Kuykendall v. State Bd. of Equalization

• Decision Date: 22 February 1994
• Docket Number: D020023,Nos. D019620,s. D019620
• Citation: 27 Cal.Rptr.2d 783,22 Cal.App.4th 1194
• Parties: Laura A. KUYKENDALL, Plaintiff and Respondent, v. STATE BOARD OF EQUALIZATION et al., Defendants and Appellants; San Diego County Regional Justice Facility Financing Agency et al., Defendants and Respondents. STATE BOARD OF EQUALIZATION et al., Petitioners, v. The SUPERIOR COURT of San Diego County, Respondent; Laura A. KUYKENDALL et al., Real Parties in Interest.
• Court: California Court of Appeals Court of Appeals

Page 783

27 Cal.Rptr.2d 783

22 Cal.App.4th 1194

Laura A. KUYKENDALL, Plaintiff and Respondent, v. STATE BOARD OF EQUALIZATION et al., Defendants and Appellants;

San Diego County Regional Justice Facility Financing Agency et al., Defendants and Respondents.

STATE BOARD OF EQUALIZATION et al., Petitioners, v. The SUPERIOR COURT of San Diego County, Respondent;

Laura A. KUYKENDALL et al., Real Parties in Interest.

Nos. D019620, D020023.

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

Feb. 22, 1994.

Review Denied May 12, 1994.

Daniel E. Lungren, Atty. Gen., Sacramento, Timothy G. Laddish, Asst. Atty. Gen., Oakland, Edmond B. Mamer, Los Angeles, and Ernest W. Piper, San Diego, for defendants and appellants and for petitioners

Milberg, Weiss, Bershad, Hynes & Lerach, William S. Lerach, Eric A. Isaacson, Alan M. Mansfield, Artie Baran, Frank J. Janecek, Jr. and Leonard B. Simon, San Diego, for plaintiff and respondent and for real party in interest.

McDougal, Love, Eckis & Grindle, Lynn R. McDougal, Tamara A. Smith, El Cajon, and Clinton L. Blain, San Diego, for defendants and respondents and for real parties in interest.

No appearance for respondent.

KREMER, Presiding Justice.

In these consolidated matters, defendants State Board of Equalization and State of California (together Board) appeal an order preliminarily enjoining the Board to deposit into a separate interest bearing account certain tax moneys held by the Board pending further court order and not to pay out any sums as refunds or otherwise; a summary judgment favoring plaintiff Laura A. Kuykendall on portions of her amended complaint; and an order requiring the Board to transfer the moneys to the County of San Diego (San Diego) to be held in trust pending further court order. The Board also seeks mandate. We reverse the judgment and orders. We dismiss as moot the petition for mandate.

I INTRODUCTION

This case arises from the California Supreme Court's determination a local sales tax in San Diego was unconstitutional. In this consumer class action lawsuit, Kuykendall seeks refund of the illegally collected tax moneys. During pendency of this lawsuit, the Legislature enacted a statutory scheme for refunding such moneys. We are asked to decide whether the legislation should prevail over a conflicting refund plan ordered by the superior court. We conclude such legislation has supplanted the superior court's rulings and is not facially unconstitutional.

II FACTUAL AND PROCEDURAL BACKGROUND

In Rider v. County of San Diego (1991) 1 Cal.4th 1, 2 Cal.Rptr.2d 490, 820 P.2d 1000 ("Rider I "), the Supreme Court declared unconstitutional the San Diego County Regional Justice Facility Financing Agency In Rider v. County of San Diego (1992) 11 Cal.App.4th 1410, 14 Cal.Rptr.2d 885 ("Rider II "), the appellate court reversed a Riverside County Superior Court ruling insofar as it imposed a "sales tax offset" as the method for redistributing the invalidly collected Jail Tax funds. (Id. at pp. 1417-1421, 1427, 14 Cal.Rptr.2d 885.) The appellate court remanded the matter to the Riverside trial court to order such funds and accrued interest be deposited with and retained by the Board "pending and subject to any such administrative and/or judicial proceedings as may hereafter be undertaken with respect thereto." (Id. at p. 1427, 14 Cal.Rptr.2d 885.) ¹

(Agency) supplemental sales and use tax ("Jail Tax"). The court concluded the Jail Tax was invalid because it was not approved by at least two-thirds of San Diego's voters as required under article XIII A, section 4 of the California Constitution. (Id. at pp. 5-16, 2 Cal.Rptr.2d 490, 820 P.2d 1000.)

In January 1993 the Board announced a plan for refund claims to be made through San Diego retailers who had transferred Jail Tax moneys to the Board.

Later in January 1993 Kuykendall filed this consumer class action lawsuit against the Board, the Agency and retailer Discover Infiniti, Inc. (Discover), seeking direct reimbursement plus interest to consumers who effectively paid the Jail Tax.

In August 1993 by preliminary injunction the superior court ordered the Board to deposit the Jail Tax moneys into an interest bearing escrow account. The Board appealed.

