Judge: Elaine Lu, Case: 22STCV34241, Date: 2023-03-07 Tentative Ruling

Case Number: 22STCV34241    Hearing Date: March 7, 2023    Dept: 26

Superior Court of California

County of Los Angeles

Department 26

Procedural Background

On October 25, 2022, Plaintiff Abdallah Zakaria and Oula Zakaria (jointly “Plaintiffs”) filed the instant tax refund action against Defendants County of Los Angles, Auditor-Controller of the County of Los Angeles, and Assessor of the County of Los Angeles (collectively “Defendants”).  The complaint asserts three causes of action for (1) Refund of Property Taxes, (2) Accounting, and (3) Declaratory Relief.

On January 24, 2023, Defendants filed the instant demurrer and motion to strike portions of the complaint.  On February 22, 2023, Plaintiffs filed an opposition to the demurrer and motion to strike.  On February 28, 2023, Defendants filed their replies.

Allegations of the Operative Complaint

            The complaint alleges that:

            Plaintiffs have been owners of 1821 Chastain Parkway East, Los Angeles, CA 90272 (“Subject Property”) since June 4, 2020.  (Complaint ¶ 10.)  Plaintiffs purchased the property for $3,361,000.00 after the Subject Property had been advertised for sale on the open marketplace for approximately 11 months and had been listed on several real estate websites.  (Id. ¶¶ 11-12.)

            “On December 31, 2020, Defendants issued a Notice of Supplemental Assessment wherein Defendants reassessed the taxable value of the Subject Property from $3,148,570 to $4,300,000.”  (Id. ¶ 13, Exh. A.)   This amount was incorrect as “[t]he correct Base Year Value for the Subject Property was $3,361,000 because that amount was the fair market value of the Subject Property at the time it was purchased by Plaintiffs.”  (Id. ¶ 15.)

            “Following the Notice of Supplemental Assessment, Defendants assessed and levied excessive and illegal property taxes against the Subject Property, including during fiscal years 2020-2021, 2021-2022, and 2022-2023.”  (Id. ¶ 16.)  “Plaintiffs paid all real property taxes assessed and levied by Defendants against the Subject Property for fiscal years 2020-2021 and 2021-2022.”  (Id. ¶ 18.)

            “Plaintiffs filed with the Los Angeles County Assessment Appeals Board (‘Assessment Appeals Board’) a timely appeal of the Supplemental Assessment of the Subject Property on January 25, 2021.”  (Id. ¶ 17.)  “A hearing on the appeal filed by Plaintiffs with the Assessment Appeals Board was held on February 10, 2022. At the hearing, Defendants conceded that the correct Base Year Value of the Subject Property was $3,361,000.”  (Id. ¶ 19.)  “Plaintiffs thereafter made demands to Defendants, and each of them to update their records to reflect the appropriate adjustments on the property tax bill(s) submitted to Plaintiffs and to issue a refund of property taxes improperly levied against the Subject Property and collected from Plaintiffs. To date, Defendants have failed to do so.”  (Id. ¶ 21.) 

            “Plaintiffs duly filed their Claim for Tax Refund with Defendants related to the foregoing acts and omissions of Defendants on or about March 21, 2022.”  (Id. ¶ 22, Exh. C.)  “Defendants confirmed receipt of Plaintiffs’ Claim for Tax Refund on March 24, 2022. 24.”  (Id. ¶ 23.)

            “To date, despite reasonable efforts by Plaintiffs, there has been a failure of Defendants to timely comply with the provisions of California Revenue and Taxation Code, including but not limited to sections 1604(c), 1604(c)(2), 1604(d)(1), and 1604(f)(1) related to the Subject Property. Further, Defendants failed to comply with the provisions of California Constitution Article XIIIA, Section 2(a) related to property valuation standards. Defendants further failed to comply with Revenue and Taxation Code section 405, et seq.”  (Id. ¶ 24.)

            “Defendants have failed to issue a refund of property taxes illegal and improperly collected from Plaintiffs in connection with the Subject Property and have failed to update all relevant tax records related to the Subject Property to correct the Base Year Value of the Subject Property. In fact, Defendants issued on or about October 9, 2022 an Annual Secured Property Tax Bill for the Subject Property for fiscal year July 1, 2022 to June 30, 2022 erroneously, falsely, arbitrarily, and illegally claiming that the net taxable value of the Subject Property is $4,431,438.”  (Id. ¶ 25, Exh. D.)

