Batt v. City and County of San Francisco, A114633.

• Court: California Court of Appeals
• Citation: 65 Cal.Rptr.3d 716,155 Cal.App.4th 65
• Decision Date: 12 September 2007
• Docket Number: No. A114633.,A114633.
• Parties: Angel BATT, Plaintiff and Appellant, v. CITY AND COUNTY OF SAN FRANCISCO, Defendant and Respondent.

65 Cal.Rptr.3d 716 155 Cal.App.4th 65 Angel BATT, Plaintiff and Appellant,
v.
CITY AND COUNTY OF SAN FRANCISCO, Defendant and Respondent. No. A114633. Court of Appeal, First District, Division 2. September 12, 2007.

[65 Cal.Rptr.3d 718]

Paul G. Kerkorian, Fresno; Berding & Weil, Daniel L. Rottinghaus and Steven Weinmann, Alamo, for Plaintiff and Appellant.

Dennis J. Herrera, City Attorney; Julie Van Nostern, Chief Tax Attorney; Peter J. Keith, Deputy City Attorney, for Defendant and Respondent.

RICHMAN, J.

Plaintiff Angel Batt appeals from the order sustaining a general demurrer to those portions of her complaint that purported to state class action claims for refund of a San Francisco tax plaintiff alleged was erroneously collected from a class she proposed to represent. The trial court sustained the demurrer on the ground that San Francisco law does not allow class action suits to recover taxes. We hold that this conclusion was correct, and we affirm.

BACKGROUND

On January 20, 2006, plaintiff filed her complaint for herself "individually and on behalf of all persons similarly situated, and as a taxpayer representative." She alleged as follows:

The City and County of San Francisco (the City) has enacted a tax on transient occupancy of hotel rooms (the Hotel Tax) of 14 percent; it is assessed on the rental of a "guest room," which is defined as "A room occupied, or intended, arranged, or designed for occupation by one or more occupants." The Hotel Tax is collected by the hotel and remitted to the City.¹

In December 2003, the City's treasurer and tax collector promulgated a number of "Hotel Tax Guidelines" (the Guidelines) advising hotel operators that the Hotel Tax applied to a number of charges, one of which was "Charges for parking (including valet services) for hotel guests" including "(i) charges to hotel guests for parking located on the hotel premises regardless how charged, and (ii) charges to hotel guests for parking located off the hotel premises where such charge is added to the room bill and paid to the hotel operator."

²

Plaintiff alleged that "imposition of the Hotel Tax on Parking Charges is unlawful and in violation of the [Hotel Tax] Ordinance. The Ordinance only authorizes the imposition of the Hotel Tax `on the rent for every occupancy of a guest room in a hotel,' whereas the Guidelines purport to extend the Hotel Tax to the Parking

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Charges. Parking Charges, however, are not `rent for ... occupancy of a guest room', and the imposition of the Hotel Tax on such charges contravenes the Ordinance and is unlawful."

Plaintiff further alleged that she is a resident of San Mateo County, and that on August 6-7, 2005, she stayed at the Ritz-Carlton Hotel in San Francisco, where she was charged $55 for parking her automobile, $7.70 of which was the 14 percent assessment pursuant to the Hotel Tax. Plaintiff alleged that the City "impose[s] and collect[s] in the same manner as described above this same unlawful tax payment on Parking Charges at each and every hotel in the City ... that provides parking for hotel guests."

Plaintiff then alleged that she "brings this action on her own behalf and on behalf of all persons similarly situated as either or both a class representative under Code of Civil Procedure section 382, or as a taxpayer representative under Code of Civil Procedure section 526a," and claimed to represent a class "composed of all persons who paid a `Hotel Tax' on their hotel parking charge[s] ... since January 20, 2002." This was followed by the standard class action allegations: that "there is a well-defined community of interest in the questions of law and fact" typified by her claim, that the class could be identified "from the records of the hoteliers," and that plaintiff would be "a representative party who will fully and adequately protect the interests of the Class members."

Finally, plaintiff alleged that on October 15, 2005 she filed separate refund claims with the City, for herself and for "all others similarly situated," pursuant to the Government Claims Act (Gov.Code, § 810 et seq. (Claims Act)); that those claims were deemed rejected by operation of law 45 days later (id., § 912.4, subd. (c)); that on January 11, 2006 (i.e., nine days before filing her complaint), plaintiff unsuccessfully demanded that the City "cease imposing the Hotel Tax upon Parking Charges"; and that she "expects to regularly return to the City ... in the future and to stay at hotels in San Francisco that impose Parking Charges," and thus "will be required to pay the Hotel Tax on such Parking Charges."

Based on the foregoing allegations, plaintiff set forth six causes of action, for: (1) declaratory relief that assessment of the Hotel Tax on parking charges pursuant to the Guidelines was illegal; (2) injunctive relief prohibiting the City from collecting "the Hotel Tax based upon a percentage of Parking Charges charged by the hotels"; (3) imposition of a constructive trust for monies improperly charged and "overpaid"; (4) an accounting for such sums; (5) refund of sums pursuant to the relevant provision of the City's municipal code (S.F. Bus. & Tax Regs.Code, § 6.15-1); and (6) a common count for money had and received.

