TOBIAS KAHAN, Plaintiff and Appellant, v. CITY OF RICHMOND, Defendant and Respondent.
A150866
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION ONE
Filed 5/23/19
CERTIFIED FOR PARTIAL PUBLICATION*; (Contra Costa County Super. Ct. No. MSC16-01298)
Kahan filed a class action lawsuit alleging the City‘s practice of recording liens for unpaid garbage collection fees violates and is preempted by state law. Kahan contends the City has no authority to levy “special assessments” for garbage collection charges that are “user fees” under state law, and argues the ordinance purporting to authorize such assessments violates state laws on lien priority. He further contends that even if the practice is allowed, the City‘s action violated its own ordinance because a garbage lien may not attach where a “bona fide encumbrancer for value” has placed a lien on the property at any time before the garbage lien is recorded.
I. BACKGROUND
Pursuant to this ordinance, on January 8, 2014, the City recorded an assessment lien for unpaid solid waste collection service charges (garbage lien) against a residential property. Kahan alleges the City‘s garbage lien was recorded “after the recordation of one or more bona fide mortgage encumbrances on the Subject Property.” On January 16, 2014, Kahan purchased the property at a foreclosure sale. When he later sold the property on August 21, 2014, he was required to pay amounts demanded by the City, along with administrative charges and escrow fees, in order to obtain a release of the garbage lien.
In August 2015, Kahan filed a notice of claim with the City on his own behalf and on behalf of an alleged class of similarly situated individuals and entities. The City sent Kahan a notice of claim deemed rejected, after which he filed this class action lawsuit. Kahan alleged causes of action for declaratory relief, injunctive relief, inverse condemnation, and negligence, seeking an injunction to stop the City from recording
The City demurred to each cause of action in Kahan‘s complaint on the grounds he failed to state a cause of action and the County of Contra Costa (County) was a necessary party to the lawsuit. (
Kahan opposed the demurrer, arguing it must be overruled because the City‘s arguments were all predicated on the legally incorrect premise that charges for garbage collection fees could be converted to “special assessments.” Because such charges are “‘user fees‘” as defined under the California Constitution, Kahan argued, they could not be treated as special assessments or tax levies. Kahan further asserted
The trial court issued a tentative ruling, which was contested. After hearing oral argument, the trial court ordered, in relevant part, as follows:
“1. For the reasons set forth in the Court‘s tentative ruling on pages 6–9, the demurrers to the Complaint are sustained with leave to amend on the grounds that: 1) the County of Contra Costa is a necessary party for the requested relief (Part II.A); and 2) the complaint fails to state a cause of action for a refund of an assessment under
Revenue & Taxation Code section 5096 et seq. (Part II.B).“2. The demurrer on the basis of immunity to the Third Cause of Action for Inverse Condemnation and Violation of Due Process and the Fourth Cause of Action for Negligence is sustained, with leave to amend, to the extent the complaint goes beyond seeking a refund.
“[¶] . . . [¶]
“5. Plaintiff has until January 17, 2017 to file his amended complaint.”
The trial court explained the demurrer was sustained with leave to amend for Kahan to add the County as a defendant because the injunctive relief sought required action by the County. As to compliance with the procedural requirements of the Revenue and Taxation Code, the trial court agreed with the City that
Though the trial court sustained the demurrers with leave to amend, Kahan did not amend within the time provided. The City moved to dismiss with prejudice, and the trial court entered a judgment of dismissal. Kahan appealed.
A. Standard of Review
“We review the ruling sustaining the demurrer de novo, exercising independent judgment as to whether the complaint states a cause of action as a matter of law.” (Kan v. Guild Mortgage Co. (2014) 230 Cal.App.4th 736, 740 (Kan).) “‘[W]e give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.‘” (Moran v. Prime Healthcare Management, Inc. (2016) 3 Cal.App.5th 1131, 1139.) “When conducting this independent review, appellate courts ‘treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions or conclusions of law.‘” (Esparza v. Kaweah Delta Dist. Hospital (2016) 3 Cal.App.5th 547, 552.)
Although we review the complaint de novo, “‘[t]he plaintiff has the burden of showing that the facts pleaded are sufficient to establish every element of the cause of action and overcoming all of the legal grounds on which the trial court sustained the demurrer, and if the defendant negates any essential element, we will affirm the order sustaining the demurrer as to the cause of action. [Citation.] We will affirm if there is any ground on which the demurrer can properly be sustained, whether or not the trial court relied on proper grounds or the defendant asserted a proper ground in the trial court proceedings.‘” (Rossberg v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1490–1491.) It is the trial court‘s ruling we review, not its reasoning or rationale. (Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982, 994; Kan, supra, 230 Cal.App.4th at p. 740.)
