Lattin v. Franchise Tax Board

• Decision Date: 25 November 1977
• Citation: 75 Cal.App.3d 377,142 Cal.Rptr. 130
• Court: California Court of Appeals
• Parties: Norman D. LATTIN et al., Plaintiffs and Appellants, v. FRANCHISE TAX BOARD, Defendant and Respondent. Civ. 40669.

Page 130

142 Cal.Rptr. 130

75 Cal.App.3d 377

Norman D. LATTIN et al., Plaintiffs and Appellants, v.FRANCHISE TAX BOARD, Defendant and Respondent.

Civ. 40669.

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

Nov. 25, 1977.

Hearing Denied Jan. 26, 1978.

Schenkel & Maas, James P. Schenkel, San Francisco, for plaintiffs and appellants.

Evelle J. Younger, Atty. Gen., Ernest P. Goodman, Asst. Atty. Gen., Gary A. Larson, Deputy Atty. Gen., San Francisco, for defendant and respondent.

ELKINGTON, Associate Justice.

The instant appeal is taken by plaintiffsNorman D. Lattin and Harriett P. Lattin from "orders of the Superior Court . . . denying plaintiffs' motions for order that class action is proper and for order to notify class members of pending action."

Plaintiffs Lattin, pursuant to Revenue and Taxation Code sections 19051-19064, had filed with the Franchise Tax Board a "claim for refund" of California state income taxes in the amount of $627.17, paid by them under protest.The claim was based on the contended unconstitutionality of subdivision (f), later redesignated subdivision (g), of Revenue and Taxation Code section 17069.That statute allowed a "special tax credit" to certain California income taxpayers who had been residents of the state for a full tax year, but denied the credit to such taxpayers as were "nonresidents as of the close of the taxable year for which the credit is claimed."Plaintiffs Lattin had been residents of the state for all but the last 25 days of the taxable year, and were denied the special tax credit which otherwise would have been their due.As will later appear, it is significant that on the claim for refund the only claimants were "Norman D. & Harriet (sic )P. Lattin," and by it they sought only such a refund as was believed due them personally.

The claim for refund was denied by the Franchise Tax Board, and on appeal to the State Board of Equalization the denial was upheld.

Thereupon plaintiffs Lattin filed in the superior court a "class action complaint for recovery of personal income tax paid under protest."Named as defendant was the Franchise Tax Board, and as plaintiffs"Norman D. Lattin and Harriett P. Lattin, on behalf of themselves and all others similarly situated "(emphasis added).The complaint sought not only recovery of the refund claimed due the plaintiffs Lattin, but also such refunds as were due all taxpayers similarly situated, a class, we are told, consisting of 235,998 persons.

The superior court thereafter made and entered certain orders the effect of which, the parties appear to agree as do we, was to finally determine the invalidity of plaintiffs' action as a class action.It is the substance and effect of such orders as determine their finality for purposes of appeal.(Daar v. Yellow Cab Co., 67 Cal.2d 695, 63 Cal.Rptr. 724, 433 P.2d 732;Lyon v. Goss, 19 Cal.2d 659, 670, 123 P.2d 11.)It is from these orders that plaintiffs have appealed.

As stated by plaintiffs: "The sole issue presented on this appeal is whether or not a class should be certified and represented by Appellants Lattin."

The Franchise Tax Board contends here as it did in the superior court that since no claim for refund, as required by Revenue and Taxation Code sections 19051-19064, was made "on behalf of any class there is no jurisdiction to maintain a class action, and (the Lattins) can sue only on behalf of themselves . . . ."We have concluded that this contention is correct, and that the superior court's orders must be affirmed.Our reasons follow.

California's Constitution, article III, section 5, provides: "Suits may be brought against the state in such manner and in such courts as shall be directed by law."

