California Cigarette Concessions, Inc. v. City of Los Angeles

Decision Date30 March 1960
Citation53 Cal.2d 865,3 Cal.Rptr. 675,350 P.2d 715
CourtCalifornia Supreme Court
Parties, 350 P.2d 715 CALIFORNIA CIGARETTE CONCESSIONS, INC. (a Corporation), Plaintiff and Respondent, v. CITY OF LOS ANGELES, Defendant and Appellant. L. A. 25257.

Roger Arnebergh, City Atty., Bourke Jones and James A. Doherty, Asst. City Attys., Los Angeles, for appellant.

Irmas & Rutter, William A. Rutter and Sydney M. Irmas, Jr., Beverly Hills, for respondent.

SPENCE, Justice.

Defendant appeals from a judgment entered in plaintiff's favor in an action to recover municipal business license taxes allegedly overpaid for the years 1951-1954, inclusive.

There is practically no dispute concerning the facts. Plaintiff is engaged in the business of selling cigarettes to the public by means of automatic vending machines placed in various retail establishments, such as restaurants, cafes and bars within the county of Los Angeles. Agreements for placement of the machines are ordinarily negotiated with the various retail owners at their places of business by plaintiff's sales manager or his assistant, whose offices are in the city of Los Angeles. Plaintiff services these machines at regular intervals through its 'servicemen,' who pick up the cigarettes from plaintiff's warehouse in the city of Los Angeles and place them in the machines, collect the money and take it to the Los Angeles office, and from there it is deposited in a los Angeles bank. The sales manager's staff and the 'servicemen' are controlled by the general manager, whose office is in Los Angeles. Many of the machines are located outside of the city limits of Los Angeles, and many are located within other cities in southern California. Many of these other cities impose certain types of taxes upon the vending machines so located, and plaintiff pays such taxes.

On February 1, 1954, plaintiff paid defendant, on demand, the sum of $187 as its business license tax for 1954, measured by receipts from those vending machines located outside the city limits of Los Angeles. On April 19, 1954, pursuant to a notice of deficiency served on plaintiff by defendant, plaintiff paid defendant the sum of $756.87, plus a penalty of $19.80, as business license taxes for the years 1951-1953, measured in the same manner. In addition to these sums, plaintiff has paid defendant taxes for the four years 1951-1954, measured by the gross receipts from machines located within the city limits of Los Angeles, which amounts are not in dispute here. Plaintiff had not applied for a hearing before the Board of Review (Los Angeles Municipal Code, § 21.16) with respect to any of the challenged assessments.

On February 25, 1955, plaintiff filed a claim for refund of the total sum of $944.87, representing the amounts paid in February and April, 1954, as taxes allegedly improperly imposed by the city. The city took no action on the claim until March 4, 1957, when defendant notified plaintiff that it had rejected it. Plaintiff commenced the present action on March 15, 1957. A trial by the court resulted in judgment for plaintiff.

The merits of the dispute concern defendant's power to measure plaintiff's business license taxes by the gross receipts from sales made from machines locates beyond the city limits. The city's position is that, although measuring a license tax by selling activities outside the city is an unreasonable discrimination and a denial of equal protection of the law (City of Los Angeles v. Belridge Oil Co., 42 Cal.2d 823, 832, 271 P.2d 5; Id., 48 Cal.2d 320, 324, 309 P.2d 417), defendant here performed sufficient selling activities within the city in connection with the receipts in question to justify their inclusion in the measure of the tax.

In addition to its argument on the merits, defendant contends that on the merits, from recovery by the statute of limitations and by plaintiff's failure to exhaust administrative remedies. Plaintiff, however, contends that defendant is estopped from interposing the statute of limitations as a defense. The trial court agreed with this latter contention as well as with plaintiff's other contentions. It found, on the basis of documentary evidence discussed below, that 'the representations made by the defendant to the plaintiff prior to the date in which the Statute of Limitations would have run were relied upon by the plaintiff to their (sic) detriment and that the defendant is estopped to plead the Statute of Limitations.'

The parties have agreed that the applicable period of limitations for this action is two years from the date of payment of the tax. Code Civ.Proc. § 339, subd. 1. However, the running of the statute is tolled during the pendency of such a claim against a municipality when the presentation of a claim is a prerequisite to court proceedings. Code Civ.Proc. § 356; Dillon v. Board of Pension Com'rs, 18 Cal.2d 427, 430-431, 116 P.2d 37, 136 A.L.R. 800. A claim not acted upon within 90 days is deemed rejected. Los Angeles City Charter, § 363. Thus the parties concede that if defendant is not estopped from relying upon the statute of limitations, the total period covered by the statute was two years and 90 days from the alleged overpayments. Accordingly, the limitation period expired on the $187 payment on May 2, 1956, and on the $776.67 payment on July 18, 1956.

Since plaintiff did not commence the present action until March 15, 1957, the action is barred unless defendant was estopped to rely upon the statute of limitations. When, as in the instant case, the facts are undisputed, the existence of an estoppel is a question of law. McNeil v Board of Retirement, 51 Cal.2d 278, 332 P.2d 281; United States Fidelity & Guaranty Co. v. State Bd. of Equalization, 47 Cal.2d 384, 303 P.2d 1034.

The facts relief upon to create an estoppel with respect to the $187 payment are as follows: Plaintiff filed its claim with defendant stating therein that it was 'based upon' the anticipated decision in the then pending case of City of Los Angeles v. Belridge Oil Co. On March 30, 1956, over thirteen months after the filing of its claim, plaintiff wrote to a deputy city attorney: 'Will you please advise what is holding up payment of this claim?' On April 4, 1956, a reply was written from the office of the city clerk, the ex-officio tax collector, to whom plaintiff's inquiry had been referred. This letter stated: 'Your claim is based upon points included in the Belridge Oil Company suit. Since final outcome of this case is still undecided, no action can be taken by this office. Upon receipt of a final decision, we will take further action in this matter. If you have any other inquiries, let us know.' There was also a letter written in reply by plaintiff's attorney to the city clerk on April 26, 1956, six days before the limitations period would have run on the $187 payment. In this letter, plaintiff's attorney, after noting that the city clerk's letter had ben forwarded to him by plaintiff, stated: 'I assume from your letter, that upon the final outcome of the Belridge Oil Company case, you will make a decision as to our claim. I am further assuming that no claim of defense will be made by you for lack of filing suit until that time.'

We are of the opinion that as a matter of law, the stated facts are insufficient to create an estoppel on the defendant city to rely on the statute of limitations. There are occasions for departure from the general rule that a city may not be estopped by the conduct of its officers or employees. Farrell v. County of Placer, 23 Cal.2d 624, 145 P.2d 570, 153 A.L.R. 323. But such departure is justified only when the facts clearly establish that a grave injustice would be done if an equitable estoppel were not applied. County of San Diego v. California Water etc. Co., 30 Cal.2d 817, 826, 186 P.2d 124, 175 A.L.R. 747. We find no justification for such departure here.

Certain conditions are necessary as the basis for an estoppel: the party to be estopped must be apprised of the facts; the other party must be ignorant of the true state of the facts; the party to be estopped must have intended that its conduct be acted upon, or so act that the other party had a right to believe that it was so intended; and the other party must rely on the conduct to its prejudice. Safway Steel Products, Inc. v. Lefever, 117 Cal.App.2d 489, 491, 256 P.2d 32.

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