195 Cal. App. 4th 675
Cal. Ct. App.2011Background
- Chodos, a Los Angeles lawyer, was assessed additional City business taxes based on reimbursements for out‑of‑pocket costs and for fees paid to independent counsel.
- Chodos brought a declaratory relief action challenging the tax, arguing it included reimbursements not properly taxable.
- The City demurred, contending Chodos failed to pay the disputed tax and sue for a refund under the pay‑first rule.
- The trial court sustained the demurrer without leave to amend; Chodos appealed.
- The court treats the demurrer de novo, focusing on whether prepayment is required before challenging the tax via declaratory relief.
- Authorities cited establish a general public policy that taxpayers must pay the tax and sue for a refund, unless the refund remedy is inadequate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether prepayment is required to challenge a local tax via declaratory relief | Chodos argues no prepayment is required to seek relief. | City argues pay‑first rule applies, requiring payment before suit. | Prepayment is required; pay first, litigate later governs. |
| Whether the City’s refund procedure is adequate to permit direct challenge without payment | Chodos asserts an adequate remedy exists through administrative/refund procedures. | City contends the tax must be paid before challenging it, regardless of refunds. | Adequate refund procedures do not override pay‑first requirement for local taxes. |
Key Cases Cited
- Flying Dutchman Park, Inc. v. City and County of San Francisco, 93 Cal.App.4th 1129 (Cal.App. 2001) (pay‑first rule for local taxes; public policy to prepay and sue for refund)
- Writers Guild of America, West, Inc. v. City of Los Angeles, 77 Cal.App.4th 475 (Cal.App. 2000) (prepayment requirement to obtain judicial review of tax)
- City of Anaheim v. Superior Court, 179 Cal.App.4th 825 (Cal.App. 2009) (discusses refund procedures and pay‑first rule applicability)
- City of Cotati v. Cashman, 29 Cal.4th 69 (Cal. 2002) (declaratory relief requires an actual present controversy)
- Andal v. City of Stockton, 137 Cal.App.4th 86 (Cal.App. 2006) (administrative remedies and public policy considerations regarding fees)