ITT Gilfillan, Inc. v. City of Los Angeles

• Decision Date: 22 September 1982
• Citation: 136 Cal.App.3d 581,185 Cal.Rptr. 848
• Court: California Court of Appeals Court of Appeals
• Parties: ITT GILFILLAN, INC., a corporation, Plaintiff and Respondent, v. The CITY OF LOS ANGELES, a municipal corporation, Defendant and Appellant. Civ. 63729.

Page 848

185 Cal.Rptr. 848

136 Cal.App.3d 581

ITT GILFILLAN, INC., a corporation, Plaintiff and Respondent, v. The CITY OF LOS ANGELES, a municipal corporation, Defendant and Appellant.

Civ. 63729.

Court of Appeal, Second District, Division 3, California.

Sept. 22, 1982.

Ira Reiner, City Atty., Thomas C. Bonaventura, Senior Asst. City Atty., Sherri M. Kirk, Deputy City Atty., for defendant and appellant

Jeffrey A. Kent, Poindexter & Doutre, Inc., Los Angeles, for plaintiff and respondent.

GORMAN, Associate Justice. ^*

The City of Los Angeles, defendant and appellant (City), appeals from a judgment of the Superior Court entered in favor of plaintiff and respondent ITT Gilfillan, Inc., a corporation (ITT).

FACTUAL SUMMARY

The matter was submitted to the trial judge on a statement of stipulated facts.

For each tax year 1963 through 1975, City imposed a business license tax on ITT, the City contending that the taxes were due pursuant to section 21.190 and ITT contending that the taxes were due pursuant to section 21.167 of the City's Business Tax Ordinance (Municipal Code of Los Angeles).

Since many other manufacturers were going to be affected by the final outcome of one of the matters, ITT's action for refund with respect to the tax years 1963-64, filed November 24, 1964, was chosen to proceed as a test case.

The ITT matter was tried in 1970. The trial court ruled in favor of the City but was reversed by the Court of Appeal in ITT Gilfillan, Inc. v. City of Los Angeles (1977) 72 Cal.App.3d 421, 140 Cal.Rptr. 193.

The City then conducted an audit with ITT's help and in 1979 and 1980 the City paid ITT refund of overpayment for the years 1963 through 1968 and 1976 through 1978.

On October 10, 1980, ITT, with permission of the Superior Court pursuant to written stipulation of the parties, filed its supplemental and amended complaint (based on the same facts as the original complaint except as to dates and amounts) contending that the City owed ITT the amount of overpayment for each of the tax years 1969 through 1975 plus prejudgment interest, and further that the City owed ITT prejudgment interest for the years that the City had already refunded to ITT the principal amounts of the overpayments.

The conclusions of law and judgment of the trial court in favor of ITT decided four issues here under attack. The first that ITT was entitled to prejudgment interest; secondly, that prejudgment interest commenced as of the date of overpayment; thirdly, that amount already refunded by the City to ITT should be first applied to interest and then to reduction of the amount of principal, i.e., the refund for overpayment; and, lastly, that the amended and supplemental pleadings filed in 1980 related back to the filing of the complaint (1964) and thereby overcame any limitations bar.

ISSUES AND RESOLUTIONS

1. Should the City pay prejudgment interest on business license tax refunds? Yes.

2. If such prejudgment interest is permissible, does it start to accrue from the date of overpayment? Yes.

3. Should any amounts refunded by the City be first applied to accrued interest? No.

4. Does the amended and supplemental complaint for the recovery of overpayment of business taxes for the tax years 1969 through 1975 relate back to the filing of the original complaint (1964), thereby avoiding the bar of Government Code section 945.6, subdivision (a)(1)? No.

DISCUSSION

Prejudgment Interest

ITT calls our attention to a recently decided matter entitled Todd Shipyards In the Todd case too the City maintained on the basis of "home rule doctrine" since the City had not provided for payment of interest in the refund section, 21.07 of the Los Angeles Municipal Code, in contradistinction to Los Angeles Municipal Code section 21.05, subdivision (e), which did provide for interest in cases of tax delinquencies, that nevertheless the City of Los Angeles was liable under Civil Code section 3287, subdivision (a). ¹

Corp. v. City of Los Angeles (1982) 130 Cal.App.3d 222, 181 Cal.Rptr. 652, decided by a divided court.

The Todd court cited Tripp v. Swoap (1976) 17 Cal.3d 671, 682, 131 Cal.Rptr. 789, 552 P.2d 749 for the holding that "... [I]n order to recover interest, a claimant must satisfy three conditions: '(1) There must be an underlying monetary obligation; (2) the recovery must be certain or capable of being made certain by calculation; and (3) the right to recover must vest on a particular day.' "

All conditions are met herein.

