People v. Coit Ranch, Inc.

• Decision Date: 23 May 1962
• Citation: 204 Cal.App.2d 52,21 Cal.Rptr. 875
• Court: California Court of Appeals Court of Appeals
• Parties: PEOPLE of the State of California, Plaintiff and Appellant, v. COIT RANCH, INC., Defendant and Appellant. Civ. 27.

Page 875

21 Cal.Rptr. 875

204 Cal.App.2d 52

PEOPLE of the State of California, Plaintiff and Appellant, v. COIT RANCH, INC., Defendant and Appellant.

Civ. 27.

District Court of Appeal, Fifth District, California.

May 23, 1962.

Hearing Denied July 18, 1962.

Stanley Mosk, Atty. Gen., Paul M. Joseph, Deputy Atty. Gen., Sacramento, Richard Z. Lamberson, Fresno, for plaintiff and appellant.

L. Kenneth Say, Fresno, Hutchinson & Quattrin, J. Albert Hutchinson, San Francisco, for defendant and appellant.

BROWN, Justice.

This appeal originated in two actions consolidated for trial. Since the nature and of pleadings in both cases are substantially identical, they will be herein referred to in the singular. The facts may be summarized as follows: as follows:

By order dated March 31, 1959, the Director of Agriculture levied an assessment, recommended by the Cantaloupe Advisory Board, upon California cantaloupe producers and handlers, for successive periods during the 1959 marketing season, under a marketing order issued by the director pursuant to the California Marketing Act of 1937, as amended. (Agr.Code, §§ 1300.10-1300.30.) The assessment provided for a combined rate allocated proportionately to administrative and inspection expense and advertising and sales promotion expense. (Agr.Code, § 1300.17(c).)

Defendant, a producer and handler of cantaloupes, paid that portion of the assessment allocated to defray administrative and investigation expense, but refused to pay that portion allocated to the expense of advertising and sales promotion.

These suits brought by the Attorney General to collect the unpaid portions of the assessment for six successive periods, to impose civil penalties, for collection costs, court costs and for injunctive relief followed. Defendant raised affirmative defenses, only one of which is relevant here, i. e., that the provisions of the marketing order conferring authority upon the Board to advertise and promote sales of cantaloupes expressly provided that, '* * * such plans or programs make no false or unwarranted claims on behalf of cantaloupes, * * *' and that one item of advertising violated this prohibition by representing '* * * that California Cantaloupes are 'picked fully ripe and rushed to you on ice.' That such advertising is false in that California cantaloupes are not shipped and/or rushed to any market on ice and further, that California cantaloupes are not picked fully ripe.' Defendant also interposes cross-complaints praying for a declaratory judgment in respect to the assessment and for an injunction. To the cross-complaints plaintiff interposed the defense of governmental immunity.

After a nonjury trial but prior to judgment, plaintiff made motions to strike the defenses and cross-complaints, for summary judgment and for judgment on the pleadings. For the first time the doctrine that defendant had failed to exhaust an administrative remedy and the court was thereby precluded from granting judicial relief made its appearance in the case. The motions were denied.

The trial court made findings of fact and conclusions of law, and entered judgment for plaintiff for $10,458.95, accrued interest of $1,007.81, civil penalties of $6 ($1 for each of six violations), $230.70 costs of suit, and enjoined the defendant from carrying on business, either directly or indirectly, as a producer or handler of cantaloupes within the State of California, without first paying the amounts of the assessment and interest. Both parties appeal.

Exhaustion of Administrative Remedy as a Condition Precedent to Obtaining Judicial Relief

Defendant first contends that the court erred in determining that this is a proper case for application of the nonexhaustion doctrine. In support of its contention, defendant argues (1) that the doctrine, injected into the case by plaintiff after trial on the merits, came too late and hence the court was foreclosed from considering it; (2) that the appeal procedure set out in the marketing order is void, constituting an ultra vires act on the part of the director, since the statute failed to set up an administrative review remedy; (3) that, if the remedy is valid, defendant is not required to exhaust it before seeking judicial relief because it is couched in permissive, rather than mandatory, language; (4) that application of the rule should not be mae to defeat defenses and cross-complaints for declaratory relief and injunction; (5) and that, in any event, this case falls within either of two recognized exceptions to the rule, i. e., the entire advertising assessment was unlawful and void, and if application of the rule is upheld, defendant will suffer great and irreparable harm. Defendant's arguments have been answered by the decisional law of this state.