Legal Standard

Demurrer Standard 

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack; or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal 3d 311, 318.) No other extrinsic evidence can be considered (i.e., no “speaking demurrers”). (Ion Equipment Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881.)

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.)  When considering demurrers, courts “give the complaint a reasonable interpretation, and read it in context.”  (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)  In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice.  (Donabedian v. Mercury Ins. Co. (2004) 116 Cal. App. 4th 968, 994.)  “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters.  Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.”  (SKF Farms v. Superior Ct. (1984) 153 Cal. App. 3d 902, 905.)  “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.”  (Hahn, supra, 147 Cal.App.4th at 747.) 

Motion to Strike Standard

Motions to strike are used to reach defects or objections to pleadings that are not challengeable by demurrer (i.e., words, phrases, prayer for damages, etc.).  (See CCP §§ 435-437.)  A party may file a motion to strike in whole or in part within the time allowed to respond to a pleading.  However, if a party serves and files a motion to strike without demurring to the complaint, the time to answer is extended.  (CCP §§ 435(b)(1), 435(c).)

A motion to strike lies only where the pleading has irrelevant, false, or improper matter, or has not been drawn or filed in conformity with laws.  (CCP § 436.)  The grounds for moving to strike must appear on the face of the pleadings or by way of judicial notice.  (CCP § 437.)

Meet and Confer Requirement

Code of Civil Procedure § 430.41, subdivision (a) requires that “[b]efore filing a demurrer pursuant to this chapter, the demurring party shall meet and confer¿in person or by telephone¿with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” The parties are to meet and confer at least five days before the date the responsive pleading is due and if they are unable to meet the demurring party shall be granted an automatic 30-day extension.  (CCP § 430.41(a)(2).)  The demurring party must also file and serve a declaration detailing the meet and confer efforts.  (Id.¿at (a)(3).)¿ If an amended pleading is filed, the parties must meet and confer again before a demurrer may be filed to the amended pleading.  (Id.¿at (a).)  There is a similar meet and confer requirement for motions to strike.  (CCP § 435.5.)

Here, Defendants have fulfilled the meet and confer requirements.  (Kim Decl. ¶¶ 2-7.)[1]

Discussion – Demurrer

            Defendants demurrer to the second and third causes of action alleged against them.  Defendants assert that the second and third causes of action are barred because (1) the only remedy available to Plaintiffs is a tax refund action and (2) these causes of action are barred by Revenue and Taxation Code section 4807.

            Pursuant to Revenue and Tax Code section 4807, “[n]o injunction or writ of mandate or other legal or equitable process shall issue in any suit, action, or proceeding in any court against any county, municipality, or district, or any officer thereof, to prevent or enjoin the collection of property taxes sought to be collected.”  (Id.)
            “The Legislature passed section 4807 to conform with California Constitution, article XIII, section 32[.]”  (Merced County Taxpayers' Assn. v. Cardella (1990) 218 Cal.App.3d 396, 400.)  The state constitution provides in relevant part that “[n]o legal or equitable process shall issue in any proceeding in any court against this State or any officer thereof to prevent or enjoin the collection of any tax. After payment of a tax claimed to be illegal, an action may be maintained to recover the tax paid, with interest, in such manner as may be provided by the Legislature.”  (Cal. Const., art. XIII, § 32.)  “The language used in each of these provisions is nearly identical, and the policy behind both of them is the same: to allow revenue collection to continue during litigation so that essential public services dependent on the funds are not unnecessarily interrupted. [Citation.] Thus, cases involving the application of California Constitution, article XIII, section 32 are relevant to the resolution of this case.”  (Merced County Taxpayers' Assn., supra, 218 Cal.App.3d at p.400.)

            “[T]he constitutional provision not only bars prepayment actions by taxpayers seeking injunctive relief but ordinarily also bars those seeking declaratory relief or mandamus.  (Loeffler v. Target Corp. (2014) 58 Cal.4th 1081, 1101.)  “‘[T]he sole legal avenue for resolving tax disputes is a postpayment refund action. A taxpayer may not go into court and obtain adjudication of the validity of a tax which is due but not yet paid’; the constitutional provision prohibits ‘not only injunctions but also a variety of prepayment judicial declarations or findings which would impede the prompt collection of a tax’ … In sum, ‘[t]he section applies if the prepayment judicial determination sought would impede tax collection.’ [Citation.]”  (Id. at pp.1101–1102.)  Similarly, under Revenue and Tax Code section 4807, “[b]ecause a tax refund action provides property owners with an adequate remedy at law, equitable actions for mandamus, injunctive, and declaratory relief generally are unavailable to obtain judicial review of a local assessment appeals board decision.”  (William Jefferson & Co., Inc. v. Orange County Assessment Appeals Bd. No. 2 (2014) 228 Cal.App.4th 1, 11.)

