Pacific Gas and Elec. Co. v. State Bd. of Equalization

Decision Date16 October 1979
Citation159 Cal.Rptr. 60,97 Cal.App.3d 687
CourtCalifornia Court of Appeals Court of Appeals
PartiesPACIFIC GAS AND ELECTRIC COMPANY, et al., Plaintiffs and Appellants, v. STATE BOARD OF EQUALIZATION, Defendant and Respondent. Civ. 45898.

John C. Morrissey, Richard F. Locke, Patrick G. Golden, Richard H. Moss, San Francisco, for Pacific Gas & Electric Co.

John R. Bury, Robert J. Cahall, L. Christian Hauck, Philip Walsh, M. Patricia Marrison, Rosemead, for Southern California Edison Co.

Gordon Pearce, L. Earl Ligon, San Diego, for San Diego Gas & Electric Co.

George Deukmejian, Atty. Gen. of Cal., Ernest P. Goodman, Asst. Atty. Gen., Philip C. Griffin, Patti S. Kitching, Deputy Attys. Gen., Los Angeles, for defendant and respondent.

ROUSE, Associate Justice.

Plaintiffs, Pacific Gas and Electric Company, Southern California Edison Company and San Diego Gas and Electric Company, appeal from a judgment in favor of defendant, State Board of Equalization (hereafter board), declaring that article XIII A, section 2, subdivision (a), of the California Constitution, does not entitle plaintiffs to a reduction and rollback of the property tax assessments levied against them by defendant board.

Plaintiffs are public utility corporations which provide electricity, water, gas and steam throughout much of the state. In May 1978, the market value of plaintiffs' facilities was computed by the board in accordance with the then prevailing formula. One month later, the electorate approved article XIII A, an initiative amendment to article XIII, which provided, in pertinent part: " § 1. (P)(a) The maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to law to the districts within the counties. . . .

" § 2. (P)(a) The full cash value means the county assessor's valuation of real property as shown on the 1975-76 tax bill under 'full cash value' or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment. All real property not already assessed up to the 1975-76 full cash value may be reassessed to reflect that valuation. For purposes of this section, the term 'newly constructed' shall not include real property which is reconstructed after a disaster, as declared by the Governor, where the fair market value of such real property, as reconstructed, is comparable to its fair market value prior to the disaster."

In the latter part of June 1978, plaintiffs petitioned defendant board for a reconsideration of their respective assessments in light of the recently enacted amendments to article XIII. The board refused to adjust the assessments. It rejected plaintiffs' contention that the tax rate limitation of section 1, subdivision (a), and the valuation formula established in section 2, subdivision (a), applied to state-assessed property, despite the fact that this position was supported by the board's chief counsel.

On July 10, 1978, plaintiffs filed a petition for a writ of mandamus and declaratory relief in the superior court. The petition sought to compel the board to apply the "rollback" provisions of article XIII A, section 2, subdivision (a) to plaintiffs. The superior court issued an alternative writ of mandamus directed to the board on July 11, 1978.

The board demurred to the petition, and on August 2, 1978, after the matter had been argued, the court issued a minute order denying the writ and dissolving the alternative writ.

In an effort to have this issue resolved prior to the final preparation and distribution of the 1978-79 public utility tax rolls, plaintiffs filed a petition for writ of mandamus in the California Supreme Court on August 11, 1978. The petition was denied without opinion on August 21, 1978. At that time, the Supreme Court had not yet decided the constitutionality of Proposition 13.

On August 30, 1978, an order and judgment in the superior court action was filed, declaring that the provisions of article XIII A, section 2, subdivision (a), did not apply to state assessees such as plaintiffs. The court dissolved the alternative writ of mandate and denied the peremptory writ prayed for.

On appeal, we must first confront a procedural question, namely, whether plaintiffs, as a condition precedent to the commencement of the instant action, were required to pay the property taxes assessed and seek a refund. Defendant board argues that the proper remedy for plaintiffs was to pay the tax and then apply for a refund, pursuant to section 5096 et seq. of the Revenue and Taxation Code, in each of the counties in which plaintiffs own property. The board bases its position on three theories: first, the refund procedure provides an adequate remedy at law, therefore, the equitable action filed by plaintiffs is inappropriate; second, the state Constitution prohibits legal proceedings to enjoin the collection of taxes and favors the refund procedure provided for by statute; and, third, by not filing for a refund, plaintiffs have failed to exhaust their administrative remedies.