Further, all payments in the case at bench were involuntary (made under protest), thus, as in Todd, this case is distinguished from Ball v. County of Los Angeles (1978) 82 Cal.App.3d 312, 147 Cal.Rptr. 252, cert. den., 439 U.S. 1116, 99 S.Ct. 1021, 59 L.Ed.2d 75 wherein the taxpayer paid taxes voluntarily though in error.

Commencement of Interest

The Todd case also decides at page 226 that interest starts running on the day that the respective payments were wrongfully collected and, "in each instance the right to recover vested on the same day on which the money was paid."

We not only agree with the reasoning of the majority in the Todd Shipyards case as to both holdings, but we are bound by the Supreme Court's denial of hearing.

Application of Refund

The City urges that the trial court's decision that the amount refunded by it for the years 1963 through 1968 and 1976 through 1978 should be applied first to accrued interest and then to principal is error. We agree.

In Finding of Fact 9, the court finds that: "When the City made each of the two refunds referred to above, the City communicated to ITT Gilfillan that the refund was for the principal amount of the overpayments because it was the City's position that it had no legal obligation to pay prejudgment interest on the overpayments and that ITT Gilfillan, with knowledge of the City's position, accepted each of the two refunds." In the stipulated facts, it is stated that the sums refunded for 1963 through 1968 and for 1976 through 1978 were, in effect, principal and that ITT Gilfillan does not "waive or release any claims or causes of action it may possess to require the City of Los Angeles to pay interest on any amounts refunded." Civil Code section 1479 provides that a debtor may designate at the time of performance how much performance is to be applied to the extinction of any particular obligation and a creditor must make such application.

The City is entitled, both on the undisputed facts and as a matter of law, to have the refund payments applied to the principal amounts of the refund.

Relation Back

The original complaint was filed on November 24, 1964, charging overpayments for the years 1963 and 1964.

In October, 1980, ITT filed a supplemental and amended complaint similar to the original complaint but adding to it the years 1969 through 1975 as years for which refunds had not been obtained plus prejudgment interest. We find that the doctrine An amended complaint which concerns the same general facts as the original complaint relates back to the date of the filing of the original complaint and is not barred by the statute of limitations. Smeltzley v. Nicholson Mfg. Co. (1977) 18 Cal.3d 932, 136 Cal.Rptr. 269, 559 P.2d 624, 85 A.L.R.3d 121.).

of relation-back does not apply to a supplemental complaint and therefore does not apply to the tax years 1969 through 1975.

There can be little question that a supplemental complaint serves a different purpose. Primarily, a supplemental complaint deals with matters occurring after commencement of the action and it only sets up matters consistent with the original complaint. Witkin, 3 California Procedure, 2d Edition, Pleading, section 1085, page 2663, and section 1086, page 2664.

A supplemental complaint is in no sense an amended complaint. Witkin, supra, section 1087, page 2665.

It is true that commencing with Austin v. Massachusetts Bonding and Insurance Co. (1961) 56 Cal.2d 596, 15 Cal.Rptr. 817, 364 P.2d 681, the California courts have adopted a very liberal rule as far as amended complaints avoiding the bar of the statute of limitations. Even different causes of action will relate back to the original pleading and thereby avoid the bar of the statute of limitations as long as recovery is sought on the same general set of facts. Young v. Berry Equipment Rentals, Inc. (1976) 55 Cal.App.3d 35, 38, 127 Cal.Rptr. 200; Schumacher v. Superior Court (1979) 94 Cal.App.3d 187, 156 Cal.Rptr. 286.

Respondent relies on three California cases, Austin v. Massachusetts Bonding and Insurance Co., supra, 56 Cal.2d 596, 15 Cal.Rptr. 817, 364 P.2d 681; Breceda v. Gamsby (1968) 267 Cal.App.2d 167, 170-171, n. 3, 72 Cal.Rptr. 832; and Bahten v. County of Merced (1976) 59 Cal.App.3d 101, 114-115, 130 Cal.Rptr. 539. In Bahten, there was a prematurely filed complaint against County of Merced for an alleged tort. The complaint did not allege compliance with Government Code section 945.4. Thereafter, the county granted plaintiff relief to proceed without the necessity of filing a government claim. Though Government Code section 945.4 states that action must be filed within 30 days after such relief, the plaintiff filed an amended complaint 45 days after the relief was granted by the superior court. In the Bahten case, the court held that, relief having been granted, the original complaint was sufficient and there did not have to be filed an amended (or supplemental) complaint. The Breceda case merely decided that where a cause of action is alleged against a fictitiously-named defendant and in good faith plaintiff amends by substituting the true name for the Doe allegation limitations cannot be used as a bar. The Austin matter generally involved an amended complaint which was filed naming a new party under the Doe allegation. As discussed above, none of these cases involved a true supplemental complaint which alleges newly accrued causes of action.

Cases have held that where there are new parties in a...