Opinion
B323205
01-16-2024
JANELLE R. POLK, Plaintiff and Appellant, v. FRANCHISE TAX BOARD, Defendant and Respondent.
Janelle R. Polk, in pro. per., for Plaintiff and Appellant. Rob Bonta, Attorney General, Tamar Pachter, Senior Assistant Attorney General, Lisa W. Chao and Douglas J. Beteta, Deputy Attorneys General, for Defendant and Respondent.
NOT TO BE PUBLISHED
APPEAL from judgment of the Superior Court of Los Angeles County. No. 20STLC09273 Elaine Lu, Judge.
Janelle R. Polk, in pro. per., for Plaintiff and Appellant.
Rob Bonta, Attorney General, Tamar Pachter, Senior Assistant Attorney General, Lisa W. Chao and Douglas J. Beteta, Deputy Attorneys General, for Defendant and Respondent.
GRIMES, ACTING P. J.
Plaintiff Janelle R. Polk appeals summary judgment entered against her on her action for a tax refund. She further appeals, pursuant to Code of Civil Procedure section 1008, subdivision (g), denial of her motion for reconsideration of the summary judgment order. We affirm.
BACKGROUND
In 2009, plaintiff earned $59,985 working at Warner Bros. in Burbank as an hourly, nonexempt full-time employee. She also lived in Burbank. Warner Bros. withheld from plaintiff's paychecks estimated amounts due for, among other things, California state income tax.
Despite her earnings from Warner Bros., plaintiff reported $0 in wages on her 2009 federal and California income tax returns and negative adjusted gross income after deductions. Accordingly, defendant Franchise Tax Board (FTB) issued her a refund of the entire $2,863 Warner Bros. withheld from her in 2009 state income tax.
In 2013, following an audit, the IRS adjusted plaintiff's 2009 wages from the $0 she reported in her federal return to the $59,985 Warner Bros. had paid her that year. FTB followed suit with respect to her state return and proposed a tax assessment of $3,018 and a penalty of $604 plus interest. Plaintiff unsuccessfully protested the proposed assessment, it became final, and FTB began enforcement.
After making partial payment on the assessment, plaintiff requested a refund in June 2017. The asserted grounds included that (1) then-current IRS transcripts showed plaintiff had no federal tax assessment, and thus no taxable income, in 2009; (2) Warner Bros. misclassified plaintiff's pay as wages; (3) Warner Bros. engaged in "illegal discrimination and extortion" (boldface omitted) in requiring plaintiff to complete a Form W-4 and/or furnish a Social Security number as a condition of her employment; (4) plaintiff provided her completed Form W-4 "strictly under duress"; (5) the withholding requirements of state and federal law "cannot be reasonably construed to apply generally to payments made to all privately employed workers in exchange for their labor in a state of the Union" (boldface omitted); and (6) if they could, such requirements would be unconstitutional. Nowhere in the refund claim did plaintiff assert she was not properly notified of the assessment she had begun paying (both voluntarily and by levy).
FTB advised plaintiff her refund claim was ineffective because she had not fully satisfied her tax liability. She later satisfied the liability and, in August 2018, filed another refund request on substantially the same grounds as the first. FTB denied plaintiff's request.
Plaintiff then sued FTB for the refund. After discovery, FTB moved for summary judgment, arguing plaintiff could not show she was entitled to a refund. In opposition, plaintiff argued FTB was not entitled to summary judgment for several reasons, including that FTB had failed to mail her certain required notices. The trial court granted summary judgment for FTB, relying in part on plaintiff's failure to raise the notice issues in her refund claims. Plaintiff then moved for reconsideration based on arguments and purported new evidence relating to the notice issues. The court denied plaintiff's motion and entered judgment for FTB.
Plaintiff timely appealed.
DISCUSSION
1. The Trial Court Properly Granted Summary Judgment to FTB.
a. Summary judgment and standard of review
A defendant moving for summary judgment must show "that one or more elements of the cause of action . . . cannot be established, or that there is a complete defense to the cause of action." (Code Civ. Proc., § 437c, subd. (p)(2).) Summary judgment is appropriate where "all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (Id., subd. (c).) The moving defendant bears the burden of persuasion that no triable issues exist and that it is entitled to judgment as a matter of law. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.)
Our Supreme Court has made clear that the purpose of the 1992 and 1993 amendments to the summary judgment statute was" 'to liberalize the granting of [summary judgment] motions.'" (Perry v. Bakewell Hawthorne, LLC (2017) 2 Cal.5th 536, 542.) It is no longer called a "disfavored" remedy. (Ibid.) "Summary judgment is now seen as 'a particularly suitable means to test the sufficiency' of the plaintiff's or defendant's case." (Ibid.)
On appeal, "we take the facts from the record that was before the trial court ....' "We review the trial court's decision de novo, considering all the evidence set forth in the moving and opposing papers except that to which objections were made and sustained." '" (Yanowitz v. L'Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1037, citation omitted.) We review the trial court's evidentiary rulings at the summary judgment stage for abuse of discretion. (Ducksworth v. Tri-Modal Distribution Services (2020) 47 Cal.App.5th 532, 544, overruled on other grounds in Pollock v. Tri-Modal Distribution Services, Inc. (2021) 11 Cal.5th 918, 932.)
