Opinion
F040349.
7-25-2003
DAVID L. WIITALA, Plaintiff and Appellant, v. CALIFORNIA FRANCHISE TAX BOARD et al., Defendants and Respondents.
David L. Wiitala, in pro. per., for Plaintiff and Appellant. Bill Lockyer, Attorney General, Lawrence K. Keethe and Robert E. Asperger, Deputy Attorney Generals, for Defendants and Respondents.
Appellant David Wiitala (Wiitala) filed a petition for a writ of mandate against the Franchise Tax Board (FTB) and the State Board of Equalization (SBE) alleging that the procedures used by the FTB and the SBE to determine he owed income tax and penalties for the 1997 tax year violated his constitutional rights under the First, Fifth, Sixth and Fourteenth Amendments and the due process clause of the California Constitution. In his prayer for relief, Wiitala requested that the decisions of the FTB and the SBE be vacated and the matter be remanded to the FTB for a meaningful, fair hearing where evidence was presented. The FTB and the SBE demurred to the petition. The superior court sustained the demurrer on the grounds that article XIII, section 32 of the California Constitution and Revenue and Taxation Code section 19381 precluded it from issuing a writ of mandate.
All further statutory references are to the Revenue and Taxation Code unless otherwise indicated.
Wiitala appeals, claiming that the constitutional and statutory prohibitions on writs of mandate do not extend to situations where (1) the FTB and SBE knowingly and willfully violate statutes and regulations applicable to the proceedings, (2) the FTB or SBE deny an individual due process of law, or (3) the relief sought is a fair hearing rather than a refund of taxes. We hold the superior court correctly concluded it lacked the authority to issue a writ of mandate under the facts alleged in the petition and will affirm the judgment.
FACTS AND PROCEEDINGS
Wiitala did not submit a California income tax return using form 540 for the 1997 tax year. In April 1999, the FTB notified Wiitala that it proposed to assess him with $ 3,020 of tax liability for the 1997 tax year and $ 2,565.44 for penalties, interest and fees. Wiitala responded by a letter that protested the notice of assessment and demanded information about the administrative process for asserting his rights and defenses. The FTB acknowledged receipt of Wiitalas protest and informed him that a hearing officer would contact him to schedule the hearing he requested under section 19044.
The hearing was held on September 16, 1999. Wiitala and an FTB hearing officer were present. At the hearing, the FTB relied upon a computer printout of W-2 and 1099 forms that were submitted to the FTB without signature under penalty of perjury. Wiitala asked for the opportunity to confront and cross-examine the individuals who supplied evidence against him, but was not given an opportunity.
On November 2, 1999, the FTB issued a notice of action that informed Wiitala the notice of proposed assessment was affirmed in accordance with the recommendation of the hearing officer. The second page of the notice of action specified the procedures for Wiitala to follow if he disagreed with the decision and wished to appeal to the SBE. Wiitala filed a timely notice of appeal with the SBE and the SBE acknowledged receipt of the notice.
By letter dated January 25, 2000, the SBE advised Wiitala that (1) the jurisdiction of the SBE was limited to a determination of the correct amount of income tax liability, if any, (2) the SBE could not decide other grievances the taxpayer had with the FTB and (3) the SBE was precluded from deciding if provisions of Californias personal income tax law were unconstitutional or unenforceable. The letter also stated that to perfect the appeal so it could be processed on its merits, Wiitala should submit a valid tax return within 90 days. Wiitalas petition alleges the SBE knowingly and willingly provided false information to him regarding the perfection of an appeal because no statute or regulation requires a person to file a tax return as a condition to perfecting an appeal to the SBE.
In April 2000, Wiitala submitted his opening brief to the SBE, a tax return for 1997 on California form 540A, and a California form 3525 (substitute for form W-2, wage and tax statement). The FTB filed a respondents opening brief with the SBE in July 2000. Wiitalas reply brief (1) presented arguments for why he received no "gross income" or "wages" as those terms were defined by the Internal Revenue Code and treasury regulations and (2) claimed the FTB repeatedly denied his right to confront and cross-examine adverse witnesses.
By letter dated December 18, 2000, the SBE notified Wiitala that the hearing for his appeal would be held on January 3, 2001, and provided him with a copy of a hearing summary prepared by the legal staff of the SBE. At the hearing before the SBE, Wiitala contended the hearing summary mischaracterized his legal positions. He then explained his interpretation of law regarding the terms "gross income" and "wages." He also explained why his argument that the FTBs violations of his due process rights was not a challenge of the constitutionality of the income tax laws of California.
On January 4, 2001, the SBE issued a one-page decision affirming the decision of the FTB and imposing a penalty of $ 750 against Wiitala for presenting frivolous arguments. The SBE did not issue a statement of findings and determinations with its decision.
