Opinion
G054057
04-27-2018
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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. Affirmed in part, reversed in part, and remanded with directions. 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 allege 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.
In our prior opinion, filed on October 20, 2017, we concluded the trial court erred in sustaining the City's demurrer, without leave to amend, on the ground the Beyls failed to exhaust their administrative remedies by filing a refund claim with the County of Orange (County) before filing suit, as required by the Revenue and Taxation Code. We concluded the Beyls were excused from the exhaustion requirement because they had sufficiently alleged the County's administrative claim process was inadequate to resolve the issues raised, and the County also lacked the ability to provide the Beyls the relief they requested.
The City petitioned for rehearing, arguing the exhaustion of administrative remedies doctrine, and thus its exceptions, did not apply to actions challenging the assessment of taxes, and therefore we lacked authority to excuse the Beyls' compliance with the statutorily mandated claim process. We granted the petition and invited further briefing.
Having considered the issues raised in the further briefing, we now affirm the judgment in part. Our Constitution gives the Legislature the power to establish the process applicable to claims seeking refunds of taxes and assessments. We consequently have no authority to modify that process based on judicially imposed notions of futility or inadequacy.
The Beyls do not dispute that proposition, but contend the constitutionally mandated process does not apply because they are not seeking a refund of the challenged assessment in this lawsuit. We reject that argument, however, because if the Beyls do not seek a refund, then their retroactive challenge to an assessment they already have paid presents nothing more than an academic question.
Finally, we reject the City's challenges to the Beyls' third cause of action, seeking an injunction prohibiting the City from making an illegal gift of public funds to finance improvements to private property. This cause of action is separate from the Beyls' challenge to the special assessment, and the City failed to show the Beyls improperly alleged the City was not authorized to improve private property with public funds, or that Code of Civil Procedure section 1094.6's limitations period applied to this claim. We therefore affirm in part, reverse in part, and remand to the trial court for further proceedings.
I
LEGAL BACKGROUND
A. 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, "'[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 Revenue and Taxation Code, 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.)
All statutory references are to the Revenue and Taxation Code unless otherwise stated.
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).) Thus, section 5097 requires the taxpayer to file a verified claim seeking a refund of the challenged property 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 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 article XIII, section 32, applies only 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), article XI, section 12, of the California Constitution gives the Legislature similar authority to establish the process applicable to claims asserted against state and local authorities: "The Legislature may prescribe procedure for presentation, consideration, and enforcement of claims against counties, cities, their officers, agents, or employees." And as explained by our Supreme Court in Ardon v. City of Los Angeles (2011) 52 Cal.4th 241, 251, the Government Claims Act (Gov. Code, §§ 910 et. seq.) applies to a taxpayer's claim for refund of taxes paid to a local government entity "in the absence of a specific tax refund procedure set forth in an applicable governing claims statute." (See also McWilliams v. City of Long Beach (2013) 56 Cal.4th 613, 616 ["'[I]n the absence of a specific tax refund procedure set forth in an applicable governing claims statute,'" the general provisions of the Government Claims Act apply to claims "by taxpayers against a local government entity for the refund of an unlawful tax"].)
As pertinent here, the Legislature decreed that all "assessments collected at the same time and in the same manner as county taxes" qualify as "'taxes'" for purposes of the claims procedures set forth in sections 5096 to 5170. (§ 4801.) Moreover, consistent with article XIII, section 32, the Legislature extended the prohibition against injunctions and writs of mandates to local, as well as State, 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.) B. 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.) C. The Landscaping and Lighting Act of 1972
The Act authorizes local agencies to pay some or all 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 under the Act are "collected at the same time and in the same manner" as county property taxes. (Sts. & Hy. Code, § 22646.) Thus, as noted above, they are subject to the same rules and claims procedures applicable to state property taxes. (§ 4801; 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"].)
