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HomeMy WebLinkAbout01-City Attorney .~ .' GRESHAM, SAVAGE, NOLAN &: TILDEN, LLP A RIlOISTIlIlIlD LIMJ11!D UABILITY PAIl1NERSHlP LAWYEIlS. FOUNDED .910 FOR 111& P1RM Aa.... C...... 600 N. ARROWHEAD AVENUE. surm lOll SAN BERNAIlDINO. CALIFORNIA nlOl.114. (OO9j....217I.FACSIMlLE(009j_2120 WlLUAMOU1HaII(I....IM7) DONALDW. JOIDAH (1907-1919) JOHN 8. LONIlIOAN (IlEI1UD 1976) August 9, 2000 Mayor Judith Valles City Attorney James F. Penman City of San Bernardino City Hall 300 North "0" Street San Bernardino, CA 9241 It / //(~ /0/ I}7w fJ~'11-j__ l.!rl _......i Yl I . q,~ h,_0~'-"_ Re: Section 241 of the City Charter <,;' Dear Mayor Valles and Mr. Penman: As you are aware, by his letter of July 18, 2000 the City Attorney requested that our law firm prepare an analysis of Section 241 of the existing Charter of the City of San Bernardino. Since the request related specifically to the Charter rather than Chapter 2.20 of the Municipal code which deals with the engagement of "outside" counsel, it is presumed that the request relates only to Charter authority, as opposed to the authority created by ordinance. Accordingly, this letter directs itself exclusively to the Charter. Section 241 states: "The Mayor and Common Council shall have power and authority to employ and engage such legal counsel and services and other assistants, as may be necessary and proper for the interest and benefit of the City and the inhabitants thereof. " Thus, in order to pursue an analysis of that Section, an inquiry must be made into what is meant by "necessary and proper". Section 55 of the Charter, in pertinent part, provides: " (d) The City Attorney shall be the chief legal officer of the City; he or she shall represent and advise the Mayor and Common Council and all City officers in all matters of law pertaining to their offices; he or she shall represent and appear for the City in all legal actions brought by or against the City, and prosecute violations of City ordinances, and may prosecute violations of State law which are misdemeanors or in.nctions and for which the City Attorney is specifically granted the power of enforcement by State law without approval of the District Anorney, or those violations which are drug or vice related; he or RiveBide Office' 3403 Tenth Slreel, Suite 518, Riverside, CA 92501 .(909) 684-2171. Facsimile (909) 684-2150 ViclOlVille Office' 14350 Civic Drive, Suite 120. ViClOlVille, CA 92392. (760) 243-2889. Facsimile (760) 243-0467 _V'"-..-.""'.''"''-'___' r- SHAM, SAVAGE, NOLAN & TILDEN, LLP I. G..-m Mayor Judith Valles City Anorney James F. Penman August 9,2000 Page 2 she shall also act and appear as attorney for any City officer or employee who is a party to any legal action in his or her official capacity; he or she shall attend meetings of the City Council, draft proposed ord;n~""~s and resolutions, give his or her advice or opinion in writing when requested to do so in writing by the Mayor or Common Council or other City official upon any matter pert~;ning to Municipal affairs; and otherwise to do and perform all services incident to his or her position and required by statute, this Charter or general law. " Prom the foregoing Charter description of the duties of the City Attorney, it is seen that the person occupying that position has a great many areas of responsibility and is to act as "the chief legal officer of the City" . As a public officer, the City Anorney is, by law, expected to properly and timely provide the services required of the office. Indeed, it would be tantamount to a waste of taxpayer funds if "outside" counsel were hired to perform duties that were those which the City Attorney was e~pected to discharge. There are, however, areas of law so specialized or that require such special talents or experience that a general legal practitioner would not be expected to provide them. Additionally, occasions can arise where the City Attorney may, by reason of a conflict of interest, not be able to discharge all the duties usually expected of the office. In such instances it would be appropriate for "outside" counsel to be utilized because, without such use, the service could not otherwise be performed. This concept of avoidance of unnecessary dUDlication of expenditures and services has long been followed in California. However, in most of the situations where the matter has been considered, Counties rather than cities have been involved. In Anorney General Opinion 52-36, it was stated that: " ... the courts have held that the board is without authority to contract with private parties for the performance of duties which the law enjoins