Opinion
G054057
10-20-2017
TOM BEYL et al., Plaintiffs and Appellants, v. CITY OF YORBA LINDA, Defendant and Respondent.
Krause, Kalfayan, Benink & Slavens and Vincent D. Slavens for Plaintiffs and Appellants. Rutan & Tucker, Todd O. Litfin and Megan K. Garibaldi for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2015-00815529) OPINION Appeal from a judgment of the Superior Court of Orange County, Nathan R. Scott, Judge. Reversed. Motion for judicial notice. Granted. Krause, Kalfayan, Benink & Slavens and Vincent D. Slavens for Plaintiffs and Appellants. Rutan & Tucker, Todd O. Litfin and Megan K. Garibaldi for Defendant and Respondent.
* * *
Plaintiffs and appellants Tom Beyl and Cindy Beyl (collectively, Beyls) sued defendant and respondent City of Yorba Linda (City) to challenge the validity of special assessments the City levied under the Landscaping and Lighting Act of 1972 (Sts. & Hy. Code, § 22500 et seq.; Act). The Beyls seek a judicial declaration the City violated Proposition 218 and the Act in levying the assessments for fiscal year 2015/2016, and a writ of mandate compelling the City to comply with Proposition 218 and the Act. The Beyls also alleged the City violated the constitutional prohibition against gifts of public funds by using public funds to improve private property, and they seek an injunction to prevent the City from doing so in the future.
The trial court sustained without leave to amend the City's demurrer to the second amended complaint on the ground the Beyls failed to exhaust their administrative remedies by filing a refund claim with the County of Orange (County) as required by the Revenue and Taxation Code. We reverse. The Beyls sufficiently alleged the County's administrative procedures were inadequate to resolve the issues raised, and the County also lacked the ability to provide the Beyls the relief they requested. The City failed to address the Beyls' specific allegations regarding the inadequacy of the County's procedures.
We also reject the City's contention Revenue and Taxation Code section 4807 bars the Beyls' claims. That section prohibits our courts from issuing a writ of mandate, declaratory judgment, or other equitable relief that would "prevent or enjoin the collection of property taxes sought to be collected." (§ 4807.) As explained below, that provision prohibits prepayment judicial challenges to a tax. A court may award mandamus, injunction, and declaratory relief after it finds a tax is illegal.
All statutory references are to the Revenue and Taxation Code unless otherwise stated.
Finally, we reject the City's challenges to the Beyls' gift of public funds claim because the City failed to show it was authorized to improve private property with public funds as the Beyls alleged, or that Code of Civil Procedure section 1094.6's limitations period applied to this claim.
I
LEGAL BACKGROUND
A. Special Assessments and Proposition 218
"A special assessment is a '"'"compulsory charge placed by the state upon real property within a pre-determined district, made under express legislative authority for defraying in whole or in part the expense of a permanent public improvement therein. . . ."' [Citation.]" [Citation.] In this regard, a special assessment is "levied against real property particularly and directly benefited by a local improvement in order to pay the cost of that improvement." [Citation.] "The rationale of special assessment[s] is that the assessed property has received a special benefit over and above that received by the general public. The general public should not be required to pay for special benefits for the few, and the few specially benefited should not be subsidized by the general public."'" (Silicon Valley Taxpayers Assn., Inc. v. Santa Clara County Open Space Authority (2008) 44 Cal.4th 431, 442 (Silicon Valley).)
"Unlike a special assessment, a tax may be imposed '"'without reference to peculiar benefits to particular individuals or property,'"' or without regard to whether the person or property subject to the tax received any particular benefit from the tax. [Citation.] 'The same holds true even for a special tax which . . . is a tax levied to fund a specific governmental project or program [citations],' but which '"need not . . . specifically benefit the taxed property" in the same manner as a special assessment.' [Citation.] 'Therefore, while a special assessment may, like a special tax, be viewed in a sense as having been levied for a specific purpose, a critical distinction between the two public financing mechanisms is that a special assessment must confer a special benefit upon the property assessed beyond that conferred generally.'" (Beutz v. County of Riverside (2010) 184 Cal.App.4th 1516, 1521 (Beutz); see also Silicon Valley, supra, 44 Cal.4th at p. 442.)
"'"Proposition 218 can best be understood against its historical background, which begins in 1978 with the adoption of Proposition 13. 'The purpose of Proposition 13 was to cut local property taxes. [Citation.]' [Citation.] Its principal provisions limited ad valorem property taxes to 1 percent of a property's assessed valuation and limited increases in the assessed valuation to 2 percent per year unless and until the property changed hands. [Citation.] [¶] To prevent local governments from subverting its limitations, Proposition 13 also prohibited counties, cities, and special districts from enacting any special tax without a two-thirds vote of the electorate."'" (Silicon Valley, supra, 44 Cal.4th at p. 442.) Our courts, however, determined that a special assessment was not a special tax within the meaning of Proposition 13, and therefore local governments could impose a special assessment without a two-thirds vote. (Silicon Valley, at p. 442.)
