City of Huntington Beach v. Superior Court

• Court: California Court of Appeals
• Writing for the Court: TAMURA; GARDNER, P. J., and KAUFMAN
• Citation: City of Huntington Beach v. Superior Court, 144 Cal.Rptr. 236, 78 Cal.App.3d 333 (Cal. App. 1978)
• Decision Date: 07 March 1978
• Parties: CITY OF HUNTINGTON BEACH, Petitioner, v. SUPERIOR COURT OF ORANGE COUNTY, Respondent; Orin G. BERGE, Jr., et al., Real Parties in Interest. Civ. 19455.

Page 236

144 Cal.Rptr. 236

78 Cal.App.3d 333

CITY OF HUNTINGTON BEACH, Petitioner, v. SUPERIOR COURT OF ORANGE COUNTY, Respondent Orin G. BERGE, Jr., et al., Real Parties in Interest.

Civ. 19455.

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

March 7, 1978.

Hearing Denied May 4, 1978.

Don P. Bonfa, City Atty., and Mark Travis, Deputy City Atty., for petitioner.

Burt Pines, City Atty. (City of Los Angeles), Thomas C. Bonaventura, Senior Asst. City Atty., Ronald Tuller, Deputy City Atty. for the City of Los Angeles, Robert J. Wheeler, City Atty. (City of Mountain View), Ronald J. Cote, Asst. City Atty., Maurice K. Hamilton, City Atty. (City of San Mateo), David E. Schricker, City Atty. (City of Redwood City), Richard K. Karren, Acting City Atty. (City of San Jose), amici curiae for petitioner.

No appearance for respondent.

Christian R. Van Deusen, Buena Park, for real parties in interest.

OPINION

TAMURA, Associate Justice.

The central issue presented by this original proceeding is whether a real property transfer tax imposed by a city is an excise tax or a real property tax.

In a bifurcated trial of a taxpayers' class action to recover real property transfer taxes imposed and collected by the City of Huntington Beach, the trial court determined the liability issue in favor of real parties in interest (hereafter plaintiffs) and entered findings of fact and conclusions of law in accordance with that determination. The matter is before us on an original proceeding in mandamus or prohibition initiated by the city to compel the trial court to set aside its findings and conclusions and to enjoin it from taking any further action in the case other than to enter judgment for the city. We issued an alternative writ and order to show cause.

The pertinent facts are not in dispute:

The City of Huntington Beach is a charter city. In 1967, it adopted an ordinance providing for a "real property transfer tax" in conformity with the provisions of the Documentary Transfer Tax Act (Rev. & Tax.Code, § 11901 et seq.). ¹ The ordinance imposed on "each deed, instrument or writing" by which real property in the City of Huntington Beach was transferred or conveyed "when the consideration or value of the interest or property conveyed (exclusive of the value of any lien or encumbrances remaining thereon at the time of sale) exceeds one hundred dollars ($100)" a tax at the rate of 271/2 cents for each $500 or fractional part thereof.

On July 1, 1974, the city adopted Ordinance No. 1925 which repealed the 1967 ordinance and adopted a new real property transfer tax. Unlike the earlier ordinance, the new ordinance was not in conformity with the specifications of the Documentary Transfer Tax Act. Subject to certain exceptions, Ordinance No. 1925 imposed "on all transfers by deeds, instruments, writings" of real property in the city a tax at the rate of one-half of one percent "of the value of consideration." ² The tax was made a joint and several obligation of the transferor and transferee; it was due at the time the deed or instrument of transfer was delivered; and it became delinquent if unpaid at the time the instrument was recorded. The amount of any tax, penalty or interest was declared to be a debt to the city recoverable by an action against the person or persons owing the tax.

In May 1975, the city electorate voted to adopt a charter amendment which forbade the city council from imposing a real property transfer tax unless authorized by a majority of the electors and rendered any transfer tax ordinance theretofore adopted by the city council of no further force or effect.

In September 1975, certain city taxpayers, "on behalf of themselves and all others similarly situated," filed claims with the city for refund of all taxes collected pursuant to Ordinance No. 1925 and later filed the instant class action for recovery of all taxes collected by the city under that ordinance. ³ Issues were joined by the city's answer. ⁴

In a bifurcated trial, the issue of liability was tried first. The case was heard on the pleadings, facts judicially noticed by the court, and written and oral arguments of counsel. At the conclusion of the trial, the court rendered its intended decision in which it held the transfer tax was a tax on real property. Taking judicial notice of the fact that real property taxes levied by the city during the years in question were at the maximum rate permitted by the city charter ($1 for each $100 of assessed valuation), the court concluded that the imposition and collection of the transfer taxes resulted in a violation of the charter limitation on real property taxes.