upon county officers. " Additionally, in Attorney General Opinion 49-202 it was pointed out that: "It has been held that the supervisors have no power to employ an attorney to conduct litigation which by law is devolved upon the district anorney, though they may employ an anorney to assist him in such matter." ~ - SHAM, SAVAGE, NOLAN & TILDEN, LLP t c....... Mayor Judith Valles City Attorney James F. Penman August 9, 2000 Page 3 As early as 1897 the California Supreme Court held: " ...it is clearly the intention of the law that the district attorney, and no one else, shall be and act as the legal advisor of the board,... The contract, then, was merely an attempt on the part of the board of supervisors to pay special counsel by the month for performing a duty which the law imposed on the district attorney.... ...to permit compensation for them would be to override the law, and to destroy one of the strongest safeguards cast about the expenditure of county funds." I ! Merriam v. Barnum (1897) 116 Cal. 619, at 623-625. Again, in the next year, the Supreme Court held: "If the board of supervisors could portion out the legal business of the county as appertaining to license matters to outside attorneys, it could likewise apportion to such anorneys all other branches of legal business in which the county was directly interested, and thus relieve and deprive the district attorney of the very labors which are devolved upon him by the law, and which he was elected by the people to perform, and which under his oath of office he is bound to perform. The law as it is framed does not allow such a practice. It was framed for the very purpose of preventing such a practice." Merced County v. Cook (1898) 120 Cal. 275, at 278. A city case did come up in 1916 when the Appellate Court stated: "The charter having provided a city attorney upon whom the board can call when a defense to a suit is necessary, it by implication makes it incumbent upon the board to avail itself of his services, and it cannot ignore this provision and employ some other attorney to render those services which it is the duty of the city attorney to perform. " Rafael v. Bovle (1916) 31 Cal.App. 619, at 626. Then, as recently as 1975, the Appellate Court again held that the duplication of attorney effort applies to Charter cities because of the obligation of the city attorney to act. Montlromerv v. SUDerior Court (1975) 46 Cal.App.3d 657. Prom these authorities it is our belief that since the City Attorney is someone whom the Charter specifically directs to perform legal duties, the City Attorney is compelled to do them unless a conflict exists or specialized experience is essential. RESHAM, SAVAGE, NOLAN & TILDEN, LLP lea. B. GreIIauD Mayor Judith Valles City Attorney James F. Penman August 9, 2000 Page 4 Since the determination of a conflict or the need for specialization is something that the City Anorney is most aware of, it seems most logical that before "outside" counsel can be engaged, inquiry should be made of the City Attorney to determine if a conflict exists or a need for specialization is present. If the City Attorney indicates that either of those two situations is present, then the engagement of outside counsel would be appropriate. . Insofar as the selection of "outside" counsel is concerned, reference should again be made to Article 55 and its recitation of the duties of the City Attorney. There it is seen that the City Attorney is to ".. .advise the Mayor and Common Council and all City officers in all matters of law pertaining to their offices;...". Prom the quoted language it is noted that the City Attorney is to "advise" the Mayor and Common Council on matters of law which would appear to include evaluation and selection of "outside" counsel. Certainly, it is to be expected that, as an attorney, the City Attorney would be aware of the expertise and reputations of attorneys that might be needed by the City. The City Attorney can also be expected to be conversant with fee ranges and other aspects of compensation. ,Accordingly, practicality would appear to indicate that the City Attorney should be directly involved with, and an active participant in, the selection, and terms of engagement, of "outside" counsel. ~~~ AIlen B. Gresham for GRESHAM, SAVAGE. NOLAN & TILDEN, LLP ABG:tdg .II;Y/A) ?(j'i ."'"~""'''. . : ~S/~/ po 71-f{; MIJJ,tJR.lTY FIVE :foG S4uI2.GZ / SUSIM/ t-/EAl, ~()$4U /1/[tr;lAJO!S Y::/YbUt::. 4'OIf&.J;;:-'z7/ /1/t/LJ G'6Pl-6:k:- 1t!5' ~fMj)fl ::[, 'S:;:;J S#1II1g (lAJ C/ 00 C/ t!Jo t?t1.;() f- .LI$/EN i06!21.1 tV GI-L f ~ iJib-ttJ wG' ~ fJe?6JPt.E o;=- c&Wt?6/?IJIII(DI,ut; It>j % OF fft)( p/ltiG1Gfs a.Jtm fJ4C(7lrX&0; SA/ [) AJCJ! IAlJj) D;;;FElfrED /hG/1-cSUI2G 'Mil tUG /J1G/J-Nr AM.!. . I ItO~ 1fJUJ tfOU tUG f1I2G' HIfP/lY aJ/11I /fN GZ6"crm (!,ITY' iMrO!2IJt;,/, vJHo cJl5 ~t)aJ allLL aJo~ WITH C/ocJ, ~f' I / /.