Opinion
B326614
10-09-2024
STEVEN BRASLAW et al., Plaintiffs and Appellants, v. CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION et al., Defendants and Respondents.
Steven Braslaw and Yoginee Braslaw, self-represented litigants, for Plaintiffs and Appellants. Rob Bonta, Attorney General, Tamar Pachter, Senior Assistant Attorney General, Brian D. Wesley and Anna Barsegyan, Deputy Attorneys General, for Defendants and Respondents.
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. 22STCV13393, Elaine Lu, Judge. Affirmed.
Steven Braslaw and Yoginee Braslaw, self-represented litigants, for Plaintiffs and Appellants.
Rob Bonta, Attorney General, Tamar Pachter, Senior Assistant Attorney General, Brian D. Wesley and Anna Barsegyan, Deputy Attorneys General, for Defendants and Respondents.
KIM, J.
I. INTRODUCTION
Plaintiffs Steven and Yoginee Braslaw appeal from a judgment of dismissal following the trial court's sustaining of a demurrer without leave to amend. Because plaintiffs failed to first present their claims against defendants[ to the Department of General Services as required by the Government Claims Act (Gov. Code, § 905.2, subd. (b)(3))[ , we affirm.
Defendants are the California Department of Tax and Fee Administration (Department of Tax) and its director Nicolas Maduros. The Department of Tax is the successor entity of the State Board of Equalization. (California Dept. of Tax and Fee Administration v. Superior Court (2020) 48 Cal.App.5th 922, 927 (CDTFA); Gov. Code, §§ 15570, 15570.20, 15570.22.)
Further statutory references are to the Government Code unless otherwise indicated.
II. BACKGROUND
"In this appeal following the sustaining of a demurrer, 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." (Fierro v. Landry's Restaurant, Inc. (2019) 32 Cal.App.5th 276, 281.)
Plaintiffs owned LYM, Inc., dba Pizza Time. In November 2012, the State Board of Equalization conducted an audit of Pizza Time and, from 2013 to 2020, "the case" went through reaudits and appeals, until September 20, 2020, when the "final determination was made." That determination became final on October 20, 2020, and concluded that plaintiffs were "solely" responsible, even though they had operated LYM, Inc. as a "corporation in every way."[
The second amended complaint does not specify how much tax was assessed against plaintiffs. Plaintiffs, however, have filed a request for judicial notice of: a statement of account dated August 1, 2023, indicating that plaintiffs owed the Department of Tax $190,145.22 (Exhibit A); copies of the Department of Tax's Releases of Lien, dated September 19, 2023 (Exhibit B); a copy of a cashier's check dated August 7, 2023, indicating a payment of $190,145.22 from Yoginee Braslaw to the Department of Tax (Exhibit C); and Senate Bill No. 86 (2017-2018 Reg. Sess.), as amended by the Assembly on June 11, 2017 (Exhibit D). We exercise our discretion to take judicial notice of Exhibits A and B. (Evid. Code, §§ 452, 459, subd. (a).) We decline to take judicial notice of Exhibit C as it is not a matter described by Evidence Code section 452. We also decline to take judicial notice of Exhibit D, which was already in the record and before the trial court.
Defendants seized plaintiffs' assets before having the right to do so, frivolously audited their business, and conducted a biased assessment of the appeals process. Defendants also "ascribed astronomical values to the business the [p]laintiffs were no longer a part of . . . ."
Plaintiffs entered into a payment plan with the Department of Tax to pay the tax liability owed.
B. Procedural History
On October 15, 2021, plaintiffs filed their initial complaint against the Department of Tax. On August 10, 2022, plaintiffs filed the second amended complaint, the operative pleading.
For the first cause of action, negligence, plaintiffs alleged that defendants negligently "serviced, operated and had control" over plaintiffs' sales and use tax account, negligently seized plaintiffs' assets, unfairly conducted a frivolous audit, and attempted to coerce plaintiffs to commit fraud by advising plaintiffs to open a new sales and tax account. Plaintiffs suffered damages as a result of defendants' negligence.
For the second cause of action, bad faith and unfair business practices, plaintiffs alleged that defendants skewed their findings by claiming that plaintiffs were operating their business as individuals, inappropriately forced plaintiffs to open a new sales and use tax permit, and, when plaintiffs refused to do so, "ascribed astronomical values to the business the [p]laintiffs were no longer a part of, and without documentation or being heard by [p]laintiffs . . . ."