Later in August 1993 the court certified the plaintiff class for purposes of establishing a method for the Jail Tax refund. The court also granted plaintiffs' motion for summary judgment and effectively imposed a constructive trust on the Jail Tax moneys. The court ruled all consumers were "taxpayers" entitled to a full direct refund of the Jail Tax they paid and the Board was not to make any refunds without the court's prior approval of a reimbursement plan. The court ordered the Board to submit a reimbursement plan for court approval. ² The Board again appealed.

On October 8, 1993, the court entered judgment favoring Kuykendall against the Board.

On October 11, 1993, Senate Bill No. 263 (SB 263), codified at REVENUE AND TAXATION CODE SECTION 7275³ et seq., became effective. (Stats.1993, ch. 1060.) SB 263 created a statutory refund scheme for the unconstitutionally collected sales tax funds, to-wit, a sales tax rollback and direct refunds for claims of $5,000 or more in documented purchases. (§§ 7276, 7277.)

On October 15, 1993, at a hearing to consider the Board's reimbursement plan, the Board asserted enactment of SB 263 rendered moot the superior court's rulings in this litigation. The court stated it did not believe its rulings were moot. The court also stated it thought SB 263 was unconstitutional under the separation of powers doctrine and violated consumers' rights to due process and equal protection. The court ordered the Board to transfer the Jail Tax funds to San Diego pending appellate review. ⁴ The Board again appealed and also sought mandate.

We have consolidated the Board's appeals and petition into this one case for decision.

III DISCUSSION

A THE BOARD'S APPEALS

The Board contends the superior court lacked jurisdiction to grant relief because In June 1993 upon remand in Rider II, supra, 11 Cal.App.4th 1410, 14 Cal.Rptr.2d 885, the Riverside superior court ordered the Agency to deposit with the Board all Jail Tax funds it held. In August 1993 the Riverside court's order became final and was not appealed. Later that month the Agency delivered almost $386 million to the Board. The record is silent whether the Agency subsequently transferred the earned interest to the Board.

plaintiffs' lawsuit assertedly did not qualify under applicable California constitutional and statutory law controlling tax refund actions.

"Under the rule of exclusive concurrent jurisdiction, 'when two superior courts have concurrent jurisdiction over the subject matter and all parties involved in litigation, the first to assume jurisdiction has exclusive and continuing jurisdiction over the subject matter and all parties involved until such time as all necessarily related matters have been resolved.' [Citations.]" (Plant Insulation Co. v. Fibreboard Corp. (1990) 224 Cal.App.3d 781, 786-787, 274 Cal.Rptr. 147.) Citing Plant Insulation Co., the Board contends the San Diego superior court could not properly assume jurisdiction over the Jail Tax funds because jurisdiction assertedly remained in the Riverside court for purposes of resolving necessarily related matters. Specifically, the Board contends the Riverside court retained jurisdiction to enforce its order until the Agency fully complied by transferring to the Board all Jail Tax funds including interest. However, the Board seeks to raise this issue for the first time on appeal without having made such contention in the superior court. Further, even if the Riverside court retained jurisdiction to enforce its order against the Agency, such continuing jurisdiction did not preclude the San Diego court from asserting jurisdiction over Kuykendall's consumer class action lawsuit seeking refunds. Kuykendall was not a party to Rider II, supra, 11 Cal.App.4th 1410, 14 Cal.Rptr.2d 885. Moreover, the appellate court in Rider II stated: "This case does not call upon us to decide, and we do not decide, any issues relating to the refund proceedings which may be undertaken to recover any invalidly collected sales tax revenues...." (Id. at p. 1420, 14 Cal.Rptr.2d 885.) The court also stated nothing in its opinion precluded San Diego retail consumers from pursuing remedial reimbursement of the Jail Tax funds in another action. (Id. at p. 1421, 14 Cal.Rptr.2d 885.)

Article XIII, section 32 of the California Constitution provides: "No legal or equitable process shall issue in any proceeding in any court against this State or any officer thereof to prevent or enjoin the collection of any tax. After payment of a tax claimed to be illegal, an action may be maintained to recover the tax paid, with interest, in such manner as may be provided by the Legislature." Citing that constitutional provision, the Board contends the court erroneously permitted a tax refund action not prescribed by the Legislature.

In Woosley v. State of California (1992) 3 Cal.4th 758, 13 Cal.Rptr.2d 30, 838 P.2d 758, the Supreme Court stated: "The California Constitution expressly provides that actions for tax refunds must be brought in the manner prescribed by the Legislature. Article XIII, section 32, of the California Constitution provides in this regard: 'After payment of a tax claimed to be illegal, an action may be maintained to recover the tax paid, with interest, in such manner as may be provided by the Legislature.' (Italics added.) This constitutional limitation rests on the premise that strict legislative control over the manner in which tax refunds may be sought is necessary so that governmental entities may engage in fiscal planning based on expected tax revenues. [Citation.]" (Id. at p. 789, 13 Cal.Rptr.2d 30, 838 P.2d 758; cited in Rider II, supra, 11 Cal.App.4th at p. 1419, 14 Cal.Rptr.2d 885.) In Woosley, supra, the Supreme Court st...