& /..~ aA-L / or (!,{){)~I tUG' ~ r4GRG6- ' ~H6 .B/Io{)UJ NO; A-~ /0 ~ Oor~.l)b LaD/t-L vnrd2lJ&y IF I{ W;I-L Nor ~ IN 71fG t26SrIV1B2G'sT lo,t: toe &lY~ mx fI!J.GR..0. tU!I,4r C;~U Ae6 Wt,ve- i/.6 ()6Ry f/JtJL/6i1/ tftJ'U fIf/tJb /J-t-eG'IfDLY kJ.sr()(/~ 16 () fPad; A-NJJ A-cS p-() IL f}1 G IF C; aJ pffSS 7111 s, .1- ' iuJttX c00{2./C 4@l1J6t Gl(ju c.6f1/'lE Gt..{;Cl1o/.J /( /l7G, Ifr/lJDflfM I~ ILpeOMLSG:. L1Cd~ lJOlG uJILL TGLL 8G 71-fG { It X f.Pt'-.(tSe.11+I\LtiOU 00 rJOIC!.ARE{ /JDQ t(f\tG (;~l~ PfiN1DJ0 AND Lbtl6' :Q6f!jOUSL'Y, f--rt:i ,00 . i061 0 1l\11'f LlDU Cb NO! ~ A 8ofjl-n+~ l!.>( 1lZ€!js iOY~(!{f\l of SA-iJ fyr;eJJA;t.?D'~6, WHO fRY TH-IE' nA)((6:S (N 11f{6- CA 1'Y i?0 ee rJ A I Lc(>(;3~ ~[)W A'(0 D t.-{ 0 f; D ,1J -ifflS CA 1'( t+LL my 4 -F ~ . . ..~"_..."....,,.,,- ~."""--'''"''''''~''''~-''''''''''~'~'''--'''-~' .......... . (!; '< ~J .~ :J ~\l N~~ W~ !~ i~ &\-- ~-8 ::f'tA u ~ VO"-" I~ \lJ .J ~ . (,0 "t: -::\ -:2 ~ F v CJ0.V ~ ~ €~ ~ "1 8 \j) '>< % !- '>- Q q: 11'\ 2 \-- - \-&: -ij -~ W ~ ~ "0 C:t ~ ~ <0 -\- 8 ';:t: \.\l d~.\.. ~ .w ~+O ')- .~ - 0 ' ~'2:s::~J o~()JJ2 tt Q'F~rJ ~~'y\-~~ c:J. . <!) :t '>Z s; _~ ,~""20~~ ~ Q: '\=r:::J..~~ ?= ~ ~~~ d ~ "2\='+\0 f'- 0::::::::. ~ ~ z ~ 13 :ical Association i ty Chapter lairperson 1~:~E9~I~O~ 87-6027 '01 JAN 16 P,10:~ January 16, 200 I Japter of the Mexican American Political :spected city policy makers to thank you :ity ordinanc~and urge you to cast ~..:t.<o .t is imperative that our city return to the l supported by California state law. This lunsel for our city should be handled by Illes established in our city charter as well ecks and balances of the elected city . for our city to function efficiently and sary to repeal ordinanc~ :2" z. <J natter. Mexican American Po1itica1 As8ociation San Bernardino City Chapter Gi1 Navarro, Chairper80n P.O. Box 1396 i~FCF!VI' San Bernardino, Ca. 92402 Te1. (909) 787-6027 ]1 ,JAil 16 PlO :~. January 16, 2001 Mayor and Common Council City of San Bernardino City Hall 300 North 0 Street San Bernardino, Ca. 92418 Dear Mayor and Council Members, We, the members of the San Bemllrdino City Chapter of the Mexican American Political Association, are writing this open letter to our respected city policy makers to thank you for your recent adoption of a measure to repeal city ordinance..2.9 and urge you to cast your vote today to finalize this action. ::4 d. tJ As past unfortunate events have demonstrated, it is imperative that our city return to the policy originally set forth in our city charter and supported by California state law. This policy clearly states that the hiring of outside counsel for our city should be handled by the mayor and council. The current ordinance, which runs against the rules established in our city charter as well as current state law, does not provide for the checks and balances of the elected city policy makers, our mayor and council. In order for our city to function efficiently and represent the needs of all its citizens, it is necessary to repeal ordinance 2.6. 2.2..0 Thank you for your attention to this important matter. Sincerely, rc/) I ~~ O~O Gil Navarro, Chairperson t _______.0...........-.._ Mexican American ~olitical Association San Bernardino City Chapter Gil Navarro, Chairperson P.O. Box 1396 ""CtIV''''. >I! San Bernardino, Ca. 924~2~ ' Tel. (909) 787-6027 ;"' i \ i, ,~ '01 JAN 16 A10:3 January 16, 2001 Mayor and Common Council City of San Bernardino City Hall 300 North 0 Street San Bernardino, Ca 92418 Dear Mayor and Council Members, We, the members of the San Bernardino City Chapter of the Mexican American Political Association, are writing this open letter to our respected city policy makers to thank you for your recent adoption of a measure to repeal city ordinance-t:e-and urge you to cast your vote today to finalize this action. -:2: ,;2 <:) As past unfortunate events have demonstrated, it is imperative that our city return to the policy originally set forth in our city charter and supported by California state law. This policy clearly states that the hiring of outside counsel for our city should be handled by the mayor and council. The current ordinance, which runs against the rules established in our city charter as well as current state law, does not provide for the checks and balances of the elected city policy makers, our mayor and council. In order for our city to function efficiently and represent the needs of all its citizens, it is necessary to repeal ordinance~ 'LZo Thank you for your attention to this important matter. Sincerely, GffJJ!g:~ , r CITY OF SAN BERNARDINO INTEROFFICE MEMORANDUM TO: FROM: Mayor and Common Council ~h~lql, /h-W fJ~ / James F. Penman, City Attorney ~h.