WESTERN OIL AND GAS ASSOCIATION v. CALIFORNIA STATE BOARD OF EQUALIZATION (1985)

NATURE OF APPEAL:

Appeal by State Board of Equalization (appellant) from order granting writ of mandate, permanent injunction and declaratory relief ordering appellant, to refrain from requiring that several oil companies (respondents) furnish information concerning rights of way and/or lands used by respondents in connection with inter-county pipelines.   We affirm.

ISSUES PRESENTED:

Although seemingly a dispute as to whether appellant in the exercise of its authority to assess pipelines may require respondents to produce information concerning the lands and rights of way on which the pipelines are located, the real point on which resolution of this appeal truly revolves is framed by the question:  “Does the constitutional requirement that appellant shall assess inter-county pipelines give appellant the power to assess lands and rights of way on which the pipelines are located?”

We hold that it does not and conclude that the trial court did not err.

BACKGROUND:

Appellant is required to and does assess annually, the pipelines of respondents under the authority of the California Constitution, article XIII, section 19.   That provision in relevant part reads:  “The Board shall annually assess (1) pipelines, flumes, canals, ditches and aqueducts lying within 2 or more counties․”  (Emphasis added.)   The predecessor of this constitutional provision which for the purposes here in issue was essentially the same, was enacted into law in 1933 as California Constitution, article XIII, section 14.   In January 1936 “pipelines” as used therein and for the purposes of that provision, was defined by the California State Supreme Court in General Pipe Line Co. v. State Bd. of Equalization (1936) 5 Cal.2d 253, 54 P.2d 18 (hereafter General Pipe Line ) as:  “The line of pipe, together with couplings, collars, valves and fittings, with protection covers;  the structures supporting or encasing the pipe, above or below ground or under water;  the pumps, boilers, engines, motors, manifolds, intakes, header station, control valves and auxiliary equipment attached to and connected therewith and necessary to the operation of the said major station units, receiving, shipping, flow, balance and surge tanks, together with the suction from leased storage tanks, to, by and through pumping stations, when such pumps, tanks and so forth are essential and part of and necessary to the use and operation of the pipe line.”  (Id., at pp. 256–257, 54 P.2d 18.)   The definition does not expressly include or exclude land or rights of way.

From the time of the constitutional enactment in 1933 until the decision in General Pipe Line, appellant had issued instruction to pipeline owners and operators for reporting pipeline property, that specifically required the listing of “lands and rights of way.”   After the General Pipe Line decision, however, and in apparent acquiescence with the exclusion of land and rights of way implicit in the definition therein, appellant modified its instruction so that thenceforth pipeline owners and operators were no longer required to furnish information concerning land and rights of way.   This policy and practice continued for 46 years, to January 1982, when appellant then sought to unilaterally change it by appellant's self-assertion that it had the jurisdiction and power to make assessments of lands and rights of way.   Appellant adopted a policy statement directing its staff to assess lands of the pipeline systems.   No change in constitution, statute or decisional law was or is relied upon or cited for this about-face.   It was simply based upon an opinion of its current legal staff that appellant had jurisdiction to make such assessments.

Appellant notified respondents of this change and met with them to work out a method of reporting pipeline lands by locating the pipelines on tax code area maps and summarizing the information on a form sheet provided by appellant.   Presumably appellant would then use the information provided on the tax code area maps to allocate the assessed property to the correct taxing agency.   Appellant estimated the cost to respondents of preparing this information would be $81,569.   Respondents estimated their costs would be $262,000.

Respondents filed this action to enjoin appellant from taking any steps to compel respondents to furnish information to appellant concerning any lands and rights of way owned by respondents.   The trial court found that appellant had no power to assess land and rights of way of pipelines and thus no legitimate need for the information it sought and granted the requested relief.

