Opinion
In an action against a city for allegedly imposing and collecting a general tax on its residents without the voter approval mandated by Proposition 62 (Gov. Code, §§ 53720-53730), when does the statute of limitations begin to run? Defendant, the City of La Habra (the City), contends the statute started to run on the date the City enacted its ordinance authorizing the tax. Plaintiffs, three taxpayer advocacy groups and three La Habra taxpayers, argue the statute began to run when this court, in Santa Clara County Local Transportation Authority v. Guardino (1995)
We agree with plaintiffs’ second contention; we conclude that if, as alleged, the tax is illegal, its continued imposition and collection is an ongoing violation, upon which the limitations period begins anew with each collection. We therefore find the action for declaratory judgment and writ of mandate timely; consequently, we reverse the judgment of the Court of Appeal, which affirmed the trial court’s dismissal of the action.
In November 1986, the voters approved Proposition 62, a statewide initiative providing, inter alia, that local governments may not impose any general tax until that tax is submitted to the electorate and approved by a majority of voters. (Gov. Code, § 53723.) A few years after the passage of Proposition 62, an appellate court declared its voter approval requirements unconstitutional. (City of Woodlake v. Logan (1991)
In December 1992, the City adopted La Habra Ordinance No. 1445 (the Ordinance), establishing a utility users tax to raise revenue for general governmental purposes. The Ordinance became effective immediately upon its enactment, though it was not operative until May 1, 1993. The City did not submit the Ordinance to the voters for approval.
In September 1995, we issued our opinion in Guardino, supra,
On March 26, 1996, more than three years after the Ordinance was adopted, plaintiffs—Howard Jarvis Taxpayers Association, Against City Tax, Paul Gann’s Citizens Committee, and three individuals described as “citizens, voters and taxpayers of the City of La Habra”—filed the instant action against the City and the Auditor Controller of the County of Orange (the County) for declaratory relief (Code Civ. Proc., § 1060), taxpayers’ injunctive relief (Code Civ. Proc., § 526a), and ordinary mandamus (Code Civ. Proc., § 1085). The complaint sought a declaration that the City’s utility tax was invalid under Government Code section 53723, an injunction against its enforcement, and a writ of mandate compelling the City to cease collecting the tax until approved by a majority of the voters. It also sought to compel the County to withhold from the City’s share of property tax revenues the amounts collected under the utility tax. (See Gov. Code, § 53728.) Finally, plaintiffs prayed for any other relief deemed proper, “including, but not limited to, refunds of past taxes collected in violation of law.”
The City demurred on the grounds the action was barred by the three-year statute of limitations applicable to a liability created by statute (Code Civ. Proc., § 338, subd. (a)), and the taxpayers’ injunctive relief cause of action
The Court of Appeal affirmed, agreeing with the City and the trial court that the three-year limitation period commenced with the Ordinance’s enactment.
We granted plaintiffs’ petition for review.
Discussion
In reviewing a judgment of dismissal after a demurrer is sustained without leave to amend, we must assume the truth of all facts properly pleaded by the plaintiffs, as well as those that are judicially noticeable. (Blank v. Kirwan (1985)
Government Code section 53723 provides: “No local government . . . may impose any general tax unless and until such general tax is submitted to the electorate of the local government. . . and approved by a majority vote of the voters voting in an election on the issue.” That this is a general tax, imposed for general fund purposes, is undisputed (Gov. Code, § 53721); nor
Also undisputed is that this action is one “upon a liability created by statute,” to which a three-year limitation period applies. (Code Civ. Proc., § 338, subd. (a).) As no different time of commencement is stated, the limitations period began when plaintiffs’ cause of action accrued. (Code Civ. Proc., § 312.) “Generally, a cause of action accrues and the statute of limitation begins to run when a suit may be maintained. [Citations.] ‘Ordinarily this is when the wrongful act is done and the obligation or the liability arises, but it does not “accrue until the party owning it is entitled to begin and prosecute an action thereon.” ’ [Citation.] In other words, ‘[a] cause of action accrues “upon the occurrence of the last element essential to the cause of action.” ’ [Citations.]” (County of San Diego v. Myers (1983)
I. Delayed Accrual
It would appear a cause of action to challenge the validity of the City’s utility tax first arose when the Ordinance was adopted, that being the first act allegedly in violation of Government Code section 53723. Plaintiffs, however, contend that accrual of the cause of action was delayed until the filing of Guardino, supra,
Plaintiffs find support in McBrearty v. City of Brawley, supra,
Jolly, supra,
We rejected the claim of delayed accrual, observing that the principle that a change in the law does not revive stale claims, though sometimes working harsh results, “encourages people to bring suit to change a rule of law with which they disagree, fostering growth and preventing legal stagnation.” (Jolly, supra, 44 Cal.3d at pp. 1116-1117.) A contrary rule, we further noted, “would allow virtually unlimited litigation every time precedent changed.” (Id. at p. 1117.)
