COASTSIDE FISHING CLUB v. CALIFORNIA RESOURCES AGENCY

Filed 1/14/08

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

The trial court interpreted a statute as conferring authority on an executive branch agency to enter a contract to obtain private funds to defray the costs of implementing a statutory scheme for which the Legislature failed to provide adequate public funds. This appeal challenges that interpretation of the statute primarily on the ground that it is inconsistent with the rule against delegation of legislative power implicit in the doctrine of separation of powers.

FACTS AND PROCEEDINGS BELOW

On August 27, 2004, respondents, the California Resources Agency (Agency) and the California Department of Fish and Game (DFG), which is supervised by the Agency, entered into a memorandum of understanding (MOU) with respondent Resources Legacy Fund Foundation (Foundation), a private nonprofit organization,^[1]for the purpose of facilitating implementation of the Marine Life Protection Act (MLPA). (Fish & G. Code,  2850 et seq.)^[2] As later explained in detail, the Legislature failed to appropriate funds sufficient to support the new and substantial planning responsibilities the MLPA required DFG to complete within a specified period. The MOU was designed to rectify this problem through creation of a public-private partnership providing the resources necessary to comply with these mandates.

Appellants, Coastside Fishing Club, a nonprofit organization representing recreational fishermen, and Michael J. Nolan, a member of the Club residing in Del Norte County and a California taxpayer, claim that the MOU was not authorized by the MLPA; was improperly devised by the Agency and DFG to appropriate money in a manner other than that prescribed by the California Constitution (Cal. Const., art. XVI,  7 [Money may be drawn from the Treasury only through an appropriation made by law and upon a Controllers duly drawn warrant]), and thereby also violated the constitutional doctrine of separation of powers (id., art. III,  3 [The powers of state government are legislative, executive, and judicial. Persons charged with the exercise of one power may not exercise either of the others except as permitted by this Constitution]).

On December 14, 2005, appellants filed in the Del Norte County Superior Court a complaint for declaratory and injunctive relief and petition for writ of mandate (Code Civ. Proc.,  1085) seeking, among other remedies, a judgment declaring that the private funding of administrative acts and regulatory processes is unconstitutional under the California and U.S. Constitutions. On July 6, 2006, after the case had been transferred to the San Francisco Superior Court, state respondents filed a motion for judgment on the pleadings, and the Foundation joined in the motion. On the same date, the Foundation demurred to appellants pleading on the grounds that the trial court had no jurisdiction over the subject of the causes of action alleged in the pleading, and the pleading did not state facts sufficient to constitute a cause of action (Code Civ. Proc.,  430.10, subds. (a), (e)), and state respondents joined in support.

On September 6, 2006, the trial court issued an order determining that (1) a provision of the MLPAsubdivision (b)(1) of section 2855authorized the Agency and DFG to enter into the MOU; (2) the resources provided by the Foundation under the MOU are not monies drawn on the state treasury and the MOU therefore does not involve the legislative power to appropriate money in violation of article XVI, section 7, of the California Constitution; (3) the use by an executive branch agency of public funds to seek private matching funds does not violate the doctrine of separation of powers set forth in article III, section 3, of our Constitution; and (4) the resources provided by the Foundation do not amount to a gift and the MOU therefore does not violate Government Code section 11005, which requires approval by the California Director of Finance of certain gifts or dedications to the state. For these reasons, the court granted the motion for judgment on the pleadings without leave to amend, sustained the demurrer without leave to amend, and dismissed with prejudice the complaint for declaratory and injunctive relief and petition for writ of mandate. Judgment for respondents was entered on September 21, 2006.

This timely appeal was filed on November 3, 2006.

DISCUSSION

I.