In 1996, the voters addressed this issue by approving Proposition 218 "'to "significantly tighten the kind of benefit assessments" an agency can levy on real property [citation] and to "'protect[] taxpayers by limiting the methods by which local governments exact revenue from taxpayers without their consent.'"'" (Beutz, supra, 184 Cal.App.4th at p. 1524; see Silicon Valley, supra, 44 Cal.4th at p. 438.) Proposition 218, entitled the "Right to Vote on Taxes Act" (Town of Tiburon v. Bonander (2009) 180 Cal.App.4th 1057, 1073), added articles XIII C and XIII D to the California Constitution (Silicon Valley, at p. 443).
"'"Proposition 218 allows only four types of local property taxes: (1) an ad valorem property tax; (2) a special tax; (3) an assessment; and (4) a fee or charge. [Citations.] It buttresses Proposition 13's limitations on ad valorem property taxes and special taxes by placing analogous restrictions on assessments, fees, and charges."'" (Silicon Valley, supra, 44 Cal.4th at p. 443.)
"Proposition 218 restricts government's ability to impose assessments in several important ways. First, it tightens the definition of the two key findings necessary to support an assessment: special benefit and proportionality. An assessment can be imposed only for a 'special benefit' conferred on a particular property. [Citations.] A special benefit is 'a particular and distinct benefit over and above general benefits conferred on real property located in the district or to the public at large.' [Citation.] The definition specifically provides that '[g]eneral enhancement of property value does not constitute "special benefit."' [Citation.] Further, an assessment on any given parcel must be in proportion to the special benefit conferred on that parcel: 'No assessment shall be imposed on any parcel which exceeds the reasonable cost of the proportional special benefit conferred on that parcel.' [Citations.] 'The proportionate special benefit derived by each identified parcel shall be determined in relationship to the entirety of the capital cost of a public improvement, the maintenance and operation expenses of a public improvement, or the cost of the property-related service being provided.' [Citations.] Because only special benefits are assessable, and public improvements often provide both general benefits to the community and special benefits to a particular property, the assessing agency must first 'separate the general benefits from the special benefits conferred on a parcel' and impose the assessment only for the special benefits." (Silicon Valley, supra, 44 Cal.4th at p. 443.)
"Second, . . . Proposition 218 established strict procedural requirements for the imposition of a lawful assessment." (Silicon Valley, supra, 44 Cal.4th at p. 443.) "Under Proposition 218's procedures, local agencies must give the record owners of all assessed parcels written notice of the proposed assessment, a voting ballot, and a statement disclosing that a majority protest will prevent the assessment's passage. [Citation.] The proposed assessment must be 'supported by a detailed engineer's report.' [Citation.] At a noticed public hearing, the agencies must consider all protests, and they 'shall not impose an assessment if there is a majority protest.' [Citation.] Voting must be weighted 'according to the proportional financial obligation of the affected property.'" (Silicon Valley, supra, 44 Cal.4th at p. 438.)
"In 1997, the Legislature codified and detailed the notice, hearing, and protest procedures in the Proposition 218 Omnibus Implementation Act. (Gov. Code § 53750 et seq., added by Stats. 1997, ch. 38, § 5.) These statutory provisions expressly supersede any others that apply to the levy of a new assessment. (Gov. Code § 53753, subd. (a).)" (Silicon Valley, supra, 44 Cal.4th at p. 438, fn. 4.)
Finally, Proposition 218 reversed the burden of proof on all legal challenges to a special assessment: "'In any legal action contesting the validity of any assessment, the burden shall be on the agency to demonstrate that the property or properties in question receive a special benefit over and above the benefits conferred on the public at large and that the amount of any contested assessment is proportional to, and no greater than, the benefits conferred on the property or properties in question.'" (Silicon Valley, supra, 44 Cal.4th at p. 444.) Other than this change in the burden of proof, Proposition 218 made no changes to the procedures governing legal challenges to special assessments. (Barratt American, Inc. v. City of San Diego (2004) 117 Cal.App.4th 809, 817-818.) B. The Landscaping and Lighting Act of 1972
The Act authorizes local agencies to pay some or all of the costs associated with landscaping and lighting improvements and maintenance by forming special assessment districts covering the properties benefited by those improvements, and levying special assessments on those properties. (Sts. & Hy. Code, §§ 22501, 22503.) Chapter 2 of the Act establishes the procedures for a local agency to form a special assessment district and levy the special assessment on the benefited properties for the assessment's initial fiscal year. (Id. at §§ 22585-22613.)
Chapter 3 of the Act establishes the procedures the local agency must follow in each successive fiscal year to determine and levy the amount of the special assessment. (Sts. & Hy. Code, §§ 22620, 22621.) Each year, the local agency must adopt a resolution describing any proposed new improvements or any substantial changes to existing improvements, and order an engineer to prepare a report describing the improvements funded by the assessment. The engineer also must calculate assessment amounts and any special benefits each improvement confers on the benefited properties. (Id. at §§ 22622, 22565-22574.) The local agency's legislative body must approve the report and adopt a resolution of intention to levy and collect the assessment for the specified fiscal year. (Id. at § 22624.) Next, the legislative body must give notice to the owners of the affected properties and conduct a public hearing to consider whether to levy the annual assessment. (Id. at §§ 22624-22629.) At the hearing's conclusion, the legislative body may adopt a resolution confirming the assessment, and the adoption of the resolution constitutes the levy of the assessment for the specified fiscal year. (Id. at § 22631.)