~ RE: DATE: CINEMA STAR MULTI-PLEX THEATER PROJECT DOCUMENTS December 21, 1998 At the September 29, 1998 Adjourned Regular Meeting of the Mayor and Common Council and the Community Redevelopment Commission, the Council/Commission declined to , approve the Subordination and Intercreditor Agreement that had been prepared by GMAC. Instead, the Council/Commission voted to purchase the GMAC funded permanent loan on the same conditions as would otherwise have been obtained by GMAC upon sale of said permanent loan to an underwriter of pooled mortgage loans along with an agency permanent loan commitment for $3,600,000. and other language contained in the motion approved on September 29 (copy attached). Attached is a memorandum from Huston T. Carlyle analyzing the three documents that will be presented to the Council/Commission at the Monday, December 21 meeting. Mr. Carlyle points out that the same language in the permanent loan Subordination and Intercreditor Agreement that the Council/Commission refused to approve in September is still present. New language from GMAC in the construction loan document requiring us to get the written permission and full release of the developer before we could "buy-out" the senior loan from the senior lender and, if that failed, requiring us to indemnify, defend and hold GMAC harmless in an amount not less than $12,000.000 and requiring us to collateralize the $12,000,000 was proposed. Late Friday, however, GMAC dropped that provision after our strenuous objection. It is still our opinion as it was on September 29, that it would be unwise for the City/EDA to agree to the language as detailed in Mr. Carlyle's memorandum. We decline to approve the Subordination and Intercreditor Agreement (Permanent Loan) and the Agency's Loan Commitment as written, We recommend that the : ( To: Mayor and Common Council Page 2 December 21,1998 Council/Commission not approve these documents due to the serious and disadvantageous legal position such approval would attach to the City/EDA. It has been proposed that we not sign the subordination and Intercreditor Agreement (Permanent) now, but agree in writing to do so only if we decide not to make the loan ourselves. This solution still obligates us to the objectional provisions in paragraph 1 (j) on pages B-5 and 6 in the Permanent loan. These legal terms are not in the best interests of the City and should not be approved. Surrendering our rights under the Bankruptcy laws is imprudent. Another proposal, to obtain another loan with higher interest but no objectional language has been discussed. If such a loan is ultimately obtained it resolves one of our immediate concerns. It is a policy decision to do so however. It is noted that even with such a change, the lender may still demand that we agree now to approve a subordination and intercreditor agreement in the future in the event we are unable to produce an alternate permanent loan. Such a demand leaves us in the same legal quandary regarding this objectionable language. Respectfully submitted, 9~ ames F Penman City Attorney Attachment: two (2) ( CITY OF SAN BERNARDINO INTEROFFICE MEMORANDUM TO: James F. Penman City Anorney !J h Huston T. Carlyle, Jr. ~ Sr. Assistant City Anorney FROM: DATE: December 21, 1998 RE: December 21, 1998 Community Development Commission Meeting Re: a. Subordination and Intercreditor Agreement (Construction Loan) b. Subordination and Intercreditor Agreement (permanent Loan) c. Permanent Loan Commitment Letter Reference is made to the above-indicated three documents relative to the MDA-San Bernardino Associates -- Cinema Star Multi-Plex Theater Project -- set for discussion and possible action at Monday's Commission meeting (agenda item #R-26). As a result of the Commission's action at the September 29, 1998 meeting, steps were undertaken to implement the direction so given. The three aforementioned documents are part of the Commission's back-up for its December 21 meeting. These are the proposed final versions for each of the three documents. The first two are "driven" by the willingness of GMAC (the senior lender) to be accommodating; the last one has been prepared by the law firm of Sabo & Green. Following is an analysis of the critical points in the first two documents (the document prepared by Sabo & Green appears to be consistent with the Commission's directive, but will be mentioned briefly at the end of this memorandum) which the Commission should be aware