Angel BATT, Plaintiff and Appellant,
v.
CITY AND COUNTY OF SAN FRANCISCO, Defendant and Respondent.
Court of Appeal of California, First District, Division Two.
*718 Paul G. Kerkorian, Fresno; Berding & Weil, Daniel L. Rottinghaus and Steven Weinmann, Alamo, for Plaintiff and Appellant.
Dennis J. Herrera, City Attorney; Julie Van Nostern, Chief Tax Attorney; Peter J. Keith, Deputy City Attorney, for Defendant and Respondent.
*717 RICHMAN, J.
Plaintiff Angel Batt appeals from the order sustaining a general demurrer to those portions of her complaint that purported to state class action claims for refund of a San Francisco tax plaintiff alleged was erroneously collected from a class she proposed to represent. The trial court sustained the demurrer on the ground that San Francisco law does not allow class action suits to recover taxes. We hold that this conclusion was correct, and we affirm.
BACKGROUND
On January 20, 2006, plaintiff filed her complaint for herself "individually and on behalf of all persons similarly situated, and as a taxpayer representative." She alleged as follows:
The City and County of San Francisco (the City) has enacted a tax on transient occupancy of hotel rooms (the Hotel Tax) of 14 percent; it is assessed on the rental of a "guest room," which is defined as "A room occupied, or intended, arranged, or designed for occupation by one or more occupants." The Hotel Tax is collected by the hotel and remitted to the City.[1]
In December 2003, the City's treasurer and tax collector promulgated a number of "Hotel Tax Guidelines" (the Guidelines) advising hotel operators that the Hotel Tax applied to a number of charges, one of which was "Charges for parking (including valet services) for hotel guests" including "(i) charges to hotel guests for parking located on the hotel premises regardless how charged, and (ii) charges to hotel guests for parking located off the hotel premises where such charge is added to the room bill and paid to the hotel operator." [2]
Plaintiff alleged that "imposition of the Hotel Tax on Parking Charges is unlawful and in violation of the [Hotel Tax] Ordinance. The Ordinance only authorizes the imposition of the Hotel Tax `on the rent for every occupancy of a guest room in a hotel,' whereas the Guidelines purport to extend the Hotel Tax to the Parking *719 Charges. Parking Charges, however, are not `rent for ... occupancy of a guest room', and the imposition of the Hotel Tax on such charges contravenes the Ordinance and is unlawful."
Plaintiff further alleged that she is a resident of San Mateo County, and that on August 6-7, 2005, she stayed at the Ritz-Carlton Hotel in San Francisco, where she was charged $55 for parking her automobile, $7.70 of which was the 14 percent assessment pursuant to the Hotel Tax. Plaintiff alleged that the City "impose[s] and collect[s] in the same manner as described above this same unlawful tax payment on Parking Charges at each and every hotel in the City ... that provides parking for hotel guests."
Plaintiff then alleged that she "brings this action on her own behalf and on behalf of all persons similarly situated as either or both a class representative under Code of Civil Procedure section 382, or as a taxpayer representative under Code of Civil Procedure section 526a," and claimed to represent a class "composed of all persons who paid a `Hotel Tax' on their hotel parking charge[s] ... since January 20, 2002." This was followed by the standard class action allegations: that "there is a well-defined community of interest in the questions of law and fact" typified by her claim, that the class could be identified "from the records of the hoteliers," and that plaintiff would be "a representative party who will fully and adequately protect the interests of the Class members."
Finally, plaintiff alleged that on October 15, 2005 she filed separate refund claims with the City, for herself and for "all others similarly situated," pursuant to the Government Claims Act (Gov.Code, § 810 et seq. (Claims Act)); that those claims were deemed rejected by operation of law 45 days later (id., § 912.4, subd. (c)); that on January 11, 2006 (i.e., nine days before filing her complaint), plaintiff unsuccessfully demanded that the City "cease imposing the Hotel Tax upon Parking Charges"; and that she "expects to regularly return to the City ... in the future and to stay at hotels in San Francisco that impose Parking Charges," and thus "will be required to pay the Hotel Tax on such Parking Charges."
