Kahan v. City of Richmond

• Decision Date: 23 May 2019
• Docket Number: A150866
• Citation: 247 Cal.Rptr.3d 714,35 Cal.App.5th 721
• Court: California Court of Appeals Court of Appeals
• Parties: Tobias KAHAN, Plaintiff and Appellant, v. CITY OF RICHMOND, Defendant and Respondent.

35 Cal.App.5th 721

247 Cal.Rptr.3d 714

Tobias KAHAN, Plaintiff and Appellant,

v.CITY OF RICHMOND, Defendant and Respondent.

A150866

Court of Appeal, First District, Division 1, California.

Filed May 23, 2019

Certified for Partial Publication.^*

Nelson & Fraenkel, Gretchen M. Nelson ; Law Offices of Gregg A. Rapoport and Gregg A. Rapoport, Los Angeles, for Plaintiff and Appellant.

Colantuono, Highsmith & Whatley, Michael G. Colantuono, Holly O. Whatley and Jon R. di Cristina, Pasadena, for Defendant and Respondent.

Margulies, J.Tobias Kahan purchased property in Richmond, California at a foreclosure sale. Shortly before the sale, the City of Richmond (City) had recorded a "special assessment" lien against the property for unpaid garbage collection fees, pursuant to a municipal ordinance. When Kahan later sold the property, he had to pay the delinquent garbage fees as well as administrative charges and escrow fees to obtain a release of the City's lien.

Kahan filed a class action lawsuit alleging the City's practice of recording liens for unpaid garbage collection fees violates and is preempted by state law. Kahan contends the City has no authority to levy "special assessments" for garbage collection charges that are "user fees" under state law, and argues the ordinance purporting to authorize such assessments violates state laws on lien priority. He further contends that even if the practice is allowed, the City's action violated its own ordinance because a garbage lien may not attach where a "bona fide encumbrancer for value" has placed a lien on the property at any time before the garbage lien is recorded.

The trial court sustained general and special demurrers to each of the causes of action in Kahan's complaint, granting leave to amend. Kahan chose not to amend his complaint and the trial court granted the City's motion to dismiss with prejudice. This appeal followed. We affirm.

I. BACKGROUND

Richmond Municipal Code section 9.20.110 provides that if a property owner fails to pay delinquent solid waste collection charges, the City may, after notice and hearing procedures, record a "special assessment against the property to which the service was rendered" to be included in the next property tax assessment. (Richmond Mun. Code, § 9.20.110, subd. (b)–(h).) "The assessment shall be collected at the same time and in the same manner as ordinary municipal taxes are collected. The assessment shall be subordinate to all existing special assessment liens previously imposed on the property. It shall have priority over all other liens except for those State, County and municipal taxes with which it shall have parity.... All laws applicable to the levy, collection and enforcement of municipal taxes shall be applicable to the special assessment." (Id. , subd. (i).)

Pursuant to this ordinance, on January 8, 2014, the City recorded an assessment lien for unpaid solid waste collection service charges (garbage lien) against a residential property. Kahan alleges the City's garbage lien was recorded "after the recordation of one or more bona fide mortgage encumbrances on the Subject Property." On January 16, 2014, Kahan purchased the property at a foreclosure sale. When he later sold the property on August 21, 2014, he was required to pay amounts demanded by the City, along with administrative charges and escrow fees, in order to obtain a release of the garbage lien.

In August 2015, Kahan filed a notice of claim with the City on his own behalf and on behalf of an alleged class of similarly situated individuals and entities. The City sent Kahan a notice of claim deemed rejected, after which he filed this class action lawsuit. Kahan alleged causes of action for declaratory relief, injunctive relief, inverse condemnation, and negligence, seeking an injunction to stop the City from recording garbage liens on "encumbered property," removal of existing garbage liens from "previously encumbered" properties, and a refund of all garbage collection charges, administrative fees, and escrow fees. Kahan's negligence and inverse condemnation claims also sought damages arising from the City's conduct.