The special assessments are "collected at the same time and in the same manner" as county property taxes. (Sts. & Hy. Code, § 22646.) C. Generally Applicable Procedures for Property Tax Challenges
California has long followed the "pay first, litigate later" doctrine, which generally requires a tax challenger to pay a tax before litigating the tax's validity. (California State University, Fresno Assn., Inc. v. County of Fresno (2017) 9 Cal.App.5th 250, 262 (Cal. State Fresno); Andal v. City of Stockton (2006) 137 Cal.App.4th 86, 90 (Andal).) Generally speaking, "'[a] taxpayer may not go into court and obtain adjudication of the validity of a tax which is due but not yet paid.'" (Cal. State Fresno, at p. 262; see California Logistics, Inc. v. State of California (2008) 161 Cal.App.4th 242, 247 (California Logistics).)
This doctrine arises from article XIII, section 32 of the California Constitution (article XIII, section 32), which states "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." (Italics added; see Cal. Const. art. XIII, § 33 ["The Legislature shall pass all laws necessary to carry out the provisions of this article"].)
"'The important public policy behind [the "pay first, litigate later" doctrine] "is to allow revenue collection to continue during litigation so that essential public services dependent on the funds are not unnecessarily interrupted."'" (Cal. State Fresno, supra, 9 Cal.App.5th at p. 262.) "Furthermore, the 'pay first, litigate later' doctrine 'rests on the premise that strict legislative control over the manner in which tax refunds may be sought is necessary so that governmental entities may engage in fiscal planning based on expected tax revenues.'" (Id. at p. 263.)
To implement article XIII, section 32 in the property tax context, the Legislature enacted sections 5096 to 5170 as "a specific statutory refund procedure for taxpayers whose property has been improperly assessed." (IBM Personal Pension Plan v. City and County of San Francisco (2005) 131 Cal.App.4th 1291, 1299 (IBM); see Plaza Hollister Ltd. Partnership v. County of San Benito (1999) 72 Cal.App.4th 1, 34 (Plaza Hollister).) "Because article XIII, section 32 vests the Legislature with plenary control over the manner in which tax refunds may be obtained, a party 'must show strict, rather than substantial, compliance with the administrative procedures established by the Legislature.'" (IBM, at p. 1299.)
First, "'a taxpayer seeking judicial relief from an erroneous assessment must . . . exhaust[] his remedies before the administrative body empowered initially to correct the error.'" (Steinhart v. County of Los Angeles (2010) 47 Cal.4th 1298, 1308 (Steinhart).) For property taxes, section 5097 requires the taxpayer to file a verified claim seeking a refund of the challenged taxes within the time specified in that section. (§ 5097; IBM, supra, 131 Cal.App.4th at p. 1300.) Based on that claim, section 5096 authorizes a refund of "[a]ny taxes paid before or after delinquency" if the taxes were "[e]rroneously or illegally collected" or "[i]llegally assessed or levied." (§ 5096, subds. (b) & (c); Hanjin Internat. Corp. v. Los Angeles County Metropolitan Transportation Authority (2003) 110 Cal.App.4th 1109, 1112 (Hanjin).) "Section 5097 is one of the claims procedures prescribed by the Legislature 'for presentation, consideration, and enforcement of claims against counties, cities, their officers, agents, or employees.'" (Cal. State Fresno, supra, 9 Cal.App.5th at p. 264.)
Before filing a refund claim, the taxpayer sometimes is required to file an application for assessment reduction with the county board of equalization. (§ 1603; Steinhart, supra, 47 Cal.4th at p. 1307.) This is a separate step in the process. Filing a refund request generally does not excuse the requirement to file an application for assessment reduction, and vice versa. (Steinhart, at p. 1308.) The City does not assert the Beyls were required to file an application for assessment reduction, and therefore we do not address whether this step applies.
If the administrative refund claim is denied, the taxpayer may file a lawsuit seeking a refund. (§ 5140; IBM, supra, 131 Cal.App.4th at p. 1300.) "The timely filing of a proper claim for refund is a statutory prerequisite to a refund action: 'No action shall be commenced or maintained under this article . . . unless a claim for refund has first been filed pursuant to Article 1 (commencing with Section 5096).' (§ 5142, subd. (a).)" (Plaza Hollister, supra, 72 Cal.App.4th at pp. 34-35; see Cal. State Fresno, supra, 9 Cal.App.5th at p. 265.) A taxpayer's failure to timely and properly exhaust his or her administrative remedies generally results in the dismissal of a lawsuit challenging the taxpayer's taxes. (William Jefferson & Co., Inc. v. Orange County Assessment Appeals Bd. No. 2 (2014) 228 Cal.App.4th 1, 10 (William Jefferson).)