We also review questions of statutory interpretation de novo. (MacIsaac v. Waste Management Collection & Recycling, Inc. (2005) 134 Cal.App.4th 1076, 1082 (MacIsaac).) “We begin with the fundamental rule that our primary task is to determine the lawmakers’ intent.” (Delaney v. Superior Court (1990) 50 Cal.3d 785, 798.) In determining that intent, “‘we first look to the plain meaning of the statutory language, then to its legislative history and finally to the reasonableness of a proposed construction.‘” (MacIsaac, at p. 1082.)
Kahan contends the trial court erred in sustaining demurrers to each cause of action in the complaint because charges for garbage collection services are “user fees,” which the City cannot “unilaterally” convert into “assessments.” Kahan also argues state law does not authorize the City to designate garbage fees as “special assessments,” as provided in its ordinance. Thus, Kahan asserts, the procedural requirements in the Revenue and Taxation Code, which apply only to refunds of taxes and assessments, do not apply to his claims. As we will explain, we reject these arguments because the City‘s treatment of delinquent garbage fees as a special assessment was expressly authorized by statute.
The fees that may be collected as special assessments include charges for garbage collection services.
Kahan‘s argument that the fees authorized by these statutes are only to pay for waste disposal sites is unavailing. As to
We find similarly unpersuasive Kahan‘s argument, raised for the first time at oral argument, that
But even if
As for
Kahan nonetheless argues “the plain meaning of [Government Code] Section 38790.1 is not clear and unambiguous,” and urges us to look to the legislative history to interpret the statute. But other than the unsupported argument it is related to the preceding section, Kahan has not explained why the language is ambiguous. To the contrary, it appears to us quite clear: “Any city collecting garbage fees or charges may collect delinquent fees or charges in the manner provided in Section 25831 for counties.” (
However, even were we to look to the legislative history of
Despite the clear statutory language authorizing the City to collect delinquent garbage fees as “special assessments,” Kahan contends the definitions of “tax,” “assessment,” and “user fee” under the California Constitution preclude the City from labelling these charges as special assessments. Under the Constitution, a tax is “any levy, charge, or exaction of any kind imposed by a local government, except, the following: [¶] (1) A charge imposed for a specific benefit conferred or privilege granted directly to the payor . . . . [¶] (2) A charge imposed for a specific government service or product provided directly to the payor . . . . [¶] . . . [¶] (7) Assessments and property-related fees imposed in accordance with the provisions of Article XIII D.” (
We decline to do so for several reasons.
First, the definitions Kahan relies upon under article XIII D of the California Constitution relate to procedural requirements and restrictions on a local government‘s authority to impose or increase revenue measures, not methods for collection of delinquent service charges. (See Apartment Assn. of Los Angeles County, Inc. v. City of Los Angeles (2001) 24 Cal.4th 830, 836–837 [explaining historical background of Prop. 218, which added art. XIII D to the Cal. Const.].) Kahan‘s complaint does not
Second, Kahan relies heavily on Isaac v. County of Los Angeles (1998) 66 Cal.App.4th 586 (Isaac) to argue the City could not treat delinquent garbage charges as special assessments, but if anything, that case supports the City‘s position under the facts here. In Isaac, the court considered the validity of an ordinance adopted by the City of Los Angeles providing for the imposition of special assessment liens on apartment buildings for the collection of past due water and electric utility bills. (Id. at p. 591.) Like the City‘s ordinance in this case, the ordinance in Isaac allowed the city to record a lien securing the assessment against the subject real property, and provided the lien had priority over other liens and encumbrances against the property. (Id. at pp. 591–592.) The court first considered whether the utility lien imposed by the ordinance was a special assessment or a special tax for purposes of article XIII A of the Constitution, concluding it was neither a valid special assessment nor a special tax, but a user fee. (Isaac, at p. 598.) Critically, however, the court then observed, “the City [of Los Angeles] cannot impose the utility lien unless there are other legal grounds supporting its imposition.” (Ibid., italics added.) It explained: “Under the Civil Code, liens are created in two ways: (1) by operation of law, and (2) by contract. (
The absence of statutory authority for the utility lien in Isaac is the dispositive difference between that case and this one. Because
This analysis is further supported by Casteel v. County of San Joaquin (2005) 134 Cal.App.4th 918. In Casteel, the plaintiff-property owner challenged a county ordinance authorizing collection of solid waste fees from nonresident property owners. The ordinance had been adopted pursuant to
Third, we reject Kahan‘s argument because even if the delinquent garbage fees are more appropriately categorized as “user fees” than assessments, Kahan cites no authority that these distinctions apply to the Revenue and Taxation Code provisions which govern
Fourth, even if the garbage collection fees are technically user fees, and even if Kahan is correct that the Revenue and Taxation Code procedural requirements do not apply, that does not mean the creation of the lien was unauthorized. Each of the causes of action in Kahan‘s complaint is premised on the contention the City‘s actions were unlawful and not authorized by
C. State Lien Priority Preemption
Kahan also relies on Isaac, supra, 66 Cal.App.4th 586 to argue the City‘s characterization of garbage liens conflicts with and is preempted by state lien priority law. In Isaac, the City of Los Angeles argued its ordinance was valid because utility service is a municipal affair and it was within the police power of the city to legislate with respect to payment of utility charges. The court rejected that argument, finding “lien priorities on real property a matter of statewide concern because uniformity in lien priority is essential.” (Id. at p. 600.) It then explained: “Because lien priority is a matter of statewide concern, the City [of Los Angeles] may not enact legislation that conflicts or disables the effectiveness of statutory law. The statutory scheme of lien priority giving priority to certain liens, such as tax liens and purchase money mortgages, reflects a legislative intent to favor certain types of charges against real property. The utility lien at issue disrupts this balance by giving what is essentially a judgment lien priority normally accorded only to tax liens.” (Id. at p. 601.)