Considering these statutes, we reject the Beyls' assertion that section 5097 does not apply because the special assessments at issue in this case are not taxes. Although the Beyls contend the Legislature did not intend to "channel[]" Proposition 218 challenges through the administrative procedures established by section 5097, they cite no authority to support that contention or overcome section 4801's plain language.
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 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 several 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 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.
In our prior opinion, we concluded the Beyls' lawsuit was not barred by their failure to file a refund claim with the County. We reasoned they had sufficiently alleged the County's administrative procedures were inadequate to resolve the complex issues raised, and that it lacked the ability to compel the City, which would not be a party to the refund claim, to comply with any resolution of that claim. We expressed no opinion on the merits of the Beyls' allegations, only that they "have alleged specific inadequacies in the County's administrative proceedings and the City's demurrer failed to address those allegations."
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 Bars 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 disagree.
The Beyls' contention is grounded on the exhaustion of administrative remedies doctrine - or more specifically, the exceptions to that doctrine which specify that when an available administrative remedy is inadequate, or its pursuit would be futile, the claimant is excused from utilizing it. (See Abelleira v. District Court of Appeal (1941) 17 Cal.2d 280, 292, "In brief, the rule is that where an administrative remedy is provided by statute, relief must be sought from the administrative body and this remedy exhausted before the courts will act"]; see Coachella Valley Mosquito & Vector Control Dist. v. California Public Employment Relations Bd. (2005) 35 Cal.4th 1072, 1080, 1081-1082 ["'[f]ailure to exhaust administrative remedies is excused if it is clear that exhaustion would be futile'" and "exhaustion of administrative remedies may be excused when a party claims that 'the agency lacks authority, statutory or otherwise, to resolve the underlying dispute between the parties'"].)
Nonetheless, as explained in Bozaich v. State of California (1973) 32 Cal.App.3d 688, 698, the exhaustion of administrative remedies doctrine, and thus its exceptions, is a court-created doctrine, grounded on the determination that although the courts have jurisdiction to adjudicate a dispute, they have chosen to defer to an administrative tribunal in the interest of preserving judicial resources. Thus, the doctrine has no application in situations where the courts lack initial jurisdiction.
This is the case here. Because our Constitution expressly gives the Legislature authority to determine the process for claiming such refunds (article XIII, section 32; article XI, section 12), the courts have no authority to alter whatever process the Legislature mandates. "[It is] the constitutional source of legislative power to control tax refund suits [that] required strict adherence to the administrative procedures set forth by the Legislature before a court action could be filed." (Shiseido Cosmetics (America) Ltd. v. Franchise Tax Bd. (1991) 235 Cal.App.3d. 478, 488; IBM, supra, 131 Cal.App.4th at p. 1299 ["a party 'must show strict, rather than substantial, compliance with the administrative procedures established by the Legislature'"]; Patane v. Kiddoo (1985) 167 Cal.App.3d 1207, 1213.)
We cited several cases in our prior opinion applying the exhaustion of administrative remedies doctrine in tax refund cases. But those cases are distinguishable because the procedure being challenged was not imposed by the Legislature. (Park 'N Fly of San Francisco, Inc. v. City of South San Francisco (1987) 188 Cal.App.3d 1201, 1209 [taxpayer claimed it was excused from complying with the city's administrative procedures]; Andal, supra, 137 Cal.App.4th at pp. 91-92 [procedure established by city ordinance]; Unfair Fire Tax Com. v. City of Oakland (2006) 136 Cal.App.4th 1424, 1429 [same].)
Other cases we cited are distinguishable because the taxpayer sought relief sought outside the scope of the mandated claims process. (See, Agnew v. State Board of Equalization (1999) 21 Cal.4th 310, 319-320 (Agnew) [plaintiff challenged a general policy of the State Board of Equalization, rather than a determination of the merits of his claim]; TRIM, Inc. v. County or Monterey (1978) 86 Cal.App.3d 539, 544-545 [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]; Knoff v. City etc. of San Francisco (1969) 1 Cal.App.3d 184, 198-199 [plaintiffs were challenging alleged "wholesale deficiencies" in assessment system].)