The Standard of Review

Orders granting judgment on the pleadings or sustaining a demurrer are reviewed in this court de novo. (Gerawan Farming, Inc. v. Lyons (2000) 24 Cal.4th 468, 515 [judgment on the pleadings]; Filet Menu, Inc. v. Cheng (1999) 71 Cal.App.4th 1276, 1279 [demurrer].)  Because a demurrer both tests the legal sufficiency of the complaint and involves the trial courts discretion, an appellate court employs two separate standards of review on appeal. [Citation] . . . Appellate courts first review the complaint de novo to determine whether or not the . . . complaint alleges facts sufficient to state a cause of action under any legal theory, [citation], or in other words, to determine whether or not the trial court erroneously sustained the demurrer as a matter of law. [Citation.] (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 879, fn. omitted.) [] Second, if a trial court sustains a demurrer without leave to amend, appellate courts determine whether or not the plaintiff could amend the complaint to state a cause of action. [Citation.] [Citation.] (Filet Menu, Inc. v. Cheng, pp. 1279-1280.) Because appellants stand on the complaint as alleged and propose no amendments, the only question for us is whether the allegations of the complaint state any legally sufficient claims.

We do not review the reasons for the trial courts ruling; if it is correct on any theory, even one not mentioned by the court, and even if the court made its ruling for the wrong reason, it will be affirmed. (Davey v. Southern Pacific Co. (1897) 116 Cal. 325, 329-330; see also In re Marriage of Burgess (1996) 13 Cal.4th 25, 32; Day v. Alta Bates Medical Center (2002) 98 Cal.App.4th 243, 252, fn. 1.)

II.

The Marine Life Protection Act

The MLPA declares that Californias marine protected areas (MPAs)^[[3]] were established on a piecemeal basis rather than according to a coherent plan and sound scientific guidelines. Many of these MPAs lack clearly defined purposes, effective management measures and enforcement. As a result, the array of MPAs creates the illusion of protection while falling far short of its potential to protect and conserve living marine life and habitat. ( 2851, subd. (a).) In order to improve the design and management of the MPA system, the MLPA directs the Fish and Game Commission (Commission)which independently establishes the policies DFG must follow in administering programs and enforcing laws pertaining to fish, wildlife, and natural resources of the stateto adopt a Marine Life Protection Program designed to achieve legislatively specified goals. ( 2853, subd. (b)(1)-(6), 2859.) The Commission, which is not a party to this action, is also directed to adopt a master plan that guides the adoption and implementation of the Marine Life Protection Program . . . and decisions regarding the siting of new MPAs and major modifications of existing MPAs. ( 2855, subd. (a).) Like DFG, the Commission is located within the Agency; however, unlike the DFG or the Agency, the Commission is an independent constitutional body. (Cal. Const., art. IV.  20.)

DFGs responsibilities under the MLPA are to prepare a draft master plan for consideration by the Commission, convene a master plan team to assist in that enterprise, and to carry out those duties in a specified manner (which is described, post, at pp. 26-30).The particular provision of the MLPA at issue, subdivision (b)(1) of section 2855, provides that in order to facilitate adoption of a master plan by the Commission, DFG shall prepare, or by contractshall cause to be prepared, a [draft] master plan compliant with the MLPA, and shall convene a master plan team to advise and assist in the preparation of the master plan, or hire a contractor with relevant expertise to assist in convening such a team. (Italics added.) Appellants chief claim is that the contracts authorized by this language are only those using public funds for the purpose of procuring expert assistance relating either to preparation of the draft master plan or the convening of a master plan team. Appellants maintain that the Foundation lacks the requisite expertise relevant to those matters^[4]and that, in any case, it was not the purpose of the MOU to obtain such assistance. As appellants see it, the only and very different purpose of the MOU is simply to provide DFG private funds to defray the costs of implementing the MLPA. Appellants claim that neither the Agency nor DFG are statutorily authorized to solicit and employ private funds for that purpose, by means of contract or otherwise, and that implementation of the MLPA may be carried out only with public funds. According to appellants, the much broader interpretation of the statute adopted by the trial court cannot be reconciled with the doctrine of separation of powers embodied in article III, section 3, of the California Constitution.

