WOOSLEY v. STATE (1990)

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:

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Depreciation Schedule

Section 10753.2 provided a depreciation schedule by which the market value for VLF purposes was reduced over a nine-year period.³  The statute provided for the depreciation schedule to commence “with the year first sold to a consumer as a new vehicle” and made no distinction concerning out-of-state vehicles.   Nevertheless in 1967 DMV began treating out-of-state vehicles differently than in-state vehicles for purposes of the depreciation schedule.   For resident vehicles the depreciation schedule commenced with the year first sold to a consumer as a new vehicle.   For out-of-state vehicles, the DMV commenced the depreciation schedule with the date of sale to the first person to register the vehicle in California.

This practice also resulted in higher VLF for a nonresident vehicle, throughout the depreciable life of the vehicle.⁴  The court found “[i]f a nonresident vehicle starts higher on the depreciation schedule, except in rare cases not relevant to this action, the nonresident vehicle is assessed overall higher fees in the succeeding years.”

DMV intimated at trial that the distinction was necessary, or at least administratively convenient, on the ground that the year an out-of-state vehicle was first sold to a consumer could not be determined.   The trial court found that DMV presented no evidence to support this assertion.

The DMV did argue, however, that a 1977 amendment to section 10753.2 validated the DMV interpretation.   That amendment provided that the depreciation schedule would start “with either the year the vehicle was first sold to a consumer as a new vehicle or the year the vehicle was first purchased or assembled by the person applying for original registration in this state.”   (Stats.1977, ch. 821, § 1, p. 2491.)

After examining the legislative history, however, the trial court found that the 1977 amendment was intended to apply only when there was never a sale to a consumer as a new vehicle, as in the case when a person assembles his own vehicle, uses it and then sells it.   In other words, the amendment was intended “to remove the confusion as to when the depreciation schedule started if a vehicle were constructed by the owner or where the person purchased a homebuilt vehicle,” but the legislative history “indicates no intent on the part of the legislature to treat vehicles purchased out-of-state any differently than vehicles originally purchased in California.”

Use Taxes

Use taxes are a complement to sales taxes.   Vehicles are an exception to the general rule that private party transactions are not subject to tax.   Use tax is charged when a person buys a vehicle from a private party or purchases a vehicle out of state and brings it into the state.   Pursuant to agreement between the DMV and the State Board of Equalization (SBE) the DMV collects the use tax on behalf of the SBE.   The use tax must be paid to the DMV in order to register a vehicle.

The use tax is based on the sales price, but section 6276 establishes a rebuttable presumption that the sales price is an amount equal to the market value as determined to measure VLF.

Thus, the DMV's post–1967 practice of treating out-of-state vehicles differently than California vehicles in determining the market value for VLF, also resulted in higher use tax on used vehicles purchased from a private party outside this state than for a similar purchase inside this state.

Facts Concerning Plaintiff Woosley's Individual Claim

In March 1976, Mr. Woosley, a California resident, purchased a 1936 Auburn Speedster in North Carolina for a price of $25,000.   Based on the purchase price, he was charged a VLF of $427 and a use tax of $1,500.   Had he purchased the same vehicle in California, the VLF would have been $2 and the use tax would have been $6 because these taxes would have been computed from the DMV rate book based on the vehicle's 1936 price and by applying the presumption of section 6276.⁵

1976 Interagency Agreement

In 1976 the DMV entered an interagency agreement with SBE that, effective November 15, 1976, in collecting the use tax the DMV would require in all private party transactions, both resident and nonresident, that the purchaser produce a certificate of cost and that the use tax be based upon actual cost rather than the presumed VLF market value.

I

THE DISCRIMINATION CLASSDiscussion

The trial court found factually that significantly higher vehicle license fees, as well as use taxes prior to November 15, 1976, were charged on a vehicle which was first sold or registered in another state than on an identical vehicle first sold in California.   From the facts found, the trial court properly concluded that this form of discrimination, based on the place of origin of the vehicle, was not required by the statute, and in any event violated the interstate commerce clause of the federal Constitution.

Statutory Interpretation

 The justification given for DMV's policy was that a vehicle purchased outside California had no “California suggested base price” and therefore the alternative cost method was demanded because the DMV “is unable to ascertain the California suggested base price.”

This argument is not persuasive.   The prior version of the statute was very similar in these respects, and the DMV did not discriminate between resident and nonresident vehicles under the prior statute.   The 1965 version of section 10753 stated in subdivision (a) that market value shall be determined based on “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․”  The 1965 version similarly had an alternative subdivision (c) for determining market value on the basis of cost price to the purchaser “in the event the department is unable to ascertain the California delivered price.”  (Stats.1965, ch. 231, § 1, p. 1204.)

The 1967 amendment substituted “California suggested base price as herein defined” for “California delivered prices.”   DMV offers no legislative history or persuasive argument why the Legislature would have intended this amendment to impose sharply different bases for determining market value depending solely on the point of origin.   It is more likely the Legislature intended that the same presumptive market value, the California suggested base price, be used regardless whether the vehicle was first sold in another state.   This is the administratively convenient method and the one which equitably treats similar vehicles with similar tax.

The DMV's next main argument is a theoretical one.   It contends there is no discrimination because whether the cost basis is higher or lower than the formula basis depends on “the individuality of each sales transaction.”   This argument has a theoretical logic but it flies in the face of the trial court's findings and DMV's own study showing that in its actual operation the cost method resulted in significantly higher fees.

Interstate Commerce

 Under the interstate commerce clause of the United States Constitution (art. I, § 8, cl. 3), a state's tax system may not discriminate against interstate commerce by imposing a higher tax burden on commerce coming into that state from another state.  (Ex parte Thomas (1886) 71 Cal. 204, 12 P. 53;  Welton v. State of Missouri (1875) 91 U.S. 275, 282, 23 L.Ed. 347;  Guy v. Baltimore (1879) 100 U.S. 434, 439, 25 L.Ed. 743;  Walling v. Michigan (1886) 116 U.S. 446, 454, 6 S.Ct. 454, 457, 29 L.Ed. 691;  Darnell & Son v. Memphis (1908) 208 U.S. 113, 120, 28 S.Ct. 247, 250, 52 L.Ed. 413;   Armco Inc. v. Hardesty (1984) 467 U.S. 638, 642, 104 S.Ct. 2620, 2622, 81 L.Ed.2d 540.)

A use tax on goods brought into a state, as a complement to that state's sales tax, is permissible, but only if it operates equally between in-state and out-of-state purchases.  (Henneford v. Silas Mason Co. (1937) 300 U.S. 577, 583–584, 57 S.Ct. 524, 527, 81 L.Ed. 814;  Halliburton Oil Well Co. v. Reily (1963) 373 U.S. 64, 69–70, 83 S.Ct. 1201, 1203–1204, 10 L.Ed.2d 202;  Boston Stock Exchange v. State Tax Comm'n (1977) 429 U.S. 318, 330–332, 97 S.Ct. 599, 607–608, 50 L.Ed.2d 514.)

