaction has such an effect if it “has the practical consequence of requiring the debtor to pay additional money on the debt after default or foreclosure.” (Original italics.) “Thus, we preserve the principle, clearly established by Gradsky and Commonwealth [Mortgage ], that a lender should not be able to utilize a device of any kind to avoid the limitations of section 580d; and we apply that principle here to standby letters of credit.” However, as we have seen, neither Gradsky nor Commonwealth Mortgage established such a principle as a rule of law. Instead, their statements accentuated the courts’ vigilance regarding attempted evasions of the antideficiency and foreclosure laws. The Court of Appeal mistook standby letters of credit for such an attempt by seeing them only as a form of guaranty. The court analogized the standby letter of credit to a guaranty because of the perceived functional similarities. One consequence of that analogy was that the court applied to standby letters of credit a rule whose legal justifications originated in the subrogation rights owed to sureties. However, as discussed before, letters of credit—standby or otherwise—are not a form of suretyship, and the rights of the parties to these transactions are not governed by suretyship principles. *251 Further, suretyship involves no counterpart to the independence principle essential to letters of credit. While analogies can improve our understanding of how and why letters of credit are useful, analogies cannot substitute for recognizing the letters’ unique qualities. The authors of one leading treatise aptly summarized the point: “In short, a letter of credit is a letter of credit. As Bishop Butler once said, ‘Everything is what it is and not another thing.’ ” (3 White & Summers, Uniform Commercial Code, supra, Letters of Credit, § 26–2, p. 117, fn. omitted.) By focusing on analogies to guaranties, the Court of Appeal also overlooked that the parties in this case specifically intended the standby letters of credit to be additional security.8 The parties’ stipulated facts include that the original loan agreement was secured by a letter of credit, and that “Vista caused [the subsequent letters of credit] to be issued by Western as additional collateral security....” The Court of Appeal found the letters of credit were not security interests in personal property under California Uniform Commercial Code section 9501, subdivision (4), as the Bank had argued. However, we need not determine whether a standby letter of credit comes within the scope of division 9 of the California Uniform Commercial Code. A letter of credit is sui generis as a means of securing or supporting performance of an obligation incurred in a separate transaction. Regardless of whether this idiosyncratic undertaking meets the qualifications for a security interest under the California Uniform Commercial Code, it nevertheless is a form of security for assuring another’s performance. When viewed as additional security for a note also secured by real property, a standby ***256 **520 letter of credit does not conflict with the statutory *252 prohibition of deficiency judgments. Code of Civil Procedure section 580d does not limit the security for notes given for the purchase of real property only to trust deeds; other security may be given as well. (Freedland v. Greco (1955) 45 Cal.2d 462, 466, 289 P.2d 463.) Creditors may resort to such other security in addition to nonjudicial foreclosure of the real property security. (Ibid.; Hatch v. Security–First Nat. Bank (1942) 19 Cal.2d 254, 260, 120 P.2d 869.) A standby letter of credit is a security device created at the request of the customer/debtor that is an obligation owed independently by the issuing bank to the beneficiary/creditor. (See San Diego Gas & Electric Co. v. Bank Leumi, supra, 42 Cal.App.4th at pp. 933–934, 50 Cal.Rptr.2d 20; Lumbermans Acceptance Co. v. Security Pacific Nat. Bank, supra, 86 Cal.App.3d at p. 178, 150 Cal.Rptr. 69.) A creditor that draws on a letter of credit does no more than call on all the security pledged for the debt. When it does so, it does not violate the prohibition of deficiency judgments. The Legislature plainly intended that the sections of Senate Bill No. 1612 we have addressed would apply to existing loan transactions supported by outstanding letters of credit. We conclude the Legislature’s action did not effect a change in the law. Before the Legislature passed Senate Bill No. 1612, an issuer could not refuse to honor a conforming draw on a standby letter of credit—given as additional security for a real property loan—on the basis that the draw followed a nonjudicial sale of the real property security. The Court of Appeal created such a Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 71 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 12 basis, but produced an unprecedented rule without solid legal underpinnings or any real connection to the actual language of the statutes involved. Therefore, the aspects of Senate Bill No. 1612 we have discussed did not effect any change in the law, but simply clarified and confirmed the state of the law prior to the Court of Appeal’s first opinion. Because the legislative action did not change the legal effect of past actions, Senate Bill No. 1612 does not act retrospectively; it governs this case. The Legislature concluded that Senate Bill No. 1612 should be given immediate effect to confirm and clarify the law applicable to loans secured by real property and supported by letters of credit. This conclusion was reasonable, particularly in view of the uncertainties the financial community evidently faced after the Court of Appeal’s decision. (See, e.g., Murray, What Should I Do With This Letter of Credit? (Cont.Ed.Bar 1994) 17 Real Prop. L. Rptr. 133, 138–140.) In sum, the Court of Appeal erred in concluding the Legislature’s enactment of Senate Bill No. 1612 had no effect on this case. The Legislature explicitly intended to abrogate the Court of Appeal’s prior decision and make certain the parties’ obligations when letters of credit supported loans also secured by