Traders Sports v. City of San Leandro

• Decision Date: 24 October 2001
• Docket Number: No. A092448.,A092448.
• Citation: 93 Cal.App.4th 37,112 Cal.Rptr.2d 677
• Court: California Court of Appeals Court of Appeals
• Parties: TRADERS SPORTS, INC. et al., Plaintiffs and Appellants, v. CITY OF SAN LEANDRO, Defendant and Respondent.

112 Cal.Rptr.2d 677

93 Cal.App.4th 37

TRADERS SPORTS, INC. et al., Plaintiffs and Appellants, v. CITY OF SAN LEANDRO, Defendant and Respondent.

No. A092448.

Court of Appeal, First District, Division 2.

October 24, 2001.

Certified for Partial Publication.^*

Review Denied Jan. 16, 2002.

James Leonard Crew, San Ramon, Jack Leavitt, Counsel for Appellants.

Meyers, Nave, Riback, Silver & Wilson, Andrea J. Saltzman, Benjamin P. Fay, San Leandro, Liane M. Randolph, City Attorney, Counsel for Respondents.

RUVOLO, J.

I. Introduction

Traders Sports, Inc. and several individuals¹ (collectively, Traders) brought this action against the City of San Leandro (San Leandro) challenging a three-percent gross receipts tax imposed by the voters of San Leandro on businesses, such as Traders, that sell concealable firearms and ammunition for concealable firearms. Traders principally alleged that the method for submitting the tax to the voters for their approval violated the procedure set out by Government Code section 53724, subdivision (b), (hereafter section 53724), which is part of Proposition 62, a statutory initiative adopted by the voters of California in 1986. Section 53724 prohibits an ordinance proposing such a tax from being put before the voters unless it has been "approved by a two-thirds vote of all members of the legislative body of the local government or district." Despite section 53724, the San Leandro City Council (City Council) approved placing the tax on the ballot by a simple majority, rather than a two-thirds vote of its members.

This appeal challenges the sustaining of San Leandro's demurrer to Traders' complaint without leave to amend. In conducting our review, this court is required to explore the limits of the power of a home rule charter city, such as San Leandro, to follow charter provisions and ordinances that are in conflict with state statutes. We conclude that, as a charter city, section 53724 cannot override San Leandro's core constitutional authority over the conduct of its local elections. (See Cal. Const., art. XI, § 5, subd. (a).) Accordingly, we affirm the trial court's judgment in favor of San Leandro because the two-thirds vote requirement of section 53724 is superseded by San Leandro's charter and municipal code, which allows a tax measure to be placed on the ballot by a simple majority vote of the City Council.

II. Facts and Procedural History

In reciting the facts, we are guided by well-settled principles governing appellate review after the sustaining of a demurrer without leave to amend. "`We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.' [Citation.]" (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58; see also Tensor Group v. City of Glendale (1993) 14 Cal.App.4th 154, 159, 17 Cal. Rptr.2d 639.) In accordance with these principles, we set out the following facts derived from the allegations of Traders' complaint and attached documents, which we judicially notice.

On March 2, 1998, by a four-to-three (4 to 3) majority vote, the City Council adopted "Resolution 98-27," which is at the center of this controversy. The resolution called for a special municipal election at which the voters of San Leandro would be asked to vote "Yes" or "No" on the following measure:

"Shall the ordinance providing for a 3 [percent] business license fee levied on firearms' dealers based on the sale of concealable firearms and ammunition be adopted?" This special election was consolidated with the general municipal election that was scheduled for June 2, 1998.

At the June 2,1998 general election, this measure, known as Measure H, received a majority of the vote and was passed. Measure H has been codified into the San Leandro Municipal Code as part of section 2-2-500. Measure H levies a business license tax on merchants within San Leandro measured at three percent of their gross sales attributable to the sale of firearms capable of being concealed upon the person and ammunition for such firearms, with the exception of sales to public agencies.

On July 16, 1998, Traders filed its original complaint against City. The complaint alleged that Measure H was a "an impermissible, confiscatory sanction on [appellants'] personal and property rights...." Among the various theories of recovery asserted was denial of equal protection of the laws, use of suspect classifications, racial animosity, imposition of improper burdens on the enjoyment of constitutionally guaranteed rights, and lack of a reasonable relationship between the fee imposed by Measure H and the services provided.