In determining whether a statute unlawfully discriminates against interstate commerce, courts look both to the face of the statute and its practical operation.  (Best & Co. v. Maxwell (1940) 311 U.S. 454, 61 S.Ct. 334, 85 L.Ed. 275;  Memphis Steam Laundry v. Stone (1952) 342 U.S. 389, 395, 72 S.Ct. 424, 427, 96 L.Ed. 436;  Nippert v. Richmond (1946) 327 U.S. 416, 431–432, 66 S.Ct. 586, 593–594, 90 L.Ed. 760;  Halliburton Oil Well Co. v. Reily, supra, 373 U.S. at p. 69, 83 S.Ct. at p. 1203.)   Even though tax rates may be equal, discriminatory effect may be caused by differences in exemptions or credits or the manner in which the tax is calculated.  (Halliburton Oil Well Co. v. Reily, supra, 373 U.S. at p. 67, 83 S.Ct. at p. 1202;  Maryland v. Louisiana (1981) 451 U.S. 725, 756, 101 S.Ct. 2114, 2134, 68 L.Ed.2d 576;   Westinghouse Elec. Corp. v. Tully (1984) 466 U.S. 388, 400, 405, 104 S.Ct. 1856, 1863, 1866, 80 L.Ed.2d 388.)   It need not be shown that the statute has a protectionist purpose in order to conclude that it discriminates against interstate commerce in practical effect.  (Nippert v. Richmond, supra, 327 U.S. at p. 434, 66 S.Ct. at p. 595;  see Bacchus Imports, Ltd. v. Dias (1984) 468 U.S. 263, 270, 104 S.Ct. 3049, 3054, 82 L.Ed.2d 200.)

Here, the DMV's interpretation on its face treated out-of-state vehicles differently.   The trial court found factually that in practical effect these distinctions imposed significantly higher VLF and use taxes on out-of-state vehicles.   The trial court properly concluded from the facts found that this tax system discriminated against interstate commerce in violation of the federal Constitution.

On appeal the DMV argues that the commerce clause does not apply to this case.   DMV suggests that interstate commerce is not involved, or is not significant, or that the “competition” involved is not significant.   There is no merit to these arguments.

“Commerce” has been broadly defined since the early interpretation of the interstate commerce clause.  (Gibbons v. Ogden (1824) 22 U.S. (9 Wheat.) 1, 189, 6 L.Ed. 23.)   Transactions may be commerce even if noncommercial.   (U.S. v. Underwriters Assn. (1944) 322 U.S. 533, 549, 64 S.Ct. 1162, 1171, 88 L.Ed. 1440.)

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, J.C. Penney Co. v. Hardesty (1980) 164 W.Va. 525, 264 S.E.2d 604, 613, is distinguishable factually because it involved a claim for a credit on taxes paid previously when the taxpayer was a resident of another state.   Here Mr. Woosley was a resident of California when he purchased the vehicle in North Carolina and he complains he was charged more California taxes, solely because he bought the vehicle in North Carolina, than if he had bought it in California.

The DMV's argument that no significant interstate commerce is involved in vehicles purchased in other states is contrary to the factual findings of the trial court.   Even if we limit our consideration to purchases from private parties in other states, the DMV offers no evidence that this commerce is insignificant, and the trial court found otherwise.

 If a tax has a protectionist purpose to discriminate against interstate commerce, courts do not attempt to determine the amount of commerce involved or to measure the anti-competitive effect.  (Bacchus Imports Ltd. v. Dias, supra, 468 U.S. at p. 269, 104 S.Ct. at p. 3054;  Westinghouse Elec. Corp. v. Tully, supra, 466 U.S. at pp. 406–407, 104 S.Ct. at pp. 1867–1868;  Maryland v. Louisiana, supra, 451 U.S. at p. 760, 101 S.Ct. at p. 2136.)   Even assuming the tax in this case was not so intended, it distinguished on its face between vehicles based on the state of purchase, and the court found that its practical effects discriminated against out-of-state purchases.   This is sufficient to merit commerce clause analysis.   (Matthews v. State, Dept. of Revenue (1977) 193 Colo. 44, 562 P.2d 415, 417.) ⁶

II

THE POST–1976 CLASS

The trial court ruled that in 1976 the DMV invalidly changed its interpretation of section 6276 by abandoning the presumption of sales price contained in that section and calculating use tax for all vehicles on the basis of actual cost.

The general rule for use tax is that the tax is based on the sales price of the product.   Since 1965, section 6276 has provided a rebuttable presumption about the sales price when the product is a vehicle.   As originally enacted, section 6276 provided in pertinent part, “[T]he sales price shall be presumed to be its market value at the time of the purchase as that value is determined to measure vehicle license fees․  The presumption may be rebutted by evidence which establishes that the sales price was other than such market value.”  (Stats.1965, First Ex.Sess., ch. 2, § 14, p. 5449.)

From 1967 until November 1976, the DMV did not ask taxpayers to present a bill of sale or other documentation of cost for the purpose of assessing use tax on California vehicles.   The DMV discouraged presentation of such documents unless beneficial to the taxpayer, and assessed use tax on California vehicles based on the presumed market value under section 6276.   This was contrary to the SBE's position that the DMV should assess use tax on resident vehicles based on cost, not presumed value, as it did on non-resident vehicles.   Cost basis assessments generally result in higher tax revenues than presumed market value assessments.   The DMV opposed this position, claiming it would require additional administrative effort.

In a series of meetings beginning in 1971, DMV and SBE attempted to agree upon a joint legislative proposal to increase use tax revenues.   A bill was introduced to repeal the formula-based presumed market value and to base use taxes exclusively on cost.   The Legislature did not pass this bill.   DMV and SBE then agreed upon and supported another proposed amendment to section 6276 which would increase use tax revenues by multiplying the presumed market values by 1.2 for noncommercial vehicles and by 1.8 for commercial vehicles.   This amendment was passed by the Legislature, effective January 1, 1972.

Despite the lack of legislative support, SBE persisted in trying to convince DMV to collect use tax based on cost rather than presumed market value.   DMV resisted, claiming that method would slow department processing and create additional inconvenience to applicants.   Internal memoranda in April and June of 1973 also show that DMV recognized that SBE's desired change in use tax computation from presumed market value to purchase price would require new legislation.

SBE continued to pressure DMV to change its use tax computation method.   Finally, in 1976, DMV and SBE entered into an interagency agreement whereby DMV agreed that in performing its function of collecting use tax on behalf of the SBE, it would in every case rebut the market value presumption by requiring a certificate of cost from the registrant showing the actual sales price, thereby establishing that the sales price was other than the presumed market value.   The trial court held that this change in practice violated and misinterpreted section 6276 and was procedurally defective because it was adopted by interagency agreement rather than by a formal regulation pursuant to the Administrative Procedure Act.   We agree.

Statutory Interpretation

 Under section 6276, as it read in 1976, whenever the purchaser of a vehicle is required to pay use tax to the DMV, “the sales price shall be presumed to be an amount equal to the market value of the vehicle at the time of the purchase as that value is determined to measure vehicle license fees imposed under Part 5 ․ of Division 2, multiplied by a factor of 1.2 for a noncommercial vehicle, including a passenger vehicle․  [¶] The presumption may be rebutted by evidence which establishes that the sales price was other than [such] amount.”

“In construing the words of a statute or constitutional provision to discern its purpose, the provisions should be read together;  an interpretation which would render terms surplusage should be avoided, and every word should be given some significance, leaving no part useless or devoid of meaning.”  (City and County of San Francisco v. Farrell (1982) 32 Cal.3d 47, 54, 184 Cal.Rptr. 713, 648 P.2d 935.)   The interpretation of section 6276 contained in the 1976 interagency agreement between SBE and DMV runs aground of this very basic tenet of statutory construction.   By requiring proof of actual sales price in every case, they have rendered the presumption of market value absolutely useless.   In no case is the presumption utilized to determine the amount of use tax, since under the agreement DMV requires a certificate of cost, signed under penalty of perjury, from all registrants;  DMV penalizes any taxpayer who fails to comply with this requirement by refusing to register the vehicle.   This interpretation of section 6276 renders the entire presumption of market value meaningless, makes that language surplusage, and is thus incorrect.