Appellants also claim the funds the Foundation provided the Agency and DFG pursuant to the MOU were a gift to the state required by law to be approved by the Director of Finance. (Gov. Code,  11055.) Because it was not so approved, appellants claim it is void. We address this issue first because a finding that the funds were a void gift would render it unnecessary to reach the other issues presented.

III.

The Funds Provided by the Foundation Were Not a Gift

Appellants claim that the Foundation received no consideration for the funds it provided pursuant to the MOU, which was for that reason not a contract (Civ. Code,  1550), and the funds were therefore a gift to the state. Because such gifts must be approved by the Director of Finance (Gov. Code,  11055), and the MOU was not so approved, appellants claim the gift is void. The trial court correctly rejected this claim. By statute, consideration for a promise to pay money may consist of [a]ny benefit conferred, or agreed to be conferred, upon the promisor, by any other person, to which the promisor is not lawfully entitled. (Civ. Code,  1605, italics added.) Appellants contend that, because the MOU cannot be read to require DFG or the [Agency] to do anything of substance that they were not otherwise required to do by statute, the Foundation was legally entitled to the benefits provided by the MOU, and lawful consideration was therefore absent.

This argument is inexplicably indifferent to the numerous duties imposed on the Agency and DFG under the MOU that are not mandated by (but, as will be seen, are fully consistent with) the MLPA. First, unlike the MLPA, which imposes no specific duties on the Agency, the MOU requires the Secretary of the Agency to establish and appoint seven to ten members of a California MLPA Blue Ribbon Task Force (Task Force) charged not only with overseeing DFGs preparation of the draft master plan, but also with (i) preparing a comprehensive strategy for long-term funding of planning, management and enforcement of MPAs; (ii) developing a recommendation for improved coordination of the management of MPAs with federal agencies involved in ocean management; and (iii) selecting one of its members to serve as the liaison to the Central [MLPA] Coast Stakeholder Group, which the MOU requires the Task Force and DFG to create to assist it in developing proposed alternative networks of MPAs in an area along the central coast. The Agency is also obliged by the MOU, but not by the MLPA, to dedicate a senior policy level staff person to provide advice to the Task Force and its Executive Director, and to provide office space, telecommunications equipment and support, and general clerical support necessary to fulfill the Agencys commitments under [the] MOU.

The MOU also expands DFGs responsibilities relating to preparation of a draft master plan beyond those mandated by the MLPA. For example, the MOU requires DFG to prepare the master plan in phases. As part of the first phase, DFG is required to prepare and submit to the Commission a Master Plan Framework to be used to develop networks of MPAs within individual regions during succeeding master plan development phases; and also to expand the membership of the master plan team beyond that required by the MLPA ( 2855, subd. (b)(3)), by adding up to eight additional scientists, reestablishing the team as the Master Plan Science Advisory Team, and directing it not just to perform the responsibilities imposed on the master plan team by the MLPA but also to assist the MOU-created Task Force.^[5]Additionally, the MOU specifies that DFG must use its best efforts to hire and fund five full-time managerial, scientific, technical and legal staff persons to provide additional assistance to the Task Force. In September and March of each year, DFG is required to provide the Foundation written semi-annual reports describing its success in complying with the foregoing requirements and others.

For the foregoing reasons, appellants claim that consideration is lacking is manifestly untenable. Because the duties the Agency and DFG promised to undertake clearly exceed those mandated by the MLPA, they provided consideration for that which the Foundation promised in return. Therefore, as the trial court concluded, the MOU is a bilateral contract with consideration on both sides of the bargain. The private funds the Foundation promised to and did provide the Agency and DFG pursuant to the MOU were not a gift to the state requiring approval by the Director of Finance. (Gov. Code,  11005.)

IV.

Respondents Were Authorized by the MLPA to Enter

Into the MOU, and Their Exercise of That Authority

Does Not Violate the Doctrine of Separation of Powers

A.

The threshold question is the scope of the contracting authority conferred upon DFG by subdivision (b)(1) of section 2855.