real property. The Legislature manifestly intended the *253 respective obligations of the parties to a letter of credit transaction should remain unaffected by the antideficiency laws, whether those obligations arose before or after enactment of Senate Bill No. 1612. Accordingly, we conclude the judgment of the Court of Appeal should be reversed.9 DISPOSITION The judgment of the Court of Appeal is reversed, and the cause remanded for further proceedings consistent with this opinion. GEORGE, C.J., and BAXTER and BROWN, JJ., concur. ***257 **521 WERDEGAR, Justice, concurring and dissenting. I concur in the majority’s conclusion that California Uniform Commercial Code section 5114, subdivision (2)(b), does not excuse Western Security Bank (Western), the issuer, from honoring its letter of credit upon demand for payment by Beverly Hills Business Bank (the Bank), the beneficiary. I would not, however, reach this conclusion under the majority’s reasoning that Senate Bill No. 1612 (Stats.1994, ch. 611) merely declared existing law and that, prior to the bill’s enactment, the antideficiency law had no effect on letters of credit. Instead, I agree with Justice Mosk that section 5114 simply does not bear the interpretation that the use of a letter of credit to support an obligation secured by a mortgage or deed of trust constitutes “fraud in the transaction.” (Cal.U.Com.Code, § 5114, subd. (2); see conc. & dis. opn. of Mosk, J., post, at pp. 262–263 of 62 Cal.Rptr.2d, at pp. 526–527 of 933 P.2d.) Thus, Western was obliged to honor the Bank’s demand for payment. The conclusion that the Bank may properly draw upon the letter of credit does not compel the further conclusion that the antideficiency law ultimately offers no protection to Vista Place Associates. This is illustrated by a comparison of the majority opinion and the separate opinion of Justice Mosk, which agree on the former point but disagree on the latte r. In my view, the Bank’s petition for review of a decision rejecting its claim (as *254 beneficiary) against Western (as issuer) under superseded law does not present an appropriate vehicle for broader pronouncements on the antideficiency law’s effect on other claims and other parties. Because the Legislature in Senate Bill No. 1612 has articulated rules that will govern all future letters of credit, and because letters of credit typically expire after a finite period, the status of residual letters of credit issued before the bill’s effective date will soon become an academic question. In contrast, whether the antideficiency law should as a general matter be expansively or narrowly construed remains of vital importance, as demonstrated by the interest in this case shown by amici curiae involved in the purchase and sale of real estate. Under these circumstances, the principle of judicial restraint counsels against the majority’s sweeping declaration that the reach of the antideficiency law prior to Senate Bill No. 1612 was too narrow to affect the respective obligations of the parties to a letter of credit transaction. Underlying the broad declaration just mentioned is the majority’s erroneous conclusion that Senate Bill No. 1612 merely clarified existing law and, thus, may be applied to transactions entered into before the bill’s operative date. Before that date, the antideficiency law did not distinguish between residential and nonresidential real estate transactions. Now, however, as amended by Senate Bill No. 1612, the antideficiency law does distinguish between residential and nonresidential real estate transactions. New Code of Civil Procedure section 580.7, Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 72 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 13 which the bill added, makes a letter of credit unenforceable when issued to avoid the default of an existing loan and “[t]he existing loan is secured by a purchase money deed of trust or purchase money mortgage on real property containing one to four residential units, at least one of which is owned and occupied, or was intended at the time the existing loan was made, to be occupied by the customer.” (Id., subd. (b)(3).) In light of this provision, we may conclude that letters of credit before Senate Bill No. 1612 either were enforceable in the specified residential real estate transactions but now are not, or were not enforceable in all other real estate transactions but now are. This case does not require us to choose between these possibilities. Either way, Senate Bill No. 1612 went beyond mere clarification to change the effective scope of the antideficiency law. To apply it retroactively would change the legal consequences of past acts. Under these circumstances, it is appropriate to apply the ordinary presumption that a legislative act operates prospectively, and inappropriate to apply to this case the new set of rules articulated in Senate Bill No. 1612. MOSK, Justice, concurring and dissenting opinion. I agree with the majority that the issue before us is not whether Senate Bill No. 1612 **522 ***258 (1993–1994 Reg. Sess.) (hereafter Senate Bill No. 1612) has retrospective application. It does not. *255 Rather, we must determine what the law was before Senate Bill No. 1612 was enacted to provide, in effect, a “standby letter of credit exception” to the antideficiency statutes. I disagree with the majority that Senate Bill No. 1612 did not change prior law. In my view, far from merely “clarifying” the “true” meaning of prior law—as the majority implausibly assert—its numerous amendments and additions to the statutes reversed what the Court of Appeal aptly referred to as “the fifty years of consistent solicitude which California courts have given to the foreclosed purchase money mortgagee.”1 As the majority concede, a legislative declaration of an existing statute’s meaning is neither binding nor conclusive. “The Legislature has no authority to interpret a statute. That is a judicial task.” (Del Costello v. State of California (1982) 135 Cal.App.3d 887, 893, fn. 8, 185 Cal.Rptr. 582; see also California Emp. etc. California Employment Stabilization Com. v. Payne (1947) 31 Cal.2d 210, 213, 187 P.2d 702; Bodinson Mfg. Co. v. California E. Com. (1941) 17 Cal.2d 321, 326, 109 P.2d 935.) As the majority also concede, the legislative interpretation of prior law in this case is particularly unworthy of deference: Nothing in the previous legislative history of letter of credit statutes suggests an intent to create an exception to the antideficiency statutes. Indeed, it is apparently only recently that standby letters of credit have been used in real estate transactions. Accordingly, unlike the majority, I conclude that before Senate Bill No. 1612, standby letters of credit were not exempt from the antideficiency statutes precluding creditors from obtaining a deficiency judgment from a creditor following nonjudicial foreclosure on a real property loan. I. As the Court of Appeal emphasized, before Senate Bill No. 1612, the potential conflict between the letters of credit statutes and the antideficiency statutes posed a question of first impression, arising from the relatively recent innovation of the use of standby letters of credit as additional security *256 for real estate loans. Does the so-called “independence principle”—under which letters of credit stand separate and apart from the underlying transaction—constitute an exception to the antideficiency statutes that bar deficiency judgments after a nonjudicial foreclosure on real property? The majority conclude that even before Senate Bill No. 1612, there was no restriction on the right of a creditor to demand payment on a standby letter of credit after a nonjudicial foreclosure on real property. They are wrong. Under the so-called “independence principle,” the issuer of a standby letter of credit “must honor a draft or demand for payment which complies with the terms of the relevant credit regardless of whether the goods or documents conform to the underlying contract for sale or other contract between the customer and the beneficiary.” (Cal. U. Com.Code, former § 5114, subd. (1), as amended by Stats.1994, ch. 611, § 4.) In turn, the issuer of a standby letter of credit “is entitled to immediate reimbursement of any payment made under the credit and to be put in effectively available funds not later than the day before maturity of any acceptance made under the credit.” (Id., subd. (3).)2 ***259 **523 A standby letter of credit specifically operates as a means of guaranteeing payment in the event Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 73 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 14 of a future default. “A letter of credit is an engagement by an issuer (usually a bank) to a beneficiary, made at the request of a customer, which binds the bank to honor drafts up to the amount of the credit upon the beneficiary’s compliance with certain conditions specified in the letter of credit. The customer is ultimately liable to reimburse the bank. The traditional function of the letter of credit is to finance an underlying customer’s beneficiary contract for the sale of goods, directing the bank to pay the beneficiary for shipment. A different function is served by the ‘standby’ letter of credit, which directs the bank to pay the beneficiary not for his own performance but upon the customer’s default, thereby serving as a guarantee device.” (Note, “Fraud in the Transaction”: Enjoining Letters of Credit During the Iranian Revolution (1980) 93 Harv.L.Rev. 992, 992–993, fns. omitted.) Thus, in practical effect, a standby letter of credit constitutes a promise to provide additional funds in the event of a future default or deficiency. As such, prior to passage of Senate Bill No. 1612, it potentially came up against the restrictions of the antideficiency statutes barring a creditor from obtaining additional funds from a debtor after a nonjudicial foreclosure. Indeed, as *257 the parties concede, nothing in the applicable statutes or legislative history prior to the amendments and additions enacted by Senate Bill No. 1612 created any specific exception to the antideficiency statutes for standby letters of credit. Nor did anything in the applicable statutes or legislative history “imply” that the antideficiency statutes must yield to the so-called “independence principle,” based on public policy or otherwise. We have previously summarized the history and purpose of the antideficiency statutes as follows. “Prior to 1933, a mortgagee of real property was required to exhaust his security before enforcing the debt or otherwise to waive all rights to his security [citations]. However, having resorted to the security, whether by judicial sale or private nonjudicial sale, the mortgagee could obtain a deficiency judgment against the mortgagor for the difference between the amount of the indebtedness and the amount realized from the sale. As a consequence during the great depression with its dearth of money and declining property values, a mortgagee was able to purchase the subject real property at the foreclosure sale at a depressed price far below its normal fair market value and thereafter to obtain a double recovery by holding the debtor for a large deficiency. [Citations.] In order to counteract this situation, California in 1933 enacted fair market value limitations applicable to both judicial foreclosure sales ( [Code Civ. Proc.,] § 726) and private foreclosure sales ( [id.,] § 580a ) which limited the mortgagee’s deficiency judgment after exhaustion of the security to the difference between the fair [market] value of the property at the time of the sale (irrespective of the amount actually realized at the sale) and the outstanding debt for which the property was security. Therefore, if, due to the depressed economic conditions, the property serving as security was sold for less than the fair [market] value as determined under section 726 or section 580a, the mortgagee could not recover the amount of that difference in this action for a deficiency judgment. [Citation.] “In certain situations, however, the Legislature deemed even this partial deficiency too oppressive. Accordingly, in 1933 it enacted section 580b [citation] which barred deficiency judgments altogether on purchase money mortgages. ‘Section 580b places the risk of inadequate security on the purchase money mortgagee. A vendor is thus discouraged from overvaluing the security. Precarious land promotion schemes are discouraged, for the security value of the land gives purchasers a clue as to its true market value. [Citation.] If inadequacy of security results, not from overvaluing, but from a decline in property values during a general or local depression, section 580b prevents the aggravation of the downturn that would result if defaulting *258 purchasers were burdened with large personal liability. Section 580b thus serves as a stabilizing factor in land sales.’ [Citations.] “Although both judicial foreclosure sales and private nonjudicial foreclosure sales provided ***260 **524 for identical deficiency judgments in nonpurchase money situations subsequent to the 1933 enactment of the fair value limitations, one significant difference remained, namely property sold through judicial foreclosure was subject to the statutory right of redemption ( [Code Civ. Proc.,] § 725a), while property sold by private foreclosure sale was not redeemable. By virtue of sections 725a and 701, the judgment debtor, his successor in interest or a junior lienor could redeem the property at any time during one year after the sale, frequently by tendering the sale price. The effect of this right of redemption was to remove any incentive on the part of the mortgagee to enter a low bid at the sale (since the property could be redeemed for that amount) and to encourage the making of a bid approximating the fair market value of the security. However, since real property purchased at a private foreclosure sale was not subject to redemption, the mortgagee by electing this remedy, could gain irredeemable title to the property by a bid substantially below the fair value and still collect a deficiency judgment for the difference between the fair value of the security and the outstanding indebtedness. Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 74 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 15 “In 1940 the Legislature placed the two remedies, judicial foreclosure sale and private nonjudicial foreclosure sale on a parity by enacting section 580d [citation]. Section 580d bars ‘any deficiency judgment’ fol lowing a private foreclosure sale. ‘It seems clear ... that section 580d was enacted to put judicial enforcement on a parity with private enforcement. This result could be accomplished by giving the debtor a right to redeem after a sale under the power. The right to redeem, like proscription of a deficiency judgment, has the effect of making the security satisfy a realistic share of the debt. [Citation.] By choosing instead to bar a deficiency judgment after private sale, the Legislature achieved its purpose without denying the creditor his election of remedies. If the creditor wishes a deficiency judgment, his sale is subject to statutory redemption rights. If he wishes a sale resulting in nonredeemable title, he must forego the right to a deficiency judgment. In either case his debt is protected.’ ” (Cornelison v. Kornbluth (1975) 15 Cal.3d 590, 600–602, 125 Cal.Rptr. 557, 542 P.2d 981, fns. omitted.) Over the several decades since their enactment, our courts have construed the antideficiency statutes liberally, rejecting attempts to circumvent the proscriptions against deficiency judgments after nonjudicial foreclosure. “It is well settled that the proscriptions of section 580d cannot be avoided through artifice....” *259 (Rettner v. Shepherd (1991) 231 Cal.App.3d 943, 952, 282 Cal.Rptr. 687; accord, Freedland v. Greco (1955) 45 Cal.2d 462, 468, 289 P.2d 463 [In construing the antideficiency statutes, “ ‘that construction is favored which would defeat subterfuges, expediencies, or evasions employed to continue the mischief sought to be remedied by the statute, or ... to accomplish by indirection what the statute forbids.’ ”]; Simon v. Superior Court (1992) 4 Cal.App.4th 63, 78, 5 Cal.Rptr.2d 428.) Nor can the antideficiency protections be waived by the borrower at the time the loan was made. (See Civ.Code, § 2953 [such waiver “shall be void and of no effect”]; Valinda Builders, Inc. v. Bissner (1964) 230 Cal.App.2d 106, 112, 40 Cal.Rptr. 735 [The debtor’s waiver agreement was “contrary to public policy, void and ineffectual for any purpose.”].) In this regard, as the Court of Appeal observed, two decisions are of particular relevance here: Union Bank v. Gradsky (1968) 265 Cal.App.2d 40, 71 Cal.Rptr. 64 (hereafter Gradsky ), and Commonwealth Mortgage Assurance Co. v. Superior Court (1989) 211 Cal.App.3d 508, 259 Cal.Rptr. 425 (hereafter Commonwealth ). In Gradsky, the Court of Appeal held that Code of Civil Procedure section 580d operated to preclude a lender from collecting the unpaid balance of a promissory note from the guarantor after a nonjudicial foreclosure on the real property securing the debt. It concluded that if the guarantor could successfully assert an action against the borrower for reimbursement, “the obvious result is to permit the recovery of a ‘deficiency’ judgment against the [borrower] following a nonjudicial sale of the security under a different label.” (Gradsky, supra, 265 Cal.App.2d at pp. 45–46, 71 Cal.Rptr. 64.) “The Legislature clearly ***261 **525 intended to protect the [borrower] from personal liability following a nonjudicial sale of the security. No liability, direct or indirect, should be imposed upon the [borrower] following a nonjudicial sale of the security. To permit a guarantor to recover reimbursement from the debtor would permit circumvention of the legislative purpose in enacting section 580d.” (Id. at p. 46, 71 Cal.Rptr. 64.) In Commonwealth, borrowers purchased real property with a loan secured by promissory notes provided by a bank. At the bank’s request, they obtained policies of mortgage guarantee insurance to secure payment on the promissory notes. They also signed indemnity agreements promising to reimburse the mortgage insurer for any funds it paid out under the policy. When the