Again, Isaac is distinguishable. There, the City of Los Angeles was relying on its general police power to grant delinquent utility charges priority over other liens. (Isaac, supra, 66 Cal.App.4th at p. 599.) Here,
D. Bona Fide Encumbrancer Exception
Next Kahan argues that even if
Kahan‘s position reflects a fundamental misunderstanding of the bona fide purchaser/bona fide encumbrancer doctrine. As explained by Miller and Starr in their preeminent California real estate treatise, “A preferential priority is given to a purchaser or encumbrancer who acquires a lien or title interest in good faith and for value without knowledge or notice of a prior interest. Such a party is called a ‘bona fide purchaser’ or a ‘bona fide encumbrancer,’ depending on whether the interest is an estate in the property or a lien on the property. . . . A ‘bona fide encumbrancer’ is an encumbrancer acting in good faith and for value who receives a lien or encumbrance on real property, or perhaps merely the means of obtaining one without knowledge or notice of competing liens on the same property, and who has parted with something of value in consideration for the encumbrance.” (4 Miller & Starr, Cal. Real Estate (4th ed.) § 10:50, pp. 10-204–10-205, fns. omitted.) The same treatise also states: “The subsequent interest of a bona fide purchaser or encumbrancer achieves priority over a prior interest where the subsequent party acquires an interest in the property for a valuable consideration, in good faith, and when he or she first records the instrument creating his or her interest without knowledge or notice of the prior interest . . . .” (
Kahan apparently concedes he is not a bona fide purchaser or encumbrancer. It is undisputed he purchased the subject property at a foreclosure sale with notice of the garbage lien, which was recorded eight days before the sale. (See Caito v. United California Bank, supra, 20 Cal.3d at p. 702 [recorded instrument provides constructive notice of its contents]; In re Marriage of Cloney (2001) 91 Cal.App.4th 429, 437 [law presumes a party acquiring property has notice of the contents of a properly recorded document affecting the property].) Kahan nonetheless contends the language of the exception in
In interpreting the meaning of a statute, we look first to its plain language. (MacIsaac, supra, 134 Cal.App.4th at p. 1082.) Here, the exception provides “if a lien of a bona fide encumbrancer for value has been created and attaches [to the real property], prior to the date on which the first installment of the taxes would become delinquent, then the lien that would otherwise be imposed by this section shall not attach to the real property . . . .” (
As explained above, a bona fide encumbrancer, by definition, is a subsequent encumbrancer who obtains a lien without notice of a prior, existing interest. One is not a bona fide encumbrancer in the abstract, but in relationship to a particular preexisting interest—here, the garbage lien. Thus, in order to be a bona fide encumbrancer for value with regard to the garbage lien in this case, Kahan would have to allege facts showing the alleged mortgage(s) were obtained after the garbage lien existed but before it was recorded.5 Kahan‘s conclusory allegation that one or more mortgage interests existed on the property at some unspecified point before the City recorded the garbage lien does not suffice to plead those mortgages were subsequent encumbrances placed after the garbage lien arose without notice of it. Nor does his legal contention the alleged mortgages were “bona fide mortgage encumbrances” suffice to overcome his failure to allege material facts supporting a cognizable cause of action. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 [“In reviewing the sufficiency of a complaint against a general demurrer, . . . . ‘We
Our construction of the statute is consistent with the apparent intent of the Legislature in adopting the exception here. In 1973, the Legislature passed Assembly Bill No. 1342 (1973–1974 Reg. Sess.) as part of a comprehensive effort to add a bona fide purchaser or encumbrancer exception to a number of statutes, including
To the extent any ambiguity remains, our construction of the bona fide encumbrancer exception in
Kahan relies on County of Butte v. North Burbank Pub. Utility Dist. (1981) 124 Cal.App.3d 342 (County of Butte), in which the court held that an assessment pursuant to
In sum, the bona fide encumbrancer exception does not apply here based on the allegations of Kahan‘s complaint.
