City of Dinuba v. County of Tulare

• Decision Date: 19 July 2007
• Docket Number: No. S143326.,S143326.
• Citation: 161 P.3d 1168,41 Cal.4th 859,62 Cal.Rptr.3d 614
• Court: California Supreme Court
• Parties: CITY OF DINUBA et al. Plaintiffs and Appellants, v. COUNTY OF TULARE et al., Defendants and Respondents.

62 Cal.Rptr.3d 614

41 Cal.4th 859

161 P.3d 1168

CITY OF DINUBA et al. Plaintiffs and Appellants, v. COUNTY OF TULARE et al., Defendants and Respondents.

No. S143326.

Supreme Court of California.

July 19, 2007.

Meyers, Nave, Riback, Silver & Wilson, Steven R. Meyers, Andrea J. Saltzman, Joseph M. Quinn, San Francisco; Tuttle & McCloskey and Daniel T. McCloskey, for Plaintiffs and Appellants.

McDonough Holland & Allen, T. Brent Hawkins and Daniel M. Wolk, Sacramento, for California Redevelopment Association as Amicus Curiae on behalf of Plaintiffs and Appellants.

Jarvis, Fay & Doporto and Benjamin P. Fay, Oakland, for League of California Cities as Amicus Curiae on behalf of Plaintiffs and Appellants.

Brown, Winfield & Canzoneri, Thomas F. Winfield III and Michael H. Wallenstein, Los Angeles, for Defendants and Respondents.

MORENO, J.

Counties are statutorily required to collect property taxes on behalf of local taxing entities and then allocate and distribute the revenue to these entities pursuant to a complex statutory scheme. (Rev. & Tax.Code, § 95 et seq.; Health & Saf. Code, § 33000 et seq.) The County of Tulare (County) improperly computed the portion of tax revenue to which the City of Dinuba Redevelopment Agency (Agency) was statutorily entitled and Agency now seeks to recover the misallocated revenue.

We granted review to consider whether County is immune from suit under Government Code section 860.2.¹ We conclude that, because Agency does not seek money damages for an "injury" as defined by the Tort Claims Act (Act),² section 810 et seq., section 860.2 does not bar Agency's action. We further conclude that because Agency is seeking to enforce a mandatory duty imposed by statute, the remedy of mandamus is available. (Code Civ. Proa, § 1085.) Accordingly, we affirm the judgment of the Court of Appeal.

I. Background

In 2002, Agency retained a private consultant to audit County's property tax assessment and allocation procedures.³ The audit discovered County had failed to assign the proper tax rate code to certain parcels within the redevelopment project, which resulted in Agency not receiving tax increment revenue to which it was entitled for 2002 and the previous four years (1998-1999 tax year through 2001-2002 tax year). Those funds were instead divided up among other entities in the area. When Agency brought these errors to County's attention, County made the appropriate corrections to the current assessment roll. However, County refused to correct the miscoding retroactively and pay previously misallocated tax increment revenue that had been distributed to other entities.

In November 2002, Agency and the City of Dinuba (City) (collectively, plaintiffs) filed a formal tort claim with County for payment of the full amount of the tax increment funds Agency had been entitled to for the previous four years. When County did not act on the claim, plaintiffs sued County, Tulare County Board of Supervisors, Tulare County Assessor Gregory Hardcastle, and Tulare County Auditor-Controller Jimmy Allen (collectively, defendants). The petition and complaint, as amended, sought a writ of mandate compelling defendants to (1) calculate and distribute the unpaid and underpaid tax increment funds for fiscal years 1997-1998 through 2003-2004; (2) correct the tax rolls for all prior fiscal years in which defendants miscoded and/or failed to properly code parcels; and (3) pay plaintiffs their respective shares of tax increment unlawfully withheld. Plaintiffs also requested a declaration and determination that defendants were required to (1) correct all previous fiscal year tax rolls in which defendants either failed to code or miscoded certain parcels and deprived plaintiffs of their respective share of tax increment revenue; and (2) calculate and pay to plaintiffs their respective share of tax increment funds as corrected.

Defendants demurred to the petition and complaint on the grounds that: (1) the disputed tax revenue had already been distributed to other taxing agencies and defendants could not be required to either recover the funds or pay plaintiffs out of County's general fund; and (2) defendants were immune from liability under section 860.2, which states: "Neither a public entity nor a public employee is liable for an injury caused by: [¶] ... [¶] (b) An act or omission in the interpretation or application of any law relating to a tax."