Pursuant to established principles, our first task in construing a statute is to ascertain the intent of the Legislature so as to effectuate the purpose of the law. In determining such intent, a court must look first to the words of the statute themselves, giving to the language its usual, ordinary import and according significance, if possible, to every word, phrase and sentence in pursuance of the legislative purpose. A construction making some words surplusage is to be avoided. The words of the statute must be construed in context, keeping in mind the statutory purpose, and statutes or statutory sections relating to the same subject must be harmonized, both internally and with each other, to the extent possible. [Citations.] Where uncertainty exists consideration should be given to the consequences that will flow from a particular interpretation. [Citation.] Both the legislative history of the statute and the wider historical circumstances of its enactment may be considered in ascertaining the legislative intent. [Citations.] A statute should be construed whenever possible so as to preserve its constitutionality. [Citations.] (Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379, 1386-1387.)

Appellants claim the language of subdivision (b)(1) of section 2855 is plain. As they see it, the provision simply commands DFG to itself prepare a draft master plan, or by contract . . . cause to be prepared a master plan, and to convene a master plan team to advise and assist in the preparation of the master plan, or hire a contractor with relevant expertise to assist in convening such a team. Appellants maintain that the statutory language limits the assistance that may be obtained by contract to that of parties possessing the expertise necessary to either prepare the master plan or assist in convening the master plan team, and to pay for those services with public funds; it does not include contracts to procure private resources in return for the performance of public services. We cannot say appellants view of the statute is manifestly unreasonable. Executive branch agencies are not commonly authorized to solicit and employ private funds to defray the costs of implementing public laws, because adequate appropriations of public funds for that purpose are ordinarily made by the Legislature. It is therefore not unreasonable to assume that if such an authorization was intended the Legislature would have said so explicitly.

Respondents acknowledge that DFGs statutory authority to enter into the MOU is not express. However, resting on the settled principle that   officials may exercise such additional powers as are necessary for the due and efficient administration of powers expressly granted by statute, or as may fairly be implied from the statute granting the powers   (Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d 805, 824-825, quoting Rich Vision Centers, Inc. v. Board of Medical Examiners (1983) 144 Cal.App.3d 110, 114, quoting Dickey v. Raisin Proration Zone No. 1 (1944) 24 Cal.2d 796, 810), respondents claim that supplemental private funds matching those appropriated by the Legislature are necessary to enable DFG to implement the MLPA, and the authority to solicit and use such funds for that purpose may fairly be implied from the contracting clauses of subdivision (b)(1) of section 2855.^[6] Furthermore, respondents argue, the grant of statutory authority to enter into contracts to procure assistance in the preparation of a draft master plan or in the convening of a master plan team does not, in the absence of limiting language, preclude any particular type of service contract or contracts not paid for with public funds. Finally, relying on the legislative history judicially noticed by the trial court, respondents claim that the Legislature was from the outset fully aware of and acted affirmatively to bring about the public-private partnership the Agency and DFG were trying to create through the MOU as a means to obtain private resources to defray the cost of implementing the MLPA. Respondents contend that such acts imply a legislative belief that the MOU conforms to the legislative will.^[7]

We conclude that subdivision (b)(1) of section 2855 is ambiguous as to the nature and scope of the contracts it authorizes. Because the statute is unclear, we attempt to ascertain the legislative intent by looking to its legislative history, including the wider historical circumstances of its enactment. (Dyna-Med, Inc. v. Fair Employment & Housing Com., supra, 43 Cal.3d at p. 1387, citing California Mfrs. Assn. v. Public Utilities Com. (1979) 24 Cal.3d 836, 844.)

B.

