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

T. M. COBB CO., a California Corporation, Plaintiff and Appellant, v. The COUNTY OF LOS ANGELES et al., Defendants and Respondents.

Civ. 44342.

Decided: March 21, 1975

David W. Levene, Buchalter, Nemer, Fields & Savitch, Los Angeles, for plaintiff and appellant. John H. Larson, County Counsel, and Lawrence B. Launer, Deputy County Counsel, Los Angeles, for defendants nd respondents.

Plaintiff T. M. Cobb Company, a California corporation, filed a complaint to recover taxes paid under protest (as provided in Rev. & Tax.Code, §§ 5136–5143)1 to defendant County of Los Angeles. Also named as a defendant in the action was the City of South El Monte. The complaint set forth three causes of action, alleging, in addition to payment under protest, the ‘erroneous and illegal collection’ of taxes (§ 5096(b)) in the amount of $9,380.97 by defendant County, and also the similarly unlawful collection of $2,440.49 on behalf of defendant City.2 Plaintiff sought summary judgment which was denied. Defendants then moved for summary judgment which was granted. Plaintiff has appealed.

The rules governing summary judgment procedure are well-established; ordinarily, ‘[t]he aim of the procedure is to discover, through the media of affidavits, whether the parties possess evidence requiring the weighing procedures of a trial.’ (Corwin v. Los Angeles Newspaper Service Bureau, Inc., 4 Cal.3d 842, 851, 94 Cal.Rptr. 785, 790, 484 P.2d 953.) In the instant case, affidavits were not employed by the parties in the trial court, apparently because the parties regarded the facts giving rise to the litigation as substantially undisputed. Points and authorities were submitted by the parties on the issue of whether, in light of the statutory law (including decisional interpretation thereof) the defendants had a ‘good and substantial defense to the plaintiff's claim . . ..’ (Code Civ.Proc., § 437c.)

Undisputed facts include the following: on October 14, 1967, the National Acceptance Company of California (hereinafter National) loaned $187,000 to the El Monte Moulding Company (formerly the Gardena Moulding Company) and, in return, El Monte Moulding executed an agreement with National whereby a security interest in favor of National was created in all of El Monte's personal property, equipment, inventory and other goods then in existence or acquired thereafter, to ensure repayment of the loan. The security interest of the lender was duly perfected by the filing, with the Secretary of State, of financing statements (pursuant to Uniform Commercial Code, sections 9401–9408) on December 10, 1969, and on August 18, 1970.

On March 1, 1970, the Los Angeles County Assessor, acting pursuant to section 405 of the Code,3 assessed the business personal property and fixtures of the El Monte Moulding Company at 1419 Potrero Avenue in South El Monte. The assessment was concededly valid and the amount of tax not in dispute. It was thereafter placed on the 1970 Unsecured Tax Roll of defendant County. The record before us shows that the total assessment was $8,840.54, with penalties of $530.43, a total of $9,370.97; the portion attributable to personal property was $4,912.68 and to ‘fixtures,’ $3,927.864 Taxes on the unsecured roll are due March 1 of the assessment year (§ 2901) and become delinquent on August 30 of that year (§ 2922).

El Monte Moulding did not pay the taxes due, and also defaulted on the payments to National. After obtaining an order in the Los Angeles Superior Court, National took possession of its collateral and commenced foreclosure of its security interest at the Potrero address early in September 1970, acting pursuant to the procedures specified in the Uniform Commercial Code sections 9501–9507. Certain inventory located there was sold to a private purchaser. On September 16, 1970, National commenced its second private sale of the remaining collateral, and, during the five-day period which must elapse between notice of the sale and the sale itself (U.C.C., § 9504(3)), the Los Angeles County Tax Assessor appeared at the premises on Potrero through one of its deputies, and posted a ‘seizure and sale’ notice there. The notice, citing section 2914 of the Code, stated that ‘personal property and fixtures' would be sold at a public sale scheduled for September 29, 1070, and that (after such sale) ‘title shall thereon vest in the purchaser.'5

However, in the face of this effort to invoke summary ‘jeopardy’ procedure, the secured creditor, National, proceeded on September 23, 1970,6 with its previously scheduled private sale and the plaintiff herein purchased the remainder of the collateral on that date. When the assessor refused to ‘release’ the property, plaintiff then paid $9,380.97 (which included an additional $10 for fees and mileage) under protest.