A further indication that such interpretation is erroneous is the DMV's interpretation of the statute for the nine years prior to the 1976 interagency agreement.   During that period, DMV consistently relied on the statutory presumption of market value unless the taxpayer chose to rebut it with evidence of the actual sales price;  DMV did not otherwise require that information.   This long-standing administrative construction of section 6276 by the agency charged with its enforcement is entitled to great weight.   (Guinnane v. San Francisco City Planning Com. (1989) 209 Cal.App.3d 732, 738, 257 Cal.Rptr. 742.)   No change in the statute occurred in 1976 to justify the entirely new administrative interpretation set forth in the interagency agreement.

We also find it highly significant that, as DMV admits, up until 1983 the Legislature consistently rejected proposals to amend section 10753 to provide for use tax assessments based on actual sales price.   Instead the Legislature adjusted the presumed market value by providing in section 6276 that such amounts should be multiplied by 1.2 for noncommercial vehicles and 1.8 for commercial vehicles.   The failure of the Legislature to change the law in a particular respect when the subject is generally before it and when it makes changes in other respects is indicative of an intent to leave the law as it stands in the aspects not amended.  (Napa Valley Educators' Assn. v. Napa Valley Unified School Dist. (1987) 194 Cal.App.3d 243, 252, 239 Cal.Rptr. 395.)   It seems clear to us that the Legislature intended that the DMV continue to utilize the market value presumption to determine the amount of use taxes when it refused to amend the statute to provide for assessments based solely on actual sales price and instead adopted an alternate method to increase use tax revenue.

DMV relies on an opinion by the Attorney General in arguing that their interagency agreement was a correct interpretation of the statute.   We find no such indication in that opinion.   Prior to the 1976 agreement, SBE requested an opinion from the Attorney General regarding this statute, asking first whether SBE and DMV, as well as the taxpayer, could rebut the presumption of “sales price” contained in section 6276.   The opinion concluded that the statute does not limit which party may rebut the presumption;  thus SBE, DMV or the taxpayer may rebut the presumption with appropriate evidence of actual sales price.   The second question posed by SBE was whether, if a true, larger sales price comes to its attention, it must make a determination of additional taxes.   This question was answered in the affirmative.   The last question presented was whether the presumption in section 6276 may be relied upon in collecting use tax without any attempt to establish and collect use tax measured by the actual sales price.   Noting that the presumption is one affecting the burden of producing evidence, the opinion explained that “such a presumption requires one ‘to assume the existence of the presumed fact unless and until evidence is introduced which would support a finding of its nonexistence․’  (Evid.Code, § 604;  emphasis added.)   Exclusive reliance on the presumption therefore would appear to conform with the legislative intent in enacting section 6276 as a means of expediting the collection of the use tax.”  (59 Ops.Cal.Atty.Gen. 47, 49–51 (1976).)

We find no fault with these conclusions.   However, the opinion does not address whether DMV and SBE could completely disregard the presumption in establishing and collecting use tax, and it provides no support for such policy.   The opinion does consider an earlier interagency agreement, dated December 26, 1973, which provided in pertinent part that:  “ ‘The Department shall compute the use tax on a vehicle required to be registered or subject to identification measured by the sales price of the vehicle.   In the absence of a bill of sale or other documented evidence of the sales price, the sales price of a vehicle required to be registered, other than one purchased outside the State from the manufacturer or a vehicle dealer, is presumed to be the market value of the vehicle as that value is determined by the Department to measure the license fee ․ as provided by section 6276 of the Revenue and Taxation Code.   This presumption of the sales price of the vehicle may be rebutted by evidence which establishes that the sales price was other than such an amount.’ ”  (59 Ops.Cal.Atty.Gen. 47, 49, fn. 2;  emphasis omitted.)

From this agreement, the Attorney General concludes that “DMV and the Board have agreed that DMV has the responsibility to first seek evidence establishing the actual sales price, and only if such evidence is not available do they resort to the presumption referred to in section 6276.”  (59 Ops.Cal.Atty.Gen. 47, 49, fn. 2) We do not reach the same conclusion.   The 1973 agreement recognizes that where other evidence of sales price is produced, that is the amount upon which the use tax shall be computed;  in the absence of evidence of actual sales price, the presumed price is the amount to be used for computing use tax.   The 1973 agreement does not require DMV to seek evidence to establish the actual sales price, and the Attorney General's statement to the contrary lends nothing to the issue currently before this court.

The trial court correctly ruled that the interagency agreement was an invalid interpretation of section 6276.

Improper Regulation

 We also agree with the trial court's ruling that DMV's 1976 change in practice was procedurally defective because it was adopted by interagency agreement rather than by a formal regulation pursuant to the Administrative Procedure Act.  (Gov.Code, § 11340 et seq.)

Government Code section 11342 defines “Regulation” as “every rule, regulation, order, or standard of general application or the amendment, supplement or revision of any such rule, regulation, order or standard adopted by any state agency to implement, interpret, or make specific the law enforced or administered by it, or to govern its procedure․”  The 1976 interagency agreement provided that DMV was to compute use tax measured by the sales price of the vehicle, which can be established by a bill of sale, other documentation of sales price, or a certificate of cost signed by the purchaser of the vehicle.   This provision constitutes both an interpretation of section 6276 and a procedure for implementation of that section.   The trial court correctly concluded that the agreement is a regulation subject to the requirements of the Administrative Procedure Act.

The Act requires state agencies to provide notice of proposed regulations as well as the opportunity for public hearing or comment on the proposal.  (Gov.Code, §§ 11346, 11346.8) The undisputed facts at trial established that DMV and SBE did not comply with the procedural requirements of the Act in implementing their interagency agreement.   Under Government Code section 11350, any interested person may bring an action for declaratory relief in order to obtain a judicial declaration as to the validity of any regulation;  such regulation may be declared invalid for a substantial failure to comply with the provisions of the Administrative Procedure Act.   The trial court had ample basis to declare the interagency agreement invalid for failure of the agencies to comply with procedural requirements.

The more important ground for declaring the agreement invalid, however, is that it is in conflict with the statute it seeks to interpret and implement.   Government Code section 11342.2 provides that:  “Whenever by the express or implied terms of any statute a state agency has authority to adopt regulations to implement, interpret, make specific or otherwise carry out the provisions of the statute, no regulation adopted is valid or effective unless consistent and not in conflict with the statute and reasonably necessary to effectuate the purpose of the statute.”

As we have discussed at length, supra, the 1976 interagency agreement essentially repeals the presumption of market value contained in section 6276.   Such an interpretation is in direct conflict with the statute it seeks to implement, and thus must be declared invalid.

III

PLEADING AND EXHAUSTION ISSUES **

IV

CLASS ACTION ISSUES

 DMV argues the trial court erred in certifying this action as a class action.   Under headings such as “no substantial benefit to the class” or “unmanageability,” DMV contends that the amount of the average refund would be small and that the costs and burdens of providing refunds would be large.   DMV asserts that it would be difficult for class members to establish the amount of damages, that the burden of searching computer records and hard copy records for the numerous members of the class ⁹ would be excessive in relation to the amount of refunds, and that many of the members could not be found and those refunds “would undoubtedly escheat to the State of California” anyway.

If there were any factual basis for these assertions, they would cast serious doubt on the desirability or suitability of maintaining such a large class action for such little benefit.  (Blue Chip Stamps v. Superior Court (1976) 18 Cal.3d 381, 386, 134 Cal.Rptr. 393, 556 P.2d 755.)   The trial court, however, found all the facts to the contrary.   In its 68–page statement of decision certifying the class action, the trial court thoroughly considered these arguments, and found there was no factual basis for the assumptions underlying DMV's argument.

DMV's assertion that the individual refunds would be small was rejected by the trial court as inconsistent with the court's findings of significantly higher VLF on out-of-state vehicles and dramatic increases in revenues from the 1976 change in practice.   The court pointed out that the average differential in VLF was $23 in 1979 increasing to $32 in 1983;  that at the certification hearing the defendants admitted that the average VLF recovery would be $80 to $90;  and that in another proceeding the state had estimated that a total of $100 million would be refunded if the trial court's interpretation of the post–1976 change in practice were upheld.

