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HOWARD JARVIS TAXPAYERS ASSOCIATION et al., Plaintiffs and Appellants, v. CITY OF LA HABRA et al., Defendants and Respondents.
O P I N I O N
In this case we are asked to decide when the statute of limitations commences to run on an action against a city which imposed a general tax on its residents without complying with the voter approval mandates of Proposition 62. (Gov.Code, §§ 53720-53730.) The respondents, City of La Habra (the City) and County of Orange (the County), contend the statute commenced to run on the date the City enacted its ordinance authorizing the tax. The trial court agreed and dismissed the action. The appellant, Howard Jarvis Taxpayers Association (HJTA), argues the statute commenced when our Supreme Court declared Proposition 62 to be constitutional, or in the alternative, that it commences to run anew each month when the tax is paid. We conclude the statute commenced to run on the date the ordinance was enacted and affirm.
* * *
Proposition 62 is a statewide initiative which was approved by the voters in November 1986. Among its provisions is a requirement that local governments may not impose any general tax until that tax is submitted to the electorate and approved by a majority of voters. (Gov.Code, § 53723.) Soon after the passage of Proposition 62, two appellate court decisions declared its voter approval requirements unconstitutional. (See City of Woodlake v. Logan (1991) 230 Cal.App.3d 1058, 282 Cal.Rptr. 27 [provisions requiring submission of new local taxes to voters and authorizing withholding of a local government's share of property taxes as a penalty for the failure to do so were unconstitutional]; City of Westminster v. County of Orange (1988) 204 Cal.App.3d 623, 251 Cal.Rptr. 511 [provision that voters must ratify general taxes enacted during a window period preceding effective date of proposition was unconstitutional].)
In December 1992, the City adopted Ordinance No. 1445 (the Ordinance), establishing a utility users' tax to raise revenue for general governmental purposes. The Ordinance was declared an emergency measure and became immediately effective upon its enactment. The Ordinance was not to become operative until May 1, 1993, when the utility tax would first begin to be collected. Relying on the cases declaring Proposition 62 unconstitutional, the City did not submit the Ordinance to the voters for approval. No challenges to the tax were filed.
In September 1995, our Supreme Court issued its opinion in Santa Clara County Local Transportation Authority v. Guardino (1995) 11 Cal.4th 220, 45 Cal.Rptr.2d 207, 902 P.2d 225 (Guardino). It held the voter approval requirements of Proposition 62 were constitutional and invalidated a tax imposed without voter approval. (Id. at p. 261, 45 Cal.Rptr.2d 207, 902 P.2d 225.)
On March 26, 1996, more than three years after the Ordinance was adopted, HJTA filed the instant action against the City and the County for declaratory relief (Code Civ. Proc., § 1060), taxpayer's injunctive relief (Code Civ. Proc., § 526a), and ordinary mandamus (Code Civ. Proc., § 1084). It sought a declaration that the City's utility tax was invalid under Government Code section 53723, an injunction against its enforcement, and a writ of mandate compelling the City to cease collecting the tax until approved by a majority of the voters. It also sought to compel the County to withhold from the City's share of property tax revenues, the amounts collected under the utility tax.
The City demurred on the grounds the declaratory relief and mandamus causes of action were barred by the three-year statute of limitations applicable to a liability created by statute (Code Civ. Proc., § 338, subd. (a)), and the taxpayer's injunctive relief cause of action failed to allege an illegal expenditure of public funds (Code Civ. Proc., § 526a). The trial court sustained the demurrer without leave to amend and judgment was entered in favor of the City. Although it decried the City's conduct in not having held an election, the court concluded the limitations period commenced when the Ordinance was enacted in December 1992. It also found the taxpayer's injunctive relief statute, Code of Civil Procedure section 526a, was inapplicable because HJTA was not seeking to enjoin the illegal expenditure of taxpayer funds, rather it was seeking to stop the collection of taxes.
I
Statute of Limitations
The primary issue in this case is: When did the statute of limitations begin to run? There is no dispute as to the facts; the issue is purely legal.1 The City argues the statute commenced to run on the date its ordinance was adopted; HJTA argues for a later date of accrual.
Government Code section 53723 provides, “No local government ․ may impose any general tax unless and until such general tax is submitted to the electorate of the local government ․ and approved by a majority vote of the voters voting in an election on the issue.” 2 It is undisputed that the City failed to comply with this mandate before it imposed its utility tax. It is also undisputed that because this action is one “upon a liability created by statute,” the three-year limitation period applies. (Code Civ. Proc., § 338, subd. (a).)