            Here, the Complaint alleges that Defendants imposed an excessive property tax on the Subject Property which Plaintiffs paid and then appealed to the Assessment Appeals Board which issued a finding that the imposed property tax was excessive.  (Complaint ¶¶ 13-20.)  However, despite this finding, no final opinion was issued by the Assessment Appeals Board as Defendants have continued to impose the excessive tax and refuse to issue the refund.  (Id. ¶ 24.)  The third cause of action for declaratory relief seeks “a judicial determination that: (1) Defendants erroneously, falsely, arbitrarily, and illegally assessed the property tax against the Subject Property; (2) as a result of this erroneous, false, arbitrary, and illegal assessment, Plaintiffs are entitled to a refund of the extra property taxes paid to Defendants above and beyond what should actually have been assessed.”  (Id. ¶ 39.)  This claim is clearly barred because Plaintiffs seek to have this Court issue the final opinion of the Assessment Appeals Board.  As noted above, “declaratory relief [is] generally [] unavailable to obtain judicial review of a local assessment appeals board decision.”  (William Jefferson & Co., Inc., supra, 228 Cal.App.4th at p.11.)  Moreover, by seeking declaratory relief, Plaintiffs seek to enjoin future imposition of the property tax on the Subject Property – i.e., an seeking enjoinment of a tax.

            As to the accounting cause of action, the legal remedy of a refund action precludes accounting as a relief.

            “[A] cause of action for accounting need only state facts showing the existence of the relationship which requires an accounting and the statement that some balance is due the plaintiff.”  (Brea v. McGlashan (1934) 3 Cal.App.2d 454, 460.)  “ ‘Equitable principles govern [accounting actions], and the plaintiff must show the legal remedy is inadequate.’”  (Green Valley Landowners Assn. v. City of Vallejo (2015) 241 Cal.App.4th 425, 442.)

            As the Court of Appeal has explained, “[a] suit for a refund of taxes paid is an adequate remedy.”  (Little v. Los Angeles County Assessment Appeals Bds. (2007) 155 Cal.App.4th 915, 923.)  Because Plaintiffs have an adequately legal remedy, the claim for accounting is also barred.

            Therefore, Defendants’ demurrer to the second and third causes of action are SUSTAINED.

Discussion – Motion to Strike

            Defendants seek to strike the complaint at (1) Complaint, page 4, lines 16-17: “including but not limited to sections 1604(c), 1604(c)(2), 1604(d)(1), and 1604(f)(1) related to the Subject Property”, (2) Complaint, page 4, lines 19-20: “Defendants further failed to comply with Revenue and Taxation Code section 405, et seq.”, and (3) Complaint, page 5, paragraph 31: “Plaintiffs have been damaged in an amount to be proven at trial.”

Revenue and Taxation Code sections 1604(c), 1604(c)(2), 1604(d)(1), and 1604(f)(1)

            Defendants contend that the allegation that Defendants violated Revenue and Taxation Code sections 1604(c), 1604(c)(2), 1604(d)(1), and 1604(f)(1) is improper because the complaint concedes that Defendants did comply with those sections.  The Court disagrees.

            Revenue and Tax Code section 1604(d)(1) requires – in relevant part – that once a final determination by the Assessment board has been made “[t]he value so determined by the county board, plus appropriate adjustments for the inflation factor, shall be entered on the assessment roll for the fiscal year in which the value is determined.”  (Rev. & Tax. Code, § 1604(d)(1), [italics and bold added].)  As alleged, Defendants failed to enter the value found on the assessment role for the fiscal year in which the value is determined. 

            The complaint alleges that Plaintiffs paid the taxes and made a claim with the Assessment Appeals Board on January 25, 2021.  (Complaint ¶¶ 17-18.)  “On February 25, 2022, the Assessment Appeals Board issued its Board Action finding that the correct Base Year Value of the Subject Property is $3,361,000.”  (Id. ¶ 20, Exh. B.)  However, “Defendants issued on or about October 9, 2022 an Annual Secured Property Tax Bill for the Subject Property for fiscal year July 1, 2022 to June 30, 2022 erroneously, falsely, arbitrarily, and illegally claiming that the net taxable value of the Subject Property is $4,431,438.”  (Id. ¶ 25.)  According to the Complaint, Defendants have persisted in the false value after the Board Action’s finding, demonstrating that Defendants have not entered the True Base Year Value in the assessment roll for the fiscal year in which the value was determined.  (Rev. & Tax. Code, § 1604(d)(1).)  The Complaint sufficiently alleges that the property value has not been entered on the assessment roll and that Defendants have failed to issue a final opinion, in violation of sections 1604(c), 1604(c)(2), and 1604(f)(1).