borrowers defaulted on the promissory notes, the bank foreclosed nonjudicially on the real property. It then collected on the mortgage insurance; the mortgage insurer then brought an action for reimbursement on the indemnity agreements. *260 The Court of Appeal in Commonwealth held that reimbursement was barred by Code of Civil Procedure section 580d. It rejected the argument that the indemnity agreements constituted separate and independent obligations: “The instant indemnity agreements add nothing to the liability [the borrowers] already incurred as principal obligors on the notes.... To splinter the transaction and view the indemnity agreements as separate and independent obligations ... is to thwart the purpose of section 580d by a subterfuge [citation], a result we cannot permit.” (Commonwealth, supra, 211 Cal.App.3d at p. 517, 259 Cal.Rptr. 425.) The majority’s attempt to distinguish Gradsky and Commonwealth, by characterizing them as grounded in subrogation law, is unpersuasive. Indeed, in Commonwealth, subrogation law was not directly in issue; the indemnity obligation provided a contract upon which Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 75 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 16 to base collection.3 The majority miss the point. As the Court of Appeal in this matter explained: “Gradsky and Commonwealth reflect the strong judicial concern about the efforts of secured real property lenders to circumvent section 580d by the use of financial transactions between debtors and third parties which involve post-nonjudicial foreclosure debt obligations for the borrowers. Their common and primary focus is on the lender’s requirement that the debtor make arrangements with a third party to pay a portion or all of the mortgage debt remaining after a foreclosure, i.e., to pay the debtor’s deficiency.” The Legislature, in enacting Senate Bill No. 1612, expressly abrogated the Court of Appeal decision in this matter and gave primacy to the so-called “independence principle” as against the antideficiency protections. Its additions and amendments to the statutes—lobbied for, and drafted by, the California Bankers Association—significantly altered prior law. Senate Bill No. 1612, therefore, should have prospective application only. *261 In their strained attempt to reach the conclusion that Senate Bill No. 1612 governs this case, the majority adopt the fiction that a standby letter of credit is an “idiosyncratic” form of “security” or the “functional equivalent” of cash collateral. They offer no sound support for such an approach. There is none.4 ***262 **526 As the Court of Appeal observed, from the perspective of the debtor, a standby letter of credit is not cash or its equivalent. It is, instead, a promise to provide additional funds in the event of future default or deficiency and has the practical consequence of requiring the debtor to pay additional money on the debt after default or foreclosure.5 Moreover, unlike cash, which can be pledged as collateral security only once, a standby letter of credit does not require a debtor to part with its own funds until payment is made and thus permits a borrower to use standby letters of credit in a large number of transactions separately. Cash collateral, by contrast, does not impose personal liability on the borrower following a trustee’s sale and does not encourage speculative lending practices. As the Court of Appeal observed: “For us to conclude that such use of a standby letter of credit is the same as an increased cash investment (whether or not from borrowed funds) is to deny reality and to invite the very overvaluation and potential aggravation of an economic downturn which the antideficiency legislation was enacted originally to prevent.” *262 II. The Court of Appeal correctly concluded that, before Senate Bill No. 1612, there was no implied exception to the antideficiency statutes for letters of credit. It erred, however, in holding that Western Security Bank, N.A. (Western) could have refused to honor the letter of credit on the ground that the Beverly Hills Business Bank (Bank), in presenting the letters of credit after a nonjudicial foreclosure, worked an “implied” fraud on Vista Place Associates (Vista). The Court of Appeal cited former California Uniform Commercial Code former section 5114, subdivision (2)(b), which provides that when there has been a notification from the customer of “fraud, forgery or other defect not apparent on the face of the documents,” the issuer “may”—but is not obligated to—“honor the draft or demand for payment.”(Cal.U.Com.Code, § 5114, subd. (2)(b) as amended by Stats.1994, ch. 611, § 4.)6 The statute is inapplicable under the present facts. Western, presented with a demand for payment on a letter of credit, was limited to determining whether the documents presented by the beneficiary complied with the letter of credit—a purely ministerial task of comparing the documents presented against the description of the documents in the letter of credit. If the documents comply on their face, the issuer must honor the draw, regardless of disputes concerning the underlying ***263 **527 transaction. (Lumbermans Acceptance Co. v. Security Pacific Nat. Bank (1978) 86 Cal.App.3d 175, 178, 150 Cal.Rptr. 69; Cal. U. Com.Code, former § 5109, subd. (2) as added by Stats.1963, ch. 819, § 1, p. 1934.) Thus, in this case, Western was not entitled to look beyond the documents presented by the Bank and refuse to honor the standby letter of credit based on a potential violation of the antideficiency statutes in the underlying transaction. In my view, the concurring and dissenting opinion by Justice Kitching in the Court of Appeal correctly reconciled the policies behind standby letter of credit law and the antideficiency provisions of Code of Civil Procedure section 580d, as they existed before Senate Bill No. 1612. Thus, I would conclude that Western was obligated, under the so-called “independence principle,” to honor the standby letter of credit presented by the Bank. None of the limited exceptions to that rule applied. Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 76 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 17 Western was not, however, without recourse. It was entitled to seek reimbursement from Vista, pursuant *263 to former California Uniform Commercial Code former section 5114, subdivision (3) and its promissory notes. Vista, in turn, could seek disgorgement from the Bank, if it has not legally waived its protection under Code of Civil Procedure section 580d—an issue that is not before us and should be remanded to the trial court. As Justice Kitching’s concurrence and dissent concluded, “[t]his procedure would retain certainty in the California letter of credit market while implementing the policies supporting section 580d.” KENNARD, J., concurs. All Citations 15 Cal.4th 232, 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534, 97 Cal. Daily Op. Serv. 2554, 97 Daily Journal D.A.R. 4507 Footnotes 1 In pertinent part, Code of Civil Procedure section 580d provides: “No judgment shall be rendered for any deficiency upon a note secured by a deed of trust or mortgage upon real property or an estate for years therein hereafter executed in any case in which the real property or estate for years therein has been sold by the mortgagee or trustee under power of sale contained in the mortgage or deed of trust.” 2 In 1996, the Legislature completely revised division 5 of the California Uniform Commercial Code, which pertains to letters of credit. (Stats.1996, ch. 176.) The enactment of chapter 176 repealed the former division 5 and added a new division 5. (Stats.1996, ch. 176, §§ 6, 7.) The new provisions apply to letters of credit issued after the statute’s effective date. (Stats.1996, ch. 176, § 14.) Letters of credit issued earlier are to be dealt with as though the repeal had not occurred. (Stats.1996, ch. 176, § 15.) We have no occasion in this case to consider the provisions of the new division 5. The Legislature (Stats.1996, ch. 497, § 7) later amended a statutory reference found in California Uniform Commercial Code section 5114 as it existed before chapter 176 was enacted. This second legislative action might appear to restore the prior section 5114 from the repealed former division 5 and possibly leave two sections numbered 5114 in the new division 5. (See Cal. Const., art. IV, § 9; Gov.Code, § 9605.) We have no occasion in this case to address the meaning or effect of this seeming incongruity either. All references to section 5114 in this opinion are to California Uniform Commercial Code section 5114 as it existed before the 1996 legislation. 3 The parties’ arrangements reflected a common use of letters of credit. A letter of credit typically is an engagement by a financial institution (the issuer), made at the request of a customer (also referred to as the applicant or account party) to pay a specified sum of money to another person (the beneficiary) upon compliance with the conditions for payment stated in the letter of credit, i.e., presentation of the documents specified in the letter of credit. (See Gregora, Letters of Credit in Real Property Finance Transactions (Spring 1991) 9 Cal. Real Prop. J. 1, 1–2.) A letter of credit transaction involves at least three parties and three separate and independent relationships: (1) the relationship between the issuer and the beneficiary created by the letter of credit; (2) the relationship between the customer and the beneficiary created by a contract or promissory note, with the letter of credit securing the customer’s obligations to the beneficiary under the contract or note; and (3) the relationship between the customer and the issuer created by a separate contract under which the issuer agrees to issue the letter of credit for a fee and the customer agrees to reimburse the issuer for any amounts paid out under the letter of credit. (Gregora, Letters of Credit in Real Property Finance Transactions, supra, 9 Cal. Real Prop. J. at p. 2; San Diego Gas & Electric Co. v. Bank Leumi, supra, 42 Cal.App.4th at pp. 932–933, 50 Cal.Rptr.2d 20; see Voest–Alpine Intern. Corp. v. Chase Manhattan Bank (2d Cir.1983) 707 F.2d 680, 682; and Colorado Nat. Bank, etc. v. Bd. of County Com’rs (Colo.1981) 634 P.2d 32, 36–38, for a discussion of the history and structure of letter of credit transactions.) Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 77 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 18 Letters of credit can function as payment mechanisms. For example, in sales transactions a letter of credit assures the seller of payment when parting with goods, while the conditions for payment specified in the letter of credit (often a third party’s documentation, such as a bill of lading) assure the buyer the goods have been shipped before payment is made. (Gregora, Letters of Credit in Real Property Finance Transactions, supra, 9 Cal. Real Prop. J. at p. 3.) In the letter of credit’s role as a payment mechanism, a payment demand occurs in the ordinary course of business and is consistent with full performance of the underlying obligations. (Ibid.) The use of letters of credit has now expanded beyond that function, and they are employed in many other types of transactions in which one party requires assurances the other party will perform. (Gregora, Letters of Credit in Real Property Finance Transactions, supra, 9 Cal. Real Prop. J. at p. 3.) When used to support a debtor’s obligations under a promissory note or other debt instrument, the so-called “standby” letter of credit typically provides that the issuer will pay the creditor when the creditor gives the issuer written certification that the debtor has failed to pay the amount due under the debtor’s underlying obligation to the creditor. (Ibid.) Thus, a payment demand under a standby letter of credit indicates that there is a problem—either the customer is in financial difficulty, or the beneficiary and the customer are in a dispute. (Ibid.) 4 The “ ‘presumption of substantial change’ ” mentioned in the quoted passage refers to the presumption that amendatory legislation accomplishing substantial change is intended to have only prospective effect. Some courts have thought changes categorized as merely formal or procedural present no problem of retrospective operation. However, as mentioned above, California has rejected this type of classification: “In truth, the distinction relates not so much to the form of the statute as to its effects. If substantial changes are made, even in a statute which might ordinarily be classified as procedural, the operation on existing rights would be retroactive because the legal effects of past events would be changed, and the statute will be construed to operate only in futuro unless the legislative intent to the contrary clearly appears.” (Aetna Cas. & Surety Co. v. Ind. Acc. Com., supra, 30 Cal.2d at p. 394, 182 P.2d 159; cf. Kizer v. Hanna, supra, 48 Cal.3d at pp. 7–8, 255 Cal.Rptr. 412, 767 P.2d 679.) 