Contrary to DMV's assertions that a costly claim form procedure would be required and that the class members would have difficulty substantiating their claims, the trial court found that defendants had the ability, all from records presently available to them, to identify each member of the class, to determine the fact and the amount of overpayment, and to make a refund to the member's last known address.   Thus claim forms from the members of the class would not be necessary.

The trial court also rejected DMV's assertion that it would be difficult or impossible to determine the base price of vehicles so as to calculate the amount of overpayment.   The court found that DMV's existing VLF rate book could be used for model years before 1968 and that numerous publications such as the Kelley Blue Book contain accurate information of manufacturer's suggested retail prices.

The court reviewed in great detail the record-keeping processes of DMV and rejected DMV's assertions that the cost of identifying the members and calculating the refunds from these records would be excessive in relation to the amount of refunds.

Part of DMV's claim of excessive burden was that in order to fully identify the members and the amounts due, it would be necessary manually to review hard copy records, not merely computer records.   The court rejected as not credible several of DMV's estimates of the cost of this procedure.

DMV does not argue that a class action for taxpayer refunds is never appropriate, nor could it.¹⁰  Unlike the rule in some other states, class actions for taxpayer refunds have been approved in California, including precedent by the Supreme Court which we are bound to follow.  (Javor v. State Board of Equalization (1974) 12 Cal.3d 790, 796–797, 117 Cal.Rptr. 305, 527 P.2d 1153;  Santa Barbara Optical Co. v. State Bd. of Equalization (1975) 47 Cal.App.3d 244, 247, 249, 120 Cal.Rptr. 609;  See Lattin v. Franchise Tax Board (1977) 75 Cal.App.3d 377, 381, 142 Cal.Rptr. 130;  Schoderbek v. Carlson (1980) 113 Cal.App.3d 1029, 1034–1037, 170 Cal.Rptr. 400.) ¹¹  Rather, DMV contends that this class action was improper because it is too big, the refunds are too small, and the benefits are not substantial in comparison to the costs of providing them.   These are factual issues, and the trial court resolved all the facts against DMV.   DMV's legal arguments are based on factual assumptions the trial court found to be untrue, and DMV does not claim that there is no substantial evidence to support the trial court's findings.   The trial court's order certifying the class action is within its discretion and is supported by substantial evidence.   In the absence of other error we have no power to reweigh the evidence or substitute our discretion for the trial court's.  (Richmond v. Dart Industries, Inc. (1981) 29 Cal.3d 462, 470, 174 Cal.Rptr. 515, 629 P.2d 23.)

V

CROSS–APPEAL

In light of the judgment for tax refunds entered in favor of the two classes, the trial court awarded attorneys' fees to the attorneys for the class, under the “common fund” principle, which provides that a party who preserves or recovers a fund for the benefit of others in addition to himself is entitled to recover his costs, including his attorneys' fees, from the fund.   (Serrano v. Priest (1977) 20 Cal.3d 25, 35, 141 Cal.Rptr. 31, 569 P.2d 1303 [hereafter Serrano III ]].)   Class counsel was awarded fees of $12,000,000, and former counsel was awarded fees of $1,700,000.   Plaintiff Woosley was awarded $1,000,000 “as fees for services rendered as class representative.”   Woosley cross-appeals from that portion of the judgment fixing the amount of his fee award, asserting that such award improperly denied him attorney's fees for the legal assistance he rendered to the class and compensated him solely as class representative.   We find his claims have merit and remand the matter for redetermination of attorney's fees.

After the court had rendered its decisions regarding liability and class certification, Woosley, who is an attorney and certified tax specialist, moved to have his appearance formally entered as co-counsel of record for the class.   He asserted this would enhance his ability to represent the class and would assure that the record accurately reflected the extent of his participation in the case.   At the hearing on the motion, counsel for DMV stated, “I am well aware of the fact that he [Woosley] has been acting as an attorney in the case.”   Counsel for the class also acknowledged Woosley's contribution:  “We have marched with this case through seven years, and Pat has done a lot of work on this case—no question about it.   And the value of his work in light of his specialty as a tax specialist has been beneficial.”

The trial court denied the motion, finding there was really nothing Woosley could provide by way of class representation as counsel that he could not provide as continuing class representative.   The court found there was “a vague kind of potential downside” and “no up side” to granting Woosley co-counsel status at that late stage in the case.   The court noted that “Mr. Woosley has contributed both legally and factually, but there is no indication that that could not continue.”   In closing, the court gave this assurance to counsel for Woosley:  “[I]f he is concerned about compensation as matters get to a close, although matters getting to a close have got to be put within quotes, who knows how much longer this lawsuit will continue.   He is perfectly, totally protected in that regard because the matter of compensation of both counsel and the class representative will be up to the court at the appropriate time.”

Three weeks later, applications for award of attorneys' fees were filed by former class counsel Jones, Bell, Simpson and Abbott;  by current class counsel Gansinger & Pick and John F. Busetti;  and by Patrick Woosley.   All three applications were supported by declarations regarding the number of hours worked by the attorneys on various aspects of this case and the appropriate hourly fee for that attorney's work as well as detailed descriptions of the complexity of the work involved.   The application of current counsel suggested that the court use a multiplier of 13 for calculation of the award.

DMV filed opposition, asserting that the declarations were insufficient to support the amount of fees claimed in the absence of the detailed time sheets of current counsel.   DMV asserted that counsel should provide detailed time records and justification for time expended, after which the court should determine reasonable hours and reasonable hourly rates.   They also recommended that if the court found it proper to use a multiplier to determine fees, then 1.32 would be appropriate.

At the hearing on these applications, the court stated that additional substantiation was not necessary, inasmuch as the requested fee, including the request of class representative Woosley, would amount to less than 2 percent of the judgment.   The court took the motions under submission, explaining:  “The court intends to grant the motions substantially in the form as requested.   Although we could attempt to augment the record further, I think it is certainly sufficient, and the court is satisfied with the factual support for the motion.”

Current counsel noted that no multiplier had been suggested by former counsel, and thus suggested that whatever multiplier the court felt reasonable for current counsel be applied equally to former counsel's fees as well.   The court asked for a letter containing that calculation.   Woosley asked if the court needed any calculations from him, and the court said no.   Current counsel added:  “We have in our petition specific dollar amounts stated, and Mr. Woosley does not specify a dollar amount.   He set forth his hours and suggested a percentage approach so that would really depend upon what that ultimate common fund looks like.”   The court asked counsel to include that information in the same letter.   That letter reflected a requested multiplier of 13 for all three awards.

The judgment entered three days later granted the fee applications of former and current counsel in almost the exact amounts requested;  former counsel requested $1,707,498 and was awarded $1,700,000 and current counsel requested $12,378,203.50 and was awarded $12,000,000.   However, Woosley requested $10,368,800 and was awarded $1,000,000.   Woosley attacks this award on several bases.

 Woosley complains the court improperly based its fee award to him on a standard for a layman, rather than compensating him for the legal services he rendered to the class.   It is important to note that the fact Woosley was not made co-counsel of record in this case does not automatically preclude him from receiving compensation for legal services;  if he in fact rendered legal services to the class in connection with this case, he may be awarded fees reflecting the reasonable value of those services without being named attorney of record.  (Consumers Lobby Against Monopolies v. Public Utilities Com. (1979) 25 Cal.3d 891, 915, fn. 14, 160 Cal.Rptr. 124, 603 P.2d 41.)   We also note that Woosley's involvement as class representative does not preclude him from recovering fees for legal services rendered to the class.  (Id. at p. 915, fn. 13, 160 Cal.Rptr. 124, 603 P.2d 41;  McGhee v. Bank of America (1976) 60 Cal.App.3d 442, 451, 131 Cal.Rptr. 482;  see also Renfrew v. Loysen (1985) 175 Cal.App.3d 1105, 1108–1110, 222 Cal.Rptr. 413.)