Further, "our review is governed by a fundamental principle of appellate procedure, namely, that' "[a] judgment or order of the lower court is presumed correct,"' and thus,' "error must be affirmatively shown."' [Citation.] Under this principle, [the nonmoving] plaintiff bears the burden of establishing error on appeal, even though [the moving] defendant[] had the burden of proving [its] right to summary judgment before the trial court. [Citation.] For this reason, our review is limited to contentions adequately raised and supported in [the] plaintiff's brief." (Murchison v. County of Tehama (2021) 69 Cal.App.5th 867, 882, first brackets in original.)
b. Analysis
Plaintiff makes several arguments for reversal, none of which has any merit.
i. Plaintiff's wage income is subject to taxation.
Plaintiff first argues the wages she earned as an employee of Warner Bros. are not subject to income taxation under federal law. Courts have repeatedly rejected as frivolous the contention that wages are not taxable income. (See, e.g., Maisano v. United States (9th Cir. 1990) 908 F.2d 408, 409; Olson v. United States (9th Cir. 1985) 760 F.2d 1003, 1005; Stubbs v. Commissioner of IRS (11th Cir. 1986) 797 F.2d 936, 938; Connor v. Commissioner (2d Cir. 1985) 770 F.2d 17, 20.) Nevertheless, we briefly address the three pillars of plaintiff's argument.
First, plaintiff is wrong that income tax on her wages is a direct tax that must be apportioned to avoid conflict with the United States Constitution. (See U.S. Const., art. I, § 9, cl. 4; see also art. I, § 2, cl. 3.) In Brushaber v. Union Pacific Railroad Co. (1916) 240 U.S. 1, 12-19, the United States Supreme Court recognized the Sixteenth Amendment authorizes a direct, nonapportioned income tax on United States citizens. (See also Zuckman v. Dept. of Treasury (2d Cir. 2012) 448 Fed.Appx. 160, 161 ["the federal income tax is constitutional, wages are taxable income, and the Sixteenth Amendment removed the apportionment requirement for direct taxes"].)
Second, plaintiff contends that "[r]emuneration for one's own labor is a conversion of one form of property for another, and thus is excluded from the meaning of 'income from whatever source derived' by decisional law." Plaintiff does not direct us to the "decisional law" supporting this proposition. Rather, she notes that in business taxation, gross receipts are not necessarily income-they are subject to deductions for expenses-so her gross receipts from wages cannot be treated as income.
This argument has long ago been rejected. Plaintiff's wages are "gross income" for purposes of section 61(a) of title 26 of the United States Code (Internal Revenue Code). "[T]he sale of one's labor is not the same creature as the sale of property, and whether the distinction comports with [plaintiff's] philosophical rationalization for [her] argument, it is recognized for Federal income tax purposes. [Citation.] One's gain, ergo h[er] 'income,' from the sale of h[er] labor is the entire amount received therefor without any reduction for what [s]he spends to satisfy h[er] human needs." (Reading v. Commissioner (1978) 70 T.C. 730, 734, affirmed in Reading v. Commissioner (8th Cir. 1980) 614 F.2d 159, 160.)
Third, plaintiff argues that she is "entitled to an inference that [her] income tax status is nonresident alien" such that the limitations on "gross income" in Internal Revenue Code section 872(a) apply, and, under plaintiff's interpretation of those limitations, her Warner Bros. wages are excluded. Plaintiff's arguments in this regard are facially meritless, but we lack jurisdiction to even consider them.
"Before filing suit for a tax refund, a taxpayer must present a claim for refund to [FTB]. [Citation.] The claim 'shall be in writing and shall state the specific grounds upon which the claim is founded.' [Citation.] The purpose of these statutory requirements is to ensure that [FTB] receives sufficient notice of the claim and its basis. [Citation.] [FTB] then has an opportunity to correct any mistakes, thereby conserving judicial resources." (Preston v. State Bd. of Equalization (2001) 25 Cal.4th 197, 206 (Preston).)
"Any lawsuit against [FTB] must be based 'on the grounds set forth in the claim' for refund. [Citation.] It may not include issues 'not raised in the claim.' [Citation.] 'The claim for refund thus frames and restricts the issues for litigation.' [Citation.] Indeed, courts 'are without jurisdiction to consider grounds not set forth in the claim.'" (Preston, supra, 25 Cal.4th at p. 206.) A taxpayer does not have to "expressly raise a contention" to satisfy her exhaustion requirements. (Ibid.) Courts may consider a contention not expressly raised in the refund claim to the extent that it is "intertwined" with those that were. (Ibid.) "Intertwined" contentions are those "clearly implied from contentions expressly raised." (Ibid.)