The City responded with a general demurrer based upon several grounds, one of which is particularly germane to the issue before us—that "with regard to unnamed putative class member plaintiffs, class action claims for a Hotel Tax refund are forbidden by law." In its supporting points and authorities, the City maintained that a class action claim for refund of municipal taxes is not permitted unless specifically authorized by local law, that the City had adopted an ordinance specifically disallowing the class action remedy, and thus the sole available remedy was a refund action by each person allegedly overcharged. However, the City conceded that plaintiff had a valid and judicially-ripe claim for a personal refund.

After conducting a brief hearing, the trial court sustained the City's demurrer without leave to amend "as to all causes of

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action brought by Unnamed Plaintiffs." The City was ordered to answer "the causes of action brought by Plaintiff Angel Batt."

Plaintiff filed a timely notice of appeal.³

DISCUSSION The Standard Of Review

We set forth the applicable rules of review in Flying Dutchman Park, Inc. v. City and County of San Francisco (2001) 93 Cal.App.4th 1129, 1134-1135, 113 Cal.Rptr.2d 690 (Flying Dutchman): "`A demurrer tests the legal sufficiency of the complaint....' [Citations.] On appeal from a dismissal after an order sustaining a demurrer, we review the order de novo, exercising our independent judgment about whether the complaint states a cause of action as a matter of law. [Citations.] When the trial court sustains a demurrer without leave to amend, we must also consider whether the complaint might state a cause of action if a defect could reasonably be cured by amendment. If the defect can be cured, then the judgment of dismissal must be reversed to allow the plaintiff an opportunity to do so. The plaintiff bears the burden of demonstrating a reasonable possibility to cure any defect by amendment. [Citations.]"

We conclude, as did the trial court, that the complaint does not state a claim, and cannot be amended to do so.

The General Rules And General Policy Regarding Taxpayer's Claims

As we indicated in Flying Dutchman, supra, 93 Cal.App.4th 1129, 1135-1136, 113 Cal.Rptr.2d 690, money is the lifeblood of modern government. Money comes primarily from taxes, and, as the importance of a predictable income stream from taxes has grown, governments at all levels have established procedures to minimize disruptions, primary among which is the condition precedent that a tax may be challenged only after it has been paid. Stated otherwise, preemptive, precollection, or prepayment lawsuits are, with a few exceptions not present here,⁴ not permitted. This principle is generally known as the "pay first, litigate later" rule, and it applies at all levels of government—the federal (26 USC §§ 7421, subd. (a), 7422, subd. (a); 28 U.S.C. §§ 1346, subd. (a)(1), 2201, subd. (a); Flora v. United States (1958) 357 U.S. 63, 67-75, 78 S.Ct. 1079, 2 L.Ed.2d 1165; Cheatham et al. v. United States (1875) 92 U.S. 85, 88-89, 23 L.Ed. 561); the state (Cal. Const., art. XIII, § 32; Rev. & Tax.Code, §§ 6931 [sales and use taxes], 19381, 19382 [franchise and income taxes]; State Bd. of Equalization v. Superior Court (1985) 39 Cal.3d 633, 638,

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217 Cal.Rptr. 238, 703 P.2d 1131); and the local (Rev. & Tax.Code, §§ 4807, 5140 [property taxes]; S.F. Bus. & Tax Regs. Code, § 6.15-4, subd. (a) [persons challenging tax "must first pay the amount of the disputed tax ... prior to seeking judicial relief']; Flying Dutchman, supra, at p. 1136-1138, 113 Cal.Rptr .2d 690; Writers Guild of America, West, Inc. v. City of Los Angeles (2000) 77 Cal.App.4th 475, 483, 91 Cal.Rptr.2d 603).

Certainly, taxation amounts to a taking of property that cannot be accomplished without due process. But due process "`does not guarantee the right to judicial review of tax liability before payment' " (Aronoff v. Franchise Tax Board (1963) 60 Cal.2d 177, 179, 32 Cal.Rptr. 1, 383 P.2d 409, quoting Modern Barber Col., Inc. v. Cal. Emp. Stab. Com. (1948) 31 Cal.2d 720, 725-726, 192 P.2d 916); rather, it requires only that government provide a procedure which, at some point, provides the taxpayer a meaningful opportunity to contest the legality of the exaction. (E.g., McKesson Corp. v. Florida Alcohol & Tobacco Div. (1990) 496 U.S. 18, 31, 36-37, 39,110 S.Ct. 2238,110 L.Ed.2d 17; Dupuy v. Superior Court (1975) 15 Cal.3d 410, 416,124 Cal.Rptr. 900, 541 P.2d 540.)

The rule against challenging the collection of a tax—usually in the equitable forms of injunctive or declaratory relief— is predicated on the existence of a procedure that provides the...