Based on the foregoing allegations, plaintiff set forth six causes of action, for: (1) declaratory relief that assessment of the Hotel Tax on parking charges pursuant to the Guidelines was illegal; (2) injunctive relief prohibiting the City from collecting "the Hotel Tax based upon a percentage of Parking Charges charged by the hotels"; (3) imposition of a constructive trust for monies improperly charged and "overpaid"; (4) an accounting for such sums; (5) refund of sums pursuant to the relevant provision of the City's municipal code (S.F. Bus. & Tax Regs.Code, § 6.15-1); and (6) a common count for money had and received.
The City responded with a general demurrer based upon several grounds, one of which is particularly germane to the issue before usthat "with regard to unnamed putative class member plaintiffs, class action claims for a Hotel Tax refund are forbidden by law." In its supporting points and authorities, the City maintained that a class action claim for refund of municipal taxes is not permitted unless specifically authorized by local law, that the City had adopted an ordinance specifically disallowing the class action remedy, and thus the sole available remedy was a refund action by each person allegedly overcharged. However, the City conceded that plaintiff had a valid and judicially-ripe claim for a personal refund.
After conducting a brief hearing, the trial court sustained the City's demurrer without leave to amend "as to all causes of *720 action brought by Unnamed Plaintiffs." The City was ordered to answer "the causes of action brought by Plaintiff Angel Batt."
Plaintiff filed a timely notice of appeal.[3]
DISCUSSION
The Standard Of Review
We set forth the applicable rules of review in Flying Dutchman Park, Inc. v. City and County of San Francisco (2001)
We conclude, as did the trial court, that the complaint does not state a claim, and cannot be amended to do so.
The General Rules And General Policy Regarding Taxpayer's Claims
As we indicated in Flying Dutchman, supra,
Certainly, taxation amounts to a taking of property that cannot be accomplished without due process. But due process "`does not guarantee the right to judicial review of tax liability before payment' " (Aronoff v. Franchise Tax Board (1963)
The rule against challenging the collection of a taxusually in the equitable forms of injunctive or declaratory relief is predicated on the existence of a procedure that provides the taxpayer with an adequate remedy at law to challenge the legality of a tax by seeking a refund of taxes already paid. (E.g., 28 U.S.C. § 1341 [prohibiting federal courts from enjoining collection of any state tax "where a plain, speedy and efficient remedy may be had in the courts of such State"]; McKesson Corp. v. Florida Alcohol & Tobacco Div., supra,
Whether the state chooses to make its remedy available prior to collection of the tax, or condition availability of the remedy upon payment of the taxes, is a matter left to the state's discretion. "[T]he States are afforded great flexibility in satisfying the requirements of due process in the field of taxation. As long as state law provides a `"clear and certain remedy,"' [citations], the States may determine whether to provide predeprivation process (e.g., an injunction) or instead to afford postdeprivation relief (e.g., a refund)....." (National Private Truck Council, Inc. v. Oklahoma Tax Comm'n (1995)
State statutes and local government regulations commonly require that a judicial action for refund cannot be commenced unless the taxpayer has completed an administrative process to recover taxes claimed to have been erroneously assessed *722 or collected. And if there is such a process, the courts require strict compliance with it and exhaustion of the administrative remedy before judicial action may be started. (E.g., IBM Personal Pension Plan v. City and County of San Francisco (2005)
Against this background, we turn to plaintiffs arguments seeking reversal of the order.
