Opinion
NOT TO BE PUBLISHED
APPEAL from the Superior Court of Riverside County No. RIC379258, Gloria Trask and Stephen D. Cunnison, Judges.
Testa & Associates and James A. Testa for Plaintiff and Appellant.
Kinkle, Rodiger & Spriggs, Bruce E. Disenhouse; Arias & Lockwood and Christopher D. Lockwood for Defendant and Appellant.
OPINION
King J.
I. INTRODUCTION
On March 5, 1990, the County of Riverside (the County) conducted a tax sale of a Palm Desert apartment complex known as the Sun Dunes Villas. Plaintiff W.C. Lusardi was the highest bidder, paying the County $269,796.45 for the property in exchange for a tax deed. On August 21, 2001, a federal district court issued a judgment declaring the tax deed void.
In February 2002, Lusardi presented a refund claim to the County and later filed the present action against the County, seeking a refund of the $269,796.45 purchase price, plus interest and costs. (Rev. & Tax. Code, § 3729.) In 2008, the trial court granted Lusardi’s motion for summary judgment on his refund claim of $269,796.45, and awarded him prejudgment interest of $122,058.87, calculated at the rate of 7 percent per annum from and after August 21, 2001, through the date of the judgment, February 28, 2008, for a total judgment amount of $391,855.32. (Civ. Code, § 3287, subd. (a); Cal. Const., art. XV, § 1.)
All further statutory references are to the Revenue and Taxation Code unless otherwise indicated.
Both parties appeal from the judgment. The County concedes Lusardi was entitled to a refund and has paid him the $269,796.45 principal sum. The County challenges only the award of prejudgment interest on the grounds the trial court applied the wrong interest rate and accrual date. The County maintains Lusardi was entitled to prejudgment interest of $35,197.44, calculated at the rate of 3 percent per annum, from and after November 4, 2003, the date the County claims the August 21, 2001, federal district court judgment became final. In response, Lusardi argues the trial court’s prejudgment interest award was correct. Alternatively, in his appeal he claims he was entitled to interest at the rate of 9 percent per annum, from and after March 5, 1990, the date he purchased the tax deed. Thus, he claims he was entitled to prejudgment interest of $340,253.98.
We conclude that the trial court correctly determined that the applicable rate of prejudgment interest payable on Lusardi’s $269,796.45 refund claim was 7 percent per annum. (Civ. Code, § 3287, Cal. Const., art. XV, § 1.) We further conclude, however, that prejudgment interest did not begin to accrue on the refund claim until November 4, 2003. As the County argues, that was the date the federal district court judgment became final. Lusardi appealed the judgment, the Ninth Circuit affirmed it, and the United States Supreme Court denied Lusardi’s petition for a writ of certiorari on November 3, 2003. As we interpret Revenue and Taxation Code section 3729, Lusardi’s refund claim against the County did not accrue until he had either waived or exhausted his rights to appeal the judgment. We therefore affirm in part and reverse in part.
II. ADDITIONAL BACKGROUND
The relevant facts are undisputed. Several days before the March 5, 1990, tax sale, and unbeknownst to Lusardi at the time of the tax sale, an entity known as 40235 Washington Street (Washington Street) acquired title to the Sun Dunes Villas property by quitclaim deed, then promptly filed for bankruptcy protection. Beginning in June 1990, Lusardi and Washington Street engaged in extensive litigation in both state and federal court concerning the validity of the tax deed. Lusardi initiated a state court action against Washington Street, but later dismissed the action before any judgment was entered in it.
Thereafter, on August 21, 2001, the United States District Court for the Southern District of California entered a judgment in favor of Washington Street and against Lusardi, declaring Lusardi’s tax deed void on the grounds it was issued in violation of the automatic stay provisions of the U.S. Bankruptcy Code. (11 U.S.C. § 362, subd. (a).) Lusardi appealed, and the Ninth Circuit Court of Appeals affirmed the judgment in a published opinion issued on May 23, 2003. Lusardi petitioned the United States Supreme Court for a writ of certiorari, and his petition was denied on November 3, 2003.
On February 1, 2002, Lusardi presented a refund claim to the County (Gov. Code, § 900 et. seq.), and the County denied it by operation of law in March 2002. On August 1, 2002, less than one year after the federal district court issued the August 21, 2001, judgment declaring the tax deed void, but while Lusardi’s appeal from that judgment was pending in the Ninth Circuit, Lusardi filed the present action against the County, seeking a refund of the $269,796.45 sum he paid for the property at the March 5, 1990, tax sale pursuant to Revenue and Taxation Code section 3729, plus interest and costs.