For the third cause of action, conversion, plaintiffs alleged that, prior to the audit being finalized, defendants wrongfully imposed levies on plaintiffs' property and seized funds to collect the taxes.
For the fourth cause of action, negligent misrepresentation, plaintiffs alleged defendants made false statements in that they led plaintiffs "to believe they were to receive a fair and accurate review of the audit and . . . to believe that their administrative protests would be reviewed with impartiality."
For the fifth and sixth causes of action, breach of contract and breach of fiduciary duty, plaintiffs alleged that they had a sales and use tax permit, which was a contract between them and the Department of Tax. Defendants breached that contract by failing to conduct a fair tax audit, by assessing taxes against plaintiffs as individuals, by skewing their findings in defendants' favor, by attempting to force plaintiffs to open a new sales and tax use permit, and by "conducting an arbitrary, cursory, and inappropriate audit and ascrib[ing] astronomical values to the business the [p]laintiffs were no longer a part of, and without documentation or being heard by [p]laintiffs and/or corporate shareholders."
For the seventh cause of action, money due and accounting, plaintiffs sought an accounting of the sales tax that defendants unlawfully collected.
The harm alleged by plaintiffs included financial injury, emotional distress, business losses, and loss of reputation. Plaintiffs sought as relief monetary damages, equitable relief, attorney fees, and costs.
Plaintiffs asserted that the Department of Tax served plaintiffs with a "Final Administrative Decision" on October 22, 2020, and that plaintiffs' service of the summons and complaint was "proper under the Government Tort Claims act" because the complaint included: the name and postal office address of plaintiffs; information about the occurrence or transaction; description of the "indebtedness, obligation, injury, damage or loss"; names of the public employees; and amount claimed in damages.[
Plaintiffs also alleged that "Plaintiff Yoginee Braslaw has filed an Application for Innocent Spousal Relief and later for Equitable Relief after the third final determination."
On September 9, 2022, defendants filed their demurrer to the second amended complaint.[ Defendants argued, among other things, that: the Department of Tax was immune from liability under section 860.2; the trial court had no jurisdiction over the matter because article XIII, section 32 of the California Constitution and Revenue and Taxation Code sections 6931 and 6932 barred plaintiffs' claims; and plaintiffs had failed to comply with the Government Claims Act, which requires that claims against a state agency be presented to the state before the filing of a lawsuit.
The Department of Tax filed the demurrer without Maduros, who had not been served with a summons and complaint. After being served with the complaint, Maduros joined the Department of Tax's demurrer.
Plaintiffs opposed the demurrer, arguing that section 860.2 did not bar their claims because they had suffered an injury based on defendants' failure to comply with a statutory duty. Plaintiffs also argued that the court had jurisdiction over this matter because they had exhausted their administrative remedies by filing claims for refunds, appeals, and administrative determinations, and by entering into a payment plan with the Department of Tax. Finally, citing to section 905, subdivision (a)[ , they contended that the Government Claims Act did not apply to their claims because that Act did not apply to "'[c]laims under the Revenue and Taxation Code or other statute prescribing procedures for the refund, rebate . . . or adjustment of any tax, assessment, fee or charge or any portion thereof, or of any penalties, costs or charges related thereto.'" (Original italics.)
Section 905, subdivision (a) requires compliance with the claims presentation requirements of the Government Claims Act for "all claims for money or damages against local public entities" except those "[c]laims under the Revenue and Taxation Code or other statute prescribing procedures for the refund, rebate, exemption, cancellation, amendment, modification, or adjustment of any tax, assessment, fee, or charge or any portion of the charge, or of any penalties, costs, or related charges." On appeal, plaintiffs do not reassert that they fell within the exception for filing claims set forth at section 905, subdivision (a). Nor would such an argument be persuasive. Section 905 applies to claims against local public entities. Further, plaintiffs' complaint sought monetary damages, not a tax refund. Accordingly, the exclusion provided in section 905, subdivision (a) does not apply.
Defendants replied.