The City demurred to each cause of action in Kahan's complaint on the grounds he failed to state a cause of action and the County of Contra Costa (County) was a necessary party to the lawsuit. ( Code Civ. Proc., §§ 430.10, subds. (d) & (e).) First, the City argued it could impose the garbage lien under Government Code sections 25831 and 38790.1, which authorize the City to convert unpaid, delinquent garbage fees to a "special assessment" and record a lien against the subject property to be placed on the secured property tax roll. The City contended that because the special assessments are collected in the same manner as ordinary county ad valorem property taxes, Kahan's refund claim was subject to the procedures of the Revenue and Taxation Code section 5096 et seq. Since Kahan failed to follow the required procedures and exhaust his administrative remedies, his refund claim must fail. Further, the City asserted Kahan was required to name the County as a necessary and indispensable party to the lawsuit, both because the party who collects the special assessment on the City's behalf must be named under Revenue and Taxation Code section 5146 and because the County was the only party that could provide Kahan the relief he sought. Among other things, the City also argued it was statutorily immune from Kahan's causes of action for inverse condemnation and negligence.

Kahan opposed the demurrer, arguing it must be overruled because the City's arguments were all predicated on the legally incorrect premise that charges for garbage collection fees could be converted to "special assessments." Because such charges are " ‘user fees’ " as defined under the California Constitution, Kahan argued, they could not be treated as special assessments or tax levies. Kahan further asserted Government Code section 25831 does not authorize the City to convert municipal garbage fees to special assessments and contended the City's treatment of garbage fees as special assessments conflicts with the statewide lien priority statutes. Kahan also argued the governmental tort immunity statutes on which the City relied did not apply to Kahan's negligence and inverse condemnation causes of action.

The trial court issued a tentative ruling, which was contested. After hearing oral argument, the trial court ordered, in relevant part, as follows:

"1. For the reasons set forth in the Court's tentative ruling on pages 6–9, the demurrers to the Complaint are sustained with leave to amend on the grounds that: 1) the County of Contra Costa is a necessary party for the requested relief (Part II.A); and 2) the complaint fails to state a cause of action for a refund of an assessment under Revenue & Taxation Code section 5096 et seq. (Part II.B).

"2. The demurrer on the basis of immunity to the Third Cause of Action for Inverse Condemnation and Violation of Due Process and the Fourth Cause of Action for Negligence is sustained, with leave to amend, to the extent the complaint goes beyond seeking a refund.

"[¶] ... [¶]

"5. Plaintiff has until January 17, 2017 to file his amended complaint."

The trial court explained the demurrer was sustained with leave to amend for Kahan to add the County as a defendant because the injunctive relief sought required action by the County. As to compliance with the procedural requirements of the Revenue and Taxation Code, the trial court agreed with the City that Government Code section 25831 authorizes counties to collect delinquent fees for garbage collection services as special assessments and Government Code section 38790.1 allows cities to collect such fees in the same manner as counties. The court rejected Kahan's argument that the constitutional definition of "special assessment" conflicts with the statutory procedure for collection of garbage fees under Government Code section 25831.

Though the trial court sustained the demurrers with leave to amend, Kahan did not amend within the time provided. The City moved to dismiss with prejudice, and the trial court entered a judgment of dismissal. Kahan appealed.

II. DISCUSSION

A. Standard of Review

"We review the ruling sustaining the demurrer de novo, exercising independent judgment as to whether the complaint states a cause of action as a matter of law." ( Kan v. Guild Mortgage Co. (2014) 230 Cal.App.4th 736, 740, 178 Cal.Rptr.3d 745 ( Kan ).) " ‘[W]e give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.’ " ( Moran v. Prime Healthcare Management, Inc. (2016) 3 Cal.App.5th 1131, 1139, 208 Cal.Rptr.3d 303.) "When conducting this independent review, appellate courts ‘treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions or conclusions of law.’ " ( Esparza v. Kaweah Delta Dist. Hospital (2016) 3 Cal.App.5th 547, 552, 207 Cal.Rptr.3d 651.)

Although we review the complaint de novo, " ‘[t]he plaintiff has the burden of showing that the facts pleaded are sufficient to establish every element of the cause of action and overcoming all of the legal grounds on which the trial court sustained the demurrer, and if the defendant negates any essential element, we will affirm the order sustaining the demurrer as to the cause of action. [Citation.] We will affirm if there is any ground on which the demurrer can properly be sustained, whether or not the trial court relied on proper grounds or the defendant asserted a proper ground in the trial court proceedings.’ " ( Rossberg v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1490– 1491, 162 Cal.Rptr.3d 525.) It is the trial court's ruling we review, not its reasoning or rationale. ( Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982, 994, 198 Cal.Rptr.3d 715 ; Kan, supra , 230 Cal.App.4th at p. 740, 178 Cal.Rptr.3d 745.)

We also review questions of statutory interpretation de...