Stutrud v. City of Rohnert Park, A118408 (Cal. App. 9/25/2008)

• Decision Date: 25 September 2008
• Docket Number: A118408
• Court: California Court of Appeals Court of Appeals
• Parties: PAUL D. STUTRUD et al., Plaintiffs and Appellants, v. CITY OF ROHNERT PARK, Defendant and Respondent.

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PAUL D. STUTRUD et al., Plaintiffs and Appellants, v. CITY OF ROHNERT PARK, Defendant and Respondent.

A118408

Court of Appeal of California, First Appellate District, Division Two

September 25, 2008

Not to be Published

Appeal from the Sonoma County, Super. Ct. No. SCV237482.

RICHMAN, J.

In Neecke v. City of Mill Valley (1995) 39 Cal.App.4th 946 (Neecke), this court held that a suit against a municipality for a refund of taxes allegedly exacted in violation of Proposition 13 could not be maintained as a class action because it lacked statutory authorization. As part of that holding, we also concluded that a representative suit authorized by Code of Civil Procedure section 382 did not displace the more specific provisions governing refund actions in the Revenue and Taxation Code. Only last year, in Batt v. City and County of San Francisco (2007) 155 Cal.App.4th 65 (Batt), we reiterated these holdings, and further held that the principle that class action refund actions could not be maintained against a municipality without express statutory approval could not be evaded by attempting to recast a refund claim in the guise of different causes of action.

The appeal here, like Neecke, involves an alleged violation of a constitutional provision, in this case, California Constitution, article XIII D, which was added by Proposition 218. Like Neecke and Batt, the plaintiffs here attempted to maintain a class action for refund of amounts assessed by a municipality. Like Neecke and Batt, that action is not statutorily authorized. We therefore conclude that the trial court did not err in striking the allegations purporting to expand an individual action for refund into an action on behalf of all municipal property owners who have allegedly been assessed sewer fees and charges in violation of Proposition 218. Like Batt, we decline to allow artful pleading to punch a hole in the principle that class actions cannot be maintained against a municipality without express statutory approval. However, we also conclude that the trial court erred in striking a prayer for attorney fees because that involves an issue that may not resolved at the pleading stage. Thus, we affirm in part and reverse in part.

BACKGROUND

This is the second appeal in this case. The start of the dispute is described in our opinion on the first appeal as follows:

"Plaintiff Paul D. Stutrud believed the City of Rohnert Park (City) had enacted an increase in sewer service charges in a way that did not comply with article XIII D of the California Constitution (Article XIII D) . . . [¶] Plaintiff, `individually and on behalf of all others similarly situated,' filed a `Complaint for Refund of Unlawful Fee for Property Related Service' against the City [on September 26, 2005]. He alleged that he is a residential homeowner, and required by City ordinances to connect his property to the municipal sewer system. City ordinances also require that `unpaid sewer charges become a lien on the real property.' In February 2005, over his written protest, the city council adopted an increase in sewer service charges.<sup>1</sup> After plaintiff paid the first bill for the increased charges, he demanded a refund from the City on the ground that the `sewer . . . rate increases are in violation of Article XIII D, section 6 of the California Constitution.' After the City denied a refund, plaintiff commenced this action.

"Plaintiff alleged that `City violated Article XIII D of the California Constitution in the manner set forth in the written objections by Plaintiff to wit: [¶] (a) The City failed to notify the record holder of the parcels to be affected by the proposed sewer rate increases of the public hearing by mail as required by Article XIII D of the California Constitution, section 6(a)(1). [¶] (b) The Notice of Public Hearing . . . fail[ed] to set forth the basis on which the proposed sewer rate increases was calculated as required by Article XIII D of the California Constitution, section 6(a)(1). [¶] (c) The City failed to give 45 days notice of the public hearing by mail to owners of the [affected] parcels as required by Article XIII D of the California Constitution, section 6(a)(2).'²

"Plaintiff requested `that this Court issue a declaratory judgment that the City sewer service is a property related service within the meaning of Article XIII D of the California Constitution and is subject to all of the limitations and requirements for the fee or charges for property related services as set forth in Article XIII D of the California Constitution except for the requirements that fee increases be approved by the voters.' He also prayed for refund of `all sewer service charges unlawfully exacted,' . . . a permanent injunction prohibiting the City from `requesting, demanding or in any way enforcing the increases in sewer charges' [, and `attorney's fees pursuant to section 1021.5 of the Code of Civil Procedure'].