The record gives many indications that an award to Woosley for legal services might have been appropriate.   Woosley's fee application and supporting declaration refer only to his legal work on this case.   As quoted, earlier, the trial court expressly recognized that Woosley had “contributed both legally and factually” to the case;  class counsel admitted Woosley's work on the case had been particularly beneficial because he is a tax specialist, and counsel for DMV expressed his awareness that Woosley had been acting as an attorney in the case.

 Yet it is unclear whether the award to Woosley was to compensate him for these professional services as attorney, for services as a tax specialist, for his contributions as a classic car collector, or merely for the inconveniences he suffered as class representative.   The court's assurance to him that he would be “perfectly, totally protected” regarding the matter of compensation provides us with no insight, either, as to the specific services the court's award encompassed.   The record is inadequate to permit meaningful appellate review of the court's exercise of discretion as to Woosley's entitlement to an award for legal services rendered to the class.   We note the original trial judge retired shortly after the entry of judgment in this action.   Therefore we remand not merely to obtain an adequate record, but for the new trial judge to independently exercise his discretion on the record as to whether Woosley is entitled to an award for his legal services.

This brings us to an additional contention in Woosley's cross-appeal, that the trial court's award to him is not supported by a record showing that it was calculated in accordance with the lodestar adjustment method required by Serrano III, supra.

 Under Serrano III, determination of attorneys' fees in class action and public interest litigation requires a trial court to first determine a “lodestar” figure based on a compilation of the time spent and reasonable hourly compensation, for each attorney involved in the presentation of the case.   That lodestar figure may then be increased or reduced by use of a multiplier, based on a number of factors specific to the litigation.   (Serrano III, supra, 20 Cal.3d at pp. 48–49, 141 Cal.Rptr. 315, 569 P.2d 1303;  Press v. Lucky Stores, Inc. (1983) 34 Cal.3d 311, 322, 193 Cal.Rptr. 900, 667 P.2d 704.)   Such an award must be supported by a record showing that it was calculated from a lodestar determination of time spent and reasonable hourly compensation of each attorney;  an abuse of discretion appears in the absence of such showing.  (Mandel v. Lackner (1979) 92 Cal.App.3d 747, 758–759, fn. 6, 155 Cal.Rptr. 269.)

 In this case, the record reveals no independent analysis of these fundamental factors.   At the hearing on the fee applications, the court merely stated its intention “to grant the motions substantially in the form as requested,” indicating it was satisfied with the factual support that had been submitted.   The subsequent awards to former and current class counsel represented “rounded off” amounts of the requested fees;  the court apparently adopted, without comment, the lodestar figures and multiplier requested by counsel.   The award to Woosley reflects neither his requested lodestar and multiplier, nor any other basis for its calculation.   This record is clearly inadequate.

To the extent the trial court determines on remand that Woosley is entitled to fees based on his legal services, the record must reflect the application of the lodestar adjustment method required under Serrano III for the calculation of the amount of the award.   Proper analysis will require the court to first make a lodestar determination of time spent and reasonable hourly compensation for Woosley, and then to decide on an appropriate multiplier based on factors which include the novelty and difficulty of the questions involved in the case, the skill displayed in presenting them, and the fact that more than one law firm contributed in some share to the success of the litigation.  (Serrano III, supra, 20 Cal.3d at p. 48–49, 141 Cal.Rptr. 315, 569 P.2d 1303.)

Evaluation of these factors for Woosley's legal contribution to the case may necessitate an adjustment in the valuation of other counsel's work on the case in order that the total fees awarded in the case remain reasonable in light of the Serrano III factors.   Thus, if the court decides that Woosley should be compensated for his legal services in this case, and if it finds that valuation of all fees are interdependent, then its determination of the amount of Woosley's fees must also involve an examination and perhaps a redetermination of the fees awarded to all other counsel for the class.   (Gonzales v. R.J. Novick Constr. Co. (1978) 20 Cal.3d 798, 805–806, 144 Cal.Rptr. 408, 575 P.2d 1190.)   Any redetermination must, of course, include a proper calculation on the record of the lodestar and multiplier.   If the trial court, in its exercise of discretion, determines that Woosley is not entitled to attorney's fees, then the award of attorneys' fees to current and former class counsel is affirmed.

 Current counsel challenges the propriety of any re-examination of the attorneys' fees already awarded, arguing that no appeal was taken from the award of fees to current and former counsel.   The notice of appeal filed by DMV in this case was from the judgment, and the judgment included the award of attorneys' fees.   There is thus no jurisdictional obstacle to our consideration of the matter.

The absence of any initial appellate contentions regarding the propriety of the fees to class counsel is not unexpected, considering the relative positions of the parties.   DMV had no direct interest in challenging the amount awarded, since it was a “common fund” award which would be paid out of the class recovery rather than by DMV.   Class counsel certainly had no motivation to complain, since the trial court awarded the amount of fees requested.   Woosley's cross-appeal was taken on his own behalf, seeking review of the award to him for his legal services to the class;  he was not acting as class representative in seeking the higher award, particularly since any increased award to him might mean additional depletion of the common fund.   Given the absence of an advocate to represent the class interests on the question of the overall reasonableness of the attorneys' fees, we find the issue was adequately preserved and properly presented by the DMV in its brief filed September 29, 1988 upon request of this court.

DISPOSITION

The judgment in favor of the plaintiff and the class is affirmed.   The award of fees to Woosley is reversed and remanded for determination in accordance with the views expressed herein.   Parties to bear their own costs on appeal.

I concur with the Presiding Justice's opinion that before 1983 the Legislature did not authorize the DMV to override the presumption of section 6276 that the VLF market value constitutes the sales price for the determination of the use tax.   I write separately merely to emphasize that the Legislature had that proposition before it in 1971.   It passed instead a revenue enhancing measure which multiplied the presumed sales price by a factor of 1.2.   It rejected the provision which would have required the DMV to impose the use tax based on actual sales cost.   This fact is a strong indication of the Legislature's satisfaction with a tax structure based on a presumption of vehicle price which would be rebutted only by a taxpayer who had paid less than the presumed price.  “ ‘The failure of the Legislature to change the law in a particular respect when the subject is generally before it and changes in other respects are made is indicative of an intent to leave the law as it stands in the aspects not amended.’ ”  (San Diego Union v. City Council (1983) 146 Cal.App.3d 947, 956, 196 Cal.Rptr. 45.)

Moreover, DMV internal memoranda consistently recognized that the 1965 amendment of section 6276, which converted the irrebuttable presumption into a rebuttable one, was made simply to permit registrants to show their actual purchase cost was less than the presumed price.   This legislative change did not enhance the convenience of the DMV or its efficiency but rather favored registrants who had purchased vehicles below the presumed price.   In fact, as DMV memoranda stated, any DMV procedures aimed at ascertaining actual cost would place an additional burden upon the DMV.   Also rebuttals by registrants result in less revenue to the state, not more, although such rebuttals were few in number.

In 1971 when the choice was placed squarely before it, the Legislature chose not to eliminate the presumption and allow actual sales price to determine the tax even though such a proposition would have increased revenue.   It retained the presumption and chose instead to increase revenue by the specific and limited means of the 1.2 factor.   Clearly this approach to revenue enhancement was more equitable and fair since it reached all registrants, not just a portion.   Faced with these legislative decisions, I must agree with the trial court and the Presiding Justice that the DMV could not unilaterally eliminate the presumption in order to increase revenue.