“Generally, a cause of action accrues and the statute of limitation begins to run when a suit may be maintained. Ordinarily this is when the wrongful act is done and the obligation or the liability arises, but it does not accrue until the party owning it is entitled to begin and prosecute an action thereon. In other words, a cause of action accrues upon the occurrence of the last element essential to the cause of action.” (County of San Diego v. Myers (1983) 147 Cal.App.3d 417, 421, 195 Cal.Rptr. 124, internal quotation marks and citations omitted.)
Here, there is no real dispute that the enactment of the Ordinance imposing the utility users without submitting it to the voters was an event giving rise to a cause of action. But HJTA has two arguments as to why we should find a later date of accrual. The first relates to the status of the case law at the time the ordinance was passed; the second, to the ongoing nature of the tax's collection. Neither has merit.
A. Issuance of the Supreme Court's Decision in Guardino Does not Commence the Statute of Limitations
After this appeal was filed and fully briefed, the same issue arose in McBrearty v. City of Brawley (1997) 59 Cal.App.4th 1441, 69 Cal.Rptr.2d 862.3 In McBrearty, HJTA finds support for its contention that it had no cause of action against the City until the Supreme Court issued its opinion in Guardino declaring Proposition 62 constitutional.
Factually, McBrearty is virtually identical. The City of Brawley adopted a utility tax ordinance, but in reliance upon Woodlake's declaration that Proposition 62 was unconstitutional, it did not seek voter approval of the tax. After the Supreme Court's opinion in Guardino was filed, more than three years after the ordinance imposing the tax was adopted, a citizen filed suit. The appellate court ruled the cause of action did not arise until Guardino was decided. It reasoned that because, under the controlling case law prior to Guardino, the plaintiff had no valid basis for seeking relief, she did not have a cause of action until Guardino overruled those cases. (McBrearty v. City of Brawley, supra, 59 Cal.App.4th at p. 1446, 69 Cal.Rptr.2d 862.)
We disagree with the analysis and reasoning of McBrearty, as it does not comport with the consistent rulings of our Supreme Court that “a change in the law, either by statute or by case law, does not revive claims otherwise barred by the statute of limitations.” (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1116, 245 Cal.Rptr. 658, 751 P.2d 923; see also Monroe v. Trustees of the California State Colleges (1971) 6 Cal.3d 399, 99 Cal.Rptr. 129, 491 P.2d 1105.)
Monroe v. Trustees of the California State Colleges, supra, 6 Cal.3d 399, 99 Cal.Rptr. 129, 491 P.2d 1105 is considered the seminal case on this issue. In Monroe, a state college professor was fired for failing to take a loyalty oath. The Supreme Court had earlier held the statute requiring the oath was constitutional, so the professor did not timely seek judicial review. When the Supreme Court subsequently overruled its earlier decision and declared the statute unconstitutional, the professor brought suit for reinstatement and back wages. The Supreme Court held the cause of action for back wages was time-barred. It was not impossible for the professor to bring his suit earlier, even if as a practical matter the contrary precedent would have dissuaded him from doing so. The Supreme Court stated, “No legal obstacle barred a judicial challenge to [the professor's] initial discharge, however, and the mere existence of a contrary precedent has never been considered sufficient to toll the running of the statute of limitations.” (Monroe v. Trustees of the California State Colleges, supra, 6 Cal.3d at p. 408, fn. 5, 99 Cal.Rptr. 129, 491 P.2d 1105.)
The Supreme Court revisited the issue in Jolly v. Eli Lilly & Co., supra, 44 Cal.3d 1103, 245 Cal.Rptr. 658, 751 P.2d 923. There, the plaintiff delayed bringing suit for injuries resulting from her mother's use of a pharmaceutical drug while in utero because the plaintiff could not identify the specific manufacturer of the drug supplied to her mother. The prevailing appellate court case, McCreery v. Eli Lilly & Co. (1978) 87 Cal.App.3d 77, 87, 150 Cal.Rptr. 730, held a plaintiff in such a case must identify the precise manufacturer of the drug. The Supreme Court rejected McCreery in Sindell v. Abbott Laboratories (1980) 26 Cal.3d 588, 612-613, 163 Cal.Rptr. 132, 607 P.2d 924, where it held that a plaintiff who was harmed by a defective drug and who was unable to identify the particular manufacturer could state a cause of action by joining defendants who manufactured a substantial percentage of the market share of the drug. The plaintiff then filed her suit. She attempted to avoid the bar of the one-year statute of limitations by arguing the issuance of the court's opinion in Sindell was what commenced the limitations period running. (Jolly v. Eli Lilly & Co., supra, 44 Cal.3d at p. 1114, 245 Cal.Rptr. 658, 751 P.2d 923.) But the court rejected the contention, noting, “Sindell did not provide plaintiff with the critical ‘fact’ that started the limitations period. Nor did it create a new tort with an independent starting date for purposes of the statute of limitations. Rather, Sindell demonstrated the legal significance of facts already known to plaintiff. The statute had started to run for plaintiff well before Sindell was decided.” (Jolly v. Eli Lilly & Co., supra, 44 Cal.3d at p. 1115, 245 Cal.Rptr. 658, 751 P.2d 923.)
