Woosley v. State

• Court: California Court of Appeals
• Writing for the Court: LUCAS; DMV argues that the commerce clause does not apply at all, because Mr. Woosley was a consumer not involved in the business of buying and selling vehicles. The case cited by DMV; BOREN; BOREN; ASHBY
• Citation: Woosley v. State, 266 Cal.Rptr. 385, 6 Cal.App.4th 343 (Cal. App. 1990)
• Decision Date: 31 January 1990
• Docket Number: No. B015832,B015832
• Parties: Previously published at 227 Cal.App.3d 1053, 234 Cal.App.3d 647, 6 Cal.App.4th 343 227 Cal.App.3d 1053, 234 Cal.App.3d 647, 6 Cal.App.4th 343 Charles Patrick WOOSLEY, individually and on behalf of all others similarly situated, Plaintiff and Respondent, v. STATE of California et al., Defendants and Appellants. Civ.

Page 385

266 Cal.Rptr. 385

Previously published at 227 Cal.App.3d 1053, 234 Cal.App.3d 647, 6 Cal.App.4th 343

227 Cal.App.3d 1053, 234 Cal.App.3d 647, 6 Cal.App.4th 343

Charles Patrick WOOSLEY, individually and on behalf of all others similarly situated, Plaintiff and Respondent, v. STATE of California et al., Defendants and Appellants.

Civ. No. B015832.

Court of Appeal, Second District, Division 5, California.

Jan. 31, 1990.

Certified for Partial Publication. ^*

As Modified on Denial March 1, 1990.

Review Granted May 31, 1990.

John K. Van de Kamp, Atty. Gen., Edmond B. Mamer, Philip C. Griffin and Richard E. Nielsen, Deputy Attys. Gen., for defendants and appellants.

Patrick Woosley, in pro. per.

Donald C. Turpen, Gansinger, Hinshaw, Buckley & Schauer and James M. Gansinger, Busetti & Rolin and John F. Busetti, Los Angeles, for plaintiff and respondent.

LUCAS, Presiding Justice.

This is a class action for taxpayer refunds of excessive vehicle license fees (VLF) and use taxes collected by the Department of Motor Vehicles of the State of California (DMV). It challenges the practice of the DMV in collecting higher taxes on vehicles originally purchased outside California than on similar vehicles originally purchased in California. The trial court ruled in favor of the plaintiff individually and in favor of the class. The court concluded that excessive taxes had been illegally collected and that this is a proper class action for taxpayer refunds, and rendered a judgment against the state for the refunds. The DMV appeals from this judgment contending that the trial court erred, both on the merits and in certifying the action as a class action. The plaintiff also appeals on a separate issue involving an award of fees.

SUMMARY OF TRIAL COURT RULING

Vehicle license fees are determined in accordance with a formula specified in Revenue and Taxation Code sections 10753 and 10753.2. ¹ Use taxes are also affected by this formula; for the purpose of use taxes on vehicles purchased other than from a manufacturer or dealer, section 6276 establishes a rebuttable presumption that the sales price is the same as the VLF market value.

In 1967 the Legislature amended section 10753 to provide that the market value for VLF be determined by the California suggested base price established by the manufacturer as shown by the window sticker required by federal law. The DMV erroneously interpreted this section to mean that if the vehicle was first sold outside of California, the suggested base price formula did not apply, and that the market value for purposes of both the VLF and the use tax must be the actual cost price to the purchaser. In addition, the DMV misinterpreted the depreciation schedule in section 10753.2, which begins "with the year first sold to a consumer as a new vehicle," by erroneously concluding that if the vehicle was first sold outside of California, the depreciation schedule would start with the year the vehicle was first registered in California. As a result of these erroneous interpretations, identical vehicles were charged significantly higher VLF and use taxes if they were originally purchased outside of California than if originally purchased in California.

The trial court concluded that DMV's interpretation, resulting in significantly higher fees and use taxes for non-California vehicles, (1) was erroneous and not intended by the Legislature nor required by the statutory language, (2) discriminated against interstate commerce in violation of the federal constitution and (3) denied the taxpayers equal protection of the law in violation of the federal and state constitutions. As to these claims the trial court certified a class (labeled the discrimination class) consisting of "[a]ll persons in the State of California who from within three years prior to October 20, 1977 to the date of refund, were charged and paid more license fees or use taxes for registration of vehicles previously registered or titled outside of the State of California because those fees or taxes were based on the actual cost of those vehicles rather than on the statutorily presumed price, in violation of the Commerce Clause of the Constitution of the United States and of the Equal Protection Clause of the Constitutions of both the United States and California."