I respectfully dissent from the majority's conclusion that the DMV in 1976 invalidly collected use taxes from buyers of motor vehicles based on their sales price.   In my opinion the DMV's change in practice by which it began calculating use tax for all vehicles sold on the basis of the actual sales price to the purchaser was lawful and appropriate.

As explained in a formal Attorney General's opinion on which the DMV and the SBE relied in 1976, the Legislature never intended that only the vehicle buyer could rebut the rebuttable presumption of section 6276.   The basic general rule for use tax is that it be based on sales price.  (§ 6201.)   The rebuttable presumption of section 6276 that the sales price equals the VLF value was intended to allow DMV to refer to an available figure and to collect a minimum tax when sales price could not be ascertained.   The Legislature never intended to prohibit DMV from determining the actual sales price by asking for a certificate of cost (§ 10753) from the buyer who, with the seller, is the person in the best position to know the sales price of the vehicle.   The 1976 change in practice was a completely proper interpretation of the laws established by the Legislature, namely that use tax is to be based upon sales price (§ 6201) and that the presumption of section 6276 is a rebuttable one.   In effect the majority is treating that presumption as conclusive.

The trial court placed undue emphasis on prior internal memoranda of the DMV which suggested that the DMV thought the presumption was rebuttable only by the buyer or that legislation would be required to enable DMV to rebut the presumption.   Nowhere in section 6276 does it say that only the buyer may rebut the presumption.   Nowhere does it say that the DMV could not obtain evidence of the sales price from the buyer of the vehicle.   The buyer has no privilege which precludes the DMV from asking the buyer to reveal the sales price.   The fact that for some reason the DMV had reservations about its authority under section 6276 does not change the plain meaning of the statute.   Nevertheless, uncertainties in DMV's own internal expressions were resolved by the Attorney General's opinion issued in January 1976.   The Attorney General's opinion thoroughly explained the duty to collect use tax on the basis of sales price, the ability of any party including the DMV and SBE to rebut the presumption of section 6276, and the ability of the SBE and DMV to act by interagency agreement.

The trial court also misconstrued the effect of the Legislature's 1971 amendment to section 6276.   The trial court found that the Legislature had before it a proposal to eliminate the rebuttable presumption and require that use taxes be based on the cost price to the purchaser, and that instead the Legislature adopted another proposal, supported by the SBE and the DMV, which left the language of the rebuttable presumption intact but multiplied the amount by a factor of 1.2.   The trial court erroneously concluded that because the Legislature did not “eliminate” the presumption, the Legislature intended to prohibit the DMV from rebutting it.   On the contrary, the 1971 legislation did not change the nature of the rebuttable presumption, it merely increased the tax by a multiplier.   Both prior to and after the 1971 amendment the statute did not limit which party may rebut the presumption.

Finally, the trial court's alternative theory that the increased taxes should be refunded because the agreed procedures were not adopted by formal regulation is also without merit.

Background

Section 6276 is derived from former section 6011.5 enacted in 1963.   At that time section 6011.5 provided that when the purchaser of a motor vehicle was required to pay use tax to the DMV, “the sales price of the property shall be deemed to be its market value at the time of application for registration as that value is determined to measure the license fee imposed under Section 10751 of this code.”  (Stats.1963, ch. 1858, § 1, p. 3834.)

When enacted as section 6276 in 1965, the section was amended to read, “[T]he sales price shall be presumed to be its market value at the time of the purchase as that value is determined to measure vehicle license fees․  The presumption may be rebutted by evidence which establishes that the sales price was other than such market value.”  (Stats.1965, First Ex.Sess. ch. 2, § 14, p. 5449.)

Although there was no direct legislative history concerning the purpose of this amendment, evidence before the trial court indicated that there had been complaints by registrants who were being asked to pay more use tax than they would have paid based on the actual purchase price.   Contemporaneous internal memoranda of the DMV showed that the policy of the DMV was to use the VLF value unless the applicant submitted evidence that the sales price was less than the VLF value.

Over the years the SBE urged that much higher use taxes would be collected if the assessment were based on actual sales price instead of VLF presumed value.¹  The DMV and the SBE had numerous meetings and conflicts over this issue.   The DMV generally resisted, arguing that implementing SBE's approach would require greater administrative effort by DMV employees and would require statutory amendment by the Legislature.

In 1971 the Legislature amended section 6276.   The Legislature retained the statutory presumption but modified it to provide that the presumed VLF market value be multiplied by a factor of 1.2 for noncommercial vehicles including passenger vehicles.   The 1.2 factor comported with studies prepared by the State showing that if use tax were based on actual price, it would be 1.2 times the amount yielded by using the VLF value.   The 1971 amendment thus made no statutory change in the manner in which the presumption could be rebutted, nor did it address the DMV's practice of treating out-of-state vehicles on a different basis than California vehicles.   It merely increased the tax by 20 percent.

In 1973 the SBE renewed its efforts to convince the DMV to collect use tax based on actual sales price.   SBE and DMV entered an interagency agreement in December 1973 (the 1973 interagency agreement) which specified that “the Department [DMV] shall compute the use tax on a vehicle required to be registered or subject to identification measured by the sales price of the vehicle.   In the absence of a bill of sale or other documented evidence of sales price, the sales price of a vehicle required to be registered, other than one purchased outside the state from the manufacturer or a vehicle dealer, is presumed to be the market value of the vehicle as that value is determined [for VLF purposes], multiplied by a factor of 1.2․  This presumption of the sales price of the vehicle may be rebutted by evidence which establishes that the sales price was other than such amount.”

The SBE and the DMV continued to have conflicts over the implementation of the 1973 interagency agreement.   DMV employees tended to discourage the use of bills of sale or other evidence of cost.

The SBE requested a formal opinion of the Attorney General concerning the effect of the presumption in section 6276 and the manner of rebutting it.   The Attorney General rendered the opinion in January 1976.  (59 Ops.Cal.Atty.Gen. 47 (1976).)   The Attorney General reached three conclusions:  “1.  Revenue and Taxation Code section 6276 in no way limits which party may rebut the presumption pertaining to ‘sales price,’ and it therefore appears clear that either the Board of Equalization (or the Department of Motor Vehicles, its agent) or the taxpayer may rebut the presumption by appropriate contrary evidence.  [¶] 2.   The Board of Equalization, as part of its administrative responsibilities, appears mandated to make a determination of the additional taxes owing, once the true larger sales price has come to its attention.  [¶] 3.   Exclusive reliance on the presumption contained in section 6276 of the Revenue and Taxation Code appears justified, but once evidence of the larger actual sales price comes to the attention of the Board of Equalization (or the Department of Motor Vehicles, its agent), there would be a duty to assess additional taxes.”

This Attorney General opinion is highly significant because it was obviously relied upon by DMV and SBE for their interpretation of section 6276 and their authority to act by interagency agreement.   For this reason I here quote substantial portions of that opinion.

In discussing the purpose and effect of the statutory presumption the Attorney General stated, “Although legislative history pertaining to section 6276 is lacking, the presumption, in our view, appears aimed at simplifying administration of the use tax laws, by allowing DMV to make reference to a readily ascertainable figure for purposes of computing the tax.   The presumption would appear to also assure the collection of a minimum amount of use tax, even in situations where the actual sales price was not readily ascertainable.  [¶] Such a presumption appears established to implement no particular public policy other than facilitating the determination of the ‘sales price.’