No Class Action Is Allowed
We begin with discussion of Woosley v. State of California (1992)
Woosley has been cited and discussed in numerous cases in its 15-year existence, including by this court, in Neecke, supra,
Howard Jarvis Taxpayers Assn. v. City of Los Angeles (2000)
Plaintiff accurately summarizes the holding of Woosley, as "if there is a pre-lawsuit claims-filing procedure for the refund of a tax, and that pre-lawsuit claims-filing procedure does not authorize class claims, then class claims (and therefore class actions) for the refund of that tax are not allowed." Despite that, plaintiffs opening argument is that Woosley "does not categorically preclude class actions for all tax refunds," and asserts that "Woosley is inapposite because there is no pre-lawsuit claim filing requirement" in either the Claims Act or the San Francisco Municipal Code "for the refund causes of action." And, so the argument runs, "if a pre-lawsuit claim was [sic] required," it would be governed by the Claims Act which, as construed in City of San Jose v. Superior Court (1974)
City of San Jose, cited four times in plaintiffs opening brief and seven times in her reply, involved a large number of owners of property located in the flight pattern of a municipal airport who sought damages for nuisance and inverse condemnation. The Court of Appeal issued a writ of mandamus directing the trial court to vacate its order certifying the action as a class action and ordering dismissal of class action aspect of the case. Doing so, however, the court discussed Government Code section 910 and Code of Civil Procedure section 382, and observed that "It is therefore clear a class claim may satisfy the claims statutes requirements. Thus, we conclude these statutes do not prohibit class actions against governmental entities for inverse condemnation and nuisance." (City of San Jose, supra,
Like plaintiff here, plaintiff Woosley relied heavily on City of San Jose, supra,
At the argument below, plaintiffs counsel argued that Woosley "narrowly applied." Plaintiff continues such argument here, especially in the reply brief, which contains seven pages replete with observations that any "expansive reading of Woosley" is incorrect; that Woosley must be limited to the "facts" presented; and that it was not based on "`general policy grounds applicable to all taxes.'" Such observations conclude with the statement that all of the cases expressly disapproved in Woosley involved "state taxes, not local taxes." We could not disagree more, as *724 we made clearor at least believed we made clear12 years ago, in Neecke, supra,
The suit in Neecke involved an attack on a Mill Valley ordinance claimed to be a special tax, and therefore requiring a two-thirds vote under California Constitution, article XVII A, section 4. Plaintiff prevailed in the trial court on his basic claim, but his motion for class certification was denied. Both sides appealed, and we held for the city, reversing the tax issue and affirming denial of class certification. Concluding that "class certification was prohibited," we began by distilling Neecke's contentions and our conclusion: "Neecke appeals from the portion of the trial court's order denying his motion to certify his action as a class action. The trial court denied the motion on the ground that the Supreme Court's recent decision in Woosley ... precluded class actions in tax refund cases unless specifically provided for by statute. Neecke contends that the trial court erred because (1) Woosley does not apply to local tax refund actions.... We conclude, however, that the trial court correctly applied Woosley to refuse to certify the class in this case." (Neecke, supra,
Following that, we addressed the issue "Does Woosley Bar Certification of the Class?" (Neecke, supra,
In sum, California has opted to allow class actions in tax refund cases only where specifically authorized by statute. *725 As a leading practical treatise puts it, Woosley and Neecke "preclude class actions in tax refund cases unless specifically allowed by statute." (Cohelan, On Cal. Class Actions (2006-2007 ed.) § 3:4, p. 30.)
It may be true, as plaintiff asserts, that Woosley does not "categorically" forbid class actions in tax refund cases. But it did in effect preclude refund class actions except where the antecedent administrative claim on behalf of the putative class is expressly authorized by statute. (See Woosley, supra,
The City has adopted an ordinance governing tax refunds. It is section 6.15-1 of the Business and Tax Regulations Code (Section 6.15-1) and provides in pertinent part: "(a) ... the Controller shall refund or cause to be refunded the amount of any tax, interest, or penalty that has been overpaid or paid more than once, or has been erroneously or illegally collected or received by the City, provided the person that paid such amount files with the Controller, within one year of payment of such amount ... a verified claim in writing .... [¶] (b) The claim shall be on a form furnished by the Controller. A claim may be returned to the person if it was not presented using the form. A refund claim may only be signed by the taxpayer or other person determined to be liable for the tax or said person's guardian or conservator. No other agent, including the taxpayer's attorney, may sign a refund claim. Class claims for refunds shall not be permitted...."[5]
Plaintiff argues that Woosley "is easily distinguishable because the tax refund claims in that case were not governed by the ... Claims Act," but by specific provisions in the Revenue and Taxation and Vehicle codes. Such argument ignores the interplay between sections 905 and 935 of the Claims Act. Although the Claims Act requires presentation of a claim for "money or damages" prior to commencing litigation, it excepts from that requirement "Claims under the Revenue and Taxation Code or other statute prescribing procedures for the refund, rebate, exemption, cancellation, amendment, modification or adjustment of any tax, assessment, fee or charge of any portion thereof, or of any penalties, costs or charges related thereto." (Gov.Code, § 905, subd. (a).) It also has a provision specifying that "Claims against a local public entity ... which are excepted by Section 905 ... and which are not governed by any other statutes or regulations expressly relating thereto, shall be governed by the procedure prescribed in any charter, ordinance or regulation adopted by the local public entity." (Gov.Code, § 935, subd. (a).) In short, those statutes allow a scope of operation for local statutes to occupy the field of local refund actions, if the locality so chooses. Here, the City has so chosen, a choice in full conformity with the Claims Act.
The same circularity defeats plaintiffs argument that Woosley does not categorically bar all refund actions being maintained as class actions. True enough, but again inapt. Woosley did hold that tax refund class actions are permitted if there is statutory authorization for an administrative *726 claim filed for the class. (Woosley, supra,
Although plaintiff expends great effort to demonstrate that the Claims Act does not apply, and thus there is no prelitigation claim requirement because she is not seeking the return of "money or damages" (Gov.Code, § 905)a point considered hereaftershe is attacking a chimera. As already shown, while the Claims Act does not itself require an administrative claim for tax refunds as a condition precedent to suit, it does allow local governmental entities to do so. (Gov.Code, § 935, subd. (a); see Pasadena Hotel Development Venture v. City of Pasadena (1981)
The Constructive Trust Cases Are Inapplicable
Plaintiff contends that her causes of action are framed in a manner that does not require compliance with either the principle requiring express authorization of the class action remedy or the rule that a plaintiff must complete the claims process prior to applying for relief in the courts. No, plaintiff argues, she is not seeking the refund of taxes so much as the return of a specific sum of money and thus principles governing imposition of a constructive trust are applicable. Again, plaintiff is wrong.
As previously established, the "pay first, litigate later" rule is firmly established in California. Originally a matter of constitutional prohibition protecting the state (Cal. Const, art. XIII, § 32), it has been extendedby this court among othersto units of local government. (Flying Dutchman, supra,
Unable to point to authority where the refund-only principle has not been applied in a situation where there is not threat of criminal penalty or process (see fn. 4, ante.), plaintiff instead cites a number of cases in claimed' support of the use of a constructive trust as an exception to the claim filing requirement of the Claims Act. All are distinguishable.
In Minsky v. City of Los Angeles (1974)
Minsky was cited in Gonzales v. State of California (1977)
Bonelli v. State of California (1977)
Del Costello v. State of California (1982)
Minsky and Gonzales involved Minsky's and Gonzales's own money. So, too, did Bonelli, the government there attempting *728 to impose an offset against Bonelli's tax refund and his security deposit, money that was his. And, of course, Ms. Del Costello lost. None of the cases dealt with the issue here, a taxpayer seeking refund of an allegedly illegal tax. Indeed, plaintiffs opening brief admits as much, acknowledging that she must win: in her words, "the declaration of the illegality ... is the sine qua non for any refund; if there is no declaration of illegality, then there can be no refund." The constructive trust concept is not applicable here.[7]
Moreover, even if plaintiff were correct on this point, i.e., that the taxes at issue do not qualify as "money or damages" within the meaning of the Claims Act, and thus there was no claim requirement imposed, she would still have to deal with the unalterable fact that the City has its own statutory requirement which has a claim requirement, authorized by the Claims Act (Gov.Code, § 935, subd. (a), quoted ante). Put another way, even if plaintiff could avoid the state law claim requirement, she would still face the local requirement, which bans class actions in tax refund actions.[8]
The Refund Claims Are Not Incidental
Plaintiff next contends that her claim for refund "is merely incidental to other non-pecuniary claims" and, because she is not seeking "money or damages" within the scope of the Claims Act, no pre-litigation administrative claim was required. Plaintiff overestimates her preferred remedies, as her apparently primary claims are not claims at all.