In earlier proceedings in the present action, the County moved for summary judgment on Lusardi’s refund claim on the ground the claim was barred by the one-year limitations period of section 3729. Section 3729, subdivision (a), states, in pertinent part, that, “When a court holds a tax deed... void, the purchaser at tax sale is entitled to a refund from the county of the amount paid as the purchase price.... The refund shall be made in the same manner as a refund of an overpayment of tax, except that the claim shall be presented within one year after the judgment becomes final.” (Italics added.)
The trial court granted the County’s motion on the ground a 1996 unpublished opinion by this court, issued in Lusardi’s subsequently-dismissed state court action against Washington Street, namely, Lusardi v. 40235 Washington Street Corp. (June 26, 1996, E013429) (nonpub. opn.) (the 1996 opinion), constituted a final judgment holding the tax deed void. Thus, the trial court concluded, Lusardi’s refund claim was untimely because it was not presented to the County within one year of this court’s 1996 opinion holding the tax deed void.
Lusardi appealed the judgment in favor of the County, and we reversed. In the unpublished opinion filed in Lusardi v. County of Riverside (Jan. 10, 2007, E040016), we held that this court’s 1996 opinion did not constitute a judgment, and indeed no judgment had ever been entered in the state court action between Lusardi and Washington Street. Instead, Lusardi dismissed the state court action after this court issued the 1996 opinion. We further observed that the only “final” judgment holding the tax deed void was the August 21, 2001, federal district court judgment. Thus, we concluded, Lusardi’s refund claim was timely presented to the County because it was presented within one year of the August 21, 2001, federal district court judgment declaring the tax deed void. (§ 3729, subd. (a).)
Following the issuance of our January 10, 2007, opinion in this case, Lusardi moved for summary judgment against the County on his refund claim. As discussed, the trial court granted the motion, awarding Lusardi the principal sum of $269,796.45 on his refund claim plus prejudgment interest of $122,058.87, calculated at 7 percent per annum from and after August 21, 2001, the date the federal district court judgment was issued declaring the tax deed void. (Civ. Code, § 3287, subd. (a); Cal. Const., art. XV, § 1.) These appeals followed.
III. DISCUSSION
A. Standard of Review and Issues Presented
These appeals present two interrelated issues: (1) whether the applicable rate of prejudgment interest on Lusardi’s refund claim was 7 percent per annum; and (2) whether prejudgment interest began to accrue on Lusardi’s refund claim on August 21, 2001. All of the relevant facts are undisputed, and the issues presented are questions of law which we review de novo. (Regents of University of California v. Superior Court (1999) 20 Cal.4th 509, 531.)
B. The Applicable Rate of Prejudgment Interest Was 7 Percent Per Annum
The trial court concluded that Lusardi was entitled to prejudgment interest on his refund claim of $269,796.45 at the rate of 7 percent per annum. (Civ. Code, § 3287, subd. (a); Cal. Const., art. XV, § 1.) The trial court was correct. First, the state Constitution provides that the rate of interest payable “upon the loan or forbearance of any money... or on accounts after demand, shall be 7 percent per annum....” (Cal. Const., art. XV, § 1.) In addition, Civil Code section 3287, subdivision (a) expressly authorizes the recovery of interest on damages certain, or capable of being made certain, against governmental entities, including the state, a city, or a county, when the right to recover such damages has vested on a particular day. (Tripp v. Swoap (1976) 17 Cal.3d 671, 681-682, overruled on other grounds in Frink v. Prod (1982) 31 Cal.3d 166, 180.) The statute has been interpreted as authorizing the recovery of prejudgment interest in actions based on monetary obligations, including statutory obligations. (Id. at p. 681.)
Civil Code section 3287, subdivision (a) states: “Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day, except during such time as the debtor is prevented by law, or by the act of the creditor from paying the debt. This section is applicable to recovery of damages and interest from any such debtor, including the state or any county, city, city and county....”
As the trial court observed in awarding Lusardi prejudgment interest, Civil Code section 3287 has three requirements: “(1) There must be an underlying monetary obligation; (2) the recovery must be certain or capable of being made certain by calculation; and (3) the right to recovery must vest on a particular day.” (Tripp v. Swoap, supra, 17 Cal.3d at p. 682.) Lusardi’s refund claim met each of these requirements. It was based on a monetary and statutory obligation (Rev. & Tax. Code, § 3729), it constituted damages certain, namely, the sum of $269,796.45, and it vested on a particular day. (The particular day the claim vested is discussed in the following section.) Accordingly, the trial court correctly determined that Lusardi was entitled to prejudgment interest on his refund claim from the County at the rate of 7 percent per annum, pursuant to Civil Code section 3287, subdivision (a) and article XV, section 1 of the state Constitution.