The McBrearty opinion is flawed, as it gave little recognition to the long-standing Supreme Court authority which we are bound to follow. (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455, 20 Cal.Rptr. 321, 369 P.2d 937.) McBrearty suggests that Jolly v. Eli Lilly & Co., supra, 44 Cal.3d 1103, 245 Cal.Rptr. 658, 751 P.2d 923 and Monroe v. Trustees of the California State Colleges, supra, 6 Cal.3d 399, 99 Cal.Rptr. 129, 491 P.2d 1105 contained but general rules, which may be disregarded when the result is unfair; “We recognize that a judicial opinion in a civil case does not generally ‘supersede the operation of the statute of limitations so as to revive old claims which were not pursued because of a previously prevailing contrary rule of law, or to reincarnate dead causes which had fallen to the sword of the statute.’ [Citation.] However, strict application of the general rule in this case would have required [the plaintiff] to bring a lawsuit challenging the validity of the tax at a time when the legal landscape suggested her only chance of success would be upon review of the issue by the California Supreme Court. Short of such a herculean effort, the City could at no time have been compelled to conduct an election for the tax in question. This result would essentially thwart the intent of the electorate in passing Proposition 62, despite the confirmation of the validity of the initiative provisions in Guardino.” (McBrearty v. City of Brawley, supra, 59 Cal.App.4th at pp. 1446-1447, 69 Cal.Rptr.2d 862.)
We do not believe our Supreme Court's rulings provided for an “ unfairness” exception to the rule. Indeed, in Jolly v. Eli Lilly & Co., supra, 44 Cal.3d 1103, 245 Cal.Rptr. 658, 751 P.2d 923 it seemed to reject any such exception. The court noted the unanimous judicial precedent in accord with the rule that a change in law does not revive stale claims. (Id. at p. 1116, 245 Cal.Rptr. 658, 751 P.2d 923.) And, it concluded, in all cases regardless of the harsh results which could be worked by the rule, “it is justified in three ways. First, the rule encourages people to bring suit to change a rule of law with which they disagree, fostering growth and preventing legal stagnation. Second, the statute of limitations is not solely a punishment for slow plaintiffs. It serves the important function of repose by allowing defendants to be free from stale litigation, especially in cases where evidence might be hard to gather due to the passage of time. Third, to hold otherwise would allow virtually unlimited litigation every time precedent changed.” (Id. at pp. 1116-1117, 245 Cal.Rptr. 658, 751 P.2d 923.)
As to the plaintiff's plea that, under McCreery v. Eli Lilly & Co., supra, 87 Cal.App.3d 77, 150 Cal.Rptr. 730, at the time she learned of her injury her suit was barred, the Supreme Court had this to say, “Although in the latter part of 1978, McCreery ․ appeared to foreclose such a suit, that case was an intermediate appellate court decision. In this regard, the last word on the subject had not been spoken, and other Courts of Appeal were free to disregard that case. Therefore, plaintiff was not entirely forestalled, even as a practical matter, from bringing a timely suit.” (Jolly v. Eli Lilly & Co., supra, 44 Cal.3d at pp. 1117-1118, 245 Cal.Rptr. 658, 751 P.2d 923.)
Thus, we conclude that under Supreme Court precedent, we are unable to apply Guardino retroactively to revive HJTA's cause of action. The situation before us is no different than that facing the plaintiff in Jolly. In December 1992, the City adopted its allegedly illegal ordinance. HJTA cannot claim ignorance of the Ordinance; it was a matter of public record. Even though the appellate courts had held Proposition 62 unconstitutional, HJTA knew the Supreme Court had not yet spoken. It is absurd for HJTA to suggest it was forestalled or intimidated by the prevailing case law from filing its suit at the time the City passed its utility tax ordinance. HJTA was in fact the real party in interest in Guardino, a case it pursued in the face of the contrary appellate court cases for the express purpose of having them overruled.
B. No Continuous Accrual of the Cause of Action
We turn to HJTA's second argument for a later date of accrual of its cause of action based on the ongoing nature of the tax collection. HJTA contends that a cause of action to challenge the underlying legality of imposing the tax commences anew each time the tax is paid. We disagree.
The statute of limitations on the challenge to the legality of the Ordinance commenced to run when it was adopted. Ponderosa Homes, Inc. v. City of San Ramon (1994) 23 Cal.App.4th 1761, 29 Cal.Rptr.2d 26 is instructive. In that case, a developer sued a city for its imposition of a traffic mitigation fee as a condition of approval of a subdivision map. The court rejected the developer's contention the statute of limitations commenced with payment of the fee. It held the limitations period began to run on the date the city approved the subdivision map and imposed the fee. “The phrase ‘to impose’ is generally defined to mean to establish or apply by authority or force, as in ‘to impose a tax.’ [Citation.] There is a logical distinction between the act of imposing something and the act of complying with that which has been imposed. As applicable here, the phrase refers to the creation of a condition or fee by authority of local government; it is not synonymous with the act of complying with that condition or fee. Just as creation is different from compliance, so is ‘imposition’ of a fee different from payment thereof.” (Id. at p. 1770, 29 Cal.Rptr.2d 26, italics omitted.)
HJTA's reliance on Rider v. County of San Diego (1992) 11 Cal.App.4th 1410, 14 Cal.Rptr.2d 885 (Rider II ) is misplaced, as that case did not consider the accrual of a cause of action challenging the underlying validity of the tax. In Rider v. County of San Diego (1991) 1 Cal.4th 1, 2 Cal.Rptr.2d 490, 820 P.2d 1000 (Rider I ), the County of San Diego imposed a supplemental sales tax for construction of justice facilities. The ordinance imposing the tax was approved by a simple majority of the electorate, as authorized by a statute. (Id. at p. 5, 2 Cal.Rptr.2d 490, 820 P.2d 1000.) A taxpayer group timely challenged the ordinance, and the Supreme Court declared it unconstitutional under Proposition 13 (Cal. Const., art. XIII, § 4) because it was not approved by two-thirds of the voters. (Rider I, supra, 1 Cal.4th at p. 5, 2 Cal.Rptr.2d 490, 820 P.2d 1000.) The Supreme Court remanded the case to the appellate court for a determination of remaining issues, including how to redistribute the illegally collected taxes.
Rider II, supra, 11 Cal.App.4th 1410, 14 Cal.Rptr.2d 885 was the opinion on remand. It mentioned the statute of limitations in the context of claims filed with the State Board of Equalization for refunds of sales and use taxes. After noting that a claim for refund must be filed within three years of the overpayment under Revenue and Taxation Code sections 6902, subdivision (a), 6905 and 6932, the court commented that since all taxes were collected “between January 1, 1989, and February 13, 1992, the three-year statute of limitations within which refund claims can be submitted to the [State Board of Equalization] with regard to that tax is still running.” (Rider II, supra, 11 Cal.App.4th at p. 1419, 14 Cal.Rptr.2d 885.) Rider II did not consider the statute of limitations on a challenge to the very legality of a tax, only on a claim for refunds after the tax had been timely challenged. There is simply no rational connection between it and the case before us.
We also reject HJTA's argument that the refund procedure contained in the Ordinance establishes a continuously accruing statute of limitations. Section 18 of the Ordinance gives service suppliers three years to claim a refund for overpayments. Service users, i.e., consumers, must in turn seek a refund from the service supplier. That provision does not create an open-ended opportunity for a taxpayer to challenge the legality of the utility tax ordinance. It simply provides a procedure for claiming a refund for overpayments resulting from errors and/or faulty administration by the City.
Other cases cited by HJTA regarding the application of statutes of limitations to governmental entities attempting to collect taxes are also inapplicable. These cases only stand for the proposition that the statute of limitations on a governmental entity's collection action begins to run when the tax obligation becomes delinquent. (City of Los Angeles v. Belridge Oil Co. (1954) 42 Cal.2d 823, 271 P.2d 5; County Sanitation Dist. v. Superior Court (1990) 218 Cal.App.3d 98, 266 Cal.Rptr. 777.) We find no support in these cases for the contention that each tax payment triggers an extension of the statute of limitations to challenge the legality of the tax.
Finally, we reject HJTA's argument that conspiracy and nuisance law should be stretched to extend the statute of limitations. Under HJTA's theory, no challenge to a decision of a public agency or statute would ever be barred as long as there is someone who might be affected at any time in the future. There is a long line of cases that have disposed of this theory. (See Dillon v. Board of Pension Commrs. (1941) 18 Cal.2d 427, 116 P.2d 37 [pension plan]; Levald, Inc. v. City of Palm Desert (9th Cir.1993) 998 F.2d 680 [mobile home rent control ordinance]; De Anza Properties X, Ltd. v. County of Santa Cruz (9th Cir.1991) 936 F.2d 1084 [mobile home rent control ordinance].)
It has long been the rule that when a citizen has an ongoing right to collect a pension or other benefit from the government, the action to determine the existence of that right is separate and distinct from the action to recover any given installment. (County of San Diego v. Myers, supra, 147 Cal.App.3d at p. 422, 195 Cal.Rptr. 124.) Thus, the courts have routinely rejected the contention that the statute of limitations on an obligation to pay a public pension commences anew with each missed payment. (Dillon v. Board of Pension Commrs., supra, 18 Cal.2d at p. 430, 116 P.2d 37; Baillargeon v. Department of Water & Power (1977) 69 Cal.App.3d 670, 684, 138 Cal.Rptr. 338.) Although the right to receive periodic payments is a continuing one, before a plaintiff may claim the periodic payment, he or she must establish the right to the payment. “Consequently, even though a pension is an obligation payable in periodic installments, the right to entitlement must be established within the applicable period of limitations or otherwise all pension rights are barred, including installments falling due in the future.” (County of San Diego v. Myers, supra, 147 Cal.App.3d at p. 422, 195 Cal.Rptr. 124.)
Relying upon the pension cases, County of San Diego v. Myers, supra, 147 Cal.App.3d 417, 195 Cal.Rptr. 124 rejected the county's contention that its claim against the state for reimbursement of indigent medical care costs commenced anew each fiscal year when the reimbursement payments were not made. The court held the county first had to establish its right to the payments and that cause of action accrued as soon as it was notified by the state that it would no longer pay. (Id. at p. 422, 195 Cal.Rptr. 124.)
We find the reasoning of County of San Diego v. Myers, supra, 147 Cal.App.3d 417, 195 Cal.Rptr. 124 persuasive. The gravamen of HJTA's complaint is the legality of the adoption of an ordinance imposing a utility tax without complying with the voter approval requirements of Proposition 62. The legality of that act must be timely challenged and cannot be said to accrue continuously with each month's utility bill.
II
Taxpayer's Injunctive Relief: Code of Civil Procedure section 526a
HJTA's complaint also contained a cause of action under Code of Civil Procedure section 526a, a taxpayer's action to halt illegal expenditure of public funds, seeking a permanent injunction prohibiting the City from collecting the utility tax. It alleged the taxpayers “are required to pay these illegal taxes,” but contained no allegations about the illegal expenditure of public funds. It contends the trial court improperly sustained the demurrer as to that cause of action. We disagree.
Code of Civil Procedure section 526a provides 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 city may be brought by any taxpayer in that city. Although Code of Civil Procedure section 526a provides a remedy for a taxpayer who is seeking to prevent illegal expenditure of tax funds (Blair v. Pitchess (1971) 5 Cal.3d 258, 267-268, 96 Cal.Rptr. 42, 486 P.2d 1242), it does not authorize an injunction to prevent the illegal collection of a tax. “[T]he illegal governmental activity which is subject to taxpayer challenge in Code of Civil Procedure section 526a does not include activity characterized as illegal solely by reason of purportedly illegal tax collection.” (Daar v. Alvord (1980) 101 Cal.App.3d 480, 485-486, 161 Cal.Rptr. 658, original italics; see also McKendry v. County of Kern (1986) 180 Cal.App.3d 1165, 1170, 226 Cal.Rptr. 45.) The trial court properly dismissed the taxpayer's injunctive relief cause of action.
The judgment is affirmed. Respondents are awarded their costs on appeal.
FOOTNOTES
1. In reviewing a judgment of dismissal after a demurrer is sustained without leave to amend, we must assume the truth of all facts properly pleaded by the plaintiff, as well as those which are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.)
2. There is no dispute that this is a general tax, as it is imposed for general fund purposes. (Gov.Code, § 53721.)
3. We invited the parties to submit supplemental briefing on the McBrearty opinion.
SEYMOUR, J.* FN* Judge of the Orange County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
SILLS, P.J., and RYLAARSDAM, J., concur.
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Docket No: No. G020573.
Decided: August 27, 1999
Court: Court of Appeal, Fourth District, Division 3, California.
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