The McBrearty court acknowledged the principle articulated in Monroe, supra, 6 Cal.3d at pages 406-407, and Jolly, supra,
We properly rejected the same reasoning in Jolly, where the plaintiff, as in McBrearty and the case at bench, would have faced an adverse Court of Appeal decision, one later overruled by our decision in Sindell v. Abbott Laboratories, supra,
Here too, plaintiffs may have been discouraged by an adverse appellate decision, but were in no manner precluded from bringing an action against the City at the time of the Ordinance’s enactment. Not only were they “in no worse a position” (Jolly, supra,
In a variation of their delayed-accrual claim, plaintiffs contend that, in the absence of voter approval, the City has never enacted its utility tax ordinance
Unlike plaintiffs, we do not read these passages as suggesting that a tax put into force without the required voter approval has never been enacted or imposed and therefore cannot be challenged as to its validity. No question regarding the timeliness or ripeness of such actions being before us in Guardino, we did not express any opinion as to when such actions might first be brought. Our description of the voter approval process was of the process as it operates under the statutes, not of the result when, as allegedly happened here, the statutory process was bypassed. That under Proposition 62 a local tax may not validly be imposed without voter approval does not imply that, when a city disregards the approval requirement in imposing a tax, the imposition has never happened and thus may not be challenged. Indeed, a remedial provision of Proposition 62 clearly implies to the contrary. (See Gov. Code, § 53728 [“If any local government or district imposes any tax without complying with the requirements of this Article, ... the amount of property tax revenue allocated to the jurisdiction . . . shall be reduced by one dollar ($1.00) for each one dollar ($1.00) of revenue attributable to such tax for each year that the tax is collected. Nothing in this section shall impair the right of any citizen or taxpayer to maintain an action to invalidate any tax imposed in violation of this Article”].)
II. Continuous Accrual
Finding plaintiffs’ claim of delayed accrual without merit, we next consider their claim of continuous accrual. Plaintiffs contend that even if the
The City, in answer, contends that “[t]he ‘injury’ that [plaintiffs] are clearly addressing in their present action is the enactment of the ordinance without voter approval, not the subsequent payments in compliance with the already enacted ordinance.” The City claims “[t]he right which [plaintiffs] are attempting to enforce is the right to vote on new taxes; the accrual of [plaintiffs’] cause of action with respect to that right occurred at the time the ordinance at issue was adopted .... The consequence of that tax, the collection of money from taxpayers each month, does not constitute a ‘new’ or ‘further’ injury which somehow tolls the running of the statute of limitations in this case.”
Plaintiffs reply that they are seeking redress for two types of injury; the violation of their right to vote on new taxes, and the City’s continued collection of the tax without valid legal authority. The City is under no compulsion to continue collecting the tax, they note, and “[e]very month the City chooses ... to send out another round of bills and collect more money without voter approval, it commits a new injury.”
