Aronoff v. Franchise Tax Bd.

• Decision Date: 18 July 1963
• Court: California Supreme Court
• Parties: , 383 P.2d 409 Stuart ARONOFF et al., Petitioners, v. FRANCHISE TAX BOARD et al., Respondents. Sac. 7440.

Page 1

32 Cal.Rptr. 1

60 Cal.2d 177, 383 P.2d 409

Stuart ARONOFF et al., Petitioners, v. FRANCHISE TAX BOARD et al., Respondents.

Sac. 7440.

Supreme Court of California, In Bank.

July 18, 1963.

Rehearing Denied Aug. 14, 1963.

LeSage & Bowman and Thomas W. LeSage, Pasadena, for petitioners.

Stanley Mosk, Atty. Gen., Dan Kaufmann, Asst. Atty. Gen., and Ernest P. Goodman, Deputy Atty. Gen., for respondents.

McCOMB, Justice.

Petitioners seek a writ of prohibition restraining respondents from taking any further steps to collect taxes assessed against them.

Facts: The taxes in question relate to assessments by the Franchise Tax Board of additional personal income taxes based on the disallowance of deductions claimed by petitioners on their California personal income tax returns. The disallowance of the deductions was based on former section 17359 of the Revenue and Taxation Code (now numbered section 17297), prohibiting the allowance of deductions to a taxpayer of any of his gross income from certain designated illegal activities.

Petitioners appealed the assessments of the Franchise Tax Board to the State Board of Equalization. The State Board of Equalization on September 20, 1962, rendered a decision upholding the validity of the assessments. Petitioners have filed petitions for a rehearing with the State Board of Equalization with respect to such decision, but the petitions have not yet been acted upon by the board.

Respondents' contention that a writ of prohibition is not available to petitioners is correct for these reasons:

First: The issuance of a writ of prohibition to restrain the collection of personal income taxes under the facts in the instant case is barred by statutory and constitutional provisions in this state.

Section 19081 of the Revenue and Taxation Code, so far as here relevant, provides: 'No injunction or writ of mandate or other legal or equitable process shall issue in any suit, action, or proceeding in any court against this State or against any officer of this State to prevent or enjoin the assessment or collection of any tax under this part * * *.'

Article XIII, section 15, of the California Constitution provides: '* * * No injunction or writ of mandate or other legal or equitable process shall ever issue in any suit, action or proceeding in any court against this State, or any officer thereof, to prevent or enjoin the collection of any tax levied under the provisions of this article; but after payment thereof action may be maintained to recover, with interest, in such manner as may be provided by law, any tax claimed to have been illegally collected.'

This court in Modern Barber Colleges v. Cal. Employment Stabilization Comm., 31 Cal.2d 720, 192 P.2d 916, had occasion to consider section 45.11(d) of the Unemployment Insurance Act, which section is similar to the statutory provision above quoted. The court held the constitutional bar contained in article XIII, section 15, to be inapplicable, but nevertheless denied a writ of mandate and upheld the validity of the statutory provision there involved against claims that the taxpayer was being deprived of constitutional rights, stating at page 725(4a) of 31 Cal.2d, page 919 of 192 P.2d: 'Implicit in the contention that the statute is unconstitutional is the assumption that the petitioner has some constitutional right which can be protected only by mandamus. The petitioner relies strongly on Laisne v. California State Board of Potometry, 19 Cal.2d 831, 123 P.2d 457. That case held that under the due process clauses of the federal and California Constitutions, U.S. Const. Amend. 14, Const.Cal. art. 1, § 13, and under the doctrine of separation of powers in our Constitution, the petitioner was entitled to a type of review of administrative activity which, under our practice, mandate alone could provide. But in the present case it is clear that depriving the petitioner of the remedy of mandate would not deprive him of due process of law, and no other constitutional right under which he might claim this particular form of relief has been suggested. The due process clause does not guarantee the right to judicial review of tax liability before payment. The power of a state to provide the remedy of suit to recover alleged overpayments as the exclusive means of judicial review of tax proceedings has long been unquestioned. (Citations.)' (Italics added.) (See also Eckert Brewing Co. v. Unemployment Reserves Comm., 47 Cal.App.2d 844, 846(1), 119 P.2d 227; Estate of Schneider, 62 Cal.App.2d 463, 465(3), 145 P.2d 90; Casey v. Bonelli, 93 Cal.App.2d 253, 254(1), 208 P.2d 723.)

The taxes involved in the present proceeding are income taxes levied under article XIII, section 11, of the Constitution. Hence both the statutory bar contained in section 19081 of the Revenue and Taxation Code and the constitutional bar contained in article XIII, section 15, operate to prohibit issuance of the writ prayed for.

Petitioners contend, relying on authorities in other jurisdictions, that there is an exception to the above rule applicable to the facts in the present case, because of the great financial hardship involved. However, this argument is devoid of merit, because in Modern Barber Colleges v. Cal. Employment Stabilization Comm., supra, we held contrary to their argument, saying at page 732, of 31 Cal.2d, page 923 of 192 P.2d: 'The petitioner's allegation that payment of the claims asserted against it will render it insolvent is one which could be made against any tax, and can have no relevancy in a situation where this court, by express legislative provision, is prohibited from interfering in advance of payment of the tax. The argument that compliance with the statute may cause hardship in some instances is one which can be addressed only to the Legislature.' ¹

Second:...