of before authorizing staff to proceed with effecting the close of escrow. Subordination and Intercreditor Agreement (Construction Loan): There are four sections in this document which should be brought to the Commission's attention. Section l(j) still contains language which prevents the Redevelopment Agency of the City of San Bernardino (Agency), as Junior Lender, from exercising any of its rights in bankruptcy, reorganization or insolvency proceedings without the prior written consent ofGMAC, which may be given or withheld in GMAC's sole and absolute discretion. If the developer seeks the protection ( of bankruptcy court during the effective period of this document, the Agency is at the mercy of GMAC relative to protecting its rights in such proceedings. There is one "out" to such a situation, however, and that leads to an analysis of the second section in question, section 1(1). It is probable, but not automatically the case in all instances, that the filing of bankruptcy, reorganization or insolvency by the developer will be considered an event of default rising to the level of a "Purchasing Event" as defined in said section 1 (1). If such is the case, then the Agency has the right "to purchase the Senior Loan from the Senior Lender for a purchase price payable in cash or immediately available funds equal to the total amount of the Senior Indebtedness and otherwise on terms and conditions acceptable to Senior Lender...." Section 1 (1) also contains additional language not heretofore seen that requires the Agency to get the wrinen permission and full release of the Borrower (developer) to the Senior Lender for such a transaction! buy-out and, failing that, the Agency will indemnify and defend and hold GMAC harmless from any claims, damages, losses, and expenses incurred relating from this transactionlbuy- out in an amount of not less than $12,000,000.00 (the estimated value of the project) and acceptable to GMAC in its "reasonable discretion." We have been advised that GMAC is agreeable to eliminating this language and merely requiring the Agency to use commercially acceptable reasonable efforts in obtaining the Borrower's wrinen permission and full release. The third section to be brought to the Commission's anention is not new, it simply has not , and will not be deleted by GMAC: Section 4 reaffirms and spells out in more detail that the Agency's ability to obtain any relief should the developer create a "Bankruptcy Event" is virtually non-existent absent the wrinen permission of GMAC. The fourth section of note is not a completely new concept per se, but it makes it crystal clear the path that the Agency will be proceeding down should it not buyout the permanent senior loan as specified in the future subordination and intercreditor agreement. Section 15 specifically refers to Exhibit "B," which is the proposed second agreement now to be discussed. Subordination and Intercreditor Agreement (Permanent Loan): Section 1(1) of this document sets forth the terms and conditions by which the Agency has a one-time right to purchase the Senior Loan from GMAC at 102% of the total amount of the Senior Indebtedness within specified time frames. Again, GMAC is agreeable to deleting the required indemnification of $12,000,000 should the Borrower's wrinen permission and release not be obtained. obligating the Agency to once again use commercially acceptable reasonable efforts. Execution of the first document obligates the Agency to execute this second document. Should the Agency not purchase said Senior Loan under the terms and time frame specified in said second document in Section 1(1), then the Agency will be bound by the terms contained in this second document which contain all of the troublesome language of the first, plus more. : .' /"'"" Section 1 (j) contains not only the same language relative to bankruptcy, reorganization and insolvency as did the first agreement, but also contains all of the classic "standstilI" language discarded in the first agreement. Section 4 is the same as in the first agreement - eliminating any rights the Agency may have in a "Bankruptcy Event" absent the written permission of GMAC. Permanent Loan Commitment Letter This document was prepared by the law firm of Sabo & Green pursuant to the Commission's directive at the September 29, 1998 meeting. It appears to be consistent with such direction. I would note that the developer is to be required to first seek the permanent loan from the Agency. The letter also obligates the Agency to sign the Subordination and Intercreditor Agreement (permanent Loan) with the standstill provisions in it if GMAC ultimately funds the permanent loan.