Although plaintiffs have, throughout this action and appeal, emphasized the allegedly improper enactment of the Ordinance, we find well taken their contention that they have, as well, complained of, and sought redress for, the City’s continued collection of the allegedly unauthorized tax. Thus, in their complaint they allege the City imposed the utility tax “[beginning in 1992,” and that it is “currently imposed at a rate of 6%.” The taxpayer plaintiffs allegedly “have paid one or more of the challenged taxes within one year before the commencement of this action.” The City’s refusal to submit the tax to a vote allegedly “evidences” the City’s belief no vote is required and demonstrates that “[a]n actual controversy exists’'’ between the City and plaintiffs. The taxpayer plaintiffs claim to have no adequate remedy at law for the harm “which will be caused by defendant City’s continued imposition of the taxes at issue in this case” or for the harm “which will be caused by defendant City’s continued refusal to seek voter approval for its utility tax.” “By continuing to impose the general tax at issue in this case,” plaintiffs allege, “defendant City is failing to perform the legal duties required of it by Proposition 62.” (Italics added throughout.) In their prayer for relief, they seek not only a declaration of the tax’s invalidity, but also a writ of mandate
True, plaintiffs have refrained from pursuing their refund claim in this action. In the trial court, counsel for plaintiffs conceded that, while they had prayed for a refund, “we are not all that serious about it. We are more serious about the vote.” In a brief filed in the Court of Appeal, plaintiffs noted that they had prayed for refunds, but in their opening brief in this court they state without qualification that “plaintiff taxpayers are not seeking a refund of the taxes they have already paid . . . .”
Plaintiffs have, however, consistently claimed the City’s continued collection of its utility tax is illegal, and have consistently sought equitable remedies and writ relief to prevent further illegal collections. The question is whether, having abandoned their refund claim, they have timely sought such prospective relief—specifically, a declaration of the tax’s invalidity and a writ ordering the City to cease collecting the tax or put it to a vote—based on the City’s recent and continuing collection of the tax. The City, indeed, does not dispute that the action would be timely as to individual payments of the tax;
We agree with plaintiffs that the lack of an outstanding refund claim in this case is a “distinction without a difference,” for it does not affect the
That plaintiffs could have brought an action for declaratory judgment at the time of the Ordinance’s enactment, before the City began actually collecting its tax, does not imply such an action was untimely because brought later, at a time when the City had collected the tax for some years and was continuing to do so. So long as an action for refund or injunction could have been brought during the period of continued collection, so could an action for declaratory relief. We explained the applicable principle in a case involving a city’s continuing statutory obligation to pay pensions calculated on a certain basis: “ ‘[I]f declaratory relief is sought. . . within the statutory period after the breach, the right to such relief is not barred by lapse of time.’ [^Q Here, as we have seen, the statutory time limitation upon the right to sue for each pension instalment commences to run from the time when that instalment falls due. It follows that even though plaintiffs might have earlier brought suit for declaratory relief . . . their failure to do so does not operate to bar their right to declaratory relief with respect to future pension payments . . . .” (Abbott v. City of Los Angeles, supra,
In short, plaintiffs have alleged an ongoing violation of Proposition 62’s commands, for which they seek relief in mandamus (Code Civ. Proc., § 1085, subd. (a)), and a presently existing actual controversy between themselves and the City over the validity of the utility tax, which they seek to resolve by declaratory judgment (Code Civ. Proc., § 1060); those causes
The principal cases relied on by defendant and the Court of Appeal to defeat the theory of continuous accrual, none involving tax collection, are materially distinguishable.
In Dillon v. Board of Pension Commrs., supra, 18 Cal.2d at pages 430-431 (Dillon), we held a mandamus action to compel payment of a widow’s pension was barred because it was not brought within three years of her husband’s death, even though, as we acknowledged, the right to receive a pension is a continuing one. Our holding depended, however, on the premise that the plaintiff could not establish the right to a pension in an action to compel payment of a particular installment: “An action to determine the existence of the right thus necessarily precedes and is distinct from an action to recover instalments which have fallen due after the pension has been granted.” (Id. at p. 430.)
