Trim, Inc. v. County of Monterey

• Decision Date: 21 November 1978
• Citation: 150 Cal.Rptr. 351,86 Cal.App.3d 539
• Parties: TRIM, INC., etc., Plaintiff and Appellant, v. COUNTY OF MONTEREY, State of California, etc., et al., Defendants and Respondents. Civ. 41138.
• Court: California Court of Appeals Court of Appeals

Page 351

150 Cal.Rptr. 351

86 Cal.App.3d 539

TRIM, INC., etc., Plaintiff and Appellant, v. COUNTY OF MONTEREY, State of California, etc., et al., Defendants and Respondents.

Civ. 41138.

Court of Appeal, First District, Division 3, California.

Nov. 21, 1978.

Hugo N. Gerstl, Gerstl & Gorman, Inc., Monterey, for plaintiff and appellant.

William H. Stoffers, County Counsel, Henry I. Jorgensen, Deputy County Counsel, Salinas, for defendants and respondents.

SCOTT, Associate Justice.

TRIM, Inc. appeals from a judgment entered upon the sustaining of a demurrer without leave to amend. Respondents are the County of Monterey and Donald P. Stewart, Tax Assessor of Monterey County. Appellant TRIM, Inc. is a California nonprofit corporation alleged to be the assignee of causes of action of certain named Monterey County taxpayers bringing the instant action on behalf of Monterey County taxpayers as a class. The corporate name TRIM is an acronym for Taxpayers Revolt in Monterey County.

The complaint sought injunctive relief and damages against the County of Monterey and its tax assessor. The complaint alleged that TRIM represented all real property owners/taxpayers in Monterey County. In an apparent inconsistency, the complaint also alleged that TRIM represented only those Monterey County real property owners/taxpayers who paid or were assessed real property taxes for 1975-1976 based upon assessment of their real property at 100 percent of true fair market value. The gravamen of TRIM's complaint was an allegation that some real property in Monterey County was properly assessed for property tax purposes at 100 percent of its fair market value, while other property in the county was assessed at substantially less than the fair market value. The complaint alleged that as a result of this discrepancy in assessment, the taxpayers represented by TRIM have paid a disproportionate share of the cost of services provided by the county. The complaint alleged that some taxpayers represented by TRIM filed a claim against the County of Monterey demanding reassessment of real property within the county or payment of damages to the claimants. The claim was rejected by the board of supervisors.

The complaint alleged and appellant contends that the action is authorized by Code of Civil Procedure section 526a, which provides in pertinent part as follows: "An action to obtain a judgment, restraining and preventing any illegal expenditure of, waste of, or injury to, the estate, funds, or other property of a county . . . may be maintained against any officer thereof . . . either by a citizen . . . or by a corporation, who is assessed for and is liable to pay . . . a tax therein."

The primary purpose of section 526a was to give a large body of citizens standing to challenge governmental actions, and California courts have consistently construed section 526a liberally to achieve this remedial purpose. (Blair v. Pitchess (1971) 5 Cal.3d 258, 269, 96 Cal.Rptr. 42, 486 P.2d 1242.) Taxpayers clearly have standing to challenge Illegal expenditures of funds by county officials under 526a (Blair v. Pitchess, supra, at p. 268, 96 Cal.Rptr. 42, 486 P.2d 1242), and may also sue to enjoin Wasteful expenditures (Los Altos Property Owners Assn. v. Hutcheon (1977) 69 Cal.App.3d 22, 29, 137 Cal.Rptr. 775, hg. den.).

In addition, section 526a has also been construed to authorize a taxpayer to contest the legality of a taxing statute. (Lundberg v. County of Alameda (1956) 46 Cal.2d 644, 298 P.2d 1, app. dism. 352 U.S. 921, 77 S.Ct. 224, 1 L.Ed.2d 157.) In Lundberg a taxpayer challenged the constitutionality of a tax exemption for nonprofit schools as operated by religious organizations. The rationale for this use of section 526a was stated in Ames v. City of Hermosa Beach (1971) 16 Cal.App.3d 146, 150-151, 93 Cal.Rptr. 786, 789 "(W)here government funds were employed . . . to enforce laws which are themselves unconstitutional . . . this use constitutes an 'illegal expenditure' in the context of Code of Civil Procedure, section 526a and may be remedied under that section by an injunction sought in a taxpayer's suit."

Appellant contends that its cause of action falls within Code of Civil Procedure section 526a because unequal assessment practices result in wasteful expenditure of county funds. Appellant reasons that more equitable assessment practices would mean more county revenues and thus more services could be provided, or conversely, that more equitable assessment would mean that the tax rate could be lowered without a reduction in services. Therefore, the county is now wasting funds.

However, the term "waste" as used in section 526a means more than an alleged mistake by public officials in matters involving the exercise of judgment or discretion. Although the court must not close its eyes to wasteful, improvident and completely unnecessary spending, it should not attempt to enjoin every expenditure which does not meet with a taxpayer's approval. (City of Ceres v. City of Modesto (1969) 274 Cal.App.2d 545, 555, 79 Cal.Rptr. 168.) A taxpayer complaining of government waste may state a cause of action under section 526a by alleging that funds are being expended for a project with no public benefit and no useful purpose (City of Ceres, supra, at p. 556, 79 Cal.Rptr. 168), or for a plan costing much more than any alternative plans considered, without a finding of any additional public benefit (Los Altos Property Owners Assn. v. Hutcheon, supra, 69 Cal.App.3d 22, 137 Cal.Rptr. 775).

Here, however, appellant makes no objection to any program or project, but merely generally alleges that the county is wasting money because it is not collecting all that it could in revenues. We conclude that these allegations are insufficient to state a cause of action for relief under Code of Civil Procedure section 526a.

We now turn to a consideration of whether appellant should have been granted leave to amend its complaint to attempt to state a cause of action. The principles to be applied to determining the sufficiency of a complaint against a general demurrer and the criteria for granting leave to amend were restated in Scott v. City of Indian Wells (1972) 6 Cal.3d 541, 549, 99 Cal.Rptr. 745, 750, 492 P.2d 1137, 1142:

"if upon a consideration of all the facts stated it appears that the plaintiff is entitled to any relief at the hands of the court against the defendants, the complaint will be held good, although the facts may not be clearly stated, or may be intermingled with a statement of other facts irrelevant to the cause of action shown, or although the plaintiff may demand relief to which he is not entitled under the facts alleged." (Citation.) (P) . . . great liberality should be exercised in permitting a plaintiff to amend his complaint, and it ordinarily constitutes an abuse of discretion to sustain a demurrer without leave to amend if there is a reasonable possibility that the defect can be cured by amendment."

Appellant should not be foreclosed from attempting to state a cause of action even though it would not be entitled to the relief sought under the facts alleged. Respondents contend, however, that under no circumstances could appellant state a cause of action since it has not exhausted its administrative remedies prior to seeking judicial relief from an alleged erroneous assessment. As a general rule, prior to seeking judicial relief from an erroneous assessment, a taxpayer must exhaust his remedies before the administrative body empowered initially to correct the error. (McCaslin v. DeCamp (1967) 248 Cal.App.2d 13, 15, 56 Cal.Rptr. 42.)

Respondents correctly contend that article 13, section 16 of the California Constitution provides for county boards of equalization, who shall "equalize the values of all property on the local assessment roll by adjusting individual assessments." The procedures to be followed by county boards of equalization are set forth in Revenue and Taxation Code sections 1601 and following.

Revenue...