5 Section 2 of Senate Bill No. 1612 added Code of Civil Procedure section 580.5, which provides in pertinent part: “(b) With respect to an obligation which is secured by a mortgage or a deed of trust upon real property or an estate for years therein and which is also supported by a letter of credit, neither the presentment, receipt of payment, or enforcement of a draft or demand for payment under the letter of credit by the beneficiary of the letter of credit nor the honor or payment of, or the demand for reimbursement, receipt of reimbursement or enforcement of any contractual, statutory or other reimbursement obligation relating to, the letter of credit by the issuer of the letter of credit shall, whether done before or after the judicial or nonjudicial foreclosure of the mortgage or deed of trust or conveyance in lieu thereof, constitute any of the following: [¶] (1) An action within the meaning of subdivision (a) of Section 726, or a failure to comply with any other statutory or judicial requirement to proceed first against security. [¶] (2) A money judgment for a deficiency or a deficiency judgment within the meaning of Section 580a, 580b, or 580d, or subdivision (b) of Section 726, or the functional equivalent of any such judgment. [¶] (3) A violation of Section 580a, 580b, 580d, or 726.” (Code Civ. Proc., § 580.5, subd. (b), as added by Stats.1994, ch. 611, § 2.) Section 4 of Senate Bill No. 1612 made certain technical, nonsubstantive changes to section 5114, which embodies the independence principle applicable to letter of credit payment obligations. (§ 5114, as amended by Stats.1994, ch. 611, § 4.) 6 We do not address the effect of section 3 of Senate Bill No. 1612, which added section 580.7 to the Code of Civil Procedure. This section provides, in pertinent part: “(b) No letter of credit shall be enforceable by any party thereto in a loan transaction in which all of the following circumstances exist: [¶] (1) The customer is a natural person. [¶] (2) The letter of credit is issued to the beneficiary to avoid a default of the existing loan. [¶] (3) The existing loan is secured by a purchase money deed of trust or purchase money mortgage on real property containing one to four residential units, at least one of which is owned and occupied, or was intended at the time the existing loan was made, to be occupied by the customer. [¶] (4) The letter of credit is issued after the effective date of this section.” (Code Civ. Proc., § 580.7, subd. (b), italics added, as added by Stats.1994, ch. 611, § 3.) The italicized language, not found in the other statutory changes made by Senate Bill No. 1612, suggests the Legislature intended section 580.7 to have prospective effect only. However, this case does not involve any interpretation of this section or its effect, Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 78 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 19 and so we express no view on those matters. 7 The precedential value of such statements in Commonwealth Mortgage also is clouded by a factual enigma the court left unresolved. As the Court of Appeal recognized, the lender in that case purchased the real property security at the trustee’s sale for a full credit bid, which ought to have satisfied the debt. (Commonwealth Mortgage, supra, 211 Cal.App.3d at p. 512, fn. 3, 259 Cal.Rptr. 425.) Despite the apparent absence of any deficiency, the court deemed it unnecessary to decide whether a deficiency in fact remained before discussing the effect of Code of Civil Procedure section 580d’s prohibition of deficiency judgments. (Commonwealth Mortgage, supra, 211 Cal.App.3d at p. 515, 259 Cal.Rptr. 425.) 8 To the extent that resort to analogy is appropriate for such a singular legal creation as the standby letter of credit, its closest relative would seem to be cash collateral. As one commentator noted: “In view of the relative positions of the beneficiary, the [customer], and the issuing bank, the standby letter of credit is more analogous to a cash deposit left with the beneficiary than it is to the traditional letter of credit or to the performance bond. Because the beneficiary generates all the documents necessary to obtain payment, he has the power to appropriate the funds represented by the standby letter of credit at any time.... [¶] Even though the standby letter of credit is functionally equivalent to a cash deposit, it differs from a cash deposit because the customer does not have to part with its own funds until payment is made and it is forced to reimburse the issuing bank. Because the cash-flow burden might otherwise be prohibitive, this is a great advantage to a party who enters into a large number of transactions simultaneously. Moreover, the beneficiary is satisfied; while it does not actually possess the funds, as it would if a cash deposit were used, it is protected by the credit of a financial institution.” (Comment, The Independence Rule in Standby Letters of Credit (1985) 52 U. Chi. L.Rev. 218, 225–226, fns. omitted; see Dolan, Letters of Credit, supra, § 1.06, pp. 1–24 to 1–25, for a discussion of cases illustrating use of standby credits in lieu of cash, bonds, and other security.) 