E. Failure to State a Claim
The trial court‘s order sustaining the demurrer states, “The demurrer on the basis of immunity to the Third Cause of Action for Inverse Condemnation and Violation of Due Process and the Fourth Cause of Action for Negligence is sustained, with leave to amend, to the extent the complaint goes beyond seeking a refund.” Kahan contends the order must be reversed because the City is not immune from liability for damages for inverse condemnation or negligence. As we explained above, however, all four causes of action in Kahan‘s complaint, including his causes of action for inverse condemnation and negligence, depend on his allegation the City‘s special assessment lien was unauthorized. Because, as we have explained above, the lien was expressly authorized by statute, Kahan has failed to state a cognizable cause of action. Accordingly, we need not reach the question of immunity. Likewise, we need not address whether the County must be named as a necessary party.
We also reject Kahan‘s argument the trial court improperly sustained the demurrers to only portions of his causes of action. Kahan argues the trial court ruled the County is a necessary party to the extent Kahan seeks an injunction to compel the City to cause the County to remove the delinquent garbage charges from the tax roll, but he also seeks to enjoin the City from recording and maintaining garbage liens and to compel them to release them. Further, the trial court ruled the governmental immunity statute precludes his negligence and inverse condemnation claims to the extent he alleges relief beyond a refund, but those claims allege a right to a refund. Thus, Kahan contends, these rulings fall short of supporting dismissal of any cause of action in its entirety.
We disagree. The trial court cited several grounds for its ruling, which together disposed of all his claims. It sustained demurrers to all causes of action in the complaint
F. Leave to Amend
In his reply brief to this court, Kahan requested leave to amend his complaint to allege that he has exhausted his administrative remedies under the property tax refund statutes, and to name the County as a defendant. Kahan raised this issue for the first time on reply, and accordingly, we need not consider it. (WA Southwest 2, LLC v. First American Title Ins. Co. (2015) 240 Cal.App.4th 148, 155.)
In any event, Kahan stood on his complaint and chose not to amend. When a plaintiff is given the opportunity to amend and elects not to do so, we construe the complaint strictly and presume the plaintiff has stated as strong a case as he or she can. (Gonzales v. State of California (1977) 68 Cal.App.3d 621, 635, disapproved on another point in City of Stockton v. Superior Court (2007) 42 Cal.4th 730, 740; Drum v. San Fernando Valley Bar Assn. (2010) 182 Cal.App.4th 247, 251.) “In these circumstances, we will affirm the judgment if the complaint is objectionable on any ground raised in the demurrer.” (Drum, at p. 251.) Although Kahan implies in his reply brief that exhaustion of his administrative remedies represents a change in circumstances that he did not have
Because we conclude Kahan is not entitled to another opportunity to amend his complaint, we deny the motion for judicial notice filed on April 9, 2018 with his reply brief and the second supplemental motion for judicial notice filed on October 4, 2018, after the reply brief, asking us to take judicial notice of his postjudgment attempts to exhaust his administrative remedies with respect to a tax refund. Moreover, judicial notice would be improper because the evidence Kahan asks us to notice was not before the trial court at the time it rendered its decision. (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444, fn. 3 [reviewing courts generally do not take judicial notice of evidence not presented to trial court and consider only matters which were part of the record at the time judgment was entered unless “exceptional circumstances exist that would justify deviating from that rule“]; California School Bds. Assn. v. State of California (2011) 192 Cal.App.4th 770, 803 [same].)
III. DISPOSITION
The judgment is affirmed. Respondent may recover its costs on appeal. (
Margulies, J.
We concur:
Humes, P. J.
Banke, J.
A150866
Kahan v. City of Richmond
Trial Judge: Hon. Barry Goode
Counsel:
Nelson & Fraenkel, Gretchen M. Nelson; Law Offices of Gregg A. Rapoport and Gregg A. Rapoport for Plaintiff and Appellant.
Colantuono, Highsmith & Whatley, Michael G. Colantuono, Holly O. Whatley and Jon R. di Cristina for Defendant and Respondent.