In their brief responding to our rehearing order, the Beyls concede the courts have no authority to excuse their compliance with the statutory refund process, acknowledging "the Legislature's plenary authority to fashion the method by which refunds may be sought." They contend instead that mandate is irrelevant because their lawsuit seeks no refund. Despite its obvious surface appeal, the contention is unpersuasive.
The Beyls rely heavily on Bunker v. County of Orange (2002) 103 Cal.App.4th 542 (Bunker), for the proposition that if no refund is sought in the lawsuit, it falls outside the administrative claims process entirely. Bunker is distinguishable.
In Bunker, a taxpayer on behalf of a putative class filed a petition for writ of mandate to compel the county's compliance with Revenue and Taxation Code provisions governing the process applicable to property reassessments, including required notices. The county's demurred to the complaint, asserting it amounted to a prohibited class action seeking tax refunds for class members (Id. at p. 546.). But this court rejected that assertion because "[a]ll Bunker is asking for now is a court order requiring the county to comply with sections 1604 and 2635. That is, if Bunker were to receive the relief he requests, there will be, in addition to a simple declaration as to the effects of section 1604 and 2635, an order to the effect that the county is obligated by law to send out two notices. Not write any checks." (Bunker, supra, at p. 551, some italics added.) As this court further explained: "Given the nature of the relief sought, one would expect class members not to have exhausted any administrative remedies (e.g., having already filed claims for tax refunds) because members of the class were unlawfully denied notice of their opportunity to file individual refund claims when the county missed the two-year deadline." (Id. at p. 552, some italics added.)
Thus, the relief sought in Bunker was the enforcement of statutory notice requirements that were separate and distinct from any taxpayer's alleged entitlement to a refund. The required notices were a precursor to the taxpayer's possible refund claim. (See also, Agnew, supra, 21 Cal.4th 310 [the taxpayer was not required to exhaust any claim process because the sole issue to be decided was the propriety of the Board's policy, not the merits of the taxpayer's refund claim].)
In contrast, the Beyls' sole interest in correcting alleged errors in a prior year's special assessment is the possibility they are entitled to a refund for that year. Otherwise, a reconsideration of the 2015-2016 special assessment would be purely an academic exercise, and they would have no concrete stake in the outcome of that inquiry. "[D]eclaratory relief is appropriate only where there is an actual controversy, not simply an abstract or academic dispute." (Newland v. Kizer (1989) 209 Cal.App.3d 647, 657; see Artus v. Gramercy Towers Condominium Assn. (2018) 19 Cal. App.5th 923.)
"Courts do not decide abstract questions of law. An indispensable element to jurisdiction is that there be an actual controversy between parties who have an adversarial interest in the outcome of the litigation. As the California Supreme Court explained nearly a century and a half ago: 'When questions are presented in good faith in the regular course of honest litigation, and are necessary to the determination of the case, we shall not hesitate to decide them; but it is no part of our duty to investigate and decide questions not regularly arising in the due course of litigation, for the gratification of the curiosity of counsel, or to serve some ulterior purpose of parties.'" (Connerly v. Schwarzenegger (2007) 146 Cal.App.4th 739, 746.)
Here, it appears the Beyls are seeking pure declaratory relief as a means of obtaining court review of the propriety of their claim, which they can then rely upon in seeking a refund. We cannot grant that relief. (See Pacific Gas & Electric Co. v. State Bd. of Equalization (1980) 27 Cal.3d 277, 280 ["a taxpayer may not circumvent restraints on prepayment tax litigation by seeking only declaratory relief"].) As explained in Loeffler v. Target Corp. (2014) 58 Cal.4th 1081, "'[t]he purpose of these statutory requirements is to ensure that the Board receives sufficient notice of the claim and its basis' and to give the Board 'an opportunity to correct any mistakes, thereby conserving judicial resources.'" (Id. at p. 1108.) Thus, until the Beyls comply with the mandatory claim process and give the City a prelitigation opportunity to correct its allegedly erroneous assessment, we may not adjudicate the propriety of that assessment.