On October 20, 2022, the trial court conducted a hearing on defendants' demurrer. After taking the matter under submission, the court sustained the demurrer without leave to amend. The court concluded that the claims in the second amended complaint were based on the alleged improper collection of taxes, which claims were barred by section 860.2. The court additionally determined that article XIII, section 32 of the California Constitution prohibited plaintiffs' claims. The court declined to address the parties' arguments concerning plaintiffs' failure to comply with the claims presentation requirement of the Government Claims Act. Finally, the trial court denied plaintiffs leave to amend.[
Defendants also moved to strike plaintiffs' request for jury trial. Because the trial court sustained their demurrer without leave to amend, it denied the motion to strike as moot.
On November 30, 2022, the trial court entered a judgment of dismissal. Plaintiffs timely appealed.
III. DISCUSSION
A. Demurrer-Standard of Review
"In reviewing the sufficiency of a complaint against a general demurrer, we are guided by long-settled rules. 'We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.' (Serrano v. Priest (1971) 5 Cal.3d 584, 591.) Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. (Speegle v. Board of Fire Underwriters (1946) 29 Cal.2d 34, 42.) When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. (See Hill v. Miller (1966) 64 Cal.2d 757, 759.) And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. (Kilgore v. Younger (1982) 30 Cal.3d 770, 781; Cooper v. Leslie Salt Co. (1969) 70 Cal.2d 627, 636.) The burden of proving such reasonable possibility is squarely on the plaintiff. (Cooper v. Leslie Salt Co., supra, [70 Cal.2d] at p. 636.)" (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)
B. Government Claims Act and Requirement to File a Claim
"Section 905.2, subdivision (b) requires the presentation of 'all claims for money or damages against the state' in all cases of 'injury for which the state is liable.' (§ 905.2, subd. (b)(3).) The California Victim Compensation Board must act on a claim 'within 45 days after the claim has been presented.' (§§ 912.4, subd. (a), 912.8.) 'If the board fails or refuses to act on a claim within' the 45-day period, 'the claim shall be deemed to have been rejected by the board on the last day of the period within which the board was required to act upon the claim.' (§ 912.4, subd. (c).)
"'[N]o suit for money or damages may be brought against a public entity on a cause of action for which a claim is required to be presented . . . until a written claim therefor has been presented to the public entity and has been acted upon by the board, or has been deemed to have been rejected.' (§ 945.4.) If the public entity provides written notice of its rejection of a claim, any suit against the public entity must be brought no later than six months after the notice is personally delivered or deposited in the mail. (§ 945.6, subd. (a)(1).) If written notice is not given, the plaintiff has two years from accrual of the cause of action to file suit. (Id., subd. (a)(2).)
"Plaintiffs filing a complaint against a public entity 'must allege facts demonstrating or excusing compliance with the claim presentation requirement. Otherwise, [their] complaint is subject to a general demurrer for failure to state facts sufficient to constitute a cause of action.' (State of California v. Superior Court (Bodde) (2004) 32 Cal.4th 1234, 1243.)" (Malear v. State (2023) 89 Cal.App.5th 213, 220.) A claim against a state agency under the Government Claims Act must be submitted to the Department of General Services. (§ 915, subds. (b), (e)(2).) The claims presentation requirement applies to all claims for money or damages, including contract claims. (City of Stockton v. Superior Court (2007) 42 Cal.4th 730, 738.)
In their opening brief, plaintiffs did not directly address whether they sufficiently alleged compliance with the claims presentation requirement of the Government Claims Act. In their supplemental letter brief, plaintiffs "acknowledge that the second amended complaint fails to allege the factual allegations with specificity concerning exhausting administrative remedies and the Government Claims Act."
Plaintiffs have failed to state a claim for the first six causes of action, each of which seeks monetary damages for defendant's alleged negligence, unfair business practice, conversion, negligent misrepresentation, breach of contract, and breach of fiduciary duty. (See Richards v. Department of Alcoholic Beverage Control (2006) 139 Cal.App.4th 304, 315 ["The presentation of a claim pursuant to the [Government Claims Act] is a separate, additional prerequisite to commencing an action against the state . . . and is not a substitute for the exhaustion of an administrative remedy"].) Plaintiffs' seventh cause of action, for money due and accounting, is an equitable action. (See Sass v. Cohen (2020) 10 Cal.5th 861, 869 [purpose of accounting is for plaintiff to determine precise amount due from defendant].) Because that cause of action does not seek to recover money or damages, it is not subject to the claims presentation requirement of the Government Claims Act. (See § 905.2, subd (b).) Nonetheless, the seventh cause of action also does not survive demurrer because "[a] right to an accounting is derivative; it must be based on other claims. [Citation.] Here, because all of [appellants'] other claims fail, so too does the one for an accounting." (Janis v. California State Lottery Com. (1998) 68 Cal.App.4th 824, 833- 834.)