In 1976, pursuant to an interagency agreement with the State Board of Equalization (SBE) the DMV changed its interpretation of section 6276, and began collecting use tax on both California and non-California used vehicles based on the actual cost price to the purchaser, and requiring the purchaser to produce a cost certificate. The trial court held this interpretation contravened the rebuttable presumption in section 6276 that the sales price is the amount determined for VLF purposes. The court held this interpretation was invalid because (1) it was not adopted as a regulation pursuant to the Administrative Procedure Act and (2) it was contrary to the legislative intent of section 6276. For purposes of this ruling the trial court certified a second class (labeled the post-1976 class) consisting of "[a]ll persons in the State of California who since November 14, 1976, have paid excess use taxes for registration of motor vehicles because of the illegal abandonment of the statutory presumption of R & TC Section 6276."

The trial court awarded attorney's fees to class counsel and a special fee to plaintiff Woosley as class representative.

SUMMARY OF OUR HOLDING

We affirm in part and reverse in part with directions. We hold:

(1) As to the discrimination class, the trial court correctly held that DMV's procedures imposing higher vehicle license fees and use taxes on vehicles originally purchased in other states was not required by statute, and unlawfully discriminated against interstate commerce in violation of the federal Constitution. We need not consider the equal protection argument. (Part I)

(2) As to the post-1976 class, the trial court correctly held that DMV's 1976 change in practice, by which it began calculating use tax for all vehicles on the basis of cost price to the purchaser, was unlawful and contrary to the intent of section 6276. (Part II)

(3) Various arguments raised by the DMV involving pleadings, exhaustion of administrative remedies, and other technical issues are without merit. (Part III, not for publication.)

(4) The trial court did not abuse its discretion in certifying this action as a class action. (Part IV)

(5) The question of fees for cross-appellant Woosley should be redetermined by the trial court on remand; if the court determines that Woosley is entitled to attorney's fees, it must then re-examine the overall reasonableness of all attorneys' fees awarded. (Part V)

FACTUAL BACKGROUND

Vehicle License Fees

The VLF is imposed upon the market value of the vehicle and is in lieu of personal property taxes. (§§ 10753, 10758.) Prior to the 1967 amendment to section 10753, the market value was determined "upon the basis of the California delivered prices as established by the manufacturers or distributors in their selling agreements with authorized dealers as of the time the particular make and year model is first offered for sale in California." (Former § 10753, subd. (a), stats. 1965, ch. 231, § 1, p. 1204.) The DMV obtained this price information from manufacturers by correspondence. The DMV compiled and maintained a loose-leaf VLF rate book for virtually all makes, models and years of vehicles built before the 1968 model year, assigning all vehicles to classes of monetary values in $200 ranges as contemplated by section 10753.2. All like vehicles, whether California or nonresident, were treated the same in the rate book. There was no discrimination between resident and nonresident vehicles prior to 1967.

The DMV lobbied the Legislature for a change in the method of determining VLF, arguing that manufacturers objected to giving prices and that during the beginning of a model year there were significant delays in obtaining information from the manufacturers by correspondence.

The Legislature amended section 10753 in 1967 to provide a formula based on the "California suggested base price" as "suggested by the manufacturer" as "reflected on the price listing affixed to the vehicle pursuant to the Federal Automobile Information Disclosure Act of 1958." (Former § 10753, subd. (g), stats. 1967, ch. 435, § 1, p. 1648.)

The DMV dramatically changed its interpretation after the 1967 amendment, claiming that if a vehicle was first sold outside of California, there could be no "California suggested base price." In the absence of a "California suggested base price," contended the DMV, the market value of the nonresident vehicle must be determined on the basis of its cost price to the purchaser. ²

Although the DMV was already aware that assessing fees based on cost rather than upon manufacturer's suggested base price would result in significantly higher revenues, the DMV commissioned a study to determine the impact of its post-1967 practice of basing VLF for non-California vehicles on cost but for California vehicles on the sticker base price. This study, completed in 1969, showed that "significantly more" fees were assessed by the cost method than the formula or "ratebook" method. The DMV staff noted that the study "emphatically underlines the gross inequities of a dual tax system, 'base price' and 'cost price,' in assessing like vehicles differently, depending on the place of purchase."

Increasing disparity between VLF for nonresident and resident vehicles was shown by certain statistical runs prepared by the DMV in the regular course of business:

             Period       Avg.  VLF Per Veh.    Disparity
                Nonres.  1/1/74"12/31/74       $21.17            22.27%
                Cal.                           $17.26
                Nonres.     1/75"12/3/75       $21.65            26.9%
                Cal.                           $17.06
                Nonres.  7/1/76"12/31/76       $35.84

...