In its appeal, the County argues that the correct rate of prejudgment interest was 3 percent per annum, as provided in section 5151, subdivision (a), which applies to interest payable on tax refunds. The County reasons that section 5151 applies because section 3729 effectively refers to it. As noted, section 3729, subdivision (a) provides that, “When a court holds a tax deed... void, the purchaser at tax sale is entitled to a refund from the county of the amount paid as the purchase price.... The refund shall be made in the same manner as a refund of an overpayment of tax, except that the claim shall be presented within one year after the judgment becomes final.” (Italics added.)
Section 5151, subdivision (a) provides: “Interest at the greater of 3 percent per annum or the county pool apportioned rate shall be paid, when that interest is ten dollars ($10) or more....” The County argues that Lusardi is not entitled to the county pool apportioned rate, if that rate is greater than 3 percent, because he presented no evidence in the trial court concerning what the county pool apportioned rate was. Lusardi argues that, in the event this court determines that section 5151, subdivision (a) applies to his refund claim, the matter must be remanded to the trial court to determine whether the county pool apportioned rate was greater than 3 percent. These arguments are moot. For the reasons we explain, section 5151 does not apply to Lusardi’s refund claim.
Based on the phrase, “The refund shall be made in the same manner as a refund of an overpayment of tax,” the County argues Lusardi’s refund constituted an overpayment of tax or a tax refund. The County is mistaken. The refund of the $269,796.45 principal sum Lusardi paid the County in exchange for the tax deed was categorically not an overpayment of tax or a tax refund. Nor does section 3729 make it so. By merely providing that a refund of the purchase price paid for a tax deed “shall be made in the same manner as a refund of an overpayment of tax,” section 3729 does not convert the refund of a purchase price paid at a tax sale into an overpayment of tax or a tax refund. Indeed, the quoted phrase effectively distinguishes tax sale purchase price refunds from overpayments of tax or tax refunds.
Moreover, the statutory scheme governing tax refunds—of which Revenue and Taxation Code section 5151 is a part—expressly applies to “taxes paid.” (See Rev. & Tax. Code, § 5096 et seq.) The statutory scheme nowhere states or suggests that it applies to refunds of monies paid in exchange for tax deeds. (Ibid.) Nor does Revenue and Taxation Code section 3729 state or imply that section 5151 applies to refunds of monies paid for tax deeds. Instead, section 3729 is silent on whether prejudgment interest is payable on refunds of monies paid in exchange for tax deeds, or, if so, what rate of interest applies. By its express terms, however, Civil Code section 3287, subdivision (a) authorizes the payment of prejudgment interest on Lusardi’s refund claim.
In his appeal, Lusardi argues that if section 5151 applies to his refund claim, then the applicable rate of prejudgment interest on his refund was 9 percent per annum, not 3 percent. As Lusardi points out, the 3 percent interest rate provided for in the current version of section 5151, subdivision (a), does not apply to tax refunds that became due and payable before March 1, 1993. (§ 5151, subd. (b).) For tax refunds due before March 1, 1993, the statute formerly provided for a 9 percent interest rate. Lusardi further argues that his refund claim accrued on March 5, 1990, the date he paid the $269,796.45 sum in exchange for the tax deed. This argument fails for two reasons: (1) neither the current nor the former version of section 5151, subdivision (a) applies to Lusardi’s refund claim, for the reasons explained above; and (2) Lusardi’s refund claim did not accrue or become due and payable on March 5, 1990, for the reasons we explain in the following section.
C. Prejudgment Interest Began to Accrue November 4, 2003
The County claims the trial court erroneously concluded that prejudgment interest began to accrue on the $269,796.45 sum on August 21, 2001, the date the federal district court issued the judgment declaring the tax deed void. The basis of the trial court’s ruling was, of course, section 3729, subdivision (a), which, as discussed, states that, “When a court holds a tax deed... void, the purchaser at tax sale is entitled to a refund... of the amount paid as the purchase price.... The refund shall be made in the same manner as a refund of an overpayment of tax, except that the claim shall be presented within one year after the judgment becomes final.” (Italics added.) The trial court was also guided by our January 10, 2007, opinion in this case, in which we observed that the August 21, 2001, federal district court judgment was a “final” judgment holding the tax deed void, for purposes of section 3729.