As enacted in 1999, the MLPA required DFG to submit to the Commission a draft of the proposed master plan it prepared on or before January 1, 2002, and thereafter to make the draft available for public review, conduct no fewer than three public meetings, and make appropriate modifications of the draft plan. (Stats. 1999, ch.  1015,  1, p. 6100.) A proposed final master plan was required to be submitted by DFG to the Commission no later than April 1, 2002, and the Commission was then required to hold at least two public hearings and the Marine Life Protection Program prior to adopting the plan and program. (Id. at p. 6101.) These statutory time lines were not met, and the Legislature twice extended them, ultimately to January 1 and April 1 of 2005. ( 2859, subds. (a), (b), (c).)

DFG was unable to prepare a draft master plan even within the legislatively extended periods. As explained in a 2005-2006 analysis prepared by the Legislative Analysts Office, DFG began implementing the MLPA in 2000 using funds redirected from other activities. The 2003-04 Budget Act provided $800,000 from the Environmental License Plate Fund . . . to match private funds for support of MLPA activities. However, the department was not able to secure private matching support and thus eliminated this funding as part of the overall program reductions required in the 2003-04 Budget Act. Consequently, in 2004, DFG halted its MLPA implementation efforts. [] The departments initial efforts at implementing the MLPA received considerable criticism. Concerns were raised that the process adopted by DFG of establishing MPAs did not provide for sufficient public participation, lacked a strong foundation in science, and was not sufficiently funded. (Legislative Analysts Office, 2005-2006 Budget Analysis, Dept. Fish & Game, pp. B-63 to B-64.)

It bears emphasizing that DFGs funding problem did not begin with and is not confined to the MLPA. As the Legislature statutorily acknowledged as long ago as 1978, DFG has in the past not been adequately funded to meet its mandates. The principal causes have been the fixed nature of the departments revenues in contrast with the rising costs resulting from inflation, the increased burden on the department to carry out its public trust responsibilities, and additional responsibilities placed on the department by the Legislature. This lack of funding has prevented proper planning and manpower allocation. The lack of funding has required the department to restrict warden enforcement and to defer essential management of lands acquired for wildlife conservation. The lack of funding for fish and wildlife conservation activities other than sport and commercial fishing and hunting activities has resulted in inadequate wildlife and habitat conservation and wildlife protection programs. ( 710, italics added.)

DFGs funding problems arose primarily from the fact that its activities have traditionally been supported by user fees, such as recreational hunting and fishing licenses, landing taxes, commercial licenses, permits and entitlements, and other fees for the use of resources regulated or managed by the department. As the Legislature recognized, the revenues generated by this user-based funding system declined during a period in which DFGs regulatory and program responsibilities increased. ( 710.7, subd. (a)(1).) The Legislature acknowledged in 1990, and reaffirmed in 2006, that DFG continues to be inadequately funded to meet its mandates, and is as a result unable to effectively provide all of the programs and activities required under this code and to manage the wildlife resources held in trust by the department for the people of the state. ( 710.5, subd. (a).) Finding that user fees are not sufficient to fund all of the departments mandates, the Legislature urged DFG to secure a significant increase in reliable funding, in addition to user fees. ( 710.5, subd. (c).) Later, recognizing that DFG continues to face serious funding instability due to revenue declines from traditional user fees and taxes and the addition of new and expanded program responsibilities, and that fish and wildlife continue to be depleted, necessitating a significant portion of the departments activities to be directed toward protecting fish and wildlife for the benefit of the people of the state ( 710.7, subd. (a)(1), (3)), the Legislature declared its intent that DFG shall cooperate with the Legislature, recreational users, conservation organizations, the commercial fishing industry, and other interested parties to identify and propose new alternative sources of revenue to fund the departments necessary marine conservation, restoration, and resources management, and protection responsibilities. ( 710.7, subd. (c), italics added.) The Legislature also expressed the intent to itself identify new funding sources and to secure those sources to adequately fund the departments activities directed at protecting and managing wildlife for the people of the state. ( 710.7, subd. (d).) Although the statutes just quoted are not part of the MLPA, they are also part of the Fish and Game Code and therefore relevant to our inquiry, because  [e]very statute should be construed with reference to the whole system of law of which it is a part, so that all may be harmonized and have effect.  (Mejia v. Reed (2003) 31 Cal.4th 657, 663, quoting Moore v. Panish (1982) 32 Cal.3d 535, 541.)