“․

“The section specifically allows rebuttal of the presumption ‘by evidence which establishes that the sales price was other than such amount.’   The section in no way limits which party may rebut the presumption, nor does it suggest that the purchaser should be excused from the obligation to pay the use tax based on the actual sales price, when that figure is available.   §§  6201 and 6011.   The conclusion appears clear therefore, that either the Board (or DMV, its agent) or the taxpayer may rebut the presumption by appropriate contrary evidence.3”  (59 Ops.Cal.Atty.Gen. at pp. 49, 50, fn. 3;  emphasis added.)

 “3. It was suggested that only the taxpayer, and not the Board had the right to rebut the presumption of the ‘sales price.’   Such was the statement of intent contained in Assembly Concurrent Resolution No. 115 (Murphy), introduced August 25, 1975.   Inasmuch as this concurrent resolution was neither passed by the Assembly nor concurred in by the Senate, we do not pass upon such a resolution's effect on the interpretation to be given section 6276.”

The Attorney General referred specifically to the 1973 interagency agreement and interpreted it to mean that the DMV and the SBE had “agreed that DMV has the responsibility to first seek evidence establishing the actual sales price, and only if such evidence is not available do they resort to the presumption referred to in section 6276.”  (Id. at p. 49, fn. 2.)   The Attorney General further stated that “the Interagency Agreement might be amended to further delineate the respective responsibilities of the two agencies, within the guidelines expressed herein.4” (Id. at p. 50 and fn. 4;  emphasis added.)

  “4. The Agreement might provide, for example, specific steps that DMV should take in an attempt to ascertain the actual ‘sales price’ before they are authorized to resort to the presumption established by section 6276.   Other areas of potential dispute might similarly be dealt with in the Agreement.”

Finally, the Attorney General concluded, “Your third question was whether the presumption in section 6276 may be relied upon in collecting use tax without any attempt to establish and collect use tax measured by the actual sales price.  Section 6276 states that the sales price ‘shall be presumed’ to be the amount determined by application of the specified factors, absent rebutting evidence.   As stated above, such a presumption is one affecting the burden of producing evidence.   Following the analogy of the Evidence Code, such a presumption requires one ‘to assume the existence of the presumed fact unless and until evidence is introduced which would support a finding of its nonexistence․’  (Emphasis added.)  Evid.Code § 604.   Exclusive reliance on the presumption therefore would appear to conform with the legislative intent in enacting section 6276 as a means of expediting the collection of the use tax.   However, once evidence of the larger actual sales price comes to the attention of the Board (or DMV, its agent), there would be a duty to assess additional taxes, as discussed above in Analysis No. 2.”  (Id. at p. 51;  emphasis added.)

When the 1976 interagency agreement, requiring all use taxes to be calculated on the actual cost of the vehicle, was subsequently implemented, the amount of revenue collected increased dramatically.   In the year following the change, use tax revenue jumped from $7.84 million per month to $10.64 million per month.

Statutory Interpretation

Prior to entering the 1976 interagency agreement, SBE requested and received a formal opinion of the Attorney General construing the rebuttable presumption in section 6276.   Although not binding on the courts, a formal opinion of the Attorney General is entitled to significant weight.  (Koire v. Metro Car Wash (1985) 40 Cal.3d 24, 30, 219 Cal.Rptr. 133, 707 P.2d 195.)   The Attorney General's opinion (59 Ops.Cal.Atty.Gen. 47) clearly held that nothing in the language of section 6276 limited which party may rebut the presumption.   The Attorney General's opinion further concluded that the purpose of the presumption was to simplify the administration of the use tax laws by allowing the DMV to make reference to a readily ascertainable figure, as well as to assure the collection of the minimum amount of tax in situations where the actual sales price was not readily ascertainable.

I find the Attorney General's opinion persuasive.   I agree with its conclusions that nothing in section 6276 prohibited DMV to choose to give up the convenience afforded by the presumption and instead to rebut the presumption by asking the taxpayer for the sales price.

Plaintiff points out that it had been long-standing policy of DMV to interpret the rebuttable presumption as a one-way street in favor of the vehicle buyer.   This could support, but in light of the clear language of the statute does not compel, the conclusion that the Legislature intended the statute to operate only in favor of the taxpayer.   For many years SBE criticized DMV's interpretation.   The Attorney General's opinion points out that neither the language of section 6276 nor any subsequent legislative action adopts the view that only the taxpayer may rebut the presumption.

The trial court placed much emphasis on the fact that in 1971 several bills were considered by the Legislature to change the method of calculating VLF, including a proposal to change explicitly to a cost price method.   The one eventually adopted by the Legislature did not change the language of the rebuttable presumption but rather multiplied the figure by a factor of 1.2.   The conclusion drawn by the trial court was that the Legislature did not want DMV to rebut the presumption and insisted that the presumption be used.   It was primarily on this basis that the trial court held the 1976 change in practice was contrary to legislative intent.

I disagree.   The language of the rebuttable presumption was not changed by the Legislature, but as indicated in the Attorney General's opinion, the main purpose of the rebuttable presumption appears to be the administrative convenience of the DMV.   Reenacting that presumption does not show that the Legislature intended to prohibit DMV from voluntarily giving up that convenience and rebutting the presumption.   Plaintiff seems to find comfort in the fact that the Attorney General's opinion stated that exclusive reliance on the presumption “appears justified” or “would appear to conform with the legislative intent in enacting section 6276 as a means of expediting the collection of the use tax.”   Plaintiff misinterprets that language.   The entire thrust of the Attorney General's opinion was that the presumption, which was for the administrative convenience of the DMV, may be rebutted if DMV and SBE so choose.   The opinion said that reliance on the presumption was justified, not that it was mandatory.

As part of its argument that the change in practice was contrary to legislative intent, the trial court suggested that the Legislature had not authorized DMV to require a certificate of cost, and that such a certificate would amount in effect to a tax return.   I disagree with these arguments.   Other subdivisions of section 10753 had long authorized DMV to determine market value on the basis of cost price to the purchaser as evidenced by a certificate of cost.   Having concluded, consistent with the Attorney General's opinion, that DMV was authorized to rebut the presumption of section 6276, it is my opinion that section 10753 authorized a certificate of cost.   If requiring a certificate is authorized by section 10753, there is no point in straining to characterize it as a tax return.   In any event section 6292, on which the court relied, provides that “[a]pplication to [the DMV] by the purchaser relieves the purchaser of the obligation to file a return with the [SBE] under Section 6452.”   This merely relieves the purchaser of the obligation to file a return with the SBE which would otherwise be required by section 6452.²  Section 6292 does not prohibit DMV from requiring a certificate of cost.

Regulation

As an additional and apparently independent ground for its ruling in favor of the post–1976 class, the trial court held that the 1976 change in practice, pursuant to the interagency agreement, was “an invalid attempt to create a regulation.”   It is suggested that DMV's change in interpretation fits the definition of a “regulation” in the Administrative Procedure Act (Gov.Code, § 11340, et seq.) and, since DMV did not follow the formal procedures of public notice and hearing for promulgation of a regulation, the new policy was “invalid.”

This issue is a confusing red herring.   It certainly does not support the conclusion reached by plaintiff that the increased taxes collected under the new interpretation should be refunded.

Preliminarily, no inference can reasonably be drawn of any intention to “evade” the Administrative Procedure Act.   Prior to entering the agreement, SBE requested and received a formal opinion of the Attorney General, which is a published document, interpreting section 6276.   That Attorney General's opinion discussed the 1973 interagency agreement and very clearly implied that the two agencies could enter a new interagency agreement to implement the policies and interpretations supported by the opinion.   Furthermore, in the press release announcing the new policy, the agencies stressed that the opinion of the Attorney General “concurred that the new collection procedure could be implemented without making any changes to the present law.”