Although these Revenue and Taxation Code provisions establishing the statutory refund process apply to local property taxes, article XIII, section 32's prohibition against any judicial process that would prevent or enjoin the collection of any tax only applies to State-imposed taxes. (Connolly v. County of Orange (1992) 1 Cal.4th 1105, 1114 (Connolly); Cal. State Fresno, supra, 9 Cal.App.5th at p. 263.) Section 4807, however, establishes a similar prohibition regarding any challenges to county, city, or other local taxes: "No injunction or writ of mandate or other legal or equitable process shall issue in any suit, action, or proceeding in any court against any county, municipality, or district, or any officer thereof, to prevent or enjoin the collection of property taxes sought to be collected." (§ 4807.) The policy underlying article XIII, section 32 and section 4807 is the same—to allow revenue collection to continue during litigation—and the two provisions are interpreted in the same manner. (Cal. State Fresno, at p. 263.)
II
FACTS AND PROCEDURAL HISTORY
Between 1979 and 1990, the City formed multiple assessment districts under the Act to provide landscaping, streetlight, and traffic signal maintenance. In 1994, the City consolidated all of the assessment districts into the City of Yorba Linda Street Lighting and Landscaping Maintenance District, and then divided that district into numerous zones and subzones. After California voters adopted Proposition 218, the City's parcel owners voted to authorize the continued levy of special assessments for landscaping and street lighting maintenance, including a yearly increase in the amount of the assessments based on the Consumer Price Index.
In March 2015, the City initiated proceedings to levy the annual assessments for fiscal year 2015/2016 and ordered an engineer's report to describe the services funded by the proposed assessments, to identify the special and general benefits provided by those services and the benefited properties, and to calculate the amount of the assessments to be levied on each parcel as required by Proposition 218 and the Act. After the City conducted a public hearing in June 2015, it accepted the report, received public comments, and ultimately approved the report. In July 2015, the City conducted another public hearing at which it heard objections to the 2015/2016 special assessments, overruled those objections, and passed a resolution approving and levying the special assessments for fiscal year 2015/2016.
The Beyls request that we judicially notice several City documents relating to the 2015/2016 special assessments, including the engineer's report, staff reports, city council resolutions, and city council meeting minutes. The trial court granted an identical request for judicial notice of these documents. The City does not challenge that ruling or oppose the request in this court. We therefore grant the Beyls' request.
In October 2015, the Beyls filed this lawsuit against the City to challenge the validity of the 2015/2016 special assessments. The operative complaint alleged three claims seeking a writ of mandate to compel the City to comply with Proposition 218 and the Act, a declaratory judgment that the City violated Proposition 218 and the Act in approving the 2015/2016 special assessments, and an injunction enjoining the City from using public funds to finance improvements on private property.
The Beyls alleged they own property in the City subject to the 2015/2016 special assessments and they have paid the assessment. They challenged the adequacy of the engineer's report prepared to support the assessments and alleged the City violated the substantive and procedural requirements of Proposition 218 and the Act in a number of ways. The Beyls also alleged the City violated the constitutional prohibition against gifts of public funds by using "general funds" and "public funds" to improve private property. The details concerning the alleged violations are not relevant to the issues raised on this appeal.
The Beyls also alleged they exhausted their administrative remedies by submitting a protest to the City during the approval process describing all of the claims they alleged in their complaint. They further alleged submitting another claim to the City would be futile because the City already overruled their protest, and submitting a refund claim to the County is an inadequate remedy because the County lacks the expertise to decide the issue and the authority to compel the City to comply with Proposition 218 and the Act if it found a violation.
The City demurred to the second amended complaint on a variety of grounds. First, it argued all causes of action failed as a matter of law because the Beyls failed to exhaust their administrative remedies by filing a refund claim with the County of Orange under section 5097. According to the City, filing a refund claim followed by a refund lawsuit provided an adequate procedure for the Beyls to assert their challenges to the validity of the City's 2015/2016 special assessments. Next, the City argued section 4807 barred the Beyls' claims because they did not seek a refund, but rather mandamus and other equitable relief that would enjoin or otherwise impede the collection of taxes. Third, the City contends section 4808 barred the Beyls' declaratory relief claim because they failed to file the lawsuit within the limited time that section establishes for seeking declaratory relief regarding the legality or constitutionality of a property tax. Finally, the City contends the 90-day limitations period in Code of Civil Procedure section 1094.6 barred the Beyls' gift of public funds claim.
Section 4808 provides, "Notwithstanding any provision of law to the contrary, any taxpayer may, no later than 30 days after the delinquency date of a property tax bill or any installment thereof, seek declaratory relief in the superior court in the county in which the property is located alleging that the locally assessed property taxes have been illegally or unconstitutionally assessed or collected or are to be so assessed or collected. [¶] . . . [¶] This section shall be applicable only in instances where the alleged illegal or unconstitutional assessment or collection occurs as the direct result of a change in administrative regulations or statutory or constitutional law that became effective not more than 12 months prior to the date the action is initiated by the taxpayer."
The trial court sustained the demurrer without leave to amend based on its conclusion the Beyls failed to exhaust their administrative remedies by filing a refund claim with the County. The court also concluded the Beyls failed to allege sufficient facts to show that filing a refund claim with the County was a futile administrative remedy. The court, however, did not address the Beyls' allegations that filing a refund claim with the County was an inadequate administrative remedy because the County lacked the expertise and authority to grant relief. Although the court concluded the failure to exhaust administrative remedies barred the Beyls' gift of public funds claim, it also rejected the City's challenge that claim was time-barred because the court determined Code of Civil Procedure section 1094.6 did not apply to the claim.