Accordingly, the trial court did not err by sustaining the demurrer. Because we find plaintiffs have failed to allege that they satisfied the claims presentation requirement of the Government Claims Act, we need not discuss the parties' arguments concerning section 860.2 and article XIII, section 32 of the California Constitution. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.)
C. Leave to Amend
Plaintiffs contend that they "can overcome their defects in their second amended complaint by alleging facts indicating they had exhausted their administrative remedies and had filed a claim pursuant to the Government Claims Act." Plaintiffs assert that in "May 2013, [their prior counsel, Jon Barker] informed [plaintiffs] that he had filed a claim pursuant to the Government Claims Act with the board."[ Even assuming the truth of this assertion, a claim filed in May 2013 would not satisfy the requirements of the Government Claims Act because, as plaintiffs alleged, their causes of action accrued on October 20, 2020, the date of the Department of Tax's final determination. And, "[a] claim relating to a cause of action . . . for injury to person or to personal property . . . shall be presented as provided in Article 2 (commencing with Section 915) not later than six months after the accrual of the cause of action." (§ 911.2, subd. (a).) "'Accrual of the cause of action for purposes of the government claims statute is the date of accrual that would pertain under the statute of limitations applicable to a dispute between private litigants. ([] § 901.)' [Citation.]" (Rubenstein v. Doe No. 1 (2017) 3 Cal.5th 903, 906.) Thus, a claim filed in May 2013 could not meet the presentation requirement for a cause of action that accrued seven years later.
Plaintiffs do not specify what they mean by "board." Section 900.2, subdivision (b), defines "board" as: "[i]n the case of the state, except as provided by subdivisions (c) and (d), the Department of General Services."
Plaintiffs additionally assert that "[i]n December 2020, [plaintiff] Steven Braslaw filed the government claim form pursuant to the Government Claims Act." They cite in support of their assertion page four of their second amended complaint. Page four of the second amended complaint includes no reference to the filing of a claim with the Department of General Services. To the extent plaintiffs contend that their filing of the second amended complaint satisfied the Government Claims Act's requirement that plaintiffs submit a claim with the Department of General Services prior to the filing of a complaint, we reject the contention.
Plaintiffs also argue that following the entry of judgment, they satisfied article XIII, section 32 of the California Constitution by paying the taxes assessed by defendants. Such payment, however, is a prerequisite for seeking a tax refund. (See CDTFA, supra, 48 Cal.App.5th at p. 930.) "The origin of this 'pay first, litigate second' rule is [article XIII, section 32 of the California Constitution], which provides: 'No legal or equitable process shall issue in any proceeding in any court against this State or any officer thereof to prevent or enjoin the collection of any tax. After payment of a tax claimed to be illegal, an action may be maintained to recover the tax paid, with interest, in such manner as may be provided by the Legislature.'" (Ibid.) As discussed, plaintiffs do not allege a suit for a tax refund. To the extent plaintiffs seek to reframe their suit as a tax refund action, they cannot cure their failure to comply with article XIII, section 32 of the California Constitution, which requires that plaintiffs pay the contested tax before seeking a tax refund. (Ibid.; see Murphy v. Twitter, Inc. (2021) 60 Cal.App.5th 12, 42 ["'"Where the appellant offers no allegations to support the possibility of amendment and no legal authority showing the viability of new causes of action, there is no basis for finding the trial court abused its discretion when it sustained the demurrer without leave to amend"'"].) Accordingly, the trial court did not abuse its discretion by denying plaintiffs leave to amend.
IV. DISPOSITION
The judgment of dismissal is affirmed. Defendants are awarded costs on appeal.
We concur: BAKER, Acting P. J. DAVIS, J. [*]
[*]Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.