Second, absence of formal regulatory procedures did not invalidate the taxes.  “Regulation” is defined in Government Code section 11342, subdivision (b) as “every rule, regulation, order, or standard of general application ․ adopted by any state agency to implement, interpret, or make specific the law enforced or administered by it․”  Assuming that the 1976 change in interpretation fits this definition, what is the effect of DMV's failure to use the formal regulatory procedure?   Plaintiff assumes that the increased tax collected as a result of the change was therefore illegal and should be refunded.   This conclusion does not follow.

In performing its functions, an administrative agency has many occasions to interpret the laws in its area of expertise, and its interpretations can take a wide variety of forms, ranging from formal regulations to less formal policies, guidelines, manuals, public statements, decisions, positions taken and the like.   When the agency has not expressed its policy by formal regulation and the agency's interpretation is litigated, the court does not owe it the special deference which is accorded to a formal regulation within the agency's rule-making power.   In such situations the court interprets the law for itself and is entitled to discount or disregard an agency interpretation which has not been adopted by formal regulation.  (Culligan Water Conditioning v. State Bd. of Equalization (1976) 17 Cal.3d 86, 92–93, 130 Cal.Rptr. 321, 550 P.2d 593;  Wallace Berrie & Co. v. State Bd. of Equalization (1985) 40 Cal.3d 60, 65, 219 Cal.Rptr. 142, 707 P.2d 204;  Armistead v. State Personnel Board (1978) 22 Cal.3d 198, 204–205, 149 Cal.Rptr. 1, 583 P.2d 744.)   The ultimate question is still the validity of the agency's interpretation of the substantive law.  (Culligan Water Conditioning v. State Bd. of Equalization, supra, 17 Cal.3d at p. 93, 130 Cal.Rptr. 321, 550 P.2d 593;  Armistead v. State Personnel Board, supra, 22 Cal.3d at pp. 204–206, 149 Cal.Rptr. 1, 583 P.2d 744;  Associated Cal. Loggers, Inc. v. Kinder (1978) 79 Cal.App.3d 34, 42–43, 144 Cal.Rptr. 786;  Carden v. Board of Registration for Professional Engineers (1985) 174 Cal.App.3d 736, 744, 220 Cal.Rptr. 416.)   The agency's interpretation is not automatically wrong merely because it could have been, but was not, expressed in a formal regulation.³

Since DMV's change in practice was not inconsistent with the rebuttable presumption in section 6276, the fact that the change was not effected by a formal regulation does not independently render the taxes illegal.

FOOTNOTES

1.   All section references hereafter are to the Revenue and Taxation Code unless otherwise indicated.

2.   This alternative was based on former section 10753, subdivision (c), which provided, “In the event the department is unable to ascertain the California suggested base price as herein defined in respect to any passenger vehicles by reason of the same being a specially constructed vehicle, or for any other reason, the department shall determine the market value upon the basis of the cost price to the purchaser of the vehicle as evidenced by a certificate of cost, but not including California sales or use tax or any local sales or other local tax.”  (Stats.1967, ch. 435, § 1, p. 1648.   Emphasis added.)

3.   “The market value of a vehicle for each calendar year of its life, starting with the year first sold to a consumer as a new vehicle,” was, for the first year, 85 percent of the midpoint in the class to which the vehicle was assigned;  second year, 70 percent;  third year, 55 percent;  fourth year, 40 percent;  fifth year, 30 percent;  sixth year, 25 percent;  seventh year, 15 percent;  eighth year, 10 percent;  ninth and each succeeding year, 5 percent.  (Former section 10753.2, subd. (c), stats. 1967, ch. 435, § 2, p. 1649.)

4.   An example given by the trial court assumed two identical vehicles with a suggested base price of $4,250 on January 1, 1970, and a fair market value of $2,495 on January 1, 1973.   One vehicle was originally sold and registered in California and the other was not.   The California vehicle would be in a classification based on its 1970 suggested base price of $4,250, and if sold to the next consumer on January 1, 1973 would be in its fourth year on the depreciation schedule and would have a VLF of $34 in 1973.   The nonresident vehicle, however, first registered in California in 1973, would have its market value based upon its cost price of $2,495 and would be on the first year of the depreciation schedule, and would pay a VLF for 1973 of $42.   Over the nine-year period 1973 to 1982, the resident vehicle would pay a total of $103 VLF, while the nonresident vehicle would pay a total of $167 VLF.

5.   Although Mr. Woosley's individual claim is unusually large because he purchased a valuable antique, the trial court found that the discrimination was also significant for average vehicles.

6.   Other cases cited by DMV are inapplicable.   In this case, there is no suggestion that there is any legitimate local regulatory purpose in charging higher VLF and use taxes on vehicles originally purchased out of state than on vehicles purchased in state.  (See Pike v. Bruce Church, Inc. (1970) 397 U.S. 137, 142, 90 S.Ct. 844, 847, 25 L.Ed.2d 174;  Lewis v. BT Investment Managers, Inc. (1980) 447 U.S. 27, 36–37, 100 S.Ct. 2009, 2015–2016, 64 L.Ed.2d 702;  Maine v. Taylor (1986) 477 U.S. 131, 140, 106 S.Ct. 2440, 2448, 91 L.Ed.2d 110;  Philadelphia v. New Jersey (1978) 437 U.S. 617, 623–624, 626–627, 98 S.Ct. 2531, 2535, 2536–2537, 57 L.Ed.2d 475;  Hughes v. Oklahoma (1979) 441 U.S. 322, 336, 99 S.Ct. 1727, 1736, 60 L.Ed.2d 250.)Nor is this a case involving a tax on those engaged in interstate commerce to compel them to pay their just share of a state's tax burden, such as fees for interstate carriers using a state's highways.   Even those taxes must be fairly apportioned, must not discriminate against interstate commerce, and must be fairly related to the services provided by the state.  (Complete Auto Transit, Inc. v. Brady (1977) 430 U.S. 274, 279, 97 S.Ct. 1076, 1079, 51 L.Ed.2d 326;  American Trucking Associations, Inc. v. Scheiner (1987) 483 U.S. 266, 107 S.Ct. 2829, 2846–2847, 97 L.Ed.2d 226;  Goldberg v. Sweet (1989) 488 U.S. 252, 109 S.Ct. 582, 588, 102 L.Ed.2d 607.)   There is no suggestion here that vehicles purchased elsewhere impose a greater burden on this state's transportation system so as to justify a higher tax than on vehicles originally purchased here.

FOOTNOTE.   See footnote *, ante.

9.   The trial court's statement of decision certifying the class action estimated there are 2.8 million persons in the discrimination class and 14 million persons in the post–1976 class.

10.   Surprisingly, DMV does argue that injunction or mandamus would have been superior remedies to a class action for refunds.   It is well established that injunction, mandamus, or other forms of equitable process are not available to prevent the collection of tax.  (Cal. Const., art. XIII, § 32;  Rev. & Tax.Code, § 6931.)

11.   See Annotation, Propriety of Class Action in State Courts to Recover Taxes (1981) 10 A.L.R.4th 655.

1.   The hundreds of millions of additional dollars collected after the DMV began using the sales price abundantly proves SBE's contention.

2.   Section 6452 provides in part that “[f]or purposes of the use tax, a return shall be filed by every ․ person purchasing tangible personal property, the storage, use, or other consumption of which is subject to the use tax.”

3.   California Assn. of Nursing Homes Etc., Inc. v. Williams (1970) 4 Cal.App.3d 800, 84 Cal.Rptr. 590, 85 Cal.Rptr. 735 and California Optometric Assn. v. Lackner (1976) 60 Cal.App.3d 500, 131 Cal.Rptr. 744, cited by plaintiff, are not to the contrary.   Those cases involved rate-making proceedings in which the administrator was required by other provision of law to fix the rates by means of formal regulation.

LUCAS, Presiding Justice.

BOREN, J., concurs.