Tyler v. State of California

• Decision Date: 12 August 1982
• Citation: 185 Cal.Rptr. 49,134 Cal.App.3d 973
• Court: California Court of Appeals Court of Appeals
• Parties: W. L. TYLER, Jr., etc., Plaintiff and Appellant, v. STATE of California, et al., Defendants and Respondents. Civ. 54170.

Page 49

185 Cal.Rptr. 49

134 Cal.App.3d 973

W. L. TYLER, Jr., etc., Plaintiff and Appellant, v. STATE of California, et al., Defendants and Respondents.

Civ. 54170.

Court of Appeal, First District, Division 4, California.

Aug. 12, 1982.

Hearing Denied October 7, 1982.

John W. Vaughn, Alameda, for plaintiff and appellant.

George Deukmejian, Atty. Gen., Matthew P. Boyle, Deputy Atty. Gen., San Francisco, for defendants and respondents.

CALDECOTT, Presiding Justice.

Plaintiff W. L. Tyler, Jr. appeals from the trial court's judgment dismissing the action after defendant State of California's demurrer to the complaint was sustained with leave to amend and Tyler failed to amend the complaint within the time prescribed.

The undisputed facts reveal that appellant, a California resident, owed an obligation for child support payments received on behalf of his minor child under the aid to families with dependent children (AFDC) program (42 U.S.C., §§ 651-662; Welf. & Inst.Code, §§ 11475-11489). Appellant's obligation had been established by judgment rendered in favor of Alameda County (Action No. 489185) and by operation of law was assigned to respondent State of California (Welf. & Inst.Code, § 11477; County of Santa Clara v. Support, Inc. (1979) 89 Cal.App.3d 687, 152 Cal.Rptr. 754; In re Marriage of Shore (1977), 71 Cal.App.3d 290, 139 Cal.Rptr. 349).

In 1979, appellant overpaid his state income tax by the sum of $321. Since appellant owed respondent an accumulated sum of $1,644 under the aforesaid judgment, the State Controller and the Department of Social Services offset the amount of tax refund against appellant's outstanding obligation pursuant to GOVERNMENT CODE SECTIONS 12419.4¹ and 12419.5.

The seminal issue presented on appeal is whether respondent was legally authorized to offset the tax refund in dispute against appellant's obligation pursuant to section 12419.5. Tyler argues that at the time here relevant the tax refund was held in a trust by the state and thus was not subject to the offset statute, citing Bonelli v. State of California (1977) 71 Cal.App.3d 459, 139 Cal.Rptr. 486. Respondent, in turn, maintains that a later amendment to the statute clarified that the tax refunds possess the characteristics of a simple debt and therefore could be offset against a debt owed by the taxpayer to the state.

At the time of the accrual of the cause of action section 12419.5 provided that: "The Controller may, in his discretion, offset any amount due a state agency from a person or entity, against any amount owing such person or entity by any state agency. The Controller may deduct from the claim, and draw his warrants for the amounts offset in favor of the respective state agencies to which due, and, for any balance, in favor of the claimant. Whenever insufficient to offset all amounts due state agencies, the amount available shall be applied in such manner as the Controller, in his discretion, shall determine. If, in the discretion of the Controller, the person or entity refuses or neglects to file his claim within a reasonable time, the head of the state agency owing the amount shall file the claim in behalf of such person or entity; if approved by the Controller it shall have the same force and effect as though filed by such person or entity. The amount due any person or entity from the State or any agency thereof is the net amount otherwise owing such person or entity after any offset as in this section provided." (Emphasis added.)

In interpreting the above code section, the court concluded in Bonelli that the income tax refund constituted a trust fund held in trust for the taxpayers and therefore, was not an amount owed to the taxpayers by the state within the meaning of the offset statute. However, Bonelli is distinguishable from the present case on its facts. In Bonelli, there was no issue of whether the tax refund constituted a trust fund as the State Controller specifically conceded that he was holding the funds in trust for the taxpayer. Thus Bonelli does not stand for the proposition that tax refunds are as a matter of law trust funds.

Furthermore, as respondent correctly points out, subsequent to the accrual of the cause of action, section 12419.5 was amended by the Legislature. The amendment effected in 1980, explicitly provides that "For purposes of this section [§ 12419.5] an amount owing to a person or entity by any state agency shall include any tax refund." (Stats.1980, ch. 572, § 1.) While it is true that as a general rule statutes are not to be given retroactive effect unless the intent of the Legislature cannot be otherwise satisfied (Di Genova v. State Board of Education (1962) 57 Cal.2d 167, 176, 18 Cal.Rptr. 369, 367 P.2d 865), an exception to the general rule is recognized in a case where the legislative amendment merely clarifies the existing law. (Balen v. Peralta Junior College Dist. (1974) 11 Cal.3d 821, 828, fn. 8, 114 Cal.Rptr. 589, 523 P.2d 629; Martin v. California Mut. B. & L. Assn. (1941) 18 Cal.2d 478, 484, 116 P.2d 71; State Bd. of Equalization v. Board of Supervisors (1980) 105 Cal.App.3d 813, 824, 164 Cal.Rptr. 739.) The rationale of this exception is that in such an instance, in essence, no retroactive effect is given to the statute because the true meaning of the statute has been always the same. (Stockton Sav. & Loan Bank v. Massanet (1941) 18 Cal.2d 200, 202, 114 P.2d 592.)

The case at bench falls squarely within the aforestated exception. In amending section 12419.5, the Legislature made express findings that the amendment became necessary because Bonelli had created some confusion with respect to the character of tax refunds; that the state tax refunds have the attributes of a simple debt and do not create a trust relationship between the taxpayer and the state; and finally that the provisions of section 12419.5 constitute a clarification and declaration of the existing law. (Stats.1980, ch. 572, § 2.) ²

Appellant's contention that we should ignore the legislative interpretation of the statute because the ultimate construction of the statute is an exercise of judicial rather than legislative power (People v. Childs (1980) 112 Cal.App.3d 374, 389-390, 169 Cal.Rptr. 183, overruled on other grounds in People v. Hernandez (1981) 30 Cal.3d 462, 179 Cal.Rptr. 239, 637 P.2d 706 and People v. Ramos (1982) 30 Cal.3d 553, 180 Cal.Rptr. 266, 639 P.2d 908) cannot be accepted. The law is well established that although construction of a statute is a judicial function, where a statute is unclear, a subsequent expression of the Legislature bearing upon the intent of the prior statute may be properly considered in determining the effect and meaning of the prior statute. (Bd. of Soc. Welfare v. County of L. A. (1945) 27 Cal.2d 90, 97, 162 P.2d 635; Friends of Lake Arrowhead v. Board of Supervisors (1974) 38 Cal.App.3d 497, 506, 113 Cal.Rptr. 539.) Also as amplified by authorities, the main characteristics of a trust relationship inter alia are: that the payor (trustor-beneficiary) retains the beneficial interest in the money paid (Rest.2d Trusts, § 12 coms. a and g ...