After it became clear that DFGs limited resources rendered it unable to prepare a draft master plan within the time periods specified by the Legislature, the Agency and DFG created the California Marine Life Protection Act Initiative in 2004,^[8]which was designed in part to obtain private funds to supplement the inadequate public funds provided for MLPA implementation through a public-private partnership. As the Initiative states: Due to the limited staffing and funding resources of the [Agency] and [DFG], this proposal is dependent upon supplementing public funding with private resources to enhance the states capacity to accomplish the science, analysis, planning, and coordination necessary to achieve the objectives [of the MLPA] on time. The Initiative is attached to the MOU as an exhibit and the MOU states that its objectives are those of the Initiative.

Story continues as Part II .

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^[1]The Foundation administers the Resources Legacy Fund (RLF), which receives grants from many other private philanthropic institutions and individuals desirous of becoming catalysts for conserving and restoring natural landscapes, protecting and enhancing marine systems, maintaining the integrity of wild lands and rivers, and strengthening supportive policies and organizations. According to its website, the Foundation operates for the benefit of and shares the same mission, staff, and operational strategy as RLF. Like RLF, the Foundation accepts contributions, then makes grants or loans, or enters into contracts, to conserve land, water, and marine resources; assists other organizations in carrying out environmental protection projects; promotes understanding of conservation issues; and advocates for sound natural resource policies. The Foundation and RLF are both public charities within the meaning of section 501, subdivision (c)(3) of the Internal Revenue Code. The Foundation is also a type I supporting organization under sections 4942, subdivision (g)(4)(B)(i) and 4966, subdivision (d)(4)(B)(i) of that code. RLF makes its audited financial statements and the annual disclosures it is required to make to the Internal Revenue Service, and the statements and disclosures of the Foundation, available to the public on its website: http://www.resourceslegacyfund.org/rlff.html.

^[2]All statutory references are to the Fish and Game Code unless otherwise indicated.

^[3]An MPA, which is primarily intended to protect or conserve marine life and habitat, is a named, discrete geographic marine or estuarine area seaward of the mean high tide line or the mouth of a coastal river . . . [which] includes marine life reserves and other areas that allow for specified commercial and recreational activities, including fishing for certain species but not others, fishing with certain practices but not others, and kelp harvesting, provided that these activities are consistent with the objectives of the area and the goals and guidelines of [the MLPA]. ( 2852, subd. (c).)

^[4]Appellants assertion that the Foundation lacks the relevant expertise required by subdivision (b)(1) of section 2855 assumes, of course, that the contracts authorized by that provision are only those to procure expert assistance in the preparation of a draft master plan or convening of a master plan team. If this assumption is erroneous, because the Legislature intended also to include contracts entered into for the purpose of securing private financial assistance, appellants claim that the Foundation lacks relevant expertise also fails.

^[5]These requirements are not inconsistent with the MLPA if, as we assume, the additional scientists included in the reconstituted team possess the qualifications of team members specified in the MLPA ( 2855).

^[6]Though the MLPA is within respondents administrative jurisdiction, they do not claim any body of experience and informed judgment entitling their interpretation of section 2855, subdivision (b)(1), to greater judicial deference than would otherwise be required. (See Skidmore v. Swift & Co. (1944) 323 U.S. 134, 140; Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 12-14.)

^[7]In this connection, respondents also point out that when Governor Gray Davis signed the measure enacting the MLPA, he issued a message to the Legislature stating, I am encouraging the proponents and the Department to seek assistance from private resources to help implement the provisions of the bill, indicating his belief such efforts were authorized by the measure. We do not think a Governors post hoc signing statement is ordinarily a reliable indication of legislative intent.

^[8]Details of the Marine Life Protection Act Initiative were made publicly available on DFGs website (http://www.dfg.ca.gov/mrd/mlpa).