Plaintiff then made a claim for refund to the Los Angeles County Board of Supervisors, asserting that payment of the taxes had been obtained illegally because the statutory collection scheme set forth in section 2914 et seq., was unconstitutional, i. e., a taking without due process of law. The claim was denied, and plaintiff then filed suit. It appears that there is no contention that plaintiff failed to meet the Code prerequisites for maintaining the action.7

Plaintiff directs a broad constitutional attack on the summary seizure and sale procedures contained in section 2914 et seq., asserting that they, like the prejudgment procedures struck down in Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1967), Blair v. Pitchess, 5 Cal.3d 258, 96 Cal.Rptr. 42, 286 P.2d 1242 (1971) and Randone v. Appellate Department, 5 Cal.3d 536, 96 Cal.Rptr. 709, 488 P.2d 13 (1971), are violative of due process because they allow a citizen to be deprived of a significant property interest without adequate notice and hearing.

Careful review of these cases suggests, however, that there is a fundamental distinction between the rights that are available to citizens in disputes involving other citizens and the rights of citizens when, as was stated in Randone, supra, 554, 96 Cal.Rptr. 720, 488 P.2d 24, ‘seizures [are] undertaken to benefit the general public rather than to serve the interests of a private individual or a single class of individuals.’ It is of paramount importance to the public, not only in California but elsewhere, that government be adequately financed through the collection of taxes; summary procedures must, of necessity, be made available to the taxing authorities in pursuit of this objective. (People v. Sonleitner, 185 Cal.App.2d 350, 8 Cal.Rptr. 528.)

There have been a number of California decisions upholding the right of the tax collector summarily to seize the property of taxpayers to secure the payment of various kinds of tax liability, without prior hearing. (See Aronoff v. Franchise Tax Board, 60 Cal.2d 177, 32 Cal.Rptr. 1, 383 P.2d 409; Horack v. Franchise Tax Board, 18 Cal.App.3d 363, 95 Cal.Rptr. 717; Greene v. Franchise Tax Board, 27 Cal.App.3d 38, 103 Cal.Rptr. 483; American Fidelity Fire Ins. Co. v. State Board of Equalization, 34 Cal.App.3d 51, 109 Cal.Rptr. 545.) In Horack, supra, 18 Cal.App.3d at page 370, 95 Cal.Rptr. at page 721, it was stated that ‘the Revenue and Taxation Code does not provide for the judicial review of a tax assessment prior to the collection of the tax. A suit to recover alleged overpayments is the exclusive means of obtaining judicial review of tax proceedings. Petitioners contend that a scheme of tax assessment providing for judicial review only at this juncture is unconstitutional . . .. We do not agree.’

Plaintiff also contends that section 2916, providing for notice of sale after seizure under section 2914, is constitutionally inadequate to apprise interested parties concerning governmental action. It is true that one appellate court has questioned the adequacy, on constitutional grounds, of section 2916 notice to a secured creditor. (See Dohrmann Company v. Security Savings & Loan Association, 8 Cal.App.3d 655, 87 Cal.Rptr. 792.) We decline to weigh the adequacy of section 2916 when, in the instant case, it is apparent that the secured creditor, National, unlike the creditor in Dohrmann, had actual notice of the tax collector's claim and intention to conduct a public sale and proceeded pursuant to the Uniform Commercial Code sections. In sum, we do not regard sections 2914 et seq. of the Code as being unconstitutional provisions per se. (In accord, Chrysler Credit Corp. v. Ostly, 42 Cal.App.3d 663, 117 Cal.Rptr. 167.)8

Plaintiff further contends that by judicial interpretation section 2914 has been construed, in the light of other pertinent sections of the Revenue and Taxation Code, to prevent its use by tax collectors to defeat the rights of secured creditors in the seized property; in essence, the contention is that where there is a perfected security interest in the property in question, a tax collector who seizes under section 2914 occupies the position of the holder of a subordinate lien, and cannot, by subsequent sale, defeat the rights of lienholders who perfected their interests at a prior time.