C. Adequacy of the Remedy
Even assuming the exhaustion of administrative remedies doctrine were applicable to the Beyls' challenge of their special assessment, we would nonetheless conclude they are not entitled to rely on its exceptions as a basis for avoiding the mandatory claim requirement.
The Beyls' complaint about the inadequacy of this remedy seems to assume the required claim process is intended to operate in the manner of a statutorily created administrative tribunal - e.g., the Workers Compensation Appeals Board, (see Lab. Code §§ 5300 et. seq.), the Labor Commissioner (see Lab. Code §§ 98 et. seq.), or the Unemployment Insurance Appeals Board (Unemp. Ins. Code, §§ 1221 et. seq.) - and thus to adjudicate their claim. And having assumed that, the Beyls suggest this statutorily mandated process is wholly inadequate for that purpose.
The Beyls, however, cite no statutes demonstrating the Legislature intended to establish that type of administrative adjudication process for refunds of property taxes and assessments. Instead, the statutes at issue here merely require the claimant to file a claim for refund (§ 5097) before filing a lawsuit, which will be either refunded (§§ 5099, 5101) or refused. (§ 5140.) Following a refusal, the claimant is free to bring an action in the superior court. (Ibid.)
There is nothing in these statutes suggesting the County is vested with jurisdiction to resolve the Beyls' claim. Instead, it would appear the purpose of the claims process is to provide the taxing entity an opportunity for a quick resolution of the taxpayer's claim before it gets hauled into court - in much the same way a notice of government claim operates. (See Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th 1228, 1234 [explaining the purpose of the notice requirement of the Government Claims Act is to "provide[] the public entity with sufficient information to enable it to perform an adequate investigation of the claim and, if appropriate, settle it without the expense of litigation" and "inform[] the public entity of potential liability so it can better prepare for the upcoming fiscal year"].)
Moreover, the Beyls' contention that the County (the tax collecting entity with which they are required to file their claim) lacks the requisite expertise to address their constitutional arguments is likewise misplaced. As explained in San Diego Municipal Employees Assn. v. Superior Court (2012) 206 Cal.App.4th 1447, 1458, a tribunal's perceived lack of constitutional expertise does not excuse compliance with a statutory claim requirement: "The mere fact that constitutional rights may be implicated or have some bearing on this dispute is not in and of itself sufficient to divest PERB [California Public Employment Relations Board] of its exclusive initial jurisdiction to consider MEA's [San Diego Municipal Employees Association's] allegations that City's conduct violated the MMBA [Meyers-Milias-Brown Act]. If City believes the ALJ's ultimate resolution of MEA's claim is legally flawed, City may appeal to PERB and, if necessary, may seek writ relief from the Court of Appeal." (See also County of Sacramento v. Assessment Appeals Bd. No. 2 (1973) 32 Cal.App.3d 654, 664 ["The existence of legal issues affects the nature and extent of review by the courts, not the jurisdiction of an equalization board"].)
Moreover, as pertinent here, we presume both the County and the City have the benefit of legal counsel to assist, as necessary, in their evaluation of the Beyls' refund claim. Thus, we would not presume the reliance on sophisticated legal principles as a basis for the claim is automatically beyond their comprehension.
We note the Beyls' specific claims of inadequacy are not unique to this case. The same arguments could be made in every case where one entity has collected a tax assessed by another governmental entity. In the absence of specific statutory authority, none of those tax collectors is a court, none is set up to try constitutional claims - or even to adjudicate factual disputes - and none of them has the legal authority to compel any other governmental entity or agency to comply with their rulings. If any of those concerns were a sufficient reason to bypass the claim process, then it would arguably nullify that process in every case where the tax collector is not the entity that directly assessed the tax.