Based on its ruling sustaining the demurrer without leave to amend, the trial court entered judgment dismissing the Beyls' claims. This appeal followed.
III
DISCUSSION
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.) "'[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.) "We assume the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded and matters of which judicial notice has been taken" (Gilkyson v. Disney Enterprises, Inc. (2016) 244 Cal.App.4th 1336, 1340), "'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).
"'Whether the plaintiff will be able to prove these allegations is not relevant; our focus is on the legal sufficiency of the complaint.'" (Debrunner v. Deutsche Bank National Trust Co. (2012) 204 Cal.App.4th 433, 438-439.) We are not bound by the trial court's construction of the complaint (Crawley v. Alameda County Waste Management Authority (2015) 243 Cal.App.4th 396, 403), and we do not review the validity of the court's reasoning (Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982, 994).
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.) B. The Failure to File a Refund Claim With the County Does Not Bar the Beyls' Claims Against the City
The Beyls contend the trial court erred in sustaining the City's demurrer based on the failure to file an administrative refund claim under section 5097. The Beyls contend they were excused from filing a refund claim because the County's administrative procedures are inadequate to resolve their constitutional challenges. We agree.
Based on the general distinction between special assessments and taxes (see Silicon Valley, supra, 44 Cal.4th at p. 442), the Beyls also contend section 5097 does not apply because the special assessments at issue are not taxes. They are mistaken. Section 4801 states, "As used in this part, 'taxes' includes assessments collected at the same time and in the same manner as county taxes." The "part" of the Revenue and Taxation Code to which section 4801 refers is part 9, which includes section 5097. Streets and Highways Code section 22646 states that assessments levied under the Act "shall be collected at the same time and in the same manner as county taxes are collected." The term taxes in section 5097 therefore includes assessments levied under the Act. (See Hanjin, supra, 110 Cal.App.4th at p. 1113 ["In light of section 4801, claims for tax refunds governed by sections 5096 and 5097 include taxes as well as assessments levied and collected by the county at the same time and in the same manner as taxes are levied and collected"].) The Beyls contend the Legislature did not intend to "channel[]" Proposition 218 challenges through the administrative procedures established by section 5097, but they cite no authority to support that contention or overcome section 4801's plain language.
A party is not required to pursue an administrative remedy before filing a lawsuit if the issues raised in the lawsuit could not be addressed in the administrative proceeding or "the administrative agency is not empowered to correct the situation from which judicial relief is sought." (Park 'N Fly of San Francisco, Inc. v. City of South San Francisco (1987) 188 Cal.App.3d 1201, 1209 [failure to exhaust administrative remedy did not bar taxpayer's constitutional challenge to city's business license tax because city's administrative procedures only authorized application for reclassification, not constitutional challenges to tax]; see Andal, supra, 137 Cal.App.4th at pp. 91-92 [same result in case involving Proposition 218 challenges to city's fee for 911 services].) "A long line of authority holds that '[t]he exhaustion requirement is not applicable where an effective administrative remedy is wholly lacking.'" (Unfair Fire Tax Com. v. City of Oakland (2006) 136 Cal.App.4th 1424, 1429 [special assessments by city for fire suppression district]; see C.H.B. Foods, Inc. v. County of Los Angeles (1987) 195 Cal.App.3d 821, 826 [personal property taxes].)
For example, in TRIM, Inc. v. County or Monterey (1978) 86 Cal.App.3d 539, 544-545, the Court of Appeal applied these principles to reject a county's claim that the plaintiffs' failure to exhaust administrative remedies barred their claim. There, a group of taxpayers sued a county alleging it had improperly assessed property taxes against other taxpayers' properties by undervaluing those properties, and sought to compel the county to accurately reassess the properties. (Id. at pp. 541-542.) Although the Revenue and Taxation Code established an administrative procedure for taxpayers to seek reassessment from the local board of equalization, TRIM concluded those procedures did not authorize an increase in the assessments on someone else's property, and therefore the procedures did not provide an adequate remedy. (Id. at pp. 544-545; see Knoff v. City etc. of San Francisco (1969) 1 Cal.App.3d 184, 198-199 [plaintiffs not required to apply to local board of equalization because board was not administrative body empowered to correct alleged deficiencies in assessment system].)
Similarly, in Agnew v. State Board of Equalization (1999) 21 Cal.4th 310, the Supreme Court rejected an exhaustion of administrative remedies defense because the plaintiff's declaratory relief claim "did not involve any issue subject to determination through the administrative refund remedy available to plaintiff." (Id. at p. 320.) There, the plaintiff sought a judicial declaration regarding the validity of a State Board of Equalization policy that required a taxpayer to pay both the challenged tax and all accrued interest before the board would consider the taxpayer's administrative refund claim. (Id. at pp. 319-320.)