Under this authority the Legislature has the power to impose conditions as a prerequisite to commencement of an action against the state or one of its agencies.(Bozaich v. State of California, 32 Cal.App.3d 688, 697, 108 Cal.Rptr. 392;Fidelity & Dep. Co. v. Claude Fisher Co., 161 Cal.App.2d 431, 436-437, 327 P.2d 78;3 Witkin, Cal.Procedure (2d ed. 1971) Pleading, §§ 86, 87, pp. 1762, 1763.)Such conditions are mandatory (City of San Jose v. Superior Court, 12 Cal.3d 447, 454, 115 Cal.Rptr. 797, 525 P.2d 701;Hall v. City of Los Angeles, 19 Cal.2d 198, 201-203, 120 P.2d 13;Bozaich v. State of California, supra, p. 697, 108 Cal.Rptr. 392;Ruffino v. City of Los Angeles, 226 Cal.App.2d 67, 68, 37 Cal.Rptr. 765); they must be strictly complied with (Hall v. City of Los Angeles, supra, p. 201, 120 P.2d 13;Bozaich v. State of California, supra, p. 697); "failure to file a claim is fatal to the cause of action"(City of San Jose v. Superior Court, supra, p. 454, 115 Cal.Rptr. p. 802, 525 P.2d p. 706;Shelton v. Superior Court, 56 Cal.App.3d 66, 82, 128 Cal.Rptr. 454, and see authority there collected); and "It is well-settled that (such) claims statutes must be satisfied"(City of San Jose v. Superior Court, supra, p. 455, 115 Cal.Rptr. p. 802, 525 P.2d p. 706).

As has been pointed out the state's Legislature has prescribed, as a condition precedent to recovery of overpayment of income taxes, the filing with the Franchise Tax Board of a claim for refund.(SeeRev. & Tax.Code, §§ 19051-19064.)Section 19055 states that: "Every claim for refund shall be in writing and shall state the specific grounds upon which it is founded."

In the case at bench, as we have seen, the claim for refund was made by, and on behalf of, the plaintiffs Lattin alone; no claim was made on behalf of the class which, by the subsequent action, they sought to represent.

There is no dispute, at least for the purpose of this appeal, whether the plaintiffs Lattin had filed a proper claim for refund on behalf of themselves.The issue accordingly narrows to whether, under the circumstances of the case, a claim for refund on behalf of the complaint's purported class was also required, or was excused.

We are of the opinion that the issue is resolved by the recent case of City of San Jose v. Superior Court, supra, 12 Cal.3d 447, 115 Cal.Rptr. 797, 525 P.2d 701.City of San Jose was concerned with other statutes requiring filing of claims against the State of California and lesser public entities before commencement of an action against them.A question posed (p. 453, 115 Cal.Rptr. p. 801, 525 P.2d p. 705) was whether the "claims statutes prohibit the maintenance of class actions against governmental entities."In concluding that they did not, the court considered in depth the effect of claims statutes generally on class actions commenced against public entities.

The court(p. 454, 115 Cal.Rptr. p. 802, 525 P.2d p. 706) first reiterated the rule that: "(C)laims statutes require timely filing of a proper claim as condition precedent to the maintenance of the action. . . .Compliance with the claims statutes is mandatory . . . ; and failure to file a claim is fatal to the cause of action."

City of San Jose(p. 455, 115 Cal.Rptr. p. 802, 525 P.2d p. 706) then considered a contention that since the names and addresses of the members of a class are generally unknown to its proponent, it was impossible "for a class claim to satisfy the claims statutes . . . ."The court disagreed, holding (pp. 456-457, 115 Cal.Rptr. p. 803, 525 P.2d p. 707) that there must be "some (substantial) compliance with all of the statutory requirements; . . ."It then said (p. 457, 115 Cal.Rptr. p. 803, 525 P.2d p. 707): "We conclude 'claimant,' . . . must be equated with the class itself and therefore reject the suggested necessity for filing an individual claim for each member of the purported class. . . .(P) Thus, to satisfy the claims statutes, the class claim must provide the name, address, and other specified information concerning the representative plaintiff and then sufficient information to identify and make ascertainable the class itself.Because such information would meet the statutory requirements of name and address, any effort to identify the class would satisfy the some compliance test.Beyond this, the sufficiency of the identifying information must be measured by the substantial compliance test."

From this high authority it thus appears that, as a mandatory condition precedent to the commencement of a...