The County argues Lusardi’s refund claim did not accrue, or that Lusardi did not have a right to a refund, until the day after the federal district court judgment became final. According to the County, the federal district court judgment did not become final until November 3, 2003, the day the United States Supreme Court denied Lusardi’s petition for a writ of certiorari following the Ninth Circuit’s May 23, 2003, opinion affirming the judgment, and Lusardi’s appellate rights were finally exhausted. Thus, the County argues, Lusardi prematurely presented his refund claim to the County on February 1, 2002, and prematurely filed the present action on his refund claim on August 1, 2002. For the reasons we explain, the County is correct on this issue.
The County relies on Coleman v. County of Los Angeles (1919) 180 Cal. 714 (Coleman), in which the court was called upon to determine when a refund claim accrued pursuant to the predecessor statute to Revenue and Taxation Code section 3729, namely, former Political Code section 3898, which contained similar language to section 3729. In holding that the tax deed purchaser’s refund claim was premature because it was filed before the entry of decree adjudicating the tax deed void, the court explained: “It is clear that the right of the purchaser to be reimbursed by the county is predicated upon a formal and final adjudication that the title acquired by him at the tax sale was invalid and void. It follows that the purchaser must either waive his right to appeal, or the time for appeal must expire, or an appeal, if taken, must be determined before the purchaser can claim any refund from the county. It is obvious that under the statute the county should not refund any portion of the money paid by the purchaser until final determination of the right of the purchaser in and to the property in question. For this reason the claim was prematurely filed with the county.” (Coleman, supra, at p. 723, italics added.)
As the County points out, “If a tax sale refund could be obtained based on a trial court judgment finding a deed void which is on appeal, the plaintiff potentially could recover the amount paid at the tax sale and also keep the property if the judgment is later reversed on appeal.” To be sure, had Lusardi obtained a refund of the $269,796.45 sum from the County before his appeal rights in the federal court action were exhausted, and had the federal district court judgment holding the tax deed void been reversed, Lusardi could have kept the refund and retained valid title to the property. In light of Coleman, section 3729 should not be interpreted as allowing such an inequitable result. (Coleman, supra, 180 Cal. at p. 723.)
In our January 10, 2007, unpublished opinion, we held that Lusardi’s refund claim was not barred by the one-year limitations period of section 3729 because it was presented within one year of August 21, 2001, the date we observed the federal district court judgment became “final.” Relying on Martin v. Martin (1970) 2 Cal.3d 752, 761 (Martin), we reasoned that, “Under federal law, a judgment or order, once rendered, is deemed ‘final’ until reversed on appeal or modified or set aside in the court of its rendition.” (Lusardi v. County of Riverside, supra, E040016, p. 27.) The Martin court observed that, under federal law, “a [federal] judgment or order, once rendered, is final for purposes of res judicata until reversed on appeal or modified or set aside in the court of rendition.” (Martin, supra, at p. 761, italics added.) The Martin court applied this rule in holding that a federal bankruptcy court order discharging a husband’s debts, which the bankruptcy court amended nunc pro tunc to provide that the husband’s support obligation to his former wife was not discharged, was “final” for purposes of res judicata in the state court divorce proceedings between the husband and wife, and could not be collaterally attacked in those proceedings. Instead, the discharge order could only be challenged by direct attack or appeal in the federal court. (Id. at pp. 761-762.)
As Martin demonstrates and as the United States Supreme Court has observed, “Finality is variously defined; like many legal terms, its precise meaning depends on context. Typically, a federal judgment becomes final for appellate review and claim preclusion purposes when the district court disassociates itself from the case, leaving nothing to be done at the court of first instance save execution of the judgment. [Citations.] For other purposes, finality attaches at a different stage....” (Clay v. U.S. (2003) 537 U.S. 522, 527.) Courts of this state have observed that, “A judgment becomes final when all avenues of direct review are exhausted.” (People v. Jackson (1967) 67 Cal.2d 96, 98 and cases cited.) This is perhaps the most common understanding of when a judgment “becomes final.”
In any event, a judgment declaring a tax deed void should be considered “final” for purposes of section 3729 when all avenues of direct review from the judgment have been exhausted or the parties have waived their appeal rights, and there is no possibility the judgment will be overturned on appeal. (Coleman, supra, 180 Cal. at p. 723.) Here, that occurred on November 4, 2003, the day after Lusardi’s petition for a writ of certiorari was denied. Before that date, Lusardi’s appeal rights had not been exhausted.
