Los Angeles County v. Continental Corp.

• Decision Date: 24 September 1952
• Citation: 248 P.2d 157,113 Cal.App.2d 207
• Court: California Court of Appeals Court of Appeals
• Parties: LOS ANGELES COUNTY v. CONTINENTAL CORP. LOS ANGELES COUNTY v. CONTINENTAL DEVELOPMENT CORP. Civ. 19058, 19060, 19059.

Page 157

248 P.2d 157

113 Cal.App.2d 207

LOS ANGELES COUNTY v. CONTINENTAL CORP.

LOS ANGELES COUNTY v. CONTINENTAL DEVELOPMENT CORP.

Civ. 19058, 19060, 19059.

District Court of Appeal, Second District, Division 2, California.

Sept. 24, 1952.

Rehearing Denied Oct. 16, 1952.

Hearing Denied Nov. 20, 1952.

George H. Emerson, Los Angeles, for appellant.

Harold W. Kennedy, County Counsel, Gordon Boller, Deputy County Counsel, Los Angeles, for respondent.

McCOMB, Justice.

From a judgment in favor of plaintiff and against defendant in the above entitled actions which were tried before the court without a jury, the three actions having been consolidated for the purpose of trial, defendants appeal.

The Honorable Julius V. Patrosso, the trial judge, prepared and filed an exhaustive and splendid opinion which fully sets forth the facts, appellant's contentions and the law applicable thereto. Since we have reached the same conclusions as the learned trial judge, no useful purpose would be served by our rephrasing the opinion prepared by Judge Patrosso. Therefore we adopt the same with minor modifications as the opinion of this court. It reads as follows:

'By these actions, which have been consolidated for the purpose of hearing, plaintiff seeks to recover taxes levied and assessed, purportedly pursuant to Section 107 of the Revenue and Taxation Code, against the rights vested in the defendant under an agreement hereinafter to be described in greater detail, executed by and between the Los Angeles County Flood Control District and the defendant, whereunder the latter was granted the right to drill for and produce oil, gas, and other hydrocarbon substances upon and from the land and premises therein described belonging to the district. Pursuant to stipulation of counsel, the cases have been submitted for decision upon the pleadings, supplemented by an agreed statement of facts and the only questions presented are the validity of the three defenses pleaded by the defendant, namely, (1) the statute of limitations, (2) res judicata, and (3) that the rights under the agreement in question are not of such nature or character as to be subject to taxation.

'The Statute of Limitations

'The first question which presents itself is the plea of the statute of limitations which defendant has interposed to plaintiff's various causes of action. In this connection it is to be noted at the outset that all of the complaints herein, as well as the various amendments thereto, were filed within three years of the date upon which the taxes sought to be recovered became delinquent, with the following exceptions:

'The second amended complaint in action No. 463871 whereby recovery was, for the first time, sought for taxes levied and assessed for the years 1943 to 1947, inclusive, was filed more than three years after the taxes for the fiscal years 1943 and 1944 became delinquent. In action No. 484748 the amended complaint seeking recovery for taxes levied and assessed for the fiscal years 1943 and 1944 was filed more than three years after such taxes became delinquent.

'Counsel are not only in disagreement as to the applicable period of limitation but also as to when a cause of action for the recovery of taxes accrues; plaintiff asserting that the applicable period of limitation is the 4-year period prescribed by subdivision (2) of Section 337 relating to actions upon a book account, in which instance the time begins to run from the date of the last item or entry in the account; while counsel for the defendant contends (1) that the applicable statute is the 3-year period prescribed by subdivision (1) of Section 338, and (2) that the action thereunder accrues not later than July 1 of the year for which the taxes sought to be recovered were levied. Additionally, however, counsel for plaintiff asserts that, if subdivision (2) of Section 338 is here applicable, the period of limitation does not commence to run until the date when the taxes sought to be recovered become delinquent.

'While counsel for plaintiff frankly acknowledges that it has uniformly been held in this state 'that a personal action for the recovery of taxes is based upon a liability created by statute within the meaning of Section 338, C.C.P.' (16 Cal.Jur. p. 475, section 77 and cases there cited), he nonetheless urges that in none of the cases so declaring did the Court have occasion to consider the precise question here presented.