Here, the Beyls alleged the administrative remedy of filing a refund claim with the County was inadequate because (1) the County lacked the experience and expertise necessary to determine whether the City violated Proposition 218 when it approved and levied the 2015/2016 assessments; (2) Proposition 218 placed the burden on the City to establish the special benefits the landscaping and lighting improvements provide and the assessment's proportionality to those benefits, but the City was not a party to the County's administrative proceedings; and (3) the County lacked authority to determine the validity of the City's special assessments or to grant any of the other relief the Beyls sought. If true, the Beyls had no obligation to pursue an administrative remedy that, in fact, offered no remedy at all.
The City offers two responses. First, the City asserts it is well established that a refund lawsuit after filing an administrative refund claim provides an adequate legal remedy that bars a taxpayer's claims for mandamus, declaratory, or other equitable relief. (See Little v. Los Angeles County Assessment Appeals Bds. (2007) 155 Cal.App.4th 915, 923.) That contention, however, addresses the proper form for a taxpayer's lawsuit after the taxpayer exhausts administrative procedures under section 5097, not the adequacy of those procedures to address the issues raised by the Beyls. We address the permissible form of the Beyls' lawsuit below, but this contention does not establish the County's refund claim procedures provided the Beyls with an adequate administrative remedy.
Second, the City contends the administrative proceedings under section 5097 are adequate because they allow the Beyls to challenge the constitutionality of the City's special assessments by arguing they were illegally assessed or levied. (See § 5096, subd. (c); Rickley v. County of Los Angeles (2004) 114 Cal.App.4th 1002, 1013-1014.) This contention, however, fails to confront the inadequacies the Beyls alleged in the County's administrative proceedings under section 5097. The case law generally supports the City's contention that a party may raise a constitutional challenge to a tax under section 5096, but that does not address whether the County had the authority to decide the constitutionality of the City's special assessment, how the City can satisfy its burden to establish the propriety of its special assessments if it is not a party to the administrative proceedings, and whether the County may provide any of the relief the Beyls seek.
The City failed to address the Beyls' specific allegations regarding the inadequacy of the procedures under section 5097. On the record before us, we therefore conclude the Beyls alleged an adequate excuse for failing to file an administrative refund claim with the County. In reaching that conclusion, we express no opinion on whether the City may be included as a party to the County's administrative proceedings or whether the County can make a binding determination regarding the constitutionality of the City's assessments under Proposition 218. Rather, we simply conclude the Beyls have alleged specific inadequacies in the County's administrative proceedings and the City's demurrer failed to address those allegations. C. Section 4807 Does Not Bar the Beyls' Claims
Although the trial court did not reach the issue, the City contends section 4807 provides an independent basis for upholding the court's judgment. According to the City, section 4807 bars the Beyls' equitable relief claims because they would impede not only the collection of the 2015/2016 assessments, but also future assessments. We disagree because the City overstates the limitations imposed under section 4807.
As discussed, section 4807 prohibits a court from issuing any injunction, writ of mandate, or other legal or equitable process against a municipality or other local governmental entity "to prevent or enjoin the collection of property taxes sought to be collected." (§ 4807.) Section 4807 is nearly identical to article XIII, section 32's prohibition against enjoining the collection of a state-imposed tax, and the two provisions share the same purpose and therefore are interpreted in the same manner. (Connolly, supra, 1 Cal.4th at p. 1114; Cal. State Fresno, supra, 9 Cal.App.5th at p. 263.)
As explained above, the term taxes as used in sections 4801 to 5170 includes assessments "collected at the same time and in the same manner as county taxes" (§ 4801), and special assessments under the Act are "collected at the same time and in the same manner as county taxes are collected" (Sts. & Hy. Code, § 22646). (See Hanjin, supra, 110 Cal.App.4th at p. 1113.)
"It is well-established that the applicability of [section 4807 and article XIII,] section 32 does not turn on whether the action at issue specifically seeks to prevent or enjoin the collection of a tax. Instead, the provision[s] bar[] 'not only injunctions but also a variety of prepayment judicial declarations or findings which would impede the prompt collection of a tax.' [Citation.] The relevant issue is whether granting the relief sought would have the effect of impeding the collection of a tax." (California Logistics, supra, 161 Cal.App.4th at pp. 247-248; see Water Replenishment Dist. of Southern California v. City of Cerritos (2013) 220 Cal.App.4th 1450, 1465 (Water Replenishment Dist.).) A taxpayer may not avoid section 4807's prohibition by disclaiming the right to a refund, and the prohibition applies if the requested relied would impede the collection of future taxes not yet due. (William Jefferson, supra, 228 Cal.App.4th at pp. 12-13; Merced County Taxpayers' Assn. v. Cardella (1990) 218 Cal.App.3d 396, 401 (Merced County).)