9 Western belatedly claims it should not be liable for prejudgment interest on the amount of the letter of credit it dishonored. It argues it should not be “punished” for seeking a declaration of its rights in a novel and complex case. The Court of Appeal decided that “if it is ultimately determined that Western is liable to the Bank on the letters of credit then it must follow that it is liable for legal interest thereon from and after the day when its obligation to pay on the letters arose. (Civ.Code, § 3287, subd. (a).)” Western did not petition for review of this aspect of the Court of Appeal decision. In any event, Western’s liability for prejudgment interest is clear. The award of this interest is not imposed for the sake of punishment. The award depends only on whether Western knew or could compute the amount the Bank was entitled to recover on the letters of credit. (Fireman’s Fund Ins. Co. v. Allstate Ins. Co. (1991) 234 Cal.App.3d 1154, 1173, 286 Cal.Rptr. 146.) The Court of Appeal correctly assessed Western’s liability for prejudgment interest. 1 Among other things, Senate Bill No. 1612 amended Civil Code section 2787, added Code of Civil Procedure sections 580.5 and 580.7, and amended California Uniform Commercial Code former section 5114. (See Stats.1994, ch. 611, §§ 1–6.) It appears, however, that our decision in this matter will have limited application. It will operate only when: (a) a lender obtained a standby letter of credit prior to September 15, 1994, the effective date of Senate Bill No. 1612, to support a transaction secured by a deed of trust against real property; (b) the creditor defaulted on the deed of trust; (c) the lender elected to foreclose on by way of trustee’s sale rather than through judicial foreclosure; and (d) the lender thereafter demanded payment under the standby letter of credit. In view of the limited precedential value of this case, a better course would have been to dismiss review as improvidently granted. 2 As the reference to “goods or documents” in the statute suggests, the drafters appear to have contemplated use of letters of credit in commercial financial transactions, not as additional security in real estate transactions. 3 In any event, the analogy between standby letters of credit and guarantees is not as “forced” as the majority would suggest. As one commentator recently observed, “upon closer analysis, the borders between standby credits and Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 79 Western Security Bank v. Superior Court, 15 Cal.4th 232 (1997) 933 P.2d 507, 62 Cal.Rptr.2d 243, 32 UCC Rep.Serv.2d 534... © 2021 Thomson Reuters. No claim to original U.S. Government Works. 20 contracts of guarantee are not so well settled as they may first appear.” (McLaughlin, Standby Letters of Credit and Guaranties: An Exercise in Cartography (1993) 34 Wm. & Mary L.Rev. 1139, 1140; see also Alces, An Essay on Independence, Interdependence, and the Suretyship Principle (1993) 1993 U.Ill. L.Rev. 447 [rejecting distinction between letters of credit and “secondary obligations,” i.e., guarantees and sureties].) Moreover, “courts have long recognized that, in a sense, issuers of credits ‘must be regarded as sureties.’ [Citation.] A seller of goods often insists on a commercial letter of credit because he is unsure of the buyer’s ability to pay. The standby letter of credit arises out of situations in which the beneficiary wants to guard against the applicant’s nonperformance. In both instances, the credit serves in the nature of a guaranty.” Dolan, The Law of Letters of Credit: Commercial and Standby Credits (2d ed. 1991) § 2.10[1], pp. 2–61–2–62.) 4 The principal “authority” cited by the majority for the proposition that standby letters of credit are the “functional equivalent” of cash collateral is a student law review note published over a decade ago—and apparently never cited in any case in California or elsewhere. (Comment, The Independence Rule in Standby Letters of Credit (1985) 52 U.Chi. L.Rev. 218.) Significantly, the note nowhere discusses the use of standby letters of credit in transactions involving purchase money mortgages or the potential conflict between the so-called “independence principle” and antideficiency statutes. Indeed, it assumes that “[t]hose who engage in standby letter of credit transactions are usually large corporate or governmental entities with access to high-quality counsel and are thus in a position to evaluate and respond to the risks involved.” (Id. at p. 238.) Needless to say, that is often not the case in real property transactions, particularly those involving residential property. As a leading commentator observed: “the motivation of the parties to a real estate secured transaction is frequently other than purely commercial, and their relative bargaining power is often grossly disproportionate.” (Hetland & Hansen, The “Mixed Collateral” Amendments to California’s Commercial Code—Covert Repeal of California’s Real Property Foreclosure and Antideficiency Provisions or Exercise in Futility? (1987) 75 Cal.L.Rev. 185, 188, fn. omitted.) 5 Although it appears to be uncommon, an issuer of a standby letter of credit may demand security from its customer in the form of cash collateral or personal property as a condition for issuing the letter of credit. In the event of a draw on the letter of credit, the issuer would then have recourse to the pledged security, up to the value of the draw, without requiring its customer to pay additional money. Whether a real estate lender’s draw on a standby letter of credit backed by security, and not by a mere promise to pay, would fall within the mixed security rule is a difficult question that need not be addressed here. 6 An issuer’s obligations and rights are now governed by California Uniform Commercial Code section 5108, enacted in 1996 as part of Senate Bill No. 1599. (Stats.1996, ch. 176, § 7.) The same legislation repealed section 5114, relating to the issuer’s duty to honor a draft or demand for payment, as part of the repeal of division 5, Letters of Credit. (Stats.1996, ch. 176, § 6.) End of Document © 2021 Thomson Reuters. No claim to original U.S. Government Works. Administrative Review Board Meeting of 1/20/2021 Item 2 - City Additional Briefing Page 80