The court made findings of fact and conclusions of law in accordance with its intended decision. In its conclusions, the court determined: Because of the coercive nature of Ordinance No. 1925, the taxes were deemed paid under protest as a matter of law; the city waived any deficiencies in the claims for refund or any objections on the ground of their untimeliness; the taxes constituted a tax on real property and their imposition and collection were in violation of the charter limitation on real property taxes; the taxes illegally collected must be returned to the members of the class with interest from the date the claims were filed. The court expressly rejected plaintiffs' attack upon the transfer tax on the ground the Documentary Transfer Tax Act preempted the city from levying a transfer tax that was not in conformity with that act.

The city's petition and supporting memorandum challenge the trial court's decision on several fronts, but its main attack is on the determination that the transfer tax was a tax on real property. ⁵ Plaintiffs have filed a demurrer to the petition on the ground the extraordinary writ procedure to review the trial court's action is inappropriate because the city has an adequate remedy by way of an appeal from a judgment after trial of the damage issue. On the merits, plaintiffs urge the trial court properly determined the nature of the tax.

For reasons expressed below, we have concluded that mandate or prohibition is an appropriate remedy to review the trial court's resolution of the liability issue. On the merits, we conclude the court below erred in holding the transfer tax to be a real property tax.

I

We first consider the propriety of the extraordinary writ to review the trial court's decision on the liability issue.

By issuing an alternative writ, we necessarily determined that the city had no other adequate remedy and that this is a proper case for the exercise of our original jurisdiction through the prerogative writ. (People ex rel. Younger v. County of El Dorado, 5 Cal.3d 480, 492, 96 Cal.Rptr. 553, 487 P.2d 1193; San Francisco Unified School Dist. v. Johnson, 3 Cal.3d 937, 945, 92 Cal.Rptr. 309, 479 P.2d 669; County of Sacramento v. Hickman, 66 Cal.2d 841, 845, 59 Cal.Rptr. 609, 428 P.2d 593.)

Our implied determination is based on the principle that while mandate will not lie to control the discretion of a court or to compel it to exercise it in a particular manner, in those instances where under the facts it can be legally exercised in but one way, the writ will lie where there is no other adequate remedy. (Mannheim v. Superior Court, 3 Cal.3d 678, 685, 91 Cal.Rptr. 585, 478 P.2d 17.) Here, the dispositive issue at the liability phase of the trial was whether the transfer tax was a tax on real property, but the trial court's resolution of that issue was nonappealable. Where a plaintiff prevails on the liability issue in a bifurcated trial, it is inappropriate to enter a judgment, and if one is entered, it is nonetheless nonappealable. (Lauderdale v. U & I Equip. Co., 271 Cal.App.2d 140, 142-143, 76 Cal.Rptr. 483.) Instead of entering a judgment, the court must, as it did here, make findings of fact and conclusions of law in accordance with rule 232 of the rules for the superior courts. (Cal.Rules of Court, rule 232.5.) Although the city could have awaited trial of the damage issue and appealed from the judgment, in the circumstances here presented, we hold that remedy to be inadequate. Relief by mandamus is appropriate where it will prevent a needless, expensive trial and an ultimate reversal (Holtz v. Superior Court, 3 Cal.3d 296, 301, 90 Cal.Rptr. 345, 475 P.2d 441, fn. 4), particularly where the issue presented is purely one of law and it is in the public interest to have a prompt settlement of the question presented (Brown v. Superior Court, 5 Cal.3d 509, 515, 96 Cal.Rptr. 584, 487 P.2d 1224. 5 Witkin, Cal.Procedure (2d ed. 1971) Extraordinary Writs, § 106, pp. 3880-3882). A number of municipalities in the state, including the City of Los Angeles, have charter limitations on the real property tax rate and also collect real property transfer taxes similar to those which were imposed and collected by the City of Huntington Beach. It is thus in the public interest to resolve the instant controversy as expeditiously as possible.

The demurrer to the petition herein is, therefore, overruled.

II

On the merits, we hold that the city's transfer tax was a tax on the exercise of the right or privilege of transferring property and not a tax on real property.

Though the precise issue here presented has never been decided by our appellate courts, the principle that a tax on the exercise of one of the incidences of property ownership is not a tax on the property is well established. Thus, the federal estate tax is a tax upon the event of transfer and not a direct tax on the property (United States v. Manufacturers Nat. Bank, 363 U.S. 194, 197-199, 80 S.Ct. 1103, 1106-1107, 4 L.Ed.2d 1158, 1162-1163); the California inheritance tax is a tax on the privilege of succeeding to property and not a tax on the property as such (Kirkwood v. Bank of America, 43 Cal.2d 333, 338-339, 273 P.2d 532; Estate of Webb, 241 Cal.App.2d 85, 87, 50 P.2d 397); a motor vehicle license fee for the privilege...