A constructive trust is "not an independent cause of action but merely a type of remedy" (Glue-Fold, Inc. v. Slautterback Corp. (2000)
Moreover, the class action is also "an invention of equity," notwithstanding *729 its "limited codification in Code of Civil Procedure section 382." (Farrar, supra,
Lastly, plaintiff argues that "[w]hile the Claims Act authorizes cities to adopt their own local pre-lawsuit claim procedure for certain types of claims, the Hotel Tax refund in this case is not such a claim." Plaintiff cites nothing in support of this argument, and the city responds by asserting that it is disposed by Pasadena Hotel Development Venture v. City of Pasadena, supra,
*730 Taking up the latter contention first, the language in Volkswagen Pacific on which plaintiff relies was dictum, as plaintiff herself expressly acknowledges.[10] Perhaps more importantly, that dictum cannot support plaintiff here, because if it meant what plaintiff claims it meant, the Supreme Court would have invalidated the Los Angeles ordinance, which it did not do. And most importantly, plaintiffs argument is belied by the many cases that have dealt with local ordinances in tax refund cases, illustrated perhaps best by Volkswagen Pacific itself, which enforced a Los Angeles municipal ordinance requiring pre-suit filing of a claim for refund of a local tax. (Volkswagen Pacific, supra,
CONCLUSION
Fundamentally, we are dealing with the constitutional principle that "No legal or equitable process shall issue in any proceeding in any court against this State or any officer thereof to prevent or enjoin the collection of any tax. After payment of a tax claimed to be illegal, an action may be maintained to recover the tax paid ... in such manner as may be provided by the Legislature." (Cal. Const., art. XIII, § 32.) Although this provision expressly applies to the state, we have accepted that its guiding principle is equally applicable to smaller units of government. (Flying Dutchman Park, supra,
We summarize our conclusions: As required by due process, the city provides a judicial remedy to contest assessment or overpayment of a tax. As allowed by due process, the city limits that remedy to persons who have paid the tax and completed the administrative process to recover the tax. The City also limits the remedy to individuals, a point on which due process is silent, but which is authorized by state law. Plaintiff, as the trial court recognized, has cleared the hurdles to her personal action for a refund of Hotel Tax amounts she paid, but she must proceed on her own. Her situation is no different from other plaintiffs who were likewise unsuccessful in transmuting their refund suit into a class action: "[P]laintiffs are *731 properly in court and able to make that attack on their own behalf. But insofar as they are forced to go it alone, they are not hindered or aggrieved in that quest by the absence of a class behind them." (Farrar, supra,
The order is affirmed.
We concur: HAERLE, Acting P.J., and LAMBDEN, J.
NOTES
Notes
[1] The City's tax on "transient occupancy of hotel rooms" is part of article 7 of the San Francisco Business and Tax Regulations Code. Originally adopted in 1961, it provides for a tax of 8 percent "on the rent for every occupancy of a guest room in a hotel in the City and County." (S.F. Bus. & Tax Regs. Code, § 502.) The definition of "guest room" has already been quoted in the text, ante. (Id., § 501, subd. (e).) Effective August 1, 1996, the City imposed a surcharge of an additional 6 percent. (Id., § 502.6-1, subd. (b).) The total tax of 14 percent is to be collected from the occupant/renter by the hotel operator, and transmitted to the city tax collector. (Id., §§ 503, 504.) The 8 percent base tax is allocated for a number of specified uses (id., § 515.01), and the 6 percent surcharge is to be deposited in the City's general fund. (Id., § 502.6-1, subd. (b).)