The existing case law supports plaintiff's contention, with respect to the personal property of the assessee. While an early decision (RCA Photophone, Inc. v. Huffman, 5 Cal.App.2d 401, 42 P.2d 1059) recognized the claim of the tax collector as superior to that of a secured creditor, two later cases have interpreted section 2914 as plaintiff suggests: (i. e., Fresno County, et al. v. Commodity Credit Corporation, 112 F.2d 639 (9th Cir. 1940) and Dohrmann Company v. Security Savings & Loan Assn., supra, 8 Cal.App.3d 655, 87 Cal.Rptr. 792.) The rationale for holding that the tax collector seizes personal property subordinate to the rights of secured creditors is explained as a consequence of the fact that, under California law, the tax collector has no automatic lien on personal property, as distinguished from real property, from the date of assessment.

In Dohrmann, the suit was between as plaintiff who was an unpaid conditional seller of personal property to the assessee and the purchaser of the property at a tax collector's sale conducted pursuant to section 2914 et seq. In reversing judgment for the defendant, the court observed:

‘[The] items were personal property which had appeared on Alameda County's ‘unsecured roll’ (see § 109), and which had been seized and sold for delinquent taxes pursuant to section 2914. A tax collector, seizing and selling personal property for taxes, is acting under the statutory equivalent of a common-law writ of distraint. (See In re Timberline Lodge, (1955) D.C., 139 F.Supp. 13. 16.) He does not, however, pass title to personal property which has been perfected from his own lien upon it; unlike the situation with realty, the law gives him no tax lien on personal property. (Ehrman and Flavin, [op. cit. supra] § 529, pp. 504–505. See Fresno County v. Commodity Credit Corporation (1940) 9 Cir., 112 F.2d 639, 640). Section 3712, operating to deliver clear title to property sold for taxes, is part of a statutory scheme which is obviously designed to stablize and guarantee tax title to realty. The Legislature has enacted no similar scheme as to personal property. . . .' (8 Cal.App.3d 663–664, 87 Cal.Rptr. 797).

This concept, i. e., that personal property taxes must be distinguished from real property taxes with respect to lien priorities, was recognized in a recent federal case, which stated that ‘[u]nder California law taxes are not automatically a lien on personal property. . . .’ (In the Matter of Western States Wire Corp., 490 F.2d 1065, 1067 (9th Cir. 1974).)

There are further indications that the Legislature has recognized the distinction between personal and real property with respect to lien priorities. Section 2192 of the Code provides that ‘Except as otherwise specifically provided, all tax liens attach annually as of 12:01 a. m. the first day of March preceding the fiscal year for which the taxes are levied.’ Sections 2191.3, 2191.4 and 2191.5 (as amended in 1967) set forth the method whereby a tax collector may, by filing a certificate of delinquency, obtain a lien ‘upon all personal and real property in the county owned by and then assessed to . . . the assessee. . . .’ (§ 2191.4). Section 2191.5 states that ‘Section 2191.4 does not give the county a preference over any other lien which attached prior to the date when the certificate . . . was recorded . . ..’ In In re Trinity Tractor Company, 3 Cal.App.3d 428, 83 Cal.Rptr. 783, the court held that these Code sections, rather than the more general section, section 2912, controlled the lien date on personal property. (These sections were not, of course, invoked by the tax collector in the instant case.)

Finally, as set forth above, the Legislature has enacted the Uniform Commercial Code, detailing the manner in which a holder of a subordinate lien, including the tax collector, may attempt to obtain a share of the proceeds of a properly conducted commercial sale, which might well be a superior method for obtaining the best price possible for the collateral in question.

While this appeal was pending, Division Three of this district published its opinion in Chrysler Credit Corporation v. Ostly, supra, 42 Cal.App.3d 663, 117 Cal.Rptr. 167 and considered, among other issues, the lien priorities in personal property and the effect of a section 2914 seizure by a tax collector. At page 670, 117 Cal.Rptr. at page 171, of that opinion, the court stated that the defendant County of Los Angeles had conceded in that appeal that the tax assessor's power to pass title at a section 2914 sale was ‘subordinate to the security interest of plaintiff [a holder of a perfected security interest in the personal property in question].’ No such concession has been made in the case at bench; defendant County maintains that section 2914 gives it a superior claim to the property regardless of the existence of prior perfected security interests; however, we conclude that the concession in Chrysler accurately states the law. In Chrysler, the court likened the tax collector's position to that occupied by any holder of a subordinate lien, and noted that while a section 2914 sale was not unlawful per se, the personal property could only be sold subject to the secured creditor's rights and, as a practical matter, it would not be likely for bidders to appear at such a sale. The section 2914 notice employed by the tax collector (similar to that used here) was found to be misleading, because it suggested that the purchaser at the tax sale receives title, without specifying the subordinate nature of that title. Chrysler concluded that the notice constituted an unlawful disparagement of the secured creditor's title; that there was, by attempted use of section 2914 procedure, an unlawful demand for the payment of taxes due, and that the plaintiff could recover taxes paid under such circumstances; plaintiff's recovery in Chrysler was barred solely on the ground that the statutory requirement of making a claim for refund prior to the suit had not been met.