Nonetheless, because section 4807 bars only judicial orders that would impede the collection of a tax, the statute does not apply to lawsuits by taxpayers who have paid the challenged tax. The case law applying section 4807 makes clear the section's prohibition only applies to "prepayment" judicial challenges to a tax. (See, e.g., Water Replenishment Dist., supra, 220 Cal.App.4th at pp. 1465-1466; California Logistics, supra, 161 Cal.App.4th at pp. 247-248; Bunker v. County of Orange (2002) 103 Cal.App.4th 542, 555-556 (Bunker); Riverside County Community Facilities Dist. v. Bainbridge 17 (1999) 77 Cal.App.4th 644, 660-661 ["any legal action or defense seeking 'prepayment adjudication that would effectively prevent the collection of a tax [is] barred'" (italics added)]; Merced County, supra, 218 Cal.App.3d at pp. 400-401.) Indeed, that interpretation is consistent with the policy behind section 4807: "'"[T]o allow revenue collection to continue during litigation so that essential public services dependent on the funds are not unnecessarily interrupted."'" (Cal. State Fresno, supra, 9 Cal.App.5th at p. 262.)
In Bunker, for example, the taxpayer plaintiff applied to the county to reassess his property because he believed the property's value had decreased significantly based on market conditions. The taxpayer continued to pay his taxes based on the higher value while he awaited the county's decision. (Bunker, supra, 103 Cal.App.4th at pp. 544-545.) A Revenue and Taxation Code provision required the county to decide the reassessment application within two years. If the county failed to do so, the statute required the county to (1) accept the taxpayer's lower property valuation, and (2) send the taxpayer notice that he had overpaid his taxes based on the new valuation and he could apply for a refund. (Bunker, at p. 549.) When the county failed to decide the taxpayer's application within the two-year period, he sought a writ of mandate compelling the county to comply with its obligations under the Revenue and Taxation Code concerning all reassessment applications the County had failed to timely decide. (Bunker, at p. 550.)
In rejecting the county's section 4807 defense, Bunker explained the statute did not apply because the taxpayer had paid the taxes and the requested relief would not impede the collection of any tax. Indeed, the requested writ merely would require the county to comply with its statutory obligations by accepting the taxpayers' valuations and providing notice to taxpayers who had paid their taxes that they could apply for a refund. The taxpayers would then have to apply for a partial refund of the taxes they previously paid. (Bunker, supra, 103 Cal.App.4th at pp. 555-556.) Accordingly, the lawsuit in no way "prevented or enjoined the 'collection' of any property tax." (Id. at p. 556.)
Moreover, our Supreme Court has explained section 4807 does not prohibit any form of judicial relief once a court has determined a tax is illegal: "[A]rticle XIII, section 32[, and by extension section 4807,] simply prohibit[] courts from 'prevent[ing] or enjoin[ing] the collection of any tax' during the pendency of litigation challenging the tax. [Citation.] In fact, article XIII, section 32 [and section 4807] do[] not purport to limit a court's authority to fashion a remedy if it determines a tax is illegal, including its authority to issue an injunction against further collection of the challenged tax." (Ardon v. City of Los Angeles (2011) 52 Cal.4th 241, 252; see Brown v. County of Los Angeles (1999) 72 Cal.App.4th 665, 667, fn. 1, 670 [in refund action, taxpayer also entitled to declaratory judgment to prevent county from continuing to tax her at incorrect rate].)
Here, the Beyls alleged they paid the City's 2015/2016 special assessments and brought this action to challenge those assessments on the ground they violated Proposition 218 and the Act. According to the Beyls, the special assessments improperly benefited the general public and they are not proportional to the benefits conferred on each benefited property. The Beyls seek a judicial declaration that the City's 2015/2016 special assessments violated Proposition 218 and the Act, and a writ of mandate compelling the City to comply with its obligations under Proposition 218 and the Act.
This lawsuit will not impede the collection of the challenged assessments because those assessments already have been collected. Nor will this lawsuit impede the collection of any future assessments because the City in each fiscal year must direct an engineer to prepare a new report and pass a new resolution levying the special assessment. This lawsuit only challenges the engineer's report and the City's approvals for the 2015/2016 fiscal year, and as explained above, the Beyls already paid the assessments for that fiscal year. At most, the requested relief would allow the Beyls and possibly other taxpayers who paid the 2015/2016 assessments to apply for a refund like the taxpayers in Bunker. Section 4807 therefore does not bar the Beyls' claims.
We acknowledge the Beyls' complaint expressly disclaims that they are seeking a refund, but that is irrelevant for our analysis.
The City argues section 4807 bars this lawsuit because the Beyls' seek relief that will have the effect of impeding the collection of future taxes. The City points to the Beyls' allegations that the City has a practice of approving assessments that violate Proposition 218 and the Act, and will continue to do so in the future. The City also points to the Beyls' request for a writ of mandate directing the City not to assess properties for more than permitted under Proposition 218 and the Act. These admittedly broad allegations, however, do not defeat the Beyls' claims. In considering the City's demurrer, we must liberally construe the complaint's allegations (Phoenix Mechanical Pipeline, Inc. v. Space Exploration Technologies Corp. (2017) 12 Cal.App.5th 844, 851), and an improper or overbroad request for relief does not defeat an otherwise sufficiently alleged claim (Caliber Bodyworks, Inc. v. Superior Court (2005) 134 Cal.App.4th 365, 385). As explained above, the Beyls' challenges to the 2015/2016 assessments are not defeated by section 4807. Demurrer is an inappropriate vehicle to resolve the breadth of the relief available to the Beyls.