We are most concerned with the cause of action in Traders' complaint alleging that the San Leandro ordinance was invalid because the method by which the City Council placed it before the voters conflicted with state law. The complaint pointed out that Resolution 98-27, which placed Measure H on the ballot, passed by a fourto-three vote of the City Council. The complaint alleged that Measure H was "invalid and void" because it was placed on the ballot by an inadequate vote, citing section 53724. As already noted, section 53724 was enacted as part of Proposition 62, a statewide initiative. The intent of the initiative was to give the local electorate a greater degree of control over the exercise of local taxing power with the obvious goal of reducing the tax burden. (City of Westminster v. County of Orange (1988) 204 Cal.App.3d 623, 626, 635-638, 251 Cal.Rptr. 511; see generally Santa Clara County Local Transportation Authority v. Guardino (1995) 11 Cal.4th 220, 272-273, 45 Cal.Rptr.2d 207, 902 P.2d 225 [full text of Proposition 62 reprinted as appendix to opinion].) Section 53724 provides that:

"No tax subject to the vote requirement prescribed by Section 53723 [a category which includes Measure H] shall be presented at an election unless the ordinance or resolution proposing such tax is approved by a two-thirds vote of all members of the legislative body of the local government or district."

On December 3, 1999, San Leandro filed a motion for judgment on the pleadings arguing that Traders had failed to allege facts sufficient to constitute a cause of action under any theory. On April 3, 2000, the court entered an order granting San Leandro's motion for judgment on the pleadings, but giving Traders leave to amend. On April 10, 2000, Traders filed an amended complaint that was essentially identical to its original complaint. After the trial court sustained San Leandro's demurrer to Traders' amended complaint without leave to amend, judgment for San Leandro was entered. This appeal followed.

III. Discussion

A. Standard of Review—Demurrer

San Leandro argues that when a judgment is entered after a demurrer is sustained, the standard of review is abuse of discretion. This is only partially correct. "A demurrer tests the legal sufficiency of the complaint...." (Hernandez v. City of Pomona (1996) 49 Cal.App.4th 1492, 1497, 57 Cal.Rptr.2d 406; Sargoy v. Resolution Trust Corp. (1992) 8 Cal.App.4th 1039, 1041, 10 Cal.Rptr.2d 889.) On appeal from a dismissal after an order sustaining a demurrer, we review the order de novo, exercising our independent judgment about whether the complaint states a cause of action as a matter of law. (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125, 271 Cal.Rptr. 146, 793 P.2d 479, cert. den. 499 U.S. 936, 111 S.Ct. 1388, 113 L.Ed.2d 444; Desai v. Farmers Ins. Exchange (1996) 47 Cal. App.4th 1110, 1115, 55 Cal.Rptr.2d 276.) We give the complaint a reasonable interpretation reading it as a whole and viewing its parts in context. (Blank v. Kirwan, supra, 39 Cal.3d at p. 318, 216 Cal.Rptr. 718, 703 P.2d 58; see Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967, 9 Cal.Rptr.2d 92, 831 P.2d 317.) We deem to be true all material facts properly pled. (Serrano v. Priest (1971) 5 Cal.3d 584, 591, 96 Cal.Rptr. 601, 487 P.2d 1241, cert. den. 432 U.S. 907, 97 S.Ct. 2951, 53 L.Ed.2d 1079.) We must also accept as true those facts that may be implied or inferred from those expressly alleged. (Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403, 44 Cal. Rptr.2d 339.) If no liability exists as a matter of law, we must affirm that part of the judgment sustaining the demurrer. (See Baughman v. State of California (1995) 38 Cal.App.4th 182, 187, 45 Cal. Rptr.2d 82.)

While the decision to sustain or overrule a demurrer is a legal ruling subject to de novo review on appeal, the granting of leave to amend involves an exercise of the trial court's discretion. (Hernandez v. City of Pomona, supra, 49 Cal.App.4th at p. 1497, 57 Cal.Rptr .2d 406; see Moore v. Regents of University of California, supra, 51 Cal.3d at p. 125, 271 Cal.Rptr. 146, 793 P.2d 479; Desai v. Farmers Ins. Exchange, supra, 47 Cal. App.4th at p. 1115, 55 Cal.Rptr .2d 276.) When the trial court sustains a demurrer without leave to amend, we must also consider whether the complaint might state a cause of action if a defect could reasonably be cured by amendment. If the defect can be cured, then the judgment of dismissal must be reversed to allow the plaintiff an opportunity to do so. The plaintiff bears the burden of demonstrating a reasonable possibility to cure any defect by amendment. (Hendy v. Losse (1991) 54 Cal.3d 723, 742, 1 Cal.Rptr.2d 543, 819 P.2d 1; Blank v. Kirwan, supra, 39 Cal.3d at p. 318, 216 Cal.Rptr. 718, 703 P.2d 58; Baughman v. State of California, supra, 38 Cal.App.4th at p. 187, 45 Cal.Rptr.2d 82.) A trial court abuses its discretion if it sustains a demurrer without leave to amend when the plaintiff shows a reasonable possibility to cure any defect by amendment. (Aubry v. Tri-City Hospital Dist, supra, 2 Cal.4th at p. 967, 9 Cal. Rptr.2d 92, 831 P.2d 317; see Code Civ. Proc, § 472c.) If the plaintiff cannot show an...