Applying similar reasoning to the instant case, we conclude that the tax assessor, as the holder of a subordinate lien, could not lawfully extract from plaintiff herein the taxes due to the county from the assessee; the taxes were ‘erroneously and illegally collected,’ should have been refunded, and may be recovered from the defendants by plaintiff. To this extent, the summary judgment in favor of the defendants must be reversed.

The portion of the assessment against ‘fixtures' of the assessee is a different matter, under California law. ‘Fixtures' are considered real property (§§ 104, 105) and lien priorities are established by section 2192.1, which provides that the lien of taxes and assessments on real property (which attaches the first day of March) ‘have priority over all other liens on the real property, regardless of the time of their creation.’ Plaintiff contends that since the fixtures were assessed in the instant case on the unsecured roll, the respondents failed to follow the statutory procedure available to them for creating a lien on improvements, and than therefore the assessment did not become a lien on real property.

Plaintiff relies on section 2190.2, in pertinent part, which provides:

‘Every tax on an assessment of . . . improvements made pursuant to the provisions of Section 2188.2 shall become a lien on . . . such improvements, provided that in those instances where the real property . . . upon which such improvements are located is not tax-exempt land, the fact of such lien shall be indicated on the secured roll where the real property . . . upon which such improvements are located is listed.’

This section must, by its language, be read with section 2188.2, which states that

‘Whenever improvements are owned by a person other than the owner of the land on which they are located, the owner of the improvements or the owner of the land may file with the assessor a written statement before the lien date attesting to their separate ownership, in which event the land and improvements shall not be assessed to the same assessee. . . .’ (Italics added.)

We do not conclude from these sections that the tax collector is limited to claiming a superior lien on assessments of improvements only when the assessments appear on the secured roll. (See Ventura County v. Channel Islands State Bank, 251 Cal.App.2d 240, 59 Cal.Rptr. 404.) The procedure set forth in these sections may be voluntarily employed by owners of taxable real property or owners of improvements on the taxable real property, and its use must be initiated by the owner, rather than the assessor. The assessor is not, however, compelled to place improvements on the secured roll to assert a superior claim.

The tax collector, therefore, may reach ‘fixtures' to satisfy taxes attributable to them, and has a superior right with respect to them; he may act under any of the statutory methods of collection, including the procedures set forth in section 2914 et seq. Plaintiff's payment of these taxes, therefore, was not the result of erroneous nor illegal collection, and thus the summary judgment for the defendants to the extent of those taxes is affirmed.

The summary judgment is reversed as to $4,912.68, and judgment for plaintiff therefor is to be entered, with interest; the remainder of the judgment is affirmed. Each party shall bear its own costs on appeal.


1.  Unless specifically otherwise stated, references to code sections or to the ‘Code’ refer to sections of the Revenue and Taxation Code or to the Revenue and Taxation Code as a whole.While the complaint mistakenly alleges that the taxes in question were paid by the secured creditor herein, National Acceptance Corporation, it is clear from the rest of the record that plaintiff made the payment and that no one disputed that fact.

2.  We note that while the complaint mentions the figure $2,440.49, the subsequent record repeatedly characterizes only the $9,380.97 figure as that in dispute.Sections 5103 and 5138 of the Code provide that when taxes are collected by a county for a city and recovery is sought, the city must be named a defendant and judgment sought against it as well as against the county. In its answer, defendant County admitted the collection of taxes in the instant case for South El Monte; we assume that the lesser sum is included in the larger one.