In her refund claims, plaintiff never raised Internal Revenue Code section 872 nor claimed to be a nonresident alien. To the contrary, she admitted working for Warner Bros., "a private business operating in a union state of the United States of America." (Boldface omitted.) Her attached IRS Form W-2c showed that she and her employer were both in Burbank.
ii. We have no jurisdiction to consider plaintiff's arguments about inadequate notice.
Plaintiff argues summary judgment was improper because FTB failed to present evidence in support of its motion that it ever mailed her (i) a "notice of action" in accordance with Revenue and Taxation Code section 19045, subdivision (a); (ii) a "notice and demand for payment" in accordance with section 19049, subdivision (a); and (iii) the advisement of rights required before a levy in accordance with section 21015.5.
Again," '[t]he claim for refund . . . frames and restricts the issues for litigation.'" (Preston, supra, 25 Cal.4th at p. 206.) Plaintiff raised none of these issues in her refund claims. Nor does she argue she raised them by implication. Accordingly, they were not a proper subject of the underlying action, and we have no jurisdiction to consider them. (Ibid.)
Plaintiff contends we should excuse her failure to raise the notice issues in her refund claims because she "detrimentally relied" on FTB's representations that it had "followed the law in assessment and collection" of plaintiff's 2009 income tax obligations. In a declaration she filed with the trial court, she said she "had no reasonable basis to specifically assert in [her] administrative refund claims that required notices were not mailed, as [she] had no reasonable way at that time of knowing the notices had not been mailed."
Plaintiff did not assert detrimental reliance in her refund claim, and in any event, it does not apply here. Detrimental reliance generally must be reasonable to accord any rights to the one claiming it. (See, e.g., Schafer v. City of Los Angeles (2015) 237 Cal.App.4th 1250, 1261 ["The detrimental reliance [necessary for equitable estoppel] must be reasonable."]; Shurpin v. Elmhirst (1983) 148 Cal.App.3d 94, 101 [causes of action for fraud and deceit require "reasonable and detrimental reliance"].) Plaintiff offers no basis for us to conclude it would be reasonable for her to rely on FTB's statement that it complied with its legal obligations, despite the fact she had not received any of the three required notices in the mail. Anyway, as the trial court noted, plaintiff admitted to getting at least one of the notices in her complaint, alleging "[FTB] issued a Notice of Action dated May 11, 2015, affirming the Notice of Proposed Assessment dated June 10, 2014."
iii. Evidentiary objections
Plaintiff argues that the trial court improperly admitted or otherwise considered evidence from FTB that it mailed her all required notices. Because we lack jurisdiction to consider the notice issues she failed to raise in her refund claims, we need not consider these subsidiary evidentiary issues.
2. Plaintiff Fails to Show the Trial Court Abused Its Discretion in Denying Her Motion for Reconsideration.
a. Reconsideration and standard of review
Plaintiff moved for reconsideration of the trial court's summary judgment order pursuant to Code of Civil Procedure section 1008, which authorizes such motions "based upon new or different facts, circumstances, or law." (Id., subd. (a).) "The party seeking reconsideration must provide not just new evidence or different facts, but a satisfactory explanation for the failure to produce it at an earlier time. [Citation.] If the trial court believes reconsideration is warranted, it can amend, modify or revoke its previous order." (Glade v. Glade (1995) 38 Cal.App.4th 1441, 1457.) We review decisions on motions for reconsideration for abuse of discretion. (Ibid.)
b. Analysis
Plaintiff cannot show error in the trial court's denial of her motion for reconsideration based on the record she provided us.
The appellant bears the burden of producing an adequate record demonstrating trial court error. (Ballard v. Uribe (1986) 41 Cal.3d 564, 574-575.) When reviewing a trial court's exercise of discretion, we must have some record of the basis on which it exercised that discretion. (See, e.g., Wagner v. Wagner (2008) 162 Cal.App.4th 249, 259 ["The absence of a record concerning what actually occurred at the hearing precludes a determination that the court abused its discretion."]; Nelson v. Anderson (1999) 72 Cal.App.4th 111, 136 [trial court's exercise of discretion will not be disturbed on appeal when appellant fails to provide record explaining trial court reasoning]; see also Southern California Gas Co. v. Flannery (2016) 5 Cal.App.5th 476, 483 ["A reporter's transcript may not be necessary if the appeal involves legal issues requiring de novo review. [Citation.] In many cases involving the substantial evidence or abuse of discretion standard of review, however, a reporter's transcript or an agreed or settled statement of the proceedings will be indispens[a]ble."].)
Here, plaintiff failed to provide a reporter's transcript or minute order showing the reasons the trial court denied her motion. Without this information, we can only speculate about why the trial court acted as it did. Such speculation cannot support reversal. Trial court orders are presumed to be correct. "In the absence of a contrary showing in the record, all presumptions in favor of the trial court's action will be made by the appellate court. '[I]f any matters could have been presented to the court below which would have authorized the order complained of, it will be presumed that such matters were presented.'" (Bennett v. McCall (1993) 19 Cal.App.4th 122, 127.)
DISPOSITION
The judgment of the trial court is affirmed. FTB is to recover its costs on appeal.
WE CONCUR: WILEY, J., VIRAMONTES, J.