Finally, we note the Supreme Court and several other reported cases have allowed taxpayers to bring lawsuits similar to the Beyls that challenge the validity of special assessments under Proposition 218 and seek mandamus, injunctive, and declaratory relief. (See, e.g., Silicon Valley, supra, 44 Cal.4th 431, Golden Hill Neighborhood Assn., Inc. v. City of San Diego (2011) 199 Cal.App.4th 416; Beutz, supra, 184 Cal.App.4th 1516.) In some of those cases, the appellate courts have specifically directed the trial court to issue mandamus and other equitable relief vacating a local agency's approval of special assessments and invalidating the levy of those assessments. (See, e.g., Golden Hill, at p. 440; see Beutz, at p. 1538.)
We acknowledge none of these cases considered whether section 4807 prohibited any of the relief the taxpayers sought, and therefore do not directly support the proposition section 4807 is inapplicable to the Beyls' claims. (Direct Capital Corp. v. Brooks (2017) 14 Cal.App.5th 1168, 1177, fn. 7 ["'Cases are not authority for propositions not considered'"].) But these cases show courts repeatedly have granted relief to taxpayers requesting mandamus, injunctive, and declaratory relief from special assessments. The City attempts to distinguish these cases on the ground they involved challenges to either "newly formed assessment districts or new and increased assessments." The City, however, fails to explain why that distinction has any significance. D. The City Did Not Show the Beyls Failed to State a Claim Based on the Constitutional Prohibition Against Gifts of Public Funds
These cases also did no address whether the taxpayers did or were required to file an administrative refund claim before coming to court.
Based on our conclusion that neither the failure to file an administrative refund claim nor section 4807 bars the Beyls' mandamus, injunctive, and declaratory relief claims, we do not address the Beyls' contention section 4808 creates an exception to section 4807 that allows them to pursue a declaratory relief claim.
The Beyls' third cause of action alleged the City violated California Constitution article XVI, section 6, by making a gift of public funds because the City used public funds to finance improvements on private property. The complaint alternated between allegations that the City used "public funds" and "general funds" to improve private property without identifying any specific funds, property, or improvement. The complaint could be interpreted to allege the City used the proceeds from the 2015/2016 special assessments to fund improvements on private property, the City used general fund moneys to improve private property, or a combination of both. Presumably, the improvements of which the Beyls complain are landscaping and street lighting improvements, but the complaint lacks clarity on this point. Despite the confusing nature of the complaint's allegations regarding this claim, the City did not demur to the claim on uncertainty grounds. Instead, the City argued this claim failed to state a cause of action for three reasons. We conclude the City's arguments lack merit.
First, the City argues the constitutional prohibition against the gift of public funds is not violated when the funds are expended for a public purpose that only incidentally benefits private property. According to the City, the Act specifically authorizes the expenditure of public funds for the public purpose of maintaining landscaping and street lighting. In support, the City cites Streets and Highways Code section 22525, subdivisions (a) and (c). That section, however, merely defines the term "improvement" as including the installation or planting of landscaping and the installation or construction of public lighting facilities. The City fails to cite any authority authorizing it to make or maintain these types of improvements on private property.
Second, the City argues this claim fails because the Beyls did not file an administrative refund claim with the County before filing this lawsuit. This challenge fails for the reasons already discussed.
Finally, the City argues the 90-day limitations periods established by Code of Civil Procedure section 1094.6 (section 1094.6) bars the claim. Code of Civil Procedure section 1094.5 (section 1094.5) generally authorizes judicial review of a governmental agency's adjudicatory or quasi-judicial action when the agency was required to take evidence and provide a hearing, and "discretion in the determination of facts is vested in the inferior tribunal, corporation, board, or officer." (§ 1094.5, subd. (a).) Section 1094.6 provides that judicial review of a local agency's decision may take place under section 1094.5 only if the lawsuit is filed within the 90-day period required by section 1094.6, subdivision (b). Section 1094.6, subdivision (e), however, states: "As used in this section, decision means a decision subject to review pursuant to Section 1094.5, suspending, demoting, or dismissing an officer or employee, revoking, denying an application for a permit, license, or other entitlement, imposing a civil or administrative penalty, fine, charge, or cost, or denying an application for any retirement benefit or allowance."
The Beyls do not challenge any decision by the City to (1) suspend, demote, or dismiss an officer or employee, (2) revoke or deny an application for a permit, license, or other entitlement, (3) impose a civil or administrative penalty, fine, charge, or costs, or (4) deny an application for any retirement benefit or allowance. (See 1 Cal. Administrative Mandamus (Cont.Ed.Bar 3d ed. 2016) Actions Involving Local Agencies, § 9.17, p. 9-18.) Rather, the Beyls challenge the City's decision to allegedly expend public funds to improve private property. Section 1094.6, subdivision (e)'s limitations period therefore does not apply. The trial court pointed out this limitation on the scope of section 1094.6's limitations period, but the City failed to address the limitation in its appellate brief.
IV
DISPOSITION
The judgment is reversed. The Beyls shall recover their costs on appeal.
ARONSON, ACTING P. J. WE CONCUR: FYBEL, J. IKOLA, J.