3.  In pertinent part, ‘Annually, the assessor shall assess all the taxable property in his county . . ..’

4.  We take judicial notice that the tax rate in Los Angeles County for 1970, which was applicable to the property involved in the instant case, was $10.8355 per one hundred dollars of assessed valuation, and applying that figure to the separate values assessed on the roll (the pertinent portion of which appears in our record) to the assessee's personal property and ‘fixtures,’ it appears that the taxes in the amounts set forth herein, which also appeared in defendant County's brief, are correctly computed.

5.  The Code provides four methods of collecting unsecured taxes. Section 3003 (suit), section 3101 (summary judgment) and section 2191.3 (certificate of delinquency) all are available to the tax collector as well as the summary procedures outlined in section 2914 et seq.:Section 2914: ‘Taxes due on unsecured property may be collected by seizure and sale of any of the following property belonging or assessed to the assessee:‘(a) Personal property.‘(b) Improvements.‘(c) Possessory interests.’Section 2916: ‘Notice of the time and place of sale shall be given at least one week before the sale by publication in a newspaper in the county, or by posting in three public places. In the event that it is necessary to continue the sale to a later date, notice shall be given as provided above.’Section 2918: ‘On payment of the price bid for property sold, the delivery of the property with a bill of sale vests title in the purchaser.’

6.  National proceeded pursuant to Uniform Commercial Code section 9504, which sets forth in detail the method by which the holder of a subordinate lien may protect the interest it claims in the proceeds of a private sale; if such action is not taken, a purchaser at such a sale takes free of any subordinate liens. As is evidenced by the situation in the instant case, the Uniform Commercial Code and the Revenue and Taxation Code, both containing procedures purporting to vest a purchaser with title, lay the groundwork for conflicting claims.Uniform Commercial Code, section 9504(1) provides for private sale of collateral by the secured party and for ‘The proceeds of disposition [to be applied] in the order following to (a) the reasonable expenses of . . . selling . . . (b) the satisfaction of indebtedness secured by the security interest under which the disposition is made; (c) the satisfaction of indebtedness secured by any subordinate security interest in the collateral if written notification of demand therefor is received before distribution of the proceeds is completed. If requested by the secured party, the holder of a subordinate security interest must seasonably furnish reasonable proof of his interest, and unless he does so, the secured party need not comply with his demand. . . .’Uniform Commercial Code section 9504(4) provides that ‘[w]hen collateral is disposed of by a secured party after default, the disposition transfers to a purchaser for value all of the debtor's rights therein, discharges the security interest under which it is made and any security interest or lien subordinate thereto. The purchaser takes free of all such rights and interest even though the secured party fails to comply with the requirements of this chapter or of any judicial proceedings . . . [if he] acts in good faith. . . .’

7.  The Code sets forth two distinct procedures for filing tax recovery actions. In sections 5096–5107 a claim of refund is required prior to suit where, among other things, taxes have been ‘erroneously and illegally collected (§ 5096(b)); in sections 5136–5143, an owner of assessed property is allowed to pay the taxes under protest without a prior claim of refund. Section 5136 states that ‘After taxes are payable, any property owner may pay the taxes on his property under protest. A payment under protest is not a voluntary payment.’ (This provision lays to rest the factual burden inherent in suits to recover taxes relevant to the presence of the element of ‘coercion.’) It was observed, in Chrysler Credit Corp. v. Ostly, 42 Cal.App.3d 663, 678, 117 Cal.Rptr. 167, that a secured creditor, such as National in the instant case, would not meet the statutory definition of ‘owner’ entitled to pursue the recovery of taxes without first claiming refund. However, the plaintiff herein, as the purchaser at a duly conducted Uniform Commercial Code section 9504 sale received title free of subordinate liens, at least; plaintiff's status, while germane to our ultimate disposition of this case, need not be determined in a procedural context, because here plaintiff met both prerequisites to suit; paid the taxes under protest; claimed refund, which was denied, and filed timely suit to recover the taxes paid.

8.  In Chrysler, supra, the court characterized the ‘seizure’ by the tax collector pursuant to section 2914 as a nullity and therefore not a taking within the meaning of due process. We do not adopt this view. When a deputy tax collector posts a section 2914 notice and advises the third-party creditor, as he did here, that the County has a superior claim, an attempt to take is in progress and was only thwarted in the case at bench because the secured creditor went ahead and held the private sale.

JEFFERSON, Acting Presiding Justice.

DUNN and COLE,* JJ., concur.