In their opposition, plaintiffs argued that if the trial court were to grant the demurrer, "Petitioners should be granted leave to amend to put forth further causes of action supported by the allegations for constructive trust, breach of contract, and other non-tort causes of action." At the hearing on defendants' motion, plaintiffs' counsel discussed amending the complaint to add claims for "breach of contract or the imposition of some type of equitable remedy, the constructive trust type theory."

The trial court sustained defendants' demurrer on both grounds. The court ruled that plaintiffs had "not stated a statutory basis to impose liability upon these public entities and their employees, and/or stated a case on point to overcome the immunity afforded the public entities and their employees under Government Code section 860.2." However, the court granted leave to amend, noting that, because plaintiffs were not required to file a tort claim under section 905, subdivision (i), the "new theories for recovery" were not barred.

Rather than appeal the trial court's ruling, plaintiffs filed their second amended complaint. The second amended complaint dropped the claim for a writ of mandate and instead asserted claims for imposition of a constructive trust and for money had and received against defendants and the nine taxing entities that had been mistakenly allocated a portion of the tax increment due to Agency.⁴

Defendants again demurred. The court sustained the demurrer without leave to amend. The court stated: "No matter how Plaintiffs attempt to plead this case, the facts are that the public entity and its officers have immunity under Government Code section 860.2 for any act or omission in the interpretation or application of any law relating to a tax. Plaintiffs have plead [sic] that the Defendants miscoded the tax rate areas and collected taxes and failed to give them the proper credit for their fair share of the tax increment revenue. Plaintiffs have attempted to allege causes of action for money had and received and for a constructive trust, but these fail as a matter of law.... [C]learly[,] the facts are that the Defendants' acts were either an interpretation or application of a law relating to a tax, and thus the Defendants would have immunity for Plaintiffs injury. Therefore, no further leave to amend is granted." Judgment was entered dismissing defendants from the action with prejudice.⁵

Plaintiffs appealed from the judgment of the trial court, contending that their claims for relief are not encompassed by the Act (§ 810 et seq.). In reversing the trial court, the Court of Appeal concluded that plaintiffs' claims do not arise from defendants' breach of their statutory duty, but rather, are "based on breach of a contractual duty. Accordingly, [defendants are] not immune under Government Code section 820.6."⁶ We granted defendants' petition for review.

II. Discussion

A. Standard of Review

On appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend, the standard of review is well settled. We give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126, 119 Cal. Rptr.2d 709, 45 P.3d 1171.) Further, we treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions or conclusions of law. (Ibid.; Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967, 9 Cal.Rptr.2d 92, 831 P.2d 317 (Aubry).) When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. (Zelig, supra, 27 Cal.4th at p. 1126, 119 Cal.Rptr.2d 709, 45 P.3d 1171.) And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse. (Ibid.)

B. Tax Increment Financing and County's Obligations

As defendants acknowledge, counties have a mandatory duty to collect property taxes, then allocate and distribute the appropriate amounts to various taxing entities pursuant to a complex statutory scheme. (Rev. & Tax.Code, § 95 et seq.) Allocation and distribution of property tax revenue is further subject to the Community Redevelopment Law (CRL). (Health & Saf.Code, § 33000 et seq.) The CRL sets forth the procedures for financing redevelopment projects. (Health & Saf. Code, § 33670.) Under the CRL, such projects are financed by "`tax increment financing.'" (Redevelopment Agency v. County of Los Angeles (1999) 75 Cal. App.4th 68, 71, 89 Cal.Rptr.2d 10.)⁷

Under tax increment financing, "[a]ll taxable property within the area to be redeveloped is subject to ad valorem property taxes. The properties lying within a redevelopment area have a certain assessed value as of the date a redevelopment plan ordinance is adopted. A local taxing agency, such as a city or county, continues in future years to receive property taxes on the redevelopment area properties, but may only claim the taxes allocable to the base year value. If the taxable properties within the redevelopment area increase in value after the base year, the taxes on the increment of value over and above the base year value are assigned to a special fund for the redevelopment agency.

"Once the redevelopment plan is adopted, the redevelopment agency may issue bonds to raise funds for the project. As the renewal and redevelopment is completed,...