We return to the question at hand: when did prejudgment interest begin to accrue on Lusardi’s refund claim? As discussed, Civil Code section 3287 provides for prejudgment interest on damages certain which vest on a particular day. (Tripp v. Swoap, supra, 17 Cal.3d at p. 682.) Here, prejudgment interest began to accrue after two things happened: (1) the judgment declaring the tax deed void became final; and (2) Lusardi presented a refund claim to the County. (Rev. & Tax. Code, § 3729 [“The refund shall be made in the same manner as a refund of an overpayment of tax, except that the claim shall be presented within one year after the judgment becomes final”].)
As the County argues, the presentation of a refund claim is a prerequisite to the running of prejudgment interest, because the County should not be liable for interest on overpaid taxes or other sums due from the County unless and until the County is put on notice that the sums are due. (Ball v. County of Los Angles (1978) 82 Cal.App.3d 312, 320-321 [liquidated claim against County did not draw interest until demanded].) Here, however, Lusardi presented his refund claim to the County on February 1, 2002, before the August 21, 2001, federal district court judgment became final. Thus, prejudgment interest began to accrue on Lusardi’s refund claim on November 4, 2003, the date the judgment became final and after the refund claim was presented.
Our conclusion that the judgment did not become final, for purposes of section 3729, until November 4, 2003, in no way undermines the holding of our January 10, 2007, opinion. It remains the case that Lusardi’s refund claim was timely presented and was therefore not barred by the one-year limitations period of section 3729. The refund claim was merely presented prematurely. It was not untimely.
In his appeal, Lusardi argues that prejudgment interest began to accrue on March 5, 1990, the date he paid the $269,796.45 sum to the County. He relies on Todd Shipyards Corp. v. City of Los Angeles (1982) 130 Cal.App.3d 222, 225-227 (Todd Shipyards), in which the court held that a corporation was entitled to collect prejudgment interest on wrongfully collected taxes it paid under protest to the city—from and after the date the taxes were paid. The court reasoned that the corporation’s right to recover the wrongfully collected taxes vested on the date the taxes were paid. (Civ. Code, § 3287, subd. (a); see also ITT Gilfillan, Inc. v. City of Los Angeles (1982) 136 Cal.App.3d 581 (ITT Gilfillan) [following Todd Shipyards].)
Todd Shipyards and ITT Gilfillan are clearly distinguishable from the present case because neither case involved a section 3729 refund claim. Instead, each involved wrongfully collected taxes paid under protest, of which the city was aware at the time the taxes were paid. In contrast, Lusardi did not become “entitled” to a refund of his $269,796.45 purchase price, pursuant to section 3729, until there was a “final” judgment declaring the tax deed void. Moreover, for purposes of section 3729 it makes no difference whether the County knew or should have known that the March 5, 1990 tax sale was conducted in violation of the automatic stay. It cannot be overemphasized that section 3729 is the sole basis of Lusardi’s refund claim in the present action. Although Lusardi presented an administrative tort claim to the County on August 24, 1990, he obtained summary judgment against the County solely on the basis of his section 3729 refund claim, his only remaining cause of action against the County.
Finally, the County relies on Ball, supra, 82 Cal.App.3d at pages 316 through 321 for the proposition that Lusardi was not entitled to any prejudgment interest on his refund claim. Ball, too, is inapposite. It involved an action by a taxpayer for property taxes she mistakenly paid to the county when, unbeknownst to her, she was entitled to an exemption. The county promptly refunded the property taxes after reviewing the taxpayer’s application for an exemption. The county denied the taxpayer’s request for interest on the taxes from the date(s) of payment, on the grounds it had no notice of the exemption claim or that it had wrongfully collected the taxes until the taxpayer presented her application for exemption. The court agreed with the county that no prejudgment interest was due on the taxes from the date(s) of payment, because they were paid and collected by mutual mistake, and interest was not recoverable before the county had no notice of its duty to make restitution.
Like Todd Shipyards and ITT Gilfillan, Ball did not involve a section 3729 refund claim. And here, unlike the county in Ball, the County knew of Lusardi’s refund claim well in advance of the time the judgment became final on November 3, 2003. Indeed, the present action on the refund claim was instituted more than one year before that date.
IV. DISPOSITION
The judgment is affirmed to the extent it determined that Lusardi was entitled to prejudgment interest on his $269,796.45 refund claim at the rate of 7 percent per annum. (Civ. Code, § 3287, subd. (a); Cal. Const., art. XI, § 1.) The judgment is reversed to the extent it determined that prejudgment interest began to accrue on August 21, 2001. Prejudgment interest did not begin to accrue until November 4, 2003. The matter is remanded to the trial court for further proceedings consistent with this opinion. The parties shall bear their respective costs on appeal.
We concur: Ramirez P.J., Hollenhorst J.