Pacific Gas & Electric Co. v. State Bd. of Equalization

• Decision Date: 05 June 1980
• Docket Number: S.F. 24111
• Citation: 165 Cal.Rptr. 122,27 Cal.3d 277
• Parties: , 611 P.2d 463 PACIFIC GAS AND ELECTRIC COMPANY et al., Plaintiffs and Appellants, v. STATE BOARD OF EQUALIZATION, Defendant and Respondent.
• Court: California Supreme Court

Page 122

165 Cal.Rptr. 122

27 Cal.3d 277, 611 P.2d 463

PACIFIC GAS AND ELECTRIC COMPANY et al., Plaintiffs and Appellants, v. STATE BOARD OF EQUALIZATION, Defendant and Respondent.

S.F. 24111.

Supreme Court of California, In Bank.

June 5, 1980.

Rehearing Denied July 9, 1980.

Malcolm H. Furbush, Joseph I. Kelly, John C. Morrissey, Richard F. Locke, Patrick G. Golden, Richard H. Moss, San Francisco, Gordon Pearce, L. Earl Ligon, San Diego, John R. Bury, Robert J. Cahall, L. Christian Hauck and Philip Walsh, Rosemead, for plaintiffs and appellants.

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

MOSK, Justice.

Three public utility companies filed this action for mandamus and declaratory relief to compel the State Board of Equalization Board) to adjust the assessment of their real property to its 1975-1976 value in accordance with the recently enacted article XIIIA of the California Constitution. ¹ The Board refused to do so on the ground that article XIIIA, section 2, subdivision (a), refers only to county-assessed real property, whereas property owned by public utilities is assessed by the Board itself. (Cal.Const., art. XIII, § 19; Rev. & Tax.Code, § 751 et seq.)

We conclude that the utilities' action is barred as a procedural matter by article XIII, section 32, of the Constitution, and that their proper recourse is an action for refund under Revenue and Taxation Code sections 5096 and 5140.

Pacific Gas and Electric Company (PG&E) produces electricity, gas, steam and water, and owns property in 50 counties in California; Southern California Edison provides electricity only and owns property in 13 counties; San Diego Gas and Electric produces electricity, gas and steam, and owns property in 3 counties. As appraised by the Board in May 1978, their combined taxable property was valued in excess of $12 billion. A few weeks after article XIIIA became effective, PG&E requested a ruling from the Board regarding the applicability of the initiative's "rollback" provision to state-assessed public utility property. The Board declined to adjust its 1978 assessments of PG&E's property to conform with subdivision (a) of section 2. Its action was upheld by the superior court, which ruled that the rollback provision does not apply to state-assessed property and denied relief.

At the outset we must determine whether the action is barred because the utilities failed to proceed by payment of the tax and suit for refund. (Rev. & Tax.Code, §§ 5096, 5140.) ²

Article XIII, section 32, of the 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." ³

On its face the provision appears to bar actions of the type before us. It is certainly true that the assessment of real property is an integral part of the taxing process, and a court order invalidating an assessment will in effect "prevent or enjoin the collection" of the tax. (See Jillson v. Board of Supervisors (1963) 221 Cal.App.2d 192, 194, 34 Cal.Rptr. 419; cf. Modern Barber Col. v. Cal. Emp. Stab. Com. (1948) 31 Cal.2d 720, 723, 192 P.2d 916.) It is also the rule that a taxpayer may not circumvent restraints on prepayment tax litigation by seeking only declaratory relief. (Honeywell, Inc. v. State Bd. of Equalization (1975) 48 Cal.App.3d 907, 912, 122 Cal.Rptr. 243; Casey v. Bonelli (1949) 93 Cal.App.2d 253, 254, 208 P.2d 723; Louis Eckert B. Co. v. Unemploy. R. Com. (1941) 47 Cal.App.2d 844, 846, 119 P.2d 227.) ⁴

The utilities, however, seek to avoid the seemingly absolute bar of section 32 by asserting that they have no other adequate remedy at law. The payment and refund procedure is unsatisfactory, they urge, because it requires them to file claims in several counties. As authority, they cite San Diego etc. Ry. Co. v. State Board (1913) 165 Cal. 560, 132 P. 1044, in which the taxpayer-railroad challenged the Board's classification of certain property under the then-existing gross receipts tax. This court granted a writ of mandate on the ground that the taxpayer had no speedy and adequate remedy at law (id. at p. 564, 132 P. 1044), but the opinion offered no explanation as to why the available legal remedies were insufficient. The utilities contend that the answer to this question appeared a half century later in Starkist Foods, Inc. v. Quinn (1960) 54 Cal.2d 507, 6 Cal.Rptr. 545, 354 P.2d 1. The taxpayer in that case alleged that the assessment methods of the County of Los Angeles were unconstitutional and sought mandate to compel reassessment. We denied the writ because of the adequacy of the taxpayer's legal remedy, a refund claim; in passing, we distinguished San Diego on the ground that the taxpayer in that case would have been forced to sue for recovery from a number of local taxing authorities. (Id. at p. 512, 6 Cal.Rptr. 545, 354 P.2d 1.)

