196 Cal. App. 4th 218
Cal. Ct. App.2011Background
- County imposes a 10% penalty for real property tax delinquency after April 10.
- CORTAC program allows tax payments to be wired by a tax services company on behalf of borrowers.
- First American acted as tax service for Bank of America and others, coordinating 2007-2008 second installment payments (~$60M total; $6,309,406 for Bank of America).
- Bank of America’s payment was not transmitted by April 10, 2008 due to First American’s spreadsheet formatting error causing a line to be hidden.
- First American timely notified County; Bank of America’s payment was wired April 11, 2008; penalty of $594,942 was assessed to Bank of America borrowers’ parcels.
- First American sought cancellation under §4985.2(a) and (b); County denied; suit filed seeking cancellation and refund.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether late payment was due to circumstances beyond the taxpayer’s control | First American: delay due to clerical error beyond control of taxpayer’s agent. | County: error was within agency’s control, not beyond taxpayer’s control. | No; delay not due to circumstances beyond the taxpayer’s control. |
| Whether §4985.2(a) requirements are satisfied | First American argues four elements satisfied (reasonable cause, beyond control, ordinary care, no willful neglect). | County contends error was avoidable and within agent’s control; elements not all met. | Not satisfied; inadvertent clerical error not 'circumstances beyond the taxpayer’s control.' |
| Whether §4985.2(b) (inadvertent error in amount) applies | First American asserts single-file CORTAC transfers could blur amounts, constituting inadvertent error. | No inadvertent error in amount; Bank of America’s payment was simply not made by deadline. | Not applicable; no inadvertent error in amount. |
Key Cases Cited
- ZC Real Estate Tax Solutions Ltd. v. Ford, 191 Cal.App.4th 378 (Cal. Ct. App. 2010) (circumstances beyond taxpayer's control must be beyond the taxpayer’s control, not a clerical error by agent)
- United States v. Boyle, 469 U.S. 241 (Supreme Court, 1985) (reliance on agent not reasonable cause for late filing in federal context)
- Strumpfer v. Westoaks Investment #27, 139 Cal.App.4th 1038 (Cal. Ct. App. 2006) (statutory relief requires applicable conjunctive elements; reliance on other cases)
- Jackson v. Gourley, 105 Cal.App.4th 966 (Cal. Ct. App. 2003) (standard of review for factual findings and statutory interpretation)
- Raytheon Co. v. County of Los Angeles, 159 Cal.App.4th 27 (Cal. Ct. App. 2008) (de novo review for statutory interpretation; substantial evidence for facts)
- Fujitsu IT Holdings, Inc. v. Franchise Tax Bd., 120 Cal.App.4th 459 (Cal. Ct. App. 2004) (statutory interpretation standards in tax matters)
- Collins v. Department of Transportation, 114 Cal.App.4th 859 (Cal. Ct. App. 2003) (statutory interpretation; implied distinctions between related statutes)