"The City filed a general demurrer on the ground the complaint did not state facts sufficient to state a cause of action [citation] because `the challenged fees are not subject to Proposition 218,' the 1996 initiative measure that enacted Article XIII D, `and even if they were, the City did not violate Proposition 218 by adopting the challenged fees.' The City argued that Article XIII D applied to fees or charges for property related services, but the sewer service increases were not related to ownership of real property: `Here, not all property owners pay the subject charges. Rather, only owners or occupants who use the sewer system pay the charges. Specifically, property owners do not need to connect to the sewer system if the subject property is located more than 300 feet away from a sewer line. [Citation.] Further, any user of the system may be billed for the service, whether or not they are property owners. [Citation.] Thus, the subject fees are not imposed "as an incident of property ownership." (Cal. Const., art XIII D, § 2, subd. (e).) Rather, they are imposed on the basis of use (i.e., whether a person generates sewage which flows into the City's system, and if so, how much). Therefore, the sewer use fees are excluded from the definition of "fee" or "charge" used in Proposition 218.' The City further argued that the Court of Appeal in Howard Jarvis Taxpayers Assn. v. City of Los Angeles (2000) 85 Cal.App.4th 79, had recognized this distinction by holding that municipal water service charges which were based on the amount of water consumed were not covered by Proposition 218." (Stutrud v. City of Rohnert Park (Dec. 12, 2006, A113357) [nonpub. opn.] (Stutrud I).)

The trial court sustained the City's demurrer without leave to amend, and entered a judgment of dismissal. Stutrud appealed. During the pendency of Stutrud's appeal, the California Supreme Court rejected the construction of Article XIII D embraced by the City, in Bighorn-Desert View Water Agency v. Verjil (2006) 39 Cal.4th 205. In light of this authority, we held that Stutrud had stated a cause of action and the case should go forward:

"Article XIII D was enacted for the benefit of property owners, and it should not be up to property owners to take affirmative steps that will excuse municipal compliance with Article XIII D. We therefore hold that the increased sewer charges challenged plaintiff's complaint `burden landowners as landowners' and are `exactions levied solely by virtue of property ownership.' [Citation.] [¶] Section 6, subdivision (c) of Article XIII D does not require that the increased charges be put to a vote of the citizens of Rohnert Park, but subdivisions (a) and (b) do require that the charges cannot be implemented unless the City complies with specified notice and hearing procedures. The conclusion is inescapable that plaintiff's complaint does state a cause of action for the City's failure to comply with the procedures of section 6 of Article XIII D." (End of quotation from Stutrud I, quoting Apartment Assn. of Los Angeles, County, Inc. v. City of Los Angeles (2001) 24 Cal.4th 830, 842 (Apartment Assn.).)

The City reacted quickly. The same month our opinion was filed, the City mailed notice of a public hearing concerning the charges already imposed, and future collection of the same charges. A City document states that "A public hearing was held . . . on January 23, 2007. Two written protests were received, and thus do not constitute a majority protest." Because there had not been a protest from a majority of property owners affected, the city council introduced an "Uncodified Ordinance of the City of Rohnert Park Regarding Sewer Service Charges." The following month, on February 13, 2007, the city council adopted that ordinance, thereby reenacting the charges established by the 2005 ordinance.

Three days later, Stutrud filed a first amended class action complaint. This time he was joined as plaintiff and putative class representative by Stephen N. Bosshard, who sued "on behalf of themselves, and all other similarly situated." The suit was described as "a class action seeking refunds, disgorgement, and/or restitution for a class of City . . . . sewer customers, . . . and an injunction to enjoin the City from charging illegal sewer fees." Stutrud and Bosshard (hereafter plaintiffs) alleged that they "bring this suit as a class action under Section 382 of the Code of Civil Procedure on behalf of the following class of persons: [¶] Residential sewer customers in the City . . . who paid sewer fees from April 1, 2005 through the date judgment is entered . . . in this action." The class was alleged to comprise "approximately 8000 Sewer Customers who were overcharged" by the City.

Plaintiffs attacked the substantive justification for the increased charges: The claimed 124% increase in the cost of maintaining facilities was "false." "Furthermore, the City frequently carries a substantial balance in its sewer enterprise fund which indicates that its revenues far exceed the...