Lorco Properties, Inc. v. Department of Benefit Payments

Decision Date29 April 1976
Citation57 Cal.App.3d 809,129 Cal.Rptr. 312
PartiesLORCO PROPERTIES, INC., Petitioner and Appellant, v. CALIFORNIA DEPARTMENT OF BENEFIT PAYMENTS AND the DIRECTOR thereof et al., Respondents. Civ. 47202.
CourtCalifornia Court of Appeals Court of Appeals

David Silverton and S. Dwayne Chasteen, Los Angeles, for petitioner and appellant.

Evelle J. Younger, Atty. Gen., Philip C. Griffin, and Rodney Lilyquist, Jr., Deputy Attys. Gen., for respondents.

HANSON, Associate Justice.

Lorco Properties, Inc. (hereinafter referred to as Lorco) appeals from a judgment of the trial court denying Lorco's mandamus petition and affirming the determination of the California Unemployment Insurance Appeals Board (hereinafter referred to as Appeals Board).


In 1965 Lorco became subject to the provisions of the Unemployment Insurance Code and was assigned account No. 155-- During the quarter ending June 30, 1973, Lorco again began to report taxable wages and pay unemployment contributions to the Department. On August 22, 1973, the Department notified Lorco that it had been assigned a new account, No. 225--2432, because its former account was cancelled. Lorco then initiated further administrative proceedings.

9508 by the Department of Benefit Payments (hereinafter referred to as Department). Lorco reported taxable wages and paid unemployment contributions to the Department through June 30, 1968. Thereafter, Lorco continued to file contribution returns with the Department showing no taxable wages. On June 30, 1972, the Department cancelled Lorco's account by an automatic data processing operation.

On October 24, 1973, Lorco made written request to Department to transfer the reserves credited under its former account to its new account pursuant to Unemployment Insurance Code section 1051. On November 14, 1973, the Department denied the request for transfer.

On November 27, 1973, Lorco petitioned the Appeals Board, which affirmed the decision of the referee. Thereupon Lorco sought judicial review of the Appeals Board's action by petitioning for writ of mandate.

After hearing, the trial court discharged the writ and entered judgment in favor of the Appeals Board and all respondents in this action.


Lorco contends that it is entitled to a writ of mandate compelling the Appeals Board to transfer its old account to its new account because Unemployment Insurance Code section 1029 1 is unconstitutional in that it provides for neither notice nor hearing prior to cancellation of a reserve account.


We are limited on this appeal to a determination of whether the trial court was correct in discharging the writ of mandate. (Agnone v. Hansen (1974) 41 Cal.App.3d 524, 116 Cal.Rptr. 122.)

It appears that Lorco by its course of conduct has been seeking to obtain an increase in its reserve account balance, by having its former balance credited to its new account to thus gain a more favorable tax rate. The situation is best understood by reference to the statutory unemployment insurance system, an adequate explanation of which is found in the case of John Breuner Co. Perluss (1963) 220 Cal.App.2d 163, 164--165, 33 Cal.Rptr. 580, 580--581:

'The California Unemployment Insurance Act makes provision for differences in the tax rate applicable to individual employers based upon the employer's experience with the risk of unemployment. (Unemp.Ins.Code, pt. 1, ch. 4.) The use of this system of variable rates stems from the Federal Social Security Act of 1935, as amended. The federal act was designed in part to induce the states to enact unemployment insurance legislation. The federal statute provides for a 3 per cent tax on employers but permits an offset against this tax up to 90 per cent for payments made to support an approved state system of unemployment insurance. The federal statute sets up standards and requirements to which state legislation must conform in order that an employer be eligible for the 90 per cent credit against the federal tax. The California Unemployment Insurance Act is expressly declared to be a part of the national plan of unemployment reserves and social security (Stats.1935, ch. 352, § 2; Unemp.Ins.Code, § 101).

'The reduction described in the federal statute is available only on the basis of the employer's experience with the risk of unemployment, or other factors having a direct relation to the risk of unemployment, during not less than three consecutive years immediately preceding the computation date. (26 U.S.C., § 3303(a)(1).) In compliance with federal law an experience rating formula is used in California. The formula may be expressed thus:

'A separate account is maintained by respondent for each employer. As to each account the cumulated contributions represent payment of taxes by the employer; the cumulated charges represent benefit payments made to employees separated from employment with the employer; base period wages are taxable wages paid by the employer over a three-year period, divided by three. Thus the denominator is in fact the average of taxable wages over a three-year period.

'The reserve ratio determined by the use of the formula is applied to a tax schedule in effect for the year for which the computation is made. Under the tax schedule, the higher the reserve ratio the lower the tax rate. The reason for this is simply that when an employer's reserve ratio is high it indicates his experience with unemployment has been good and his percentage of unemployment relatively low, and this results in a favorable rate of tax.'

It is clear that under this system of accounting the reserve account is utilized as a basis for adjusting the employer's tax rate according to the experience rating the employer receives. Lorco would not be entitled under this system to receive a tax rate lower than that of a new employer, once its new account is opened, because for the three years immediately preceding its reserve account was not subject to charges for unemployment benefits. (Unemp.Ins.Code, § 982.)

Lorco contends that section 1029 is unconstitutional because it fails to provide for notice to the employer and the opportunity for a hearing before the reserve account is cancelled. (Sniadach v. Frmily Finance Corp. (1969)395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349; Randone v. Appellate Department (1971) 5...

To continue reading

Request your trial
7 cases
  • Interstate Brands v. Unemployment Ins. Appeals Bd.
    • United States
    • California Supreme Court
    • 10 Abril 1980
    ...23 112 Cal.Rptr. 872.)Also distinguishable, although for an entirely different reason, is the case of Lorco Properties, Inc. v. Department of Benefit Payments (1976) 57 Cal.App.3d 809. 129 Cal.Rptr. 312, where it was held that the provisions of section 1029 (providing for the automatic canc......
  • California v. Grace Brethren Church United States v. Grace Brethren Church Grace Brethren Church v. United States
    • United States
    • U.S. Supreme Court
    • 18 Junio 1982
    ...prohibit the courts from enjoining the collection of unemployment insurance taxes. Lorco Properties, Inc. v. Department of Benefit Payments, 57 Cal.App.3d 809, 815, 129 Cal.Rptr. 312, 315 (1976). Recently, in Pacific Gas & Electric Co. v. State Board of Equalization, 27 Cal.3d 277, 279, 165......
  • Retirement Fund Trust of Plumbing v. Franchise Tax Bd.
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • 16 Julio 1990
    ...unemployment contributions, has an adequate remedy at law in a refund action against EDD. Lorco Properties, Inc. v. California Dept. of Benefit Payments, 57 Cal.App.3d 809, 129 Cal.Rptr. 312 (1976). Most of the provisions approved of by the Grace Brethren Court apply to the withholding proc......
  • Pacific Gas and Elec. Co. v. State Bd. of Equalization
    • United States
    • California Court of Appeals Court of Appeals
    • 16 Octubre 1979
    ...sought a refund, have done so on the basis that petitioner had an adequate remedy at law. (Lorco Properties, Inc. v. Department of Benefit Payments (1976) 57 Cal.App.3d 809, 129 Cal.Rptr. 312; Aronoff v. Franchise Tax Board of State of California (9th Cir. 1965) 348 F.2d 9.) Significantly, ......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT