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District Court of Appeal, First District, Division 2, California.

FOSTER'S LUNCH SYSTEM, Limited, a corporation, Plaintiff and Appellant, v. James G. BRYANT, Director of the Department of Employment of the State of California, Defendant and Respondent.

GANTNER & MATTERN CO., a corporation, Plaintiff and Appellant, v. James G. BRYANT, Director of the Department of Employment of the State of California, Defendant and Respondent.

Civ. 16096, 16097.

Decided: October 25, 1954

Fabian D. Brown, San Francisco, for appellants. Edmund G. Brown, Atty. Gen., Irving H. Perluss, Asst. Atty. Gen., William L. Shaw, Deputy Atty. Gen., Vincent P. Lafferty, Deputy Atty. Gen., for respondent.

These are appeals from judgment of the Superior Court in and for the City and County of San Francisco, sustaining demurrers without leave to amend in two cases on Complaints to Recover Contributions paid by employers under the California Unemployment Insurance Act. The cases were not consolidated for trial, but the issues involved are identical and the appeals are submitted on identical briefs.

It is true, as contended by appellants, that if the complaints state a cause of action showing plaintiffs entitled to some relief, the general demurrers should not have been sustained without leave to amend, even though special demurrers were well taken. Hancock Oil Co. of California v. Hopkins, 24 Cal.2d 497, 150 P.2d 463; Wennerholm v. Stanford University School of Medicine, 20 Cal.2d 713, 718, 128 P.2d 522, 141 A.L.R. 1358.

Appellants contend that their actions were brought pursuant to provisions of Section 41.1 of the Unemployment Insurance Act, Statutes of 1949, Chapter 1441, Unemployment Insurance Code, §§ 1033–1038.

The provisions of Section 41.1 enacted in 1949, and pertinent here are as follows:

‘(a) The commission shall not less frequently than once each year furnish each employer with (1) an itemized statement of the charges to his account, and (2) a statement of his account showing the credits and charges, the net balance of his reserve and his contribution rate for the applicable rating period.

‘(b) The employer within sixty days after the date of mailing of any such statement, or within an additional period not exceeding sixty days which may for good cause be granted by the commission, may file with the commission a written protest on any item shown thereon. The protest shall set forth the specific grounds on which it is made. No such protest, however, may be made on the ground that a claimant was ineligible for a benefit payment where the employer was notified as required by this act and any authorized regulation of the filing of a claim for such benefits or of a determination of the claimant's eligibility therefor and either (1) such employer failed to file a timely appeal on such benefit claim, or (2) a final decision of a referee or of the appeals board affirmed the payment of such benefits.

‘Except as to corrections made by the commission as hereinafter provided, the contribution rate and other items shown on any such statement of charges or statement of account shall be final unless a protest is filed within the time herein prescribed.

‘The commission shall give notice to the employer of its action on a protest. Within thirty days of notice of disallowance of any protest the employer may file with the appeals board a petition for review of the protest. A decision of the appeals board in and such protest proceeding shall be subject to judicial review, as provided by law, if an appropriate proceeding is filed by the employer within sixty days of the date of mailing of such decision; provided, however, that the commission may in writing extend the time for a period of not exceeding two years from the time within which such proceeding may be instituted if written request for such extension is filed with the commission within the sixty-day period.

‘Prior to the expiration of the rating period to which a statement relates the commission shall give notice to the employer of the correction of any error which the commission finds in any statement of account or statement of charges.

‘If the correction increases the contribution rate the notice of correction shall be included in a notice of assessment of any applicable deficiency in contributions for the rating period and the procedures governing petitions for reassessment shall apply; if the correction reduces the contribution rate the notice of correction shall be included in a notice of the amount of any applicable overpayment of contributions paid for the rating period and the procedures governing claims for refund shall apply; otherwise any notice of correction shall be subject to protest and review in the same manner as in respect to an original statement of account or statement of charges.

‘(c) If a protest involving the contribution rate is pending when any contribution to which such rate relates is due, the employer shall pay the contribution at the rate shown in the statement furnished by the commission. Such a protest, however, shall constitute a claim for refund under Section 45.11, and if a final determination on the protest reduces the contribution rate the amount of overpayment shall be promptly credited or refunded as provided in Section 45.11.’

Section 45.11 of the Act, Unemployment Insurance Code, §§ 1181–1184, provides that: ‘Within 90 days after the mailing of the notice of the action by the appeals board upon a claim filed pursuant to this section, the claimant may bring an action against the commission on the grounds set forth in the claim in a court of competent jurisdiction in the County of Sacramento for the recovery of the whole or any part of the amount with respect to which the claim has been disallowed, * * *.’ (Emphasis ours.) Unemployment Insurance Code, § 1182.

The complaints herein, filed February 6, 1952, allege that plaintiffs are employers subject to the California Unemployment insurance Act, who paid contributions thereunder to defendant during the years from 1936 to date, that defendant as required by statute kept account of all such contributions and all benefits paid to employees and charged against plaintiffs' accounts, and that during such period defendant charged against the accounts of plaintiffs certain sums in error ($33,818 in the case of Foster's; $26,968 in the case of Ganter & Mattern); that on May 31, 1950, defendant pursuant to statute furnished each plaintiff with a statement showing that said sum had been charged against each plaintiffs' account; that each plaintiff duly protested pursuant to statute ‘upon receiving statements thereof pursuant to statute the said items charged to said account of plaintiff * * * within the time and in the manner required by law; that said protest was denied by defendant and thereafter, pursuant to said statute and the rules of the California Department of Employment, * * * said plaintiffs appealed the order overruling said protest to the California Unemployment Insurance Appeal Board, which said appeal was denied.’

In the complaint of Foster it is then alleged that by reason of the foregoing, plaintiff was required for the year 1944 to pay unemployment insurance taxes upon its payroll at the rate of 2.7% which rate should have been 1.5%, resulting in over-payment of $21,948.97; that for 1945, the rate was 2% but should have been 1.5%, resulting in over-payment of $9,131.01; that for 1946 the rate was 1.5%, but should have been 1%, resulting in over-payment of $10,201.32. For the years 1947, 1948, and 1949, there are blanks for the rate charged, the rate which it is alleged should have been charged, and the amount of over-payment.

In the complaint of Gantner & Mattern it is alleged that plaintiff was required to pay for the year 1944 at the rate of 2.7% instead of 1%, resulting in over-payment of $22,000. The allegation for 1944 is repeated with blanks for rate paid, rate that should have been paid, and amount of over-payment. The same pattern is repeated in allegations for the years 1946, 1947, 1948 and 1949.

The prayer for relief in each complaint asks that the Court review the said proceeding and account, and render judgment removing said charges from the account, and for a definite sum with interest for the years 1944, 1945, 1946, 1947, 1948 and 1949.

Appellants' theory on appeal is that a cause of action is stated under the statute inasmuch as this is clearly a suit for a refund of taxes overpaid by reason of erroneous charges against appellants' accounts for benefits paid to former employees. Appellants say that Section 45.1 formerly provided that after the overruling of the protest, an action could be brought in Superior Court to recover the money but to prevent duplication, in 1949, at the same time that Section 1094.5 of the Code of Civil Procedure was enacted, Section 45.1 was amended to provide that a protest under that section would constitute a claim for a refund under Section 45.11.

Appellant argues that some 28 cases were determined by the Supreme Court under the statute as it existed prior to the 1949 amendment in which the form and type of action brought here were sustained. Bell-Brook Dairies, Inc. v. Bryant, 35 Cal.2d 404, 218 P.2d 1, 2. But as pointed out in that case, where the right to bring this type of suit was questioned, the case then being considered arose under the statute as it existed in 1944. Stats.1941, p. 2535. The statute then in force, Section 41.1(d), specifically provided that the employee could bring an action ‘in the event that the determination in any protest proceeding is rendered against the employer’. Subdivision (d) was no longer in the act when the present suit was instituted, and as appellants admit, the procedure for the recovery of over-payments was transferred to Section 45.11 which now defines the conditions under which such an action can be brought. As noted above, appellants have not met those conditions.

Appellants contend that even if the court should decide that the proceedings here involved are not of a special statutory type intended to be in the nature of an action to recover back taxes paid under protest the complaints may properly be treated as petitions for writs of mandamus and being sufficient as such, the demurrers should have been overruled. Hostetter v. Alderson, 38 Cal.2d 499, 241 P.2d 230; Boren v. State Personnel Board, 37 Cal.2d 634, 234 P.2d 981.

The complaints allege that on May 31, 1950 defendant furnished appellants with a statement pursuant to statute. Under Section 41.1(a) the Commission is required at least once a year to furnish the employer with a statement of the charges to his account and his tax contribution rate for the next ensuing year. The only specific statements which are referred to in the complaints as having been protested, disallowed, and reviewed by the California Unemployment Appeals Board are those of May 31, 1950. Obviously, under the law, this protest and review could be applicable only to the year 1949. The general allegation of a total overcharge stated in Paragraph III of such complaint is in Paragraph IV broken down into specific allegations making up the whole, and as shown above, in each complaint the allegations as to 1949 contain blanks as to the unemployment insurance taxes paid for that year, the rate of tax and the amount of over-payment. Therefore, no cause of action is stated under the statute as to the year 1949. The statement of May, 1950, is also the only statement in reference to which there is a showing that plaintiffs exhausted all their administrative remedies, by carrying through to a final determination of the dispute by the Appeals Board. If these complaints are to be considered as petitions for Writs of Mandate under Section 1094.5, Code of Civ.Proc., they must contain allegations which show that administrative remedies have been exhausted for the statute refers to review of ‘final administrative order or decision’. Failure to allege such exhaustion of remedies renders such petition subject to a general demurrer for failure to state a cause of action. McPheeters v. Board of Medical Examiners, 82 Cal.App.2d 709, 187 P.2d 116; Abelleira v. District Court of Appeal, 17 Cal.2d 280, 109 P.2d 942, 132 A.L.R. 715; Jackson v. Howser, 66 Cal.App.2d 870, 153 P.2d 423; 2 Stanford Law Rev. 298.

The complaints herein also seek money judgment and such relief cannot be given under Section 1094.5, Code of Civil Procedure.

It is the earnest contention of respondent that since the addition of Section 1094.5, Code of Civ.Proc., in 1949, the review by mandamus is the exclusive method by which the plaintiffs could proceed to have these charges reviewed. But since the complaints do no state a cause of action in mandamus we do not now decide that question.

Respondents also urge that since the very same matters which appellants attempt to raise in these suits were decided in Tax Decision 1442, the matter is res judicata. But res judicata is a plea in bar and not a matter to be raised on demurrer.

We conclude that the demurrers were correctly sustained without leave to amend and that the judgments thereafter entered were correct.

Judgments affirmed.

KAUFMAN, Justice.

NOURSE, P. J., and DOOLING, J., concur.

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