Finally, assuming the Beyls' complaints are accurate, it suggests the claim process would be a short one. In Hanjin Internat. Corp. v. Los Angeles County Metropolitan Transportation Authority (2003) 110 Cal.App.4th 1109, the county that collected the tax simply referred the taxpayer's refund claim to the MTA [Metropolitan Transportation Authority] (the entity which assessed the tax), and let it address the merits. Once the MTA issued a denial, the county passed that denial along to the taxpayer and the claim process was done.
Considering the foregoing, we conclude that even if we had authority to relieve the Beyls from complying with their mandatory claim requirement, they have demonstrated no grounds for such relief in this case.
D. Section 4808
Finally, the Beyls also rely on section 4808, which preserves a taxpayer's right to seek declaratory relief in narrow circumstances, as justification for their challenge to the 2015-2016 special assessment. Section 4808 states that an action for declaratory relief to challenge a local tax that is "illegally or unconstitutionally assessed or collected or are to be so assessed or collected," may be filed "no later than 30 days after the delinquency date of a property tax bill or any installment thereof." (§ 4808.) However, the provision is 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." (Ibid, italics added.)
Relying on this court's decision in Howard Jarvis Taxpayers Assn. v. County of Orange (2003) 110 Cal.App.4th 1375 (Howard Jarvis), the Beyls argue section 4808 is applicable here because each annual levy of the special assessment constitutes a "'change in law.'" We disagree. In Howard Jarvis, the issue was whether the operative change in law was the city's 20-year old charter, which authorized the city to make changes to its pension system, or the ordinance by which the city made the specific change in dispute. This court concluded it was the latter, noting "A city ordinance '"is the equivalent of a municipal statute."'" (Howard Jarvis, supra, 110 Cal.App.4th at p. 1388.)
In this case, the Beyls offer no authority establishing that each annual levy of a special assessment under the Act operates as the equivalent of a new municipal statue, nor do they demonstrate how the 2015-2016 assessment resulted from a change in any existing regulation or the law. Instead, they simply point to various authorities to support the proposition that even the interim decisions of legislative bodies would qualify as "legislative acts." We have no quibble with that proposition, but the right to seek declaratory relief under section 4808 is not triggered by a mere "legislative act" -- if it did, all assessments would presumably qualify. Rather, it requires an assessment which "occurs as the direct result of a change" in either regulations or the law. The Beyls have shown none here. E. Section 4807 Bars the Beyls' Claim for Relief as Applied to Future Years
In their operative second amended petition, the Beyls allege they are "seek[ing] an order compelling the City to comply with its constitutional and statutory duties with regard to the 2015 Resolution and with regard to assessments in future years and seek a declaration that the City violated Prop. 218 and the L&L Act when it adopted the 2015 Resolution." (Italics added.) ~(ct913)~ However, to the extent the Beyls are seeking relief affecting the City's future assessments, that relief is barred as well.
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.)
"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).)
Here, a direct effort to limit the City's calculation of the special assessments to be collected in future years - each of which must be based on a separate engineering report and a new resolution levying the assessment - would impede its ability to collect those future revenues not yet due. As such, the challenge is barred by section 4807. F. The City Did Not Show the Beyls Failed to State a Claim Based on the Constitutional Prohibition Against Gifts of Public Funds
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. But the Beyls' third cause of action does not seek any refund of taxes, nor does it pose a purely academic question in the absence of such a claim. The Beyls have an obvious interest in ensuring their city adheres to constitutional requirements in expending the taxes it collects.
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 affirmed in part and reversed in part. The trial court erred in sustaining the City's demurrer to the Beyls' third cause of action, and the case is remanded to the court for further proceedings on that cause of action. Both sides shall bear their own costs on appeal.
ARONSON, ACTING P. J. WE CONCUR: FYBEL, J. IKOLA, J.