Equitable remedies such as a writ of mandamus can be barred by the presence of a legal remedy if that remedy is plain, speedy and adequate. (See Code Civ.Proc., § 1086.) Plaintiffs argue, convincingly, that since they own property in numerous counties (one of the plaintiffs owns property in 50 counties in the state), to pay the tax and then seek refunds in all these counties is not a plain, speedy and adequate legal remedy, and that their equitable action, therefore, should not be barred.

The major case in point is San Diego etc. Ry. Co. v. State Board (1913) 165 Cal. 560, 132 P. 1044. There, the petitioner sought mandamus in the California Supreme Court following the board's decision that petitioner's railroad was subject to county and local taxation. The court held that mandamus was a proper method to obtain review of the board's decision, since it involved a question of law and the railway had no other plain, speedy and adequate remedy. (P. 564, 132 P. 1044.) In a more recent decision, the California Supreme Court explained San Diego in these terms: "In that case mandamus issued to compel action by the state board to preclude local taxation of the petitioner's assets. The writ was timely to prevent the collection of local taxes and its denial would have compelled the petitioner to sue for recovery of taxes from a number of local taxing authorities." (Star-Kist Foods, Inc. v. Quinn (1960) 54 Cal.2d 507, 512, 6 Cal.Rptr. 545, 547, 354 P.2d 1, 4.)

In Hopkins v. Southern Cal. Tel. Co. (1928) 275 U.S. 393, 48 S.Ct. 180, 72 L.Ed. 329, the United States Supreme Court held that seeking a refund was not an adequate legal remedy when the refund procedure would require separate actions against one county and sixteen municipalities and when interest was not paid. (Pp. 399-400, 48 S.Ct. 180.) The court stressed that the necessity for separate actions kept the procedure from being adequate. We believe that the language in this case supports plaintiffs' position.

None of the cases cited by the board involves a situation where the taxpayer would be forced to seek refunds from a number of government agencies. Typical of the cases relied upon is Aronoff v. Franchise Tax Board (1963) 60 Cal.2d 177, 32 Cal.Rptr. 1, 383 P.2d 409. That case involved a group of taxpayers suing the California Franchise Tax Board over some deductions which had been rejected by the board. The taxpayers' refund action would have been brought solely against this one agency.

The board argues that the San Diego rationale is no longer applicable because modern procedures expedite the refund process. Specifically, the board points to section 404 of the Code of Civil Procedure and two class action cases. (Santa Barbara Optical Co. v. State Bd. of Equalization (1975) 47 Cal.App.3d 244, 120 Cal.Rptr. 609; Lattin v. Franchise Tax Board (1977) 75 Cal.App.3d 377, 142 Cal.Rptr. 130.) Section 404 allows for consolidation when civil actions sharing a common question of fact or law are pending in different courts. Under this section, plaintiffs would be forced to seek refunds in each and every county in which their property is located, followed by the filing of separate complaints, before seeking consolidation. Those cases cited by the board involve plaintiffs who had joined together in a class action against one agency, rather than an action instituted against several agencies. In this instance, even under modern procedures, the refund method does not constitute an adequate legal remedy.

Without an expeditious decision on the merits, plaintiffs would be required to initiate refund actions, followed by the filing of lawsuits, in over 50 counties. While these actions are pending, local taxing jurisdictions would be in doubt as to both the validity and amount of tax revenue to be budgeted. Significantly, at the June 14 hearing, the board indicated its concern with the need for a prompt resolution of the question. It is clear that the refund procedure is not a plain, speedy and adequate remedy which would serve as a bar to plaintiffs' equitable action.

The second theory advanced by the board is predicated upon article XIII, section 32, of the California Constitution: "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."

The courts which have applied this section and dismissed complaints where the petitioner sought judicial resolution of a tax dispute before having sought a refund, have done so on the basis that petitioner...

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