Wiitala filed a petition for rehearing with the SBE asserting, among other things, that the failure to provide a statement of findings and determinations violated Government Code section 11425.10 and Wiitalas due process rights. The SBE denied Wiitalas petition for a rehearing because it concluded the grounds set forth in the petition did not constitute good cause of a new hearing.
On September 14, 2001, Wiitala filed a petition for writ of mandate in Fresno County Superior Court. In his prayer for relief, Wiitala requested an order directing the FTB and SBE to vacate its previous rulings against him for the 1997 tax year and remanding the matter back to the FTB to provide him with a meaningful, fair hearing where evidence was presented.
The FTB and SBE filed a demurrer to the petition for writ of mandate contending that Wiitalas allegations are insufficient to establish he was denied a fair hearing because (1) the FTB supported its assessment with sufficient evidence, (2) the SBE is not required to issue a statement of findings supporting its decision, (3) Wiitala was not denied the opportunity to cross-examine witnesses because there were no witnesses to question, and (4) Wiitalas other claims of procedural defects do not show he was denied a fair hearing.
The superior court sustained the demurrer of the FTB and SBE based on the provisions of article XIII, section 32 of the California Constitution and section 19381. A judgment of dismissal was entered and Wiitala filed this appeal.
DISCUSSION
I. Standard of Review
"A demurrer challenges only the legal sufficiency of the complaint, not the truth of its factual allegations or plaintiffs ability to prove those allegations. [Citations.] In order to overturn the demurrers sustained by the trial court, a plaintiff must overcome all legal grounds on which the trial court sustained the demurrers. [Citation.] A demurrer should not be sustained without leave to amend if the complaint states a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment. It may be sustained without leave to amend if the facts are not in dispute, and the nature of the plaintiffs claim is clear but, under substantive law, no liability exists. [Citation.]" (Nast v. State Bd. of Equalization (1996) 46 Cal.App.4th 343, 346, fn. 2; see County of Fresno v. Shelton (1998) 66 Cal.App.4th 996, 1009-1010.)
II. Prepayment Review of the Actions of the FTB and SBE is Not Required.
Article XIII, section 32 of the California Constitution provides: "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, with interest, in such manner as may be provided by the Legislature." Sections 19381 and 19382 implement this constitutional provision. Section 19381 provides in pertinent part: "No injunction or writ of mandate or other legal or equitable process shall issue in any suit, action, or proceeding in any court against this state or against any officer of this state to prevent or enjoin the assessment or collection of any tax under this part...." Section 19382 authorizes a taxpayer who disputes the computation or assessment of a tax to bring an action against the FTB for its recovery.
The primary issue raised in this appeal is whether the constitutional and statutory ban on prepayment judicial review of tax matters contained in article XIII, section 32 of the California Constitution and section 19381 apply in spite of Wiitalas allegations that the administrative process used by the FTB and SBE violated his federal constitutional rights under the First, Fifth, Sixth and Fourteenth Amendments.
Wiitala asserts he is not seeking prepayment review of the tax assessed against him, but is seeking a writ of mandate to require the FTB and SBE to follow the law and provide meaningful administrative due process. However, in his petition Wiitala requested an order directing the FTB and SBE to vacate its previous rulings against him for the 1997 tax year. The rulings relate to the assessment of income tax. Therefore, vacating the rulings would, in effect, "prevent or enjoin the assessment" (§ 19381) of income tax and thereby impede tax collection. (See Western Oil & Gas Assn. v. State Bd. of Equalization (1987) 44 Cal.3d 208, 213, 242 Cal. Rptr. 334, 745 P.2d 1360.) As a result, we conclude Wiitalas petition for writ of mandate falls within the express language of article XIII, section 32 of the California Constitution and section 19381.
The next step to determining whether or not Californias constitutional and statutory prohibition of prepayment judicial review applies in this case is to determine if an exception applies. The Attorney General recognizes that the ban on prepayment judicial review is subject to an exception designed to protect federal constitutional rights. (See Western Oil & Gas Assn. v. State Bd. of Equalization, supra, 44 Cal.3d at p. 213 [Californias ban on prepayment judicial review yields to the federal Constitution]; U.S. Const., art. VI, cl. 2 [supremacy clause].) The Attorney General argues the exception is extremely narrow and does not apply to the facts alleged by Wiitala. In contrast, Wiitala contends he has alleged sufficient facts to show the FTB and SBE did not follow the rules applicable to their proceedings and the prohibition on judicial review presumes that the agencies followed proper procedures.
In light of these contentions, the dispute in this appeal focuses on whether the facts of this case fall within the general rule prohibiting the issuance of a writ of mandate that prevents or enjoins the assessment or collection of any personal income tax (see § 19381) or fall within an exception to that general rule.
This issue is sufficient to provide this court with appellate jurisdiction. (See Pacific-Union Club v. Superior Court (1991) 232 Cal. App. 3d 60, 70, 283 Cal. Rptr. 287.)