[2] "The Tax Collector may promulgate regulations and issue rules, determinations and interpretations consistent with the provisions of the Business and Tax Regulations Code as may be necessary or appropriate for the purpose of carrying out and enforcing the payment, collection and remittance of taxes. (S.F. Bus. & Tax Regs.Code, § 6.16-1.)
[3] Despite that the appeal is from an order sustaining the City's demurrer without leave to amend, and further despite that the order deals only with the portion of plaintiff's complaint that sought to expand the claim into a class action, it is well accepted that such so-called "death knell" orders in putative class actions are appealable. (See Daar v. Yellow Cab Co. (1967)
[4] The exceptions deal primarily with situations where the taxpayer is facing criminal penalties or is forced to endure unwarranted criminal procedures. (See, e.g., Western Oil & Gas Assn. v. State Bd. of Equalization (1987)
[5] In 2001, this court held that a predecessor version of this ordinance constituted an adequate remedy at law to satisfy due process for a taxpayer challenging the City's parking tax. (Flying Dutchman, supra,
[6] Finally on this issue, we note plaintiff does not mention in her brief the alternative basis identified in her complaint, i.e., to prosecute this action as a taxpayer representative pursuant to Code of Civil Procedure section 526a. Plaintiff's omission is perhaps not surprising, as this remedy is not available to a nonresident who is not working to assist in the collection of a tax (see Lundberg v. County of Alameda (1956)
[7] The four other cases string-cited by plaintiff without discussion are likewise distinguishable. Branciforte Heights, LLC v. City of Santa Cruz (2006)
[8] Both the local claim requirement, and the ban on class claims, are embodied in section 6.15-1, which was quoted ante. We are puzzled as to how plaintiff can logically disclaim the applicability of section 6.15-1 while at the same time basing one of her causes of action directly upon it.
[9] This concluding reference to Neecke, supra,
The California Rules of Professional Conduct provide that in presenting a matter to a court "an attorney must employ, for the purpose of maintaining the causes confided to the attorney, only those means consistent with truth. (Rules of Professional Conduct, Rule 5-200(A).) . . . Thus, an attorney must not do any of the following: [1] Seek to mislead the judge, judicial officer, or jury by an artifice or false statement of fact or law. (Rules of Professional Conduct, Rule 5-200(B).) ..." (See, generally, 1 Witkin, Cal. Procedure, supra, Attorneys, § 521, p. 621.)
While Rule 5-200 is perhaps applicable only by interpretation, the Model Rules of Conduct, adopted by the American Bar Association, have a section that needs no interpretation. Rule 3.3, entitled, "Candor Toward the Tribunal," provides in pertinent part as follows: "A lawyer must not knowingly do the following: ... [11] ... [H] (2) fail to disclose to the tribunal legal authority in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel." (ABA Model Rules Prof. Conduct, rule 3.3(a)(2).)
"Although California has not adopted the Model Rules, courts and lawyers find the rules both helpful and persuasive in situations where the coverage of our Rules is unclear or inadequate." (1 Witkin, supra, Attorneys, § 418, p. 508.) We are one of those courts. (See generally Fortune, Underwood, Imwinkelried, Modern Litigation and Professional Responsibility Handbook (2001) § 8.5.1 pp. 329-330 ["The obligation to disclose adverse legal authority is an aspect of the lawyer's role as `officer of the court.' . . . lawyers should reveal cases and statutes of the controlling jurisdiction that the court needs to be aware of in order to intelligently rule on the matter. It is good ethics and good tactics to identify the adverse authorities, even though not directly adverse, and then argue why they are distinguishable or unsound. The court will appreciate the candor of the lawyer and will be more inclined to follow the lawyer's argument."].)
[10] The disputed sentence was "It would appear that if the Legislature intended to except tax refund actions, rather than just those arising under state law, it would have used `enactment' rather than `statute.'" (Volkswagen Pacific, supra,