            Therefore, there is no basis to strike these allegations.

Revenue and Taxation Code section 405 et seq.

            Revenue and Taxation Code section 405 requires that the assessor assess all taxable property in his county every year.  (Id.)  There is no allegation that Defendants have not assessed the Subject Property every year.  Rather, the claim is that the assessment was incorrectly done.  Thus, there is no basis for this allegation.  Defendants’ motion to strike the Complaint, page 4, lines 19-20: “Defendants further failed to comply with Revenue and Taxation Code section 405, et seq.” is GRANTED.

The Prayer for Damages

“In California, all government tort liability must be based on statute. ‘Government Code section 815, enacted in 1963, abolished all common law or judicially declared forms of liability for public entities, except for such liability as may be required by the federal or state Constitution. Thus, in the absence of some constitutional requirement, public entities may be liable only if a statute declares them to be liable.’ [Citation.]”  (Harshbarger v. City of Colton (1988) 197 Cal.App.3d 1335, 1339.)  Under Government Code § 815, “[a] public entity is not liable for an injury, whether such injury arises out of an act or omission of the public entity or a public employee or any other person.”  (Gov. Code, § 815(a), [italics added].)  Moreover, “[a] public entity cannot be held liable on an implied-in-law or quasi-contract theory.”  (Pasadena Live v. City of Pasadena (2004) 114 Cal.App.4th 1089, 1094; see also Lundeen Coatings Corp. v. Department of Water & Power (1991) 232 Cal.App.3d 816, 831 [“a public entity cannot be sued on an implied in law or quasi-contract theory, because such a theory is based on quantum meruit or restitution considerations which are outweighed by the need to protect and limit a public entity's contractual obligations.”].)  “‘Public entity’ includes the state, the Regents of the University of California, the Trustees of the California State University and the California State University, a county, city, district, public authority, public agency, and any other political subdivision or public corporation in the State.”  (Gov. Code, § 811.2.)

“[T]he plaintiff must plead facts sufficient to show his cause of action lies outside the breadth of any applicable statutory immunity.”  (Keyes v. Santa Clara Valley Water Dist. (1982) 128 Cal.App.3d 882, 886.)

            Defendants are a government entity and are immune from liability except as by statute.  Plaintiffs have not identified any statutory basis for damages.  Therefore, absent a statute enabling Plaintiffs to obtain damages from Defendants, there is no basis for the prayer for damages.  Accordingly, Defendants’ motion to strike the prayer for damages is GRANTED.

Leave to Amend

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the plaintiff to show the court that a pleading can be amended successfully. (Goodman v. Kennedy, supra, 18 Cal.3d at p. 348; Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.) 

Here, the second and third causes of action are barred as a matter of law.  Therefore, there is no reasonable possibility of a successful amendment.  As to the allegation that Defendant’s violated Revenue and Taxation Code section 405, et seq. and the prayer for damages, it is unclear whether Plaintiffs can successfully amend the complaint.  However, this is the first time that the Court has granted a motion to strike portions of Plaintiffs’ complaint on these grounds.  The Court finds it is proper to allow Plaintiffs an opportunity to cure the defects discussed in this order.  (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349; Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037.)  

CONCLUSIONS AND ORDER

Based on the foregoing, Defendants County of Los Angles, Auditor-Controller of the County of Los Angeles, and Assessor of the County of Los Angeles’ demurrer to the complaint is SUSTAINED WITHOUT LEAVE TO AMEND as to the second and third causes of action.

Defendants’ motion to strike is GRANTED WITH LEAVE TO AMEND as to Complaint, page 4, lines 19-20: “Defendants further failed to comply with Revenue and Taxation Code section 405, et seq.”, and Complaint, page 5, paragraph 31: “Plaintiffs have been damaged in an amount to be proven at trial.” The motion to strike is otherwise DENIED.

Plaintiffs are to file an amended complaint within twenty (20) days of notice of this order.

The case management conference is continued to May 17, 2023 at 8:30 am.

            Moving Parties are to give notice and file proof of service of such.

DATED:  March 7, 2023                                                        ___________________________

Elaine Lu

                                                                                    Judge of the Superior Court