'The term 'book account' has been defined, generally, as 'a detailed statement, kept in a book, in the nature of debit and credit, arising out of contract or some fiduciary relation.' (Wright v. Loaiza, 177 Cal. 605, 606 .) While the books containing the assessment roll of the County of Los Angeles may be said to constitute a detailed statement in the nature of the debit and credit, an assessment of taxes cannot be said to arise either out of contract or a fiduciary relation. The obligation to pay taxes is clearly a liability created by statute, for in the absence of a statute authorizing the levy of a tax, no liability therefor exists. Thus in State v. Poulterer, 16 Cal. 514, 529, it was held that, in the absence of an express provision imposing personal liability for the tax or authorizing the filing of suit to recover the same, no action may be maintained therefor. Nor is the nature of the liability altered by the mere fact that evidence of the assessment of the tax is to be found in the assessment roll which in turn is included within a book or books. If counsel's position is correct, then the period of limitation prescribed for enforcing a liability created by statute might, in every instance, be extended for an additional period of one year merely by the mechanical act of entering the same in a book. The Court does not believe that the Legislature contemplated such a result.

'A similar question, in principle, was presented in the case of People v. [California] Safe Deposit [& Trust] Co., 41 Cal.App. 727 . There the intervenor Smith sought to recover accrued installments upon a written contract, and in order to avoid the bar of the statute of limitations undertook to predicate his claim upon a book account rather than upon the written agreement. In answer to this contention the Court said ([41 Cal.App. at page] 732 ):

"Appellant further contends that his cause of action is based upon a book account, in which the last entry was made on July, 7, 1917, and, therefore, his cause of action is not barred. The alleged book account was a memorandum kept by appellant, in which he charged the amounts accruing under the contract and credited the several payments made, including that collected by him as the result of the judgment in the former suit above referred to. Appellant's alleged cause of action is based upon his contract and not upon this account. The writing is a mere memorandum of debts accruing from an entirely independent source. In Mercantile Trust Co. v. Doe, 26 Cal.App. 246, 253 , a number of definitions of a book account, as applied to the statute of limitations, are given among which is the following: 'In 1 Ruling Case Law, p. 207, it is said: 'The expression 'outstanding and open account' has a well-defined and well-understood meaning. In legal and commercial transactions it is an unsettled debt arising from items of work and labor, goods sold and delivered, and other open transactions, not reduced to writing, and subject to further settlement and adjustment. It is usually disclosed by the account books of the owner of the demand, and does not include express contracts or obligations which have been reduced to writing, such as bonds, bills of exchange, or promissory notes.'''

'So here, plaintiff's cause of action is based upon the liability, created by statute, arising upon the assessment of the tax, and not upon the entry of the assessment thereof on the assessment roll, it being held that a cause of action to recover taxes accrues upon the assessment thereof, or upon the date payment becomes delinquent, and the running of the statute of limitations with respect to an action to recover the same is not tolled until the entry of the tax upon the assessment roll. (County of Los Angeles v. L. A. Junk Co., 8 Cal.App.2d 136 .)

'Not only for the reasons stated, but in the absence of any authority in California or elsewhere supporting the contention of counsel for plaintiff, and in view of the previous decisions of our courts declaring that actions to enforce the payment of taxes are controlled by the 3-year period prescribed by subdivision (1) of Section 338, the Court concludes that this section is applicable here.

'Thus we are brought to a consideration of the question as to when a cause of action to recover taxes accrues. As a general rule, subject to exceptions not here deemed applicable, the statute of limitations does not commence to run until a cause of action accrues, which is ordinarily when the liability matures, so that suit may be based thereon. (16 Cal.Jur. p. 488, sec. 91.) In order to determine when suit may be commenced to enforce payment of taxes, we turn to the provisions of the Revenue and Taxation Code.

'Preliminarily, it is to be noted that, prior to 1943, taxes assessed against possessory interests in real property were not secured by a lien and were entered upon the unsecured roll, but by an amendment effective that year it was provided:

"Leasehold estates for the production of gas, petroleum and other hydrocarbon substances from beneath the surface of the earth, and other rights relating to such substances which constitute incorporeal hereditaments or profits a prendre, are sufficient security for the payment of taxes levied thereon. Such estates and rights shall not be classified as possessory interests, but shall be placed on the secured roll.' (Revenue and Taxation Code, 107.)

'Consequently, from and after the effective date of said amendment taxes on interests of the character therein...