In Abelleira v. District Court of Appeal, 17 Cal.2d 280, 293, 109 P.2d 942, 950, 132 A.L.R. 715, our Supreme Court concluded '* * * that exhaustion of the administrative remedy is a jurisdictional prerequisite to resort to the courts.' (See also United States v. Superior Court, 19 Cal.2d 189, 194, 120 P.2d 26; Woodard v. Broadway Fed. S. & L. Assn., 111 Cal.App.2d 218, 221, 244 P.2d 467; 1 Witkin, California Procedure, Jurisdiction, § 44, p. 316.) A court may not acquire jurisdiction over the subject matter of a controversy by consent, waiver or estoppel (Sampsell v. Superior Court, 32 Cal.2d 763, 773, 197 P.2d 739; Unemp. Etc. Com. v. St. Francis Homes Ass'n, 58 Cal.App.2d 271, 275, 137 P.2d 64). Jurisdiction of a court over the subject matter may be challenged at any stage of the proceeding. Therefore, it is immaterial that the doctrine of nonexhaustion was not reserved in the pretrial order or raised prior to trial on the merits.

In United States v. Superior Court, supra, 19 Cal.2d 189, 120 P.2d 26, it was held that the requirement of exhaustion of administrative remedies applies not only to orders which are erroneous, but to those asssailed as a nullity because illegally adopted. At pages 194-195, at page 29 of 120 P.2d the court stated:

'But there is no substantial difference, insofar as the necessity for resort to administrative review is concerned, between an erroneous order and one which, it is claimed, is being executed in violation of statutory authority.

'Conceding the existence of such a distinction, however, the doctrine of exhaustion of administrative remedies is not so limited. For example, it lies within the power of the administrative agency to determine in the first instance, and before judicial relief may be obtained, whether a given controversy falls within the statutory grant of jurisdiction [citations]. And even where the statute sought to be applied and enforced by the administrative agency is challenged upon constitutional grounds, completion of the administrative remedy has been held to be a prerequisite to equitable relief [citations].'

(See also Brock v. Superior Court, 109 Cal.App.2d 594, 241 P.2d 283.) Thus, defendant's position that the appeals procedure contained in the marketing order is the invalid result of an ultra vires act will not aid it. It is for the director to first determine the extent of administrative authority before resort to the courts may be made. (Hill v. Brisbane, 66 Cal.App.2d 15, 151 P.2d 578.)

The rule of nonexhaustion is applied even though the administrative remedy is couched in permissive language. (Alexander v. State Personnel Board, 22 Cal.2d 198, 200, 137 P.2d 433; Clark v. State Personnel Board, 61 Cal.App.2d 800, 144 P.2d 84; Child v. State Personnel Board, 97 Cal.App.2d 467, 218 P.2d 52; United States v. Ruzicka, 329 U.S. 287, 67 S.Ct. 207, 91 L.Ed. 290; United States v. Turner Dairy Co., 7 Cir., 166 F.2d 1.)

The rule is applicable to preclude defenses (People v. West Publishing Co., 35 Cal.2d 80, 216 P.2d 441; People v. Sonleitner, 185 Cal.App.2d 350, 8 Cal.Rptr. 528; People v. Keith Railway Equipment Co., 70 Cal.App.2d 339, 161 P.2d 244); to actions for declaratory relief (Hoyt v. Board of Civil Service Commrs., 21 Cal.2d 399, 132 P.2d 804; Louis Eckert Brewing Co. v. Unemp. Reserves Com., 47 Cal.App.2d 844, 847, 119 P.2d 227; Walker v. Munro, 178 Cal.App.2d 67, 2 Cal.Rptr. 737); and to actions seeking injunctive relief (United States v. Superior Court, supra, 19 Cal.2d 189, 120 P.2d 26; Teeter v. Los Angeles, 209 Cal. 685, 687, 290 P. 11).

We cannot agree that the entire advertising assessment was unlawful and void so as to bring this case within the purview of cases cited by defendant, such as City & Co. of S. F. v. County of San Mateo, 36 Cal.2d 196, 222 P.2d 860; Security-First Nat. Bank v. County of L. A., 35 Cal.2d 319, 217 P.2d 946; and Parrott & Co. v. City & Co. of S. F., 131 Cal.App.2d 332, 280 P.2d 881. The cited cases tend to establish the proposition that a taxpayer is not required to exhaust an administrative remedy before a board of equalization where the tax is invalid in its entirety because the property taxed is either outside the jurisdiction of the taxing agency, is nonexistent, or is exempt. The underlying rationale is that the Board of Equalization has authority to adjust a tax by reclassification or revaluation of subject property, but lacks authority to adjudicate invalidity of the tax. Here, the assessment is a valid assessment, levied in accordance with procedures outlined in the Act, within the permissible statutory amount, designed to effectuate one of the primary purposes of the Act, and falling not upon this particular defendant alone, but upon all producers and handlers of cantaloupes within this State. Neither the assessment nor the purpose for which it was levied is invalid. The claimed illegality was born of a collateral, remote contract entered into between the Board and a private advertising agency. The Act expressly makes the director responsible for administration and enforcement of its terms. The question of whether the Board has acted illegally or has entered into a contract for an illegal...