In County of San Diego v. Myers, supra, 147 Cal.App.3d at pages 421-422, the appellate court held a county’s action against the State of California to
In Ponderosa Homes, Inc. v. City of San Ramon (1994)
In its discussion of Ponderosa Homes, the City appears to contend that Proposition 62 can be violated only at the time a tax ordinance is first enacted because, in the City’s view, all Proposition 62 prohibits is “imposition” of a tax without voter approval, and imposition is limited to the time of initial enactment. Both premises are faulty. Government Code section 53727, subdivision (b), which governs taxes imposed prior to the measure’s passage, provides that no such tax “shall continue to be imposed” without a vote within two years of the measure’s effective date, and that a taxing jurisdiction that fails to obtain a majority vote “shall cease to impose such tax on and after November 15, 1988.” Clearly, in this provision, “imposition” is not limited to the time of initial enactment, and nothing in Proposition 62 suggests that it was used in a more restricted sense in Government
In De Anza Properties X, Ltd. v. County of Santa Cruz (9th Cir. 1991)
Finally, an amicus curiae group of California cities and counties contends that plaintiffs’ theory of continuous accrual, applied to tax measures, would unacceptably impair the security and reliability of municipal revenue sources and interfere with budgetary planning. Plaintiffs, in turn, acknowledge the public policy favoring security of municipal finance, but observe that the policy “is not a trump card that somehow requires the courts to countenance ultra vires or illegal tax practices.” We agree. The local governments’ suggestion, 14 years after the passage of Proposition 62 and
Our decision in this case does not, in any event, subject municipalities to limitless claims for refund of illegal taxes. First, to state what should be apparent, our decision here does not resolve the substantive merits of plaintiffs’ claims, much less the merits of similar potential claims against other municipalities; we resolve only the statute of limitations issue upon which review was sought. On that issue, moreover, we hold only that, where the three-year limitations period for actions on a liability created by statute (Code Civ. Proc., § 338, subd. (a)) applies, and no other statute or constitutional rule provides differently, the validity of a tax measure may be challenged within the statutory period after any collection of the tax, regardless of whether more than three years have passed since the tax measure was adopted. We are not concerned in this case with bond issues or other governmental actions that, by state law, are made subject to the accelerated validation procedures of Code of Civil Procedure sections 860-870.5. (See generally Planning & Conservation League v. Department of Water Resources (1998)
Disposition
The judgment of the Court of Appeal is reversed.
George, C. J., Mosk, J., Kennard, J., Baxter, J., Chin, J., and Brown, J., concurred.
The petition of respondent City of La Habra for a rehearing was denied July 18, 2001, and the opinion was modified to read as printed above.
Notes
The Court of Appeal also agreed that the taxpayers’ injunctive relief statute, Code of Civil Procedure section 526a, was inapplicable because plaintiffs were not seeking to enjoin the illegal expenditure of taxpayer funds; rather, they were seeking to stop the collection of taxes. Plaintiffs did not petition for review on that issue, and we do not address it.
McBrearty, supra,
An action for refund of an illegally collected tax must generally be brought within a specified time after the tax is paid and an administrative claim denied. (See, e.g., Rev. & Tax. Code, §§ 5097, 5141 [property tax: claim must be made within four years after payment; action within six months after claim rejected]; id., §§ 6902, 6933 [sales tax: claim within three years of end of payment period; action within 90 days of disallowance].) The parties have not cited, and our research has not disclosed, any such Revenue and Taxation Code provision governing local utility taxes. Because plaintiffs here do not seek refunds, we need not decide what claims procedures and limitations period would apply to such a claim. (See Ord., § 18 [providing a three-year period, running from the date of payment, for refunds or credits to the service supplier (which must then refund or credit the customer) for taxes “illegally collected or received”]; but see Pub. Util. Code, § 799 [providing, as to local utility taxes, that the service supplier is not liable to customers for refunds and may not be named a party in an action for a refund of the tax]; Volkswagen Pacific, Inc. v. City of Los Angeles (1972)
Our subsequent decision in Abbott v. City of Los Angeles, supra,
Article XIII, section 32 of the California Constitution and section 6931 of the Revenue and Taxation Code bar certain injunctive and writ relief in tax actions against the State of California and its officers. Neither provision applies to this action against two local governments. Section 4807 of the Revenue and Taxation Code, which similarly bars actions to enjoin collection of property taxes, also does not apply to the utility tax at issue here.
As limited in Levald, Inc. v. City of Palm Desert (9th Cir. 1993)