To obtain the prepayment remedy of mandamus, the petitioner must show that some constitutional right has been adversely affected by administrative activity and that only mandamus can protect that constitutional right. (Aronoff v. Franchise Tax Board (1963) 60 Cal.2d 177, 179, 32 Cal. Rptr. 1, 383 P.2d 409; Code Civ. Proc., § 1086 [writ available if there is no plain, speedy and adequate remedy at law].)
Had Wiitala filed his petition in federal district court, a similar standard would have applied. Section 1341 of title 28 of the United States Code, the Tax Injunction Act, provides: "The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State."
A. Mandamus Not Needed to Remedy Due Process Claims
All of Wiitalas assertions based on the due process clause fail because the procedural irregularities alleged can be remedied in an action brought in superior court to obtain a refund of the taxes paid. (Nast v. State Bd. of Equalization, supra, 46 Cal.App.4th at pp. 347-348.)
"The power of the state to provide the remedy of suit to recover alleged overpayments as the exclusive means of judicial review of tax proceedings is unquestioned. Because the remedy at law is deemed to be adequate, mandamus relief is unavailable even if the taxpayers underlying claim has merit. Nast v. State Bd. of Equalization[, supra,] 46 Cal.App.4th 343, 53 Cal.Rptr.2d 592." (34 Cal.Jur.3d (1998) Franchise and in Lieu Taxes, § 25, p. 89, fn. 73.)
In light of this principle of law, we need not consider whether or not Wiitalas underlying due process claims have merit. Even if the due process claims have merit, mandamus relief is not available.
Not all of Wiitalas allegations of procedural irregularities appear to have merit. For example, Wiitalas claim that the SBE failed to provide a proper written decision based upon the law, statutes and regulations lacks merit because the SBE is exempt for the requirements of the Administrative Procedure Act. (Gov. Code, § 15609.5; 25 Cal. Law Revision Com. Rep. (1995) p. 712.) Thus, the SBEs decision need not include a written statement of the factual and legal basis of the decision as specified in Government Code section 11425.10, subdivision (a)(6).
B. Mandamus Not Needed to Protect the Right to Confront and Cross- Examine Witnesses
"In all criminal prosecutions, the accused shall enjoy the right ... to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor ...." (U.S. Const., 6th Amend.) Assuming there is a reasonable possibility that Wiitala could allege facts showing the administrative actions of the FTB and SBE were "criminal prosecutions" for purposes of the Sixth Amendment (see Lynn v. West (4th Cir. 1998) 134 F.3d 582, 593, cert. denied (1998) 525 U.S. 813, 142 L. Ed. 2d 36, 119 S. Ct. 47; Hudson v. United States (1997) 522 U.S. 93, 99, 139 L. Ed. 2d 450, 118 S. Ct. 488), it does not follow that a petition for writ of mandate is an appropriate remedy.
In a refund action under section 19382, Wiitala is entitled to a full and fair hearing before the superior court with the right to present evidence and cross-examine witnesses. Consequently, the refund action provides an adequate remedy at law for any infraction of Wiitalas Sixth Amendment rights.
C. Mandamus is Not Needed to Remedy the Alleged Violations of
the First Amendment
Wiitala contends his First Amendment rights were violated in two respects. First, the administrative actions of the FTB and SBE impinged upon his right to petition for redress of grievances. Second, the SBEs decision to impose a penalty of $ 750 against him for presenting frivolous arguments effectively chilled his right to freedom of speech.
"Congress shall make no law ... abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances." (U.S. Const., 1st Amend.)
Neither of these claims justifies the issuance of a writ of mandate in this case. A refund action under section 19382 is an adequate remedy for Wiitala to obtain a redress of his grievances against the FTB and SBE. In addition, if the decision of the SBE to impose the $ 750 penalty was erroneous, that decision can be reviewed by the superior court in a refund action. Therefore, Wiitala has an adequate remedy at law for the alleged violations of his First Amendment rights. (Cf. California v. Grace Brethren Church (1982) 457 U.S. 393, 73 L. Ed. 2d 93, 102 S. Ct. 2498 [prepayment judicial relief not appropriate in a federal action raising First Amendment claims because California provided an adequate postpayment remedy].)
In summary, the rule against precollection judicial relief is firmly established and this court is bound by that precedent. While the California courts are bound to enforce existing law, taxpayers can seek to change the law through the Legislature or the initiative process. Such a change occurred in the federal tax laws when the United States Congress enacted the Internal Revenue Service Restructuring and Reform Act of 1998. That legislation provides federal taxpayers with a so-called due process hearing and the ability to appeal the determination made at the hearing to the U.S. Tax Court or federal district court before paying the tax assessed. (26 U.S.C. §§ 6320, 6330.) Obviously, this federal legislation is not applicable to the FTB or SBE and does not change California law. Thus, California courts are required to enforce article XIII, section 32 of the California Constitution and section 19381 as long as they remain the law.
DISPOSITION
The judgment is affirmed.
We concur: Dibiaso, Acting P.J., Wiseman, J.