The utilities' reliance on San Diego and Starkist is misplaced. In 1913, when San Diego was written, the forerunner of section 32 read only that "no injunction" shall issue to interfere with tax collections. ⁵ As the taxpayer sought mandate, the court invoked the traditional test for determining the availability of that writ. (Code Civ.Proc., § 1085.) On the other hand, Starkist involved a county assessment, and hence did not require any analysis of section 32; ⁶ the availability of mandate to review claims asserted against county tax authorities is determined by the statutory test of section 1085. (See, e. g., Security-First Nat. Bk. v. Bd. of Supervisors (1950) 35 Cal.2d 323, 327, 217 P.2d 948; Valley Fair Fashions, Inc. v. Valley Fair (1966) 245 Cal.App.2d 614, 616, 54 Cal.Rptr. 306.) In context, the dictum in Starkist relied on by the utilities thus stands at most for the commonplace proposition that potential multiplicity of actions is a ground for the issuance of a discretionary writ under section 1085; it cannot be interpreted as establishing an "inadequate remedy at law" exception to the unequivocal constitutional prohibition against prepayment tax litigation.

The question therefore remains whether an "inadequate remedy at law" exception to the rule barring judicial interference with the state taxing process should now be recognized.

The earliest restraints on the use of judicial power to intervene in the collection of taxes, predating any explicit statutory or constitutional restrictions, were based merely on the traditional tests of equity: a taxpayer could receive equitable relief only if faced with an irreparable injury without adequate remedy at law. (De Witt v. Hays (1852) 2 Cal. 463, 468-469; Robinson v. Garr (1856) 6 Cal. 273, 275; Ritter v. Patch (1859) 12 Cal. 298; Sav. and Loan Society v. Austin (1873) 46 Cal. 415, 489; Crocker v. Scott (1906) 149 Cal. 575, 594-595, 87 P. 102.) Even in the absence of constitutional guidance, courts recognized the dangers inherent in delaying collection of needed public revenue and were extremely reluctant to interfere with the taxation process before payment. For example, the most severe financial hardship resulting in bankruptcy was judged not to be an irreparable injury sufficient to permit judicial intervention. (California v. Latimer (1938) 305 U.S. 255, 262, 59 S.Ct. 166, 169, 83 L.Ed. 159; Modern Barber Col. v. Cal. Empl. Stab. Com., supra, 31 Cal.2d 720, 732, 192 P.2d 916.)

Essentially the utilities' contention is that the adoption of section 32 and statutes similarly worded was a mere restatement of the former equity practice. But this thesis was firmly rejected, albeit in dictum, in Modern Barber Col. v. Cal. Empl. Stab. Com., supra, 31 Cal.2d at p. 725, 192 P.2d at p. 919: " 'The provision of the California Constitution is much more than a mere declaration of the rules generally applicable in proceedings for injunction, mandamus, or other legal or equitable relief.' . . . It follows that cases such as Miller v. Standard Nut Margarine Co., 284 U.S. 498, 52 S.Ct. 260, 76 L.Ed. 422, which discuss the various instances under which an injunction may be available according to the common-law rules of equity or under statutes restating them are not relevant here." Indeed, the utilities are unable to cite a single case in which mandate has been granted under the present constitutional restrictions. ⁷ On the contrary, in Aronoff v. Franchise Tax Board (1963) 60 Cal.2d 177, 180, 32 Cal.Rptr. 1, 3, 383 P.2d 409, one of the few decisions dealing directly with a forerunner of section 32, we held that the constitutional provision "operate(s) to prohibit issuance of the writ (of prohibition) prayed for." ⁸

The utilities complain they will be forced to litigate in more than 50 counties in order to recover their alleged overpayments, and the hardship of such a process should entitle them to a prepayment adjudication on the merits. While we agree that multiple-forum litigation is undesirable both from the viewpoint of the parties and the overburdened court system, the utilities' fears are exaggerated. They may actually proceed in a far more expeditious manner, either by coordinating their actions (Code Civ.Proc., § 404 et seq.; Cal.Rules of Court, rule 1501 et seq.) or by choosing a target forum and, in the event they receive a favorable judgment invalidating the Board's decision, obtaining refunds from the remaining counties through administrative procedures. (Rev. & Tax.Code, § 5096.) Public utilities in a similar position in the past have proceeded via a comparable method. (ITT World Communications, Inc. v. County of Santa Clara (1980) 101 Cal.App.3d 246, 162 Cal.Rptr. 186; Southern Cal. Tel. Co. v. Los Angeles (1941) 45 Cal.App.2d 111, 113 P.2d 773.)

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