APPELLANT'S CONTENTIONS:

Appellant's contentions are:  (1) the relief granted by the trial court is prohibited in tax assessment and collection matters by California Constitution, Article XIII, section 32;  (2) respondents did not exhaust their administrative remedies;  (3) appellants may constitutionally require a taxpayer to furnish information reasonably related to the valuation of taxable property;  and (4) California Constitution, article XIII, section 19, gives appellant jurisdiction to assess lands and rights of way of inter-county pipelines.

DISCUSSION:

(1) The Jurisdiction of the Trial Court to Grant Mandate Injunctive and Declaratory Relief

Appellant argues that a writ of mandate or preliminary injunction whereby the State Board of Equalization would be prevented from gaining information to make an assessment would enjoin the collection of property taxes.   It then concludes such an order is absolutely prohibited by the California Constitution and the California Revenue and Taxation Code.  (Pacific Gas & Electric Co. v. State Bd. of Equalization (1980) 27 Cal.3d 277, 280–284, 165 Cal.Rptr. 122, 611 P.2d 463;  Modern Barber Col. v. Cal. Emp. Stab. Com. (1948) 31 Cal.2d 720, 723, 192 P.2d 916;  Aronoff v. Franchise Tax Board (1963) 60 Cal.2d 177, 179–180, 32 Cal.Rptr. 1, 383 P.2d 409.)   Appellant's position is based on Section 32 of article XIII of the California Constitution which states:  “No legal or equitable process shall issue in any proceeding in any court against this State or any officer thereof to prevent or enjoin the collection of any tax.   After payment of a tax claimed to be illegal, an action may be maintained to recover the tax paid, with interest, in such manner as may be provided by the Legislature.”

 The trial court was not prohibited by this constitutional provision from entertaining this action nor in granting the relief sought.   At bench the trial court did not enjoin or prevent the collection of any tax.   Instead, it merely enjoined the Board from forcing respondents to go to the considerable burden of furnishing the State Board of Equalization with detailed material for which the State Board has no need.   Secondly, section 32 of the constitutional provision applies only in those situations where the wrong is of the type that can be cured by an action to recover illegal taxes.   Therefore the section does not prohibit courts from enjoining or preventing the Board of Equalization from taking wholly unauthorized acts, such as demanding unnecessary information from taxpayers, which are beyond the scope of its constitutional grant of authority.   The legal and equitable powers of the courts are not curbed in situations which refund procedures are not designed to cover.   Thus here appellant's self-assumed power to expand upon the state constitutional language and authority and upon the decisional law as expressed by the highest court of this state is a classic example of where the administrative refund procedures do not apply and would be meaningless.

Additionally, the purpose and policy behind article XIII, section 32 of the California Constitution is to allow revenue collection to continue during litigation.   The relief granted by the trial court does not offend that policy.   The revenue collection continues during the litigation and the essential public services dependent upon the funds are not unnecessarily interrupted.  (Hunter-Reay v. Franchise Tax Board (1983) 140 Cal.App.3d 875, 879, 189 Cal.Rptr. 810.)

The relief granted by the trial court merely precludes appellant's unauthorized conduct of demanding information which is totally apart from its constitutional and statutory powers.   It does not in any way prevent appellant from continuing its lawful duty of making assessments nor does it prevent the imposition of taxes on those assessments or prevent the collection of such taxes.   In fact, here after the decision was issued by the trial court appellant did assess the lands and rights of way here in question.   Respondents then protested the amounts of those assessments.   Administrative hearings were held and respondents' requests for reassessments were denied.

But most significantly and importantly, assuming for argument that the writ or injunction issued below did somehow prevent or enjoin the collection of any tax and hence did run afoul of article XIII, section 32 of the California Constitution, that “․ anti-injunction provision of the California Constitution must yield to the paramount provisions of the United States Constitution․”  (Dupuy v. Superior Court (1975) 15 Cal.3d 410, 418, 124 Cal.Rptr. 900, 541 P.2d 540.)   It follows that the statutory prohibitions against judicial relief in tax matters must also yield.  (Cal.Rev. & Tax.Code, § 19081.)

As the trial court correctly concluded where there is no legitimate need the Board has no power to compel disclosure of information in order to compel the taxpayer respondents to do the work for it.   Although the information sought here was in a general sense related to pipelines, it admittedly was sought by appellant to assist it in assessing the lands and rights of way, a function in which it has no control or statutory power to exercise as we more fully later explain in part four of this opinion.   In view of the 46-year history of assessing pipelines without this additional information there is no demonstrated need for it now, except as a possible attempt to strengthen appellant's unfounded claim to the right to assess lands and rights of way.

 It follows that the demand for information concerning the lands as made by appellant in the instant matter are legally irrelevant and unnecessary to the full and proper performance of its authorized duty.   Respondents are protected from the demand at issue herein by reason of the Fourth Amendment of the United States Constitution and California Constitution, article I, section 13.   These protections against unreasonable search and of privacy are applicable to civil discovery matters such as that before us (McClatchy Newspapers v. Superior Court (1945) 26 Cal.2d 386, 396, 159 P.2d 944;  Shell Oil Co. v. Superior Court (1930) 109 Cal.App. 75, 292 P. 531) and whether asserted by an individual or corporation (Silverthorne Lumber Co. v. United States (1920) 251 U.S. 385, 40 S.Ct. 182, 64 L.Ed. 319).   Thus the federal and state constitutional guarantees above described afford respondents protections before which the anti-injunction provision of article XIII, section 32, and its decisional progeny must yield.   The equitable relief sought from the trial court was properly available.

The instant action is in no way an impediment to nor do respondents seek to prevent appellant from carrying out its proper function of assessing pipelines nor the collection of the taxes payable on the pipelines.   Nor for that matter do they seek to prevent the proper assessor of lands, i.e., the county assessor, from performing his function.   The respondents by their suit here seek only to prevent new and unauthorized conduct by appellant under the color of a non-existent power.

(2) Exhaustion of Administrative Remedies

 Here there were few if any administrative remedies truly applicable to the conduct and demands of appellant.   Here appellant's acts are not merely incorrect, for example, mechanical maladjustment or erroneous computation in the exercise of authorized power for which administrative remedies are available.   Here instead appellants demand additional duties of respondents, a demand made under a void assertion of authority because the claimed authority to make the assessment here is totally absent.   There is a fundamental flaw.   It is the lack of a jurisdictional basis and for which no administrative remedy is furnished when asserted.

The record discloses that respondent pipeline companies did in fact appear before the State Board of Equalization and objected to the furnishing of the material requested.   Beyond doing that there were no other administrative remedies for respondent operators to exhaust.   The refund procedures (Cal.Rev. & Tax.Code, §§ 5096, 5140) which appellants assert should have been exhausted as administrative remedies, simply are not applicable.   They provide no remedy which would protect the constitutional rights which respondents here assert.   Long before any tax is assessed and therefore long before refund action could be brought the respondents would have already furnished the information which they object to furnishing.   Their case would have been moot before it was filed and respondents' rights would have been lost in the process.   Private protected information would have been disclosed, personal papers would have been given, and the work to provide the information to appellant would have been performed.   There would be no way to recover all of that.   By contrast, money unlawfully paid can be recovered.   The administrative refund procedures set forth in the Revenue and Taxation Code and to which appellant refers in its claim that administrative remedies exist are simply, wholly inapplicable to the type of situation presented here.   Moreover a lawsuit to recover after administrative denial is brought against the local county.   Appellant would not be a party to any such suit for recovery of taxes paid under the Revenue and Taxation Code.

(3) The Implied Right of Appellant to Demand Information Based on its Constitutional Duty

 Appellant Board contends that it has the right to information for the purpose of carrying out its necessary functions and duties within the taxing scheme.   There is no quarrel with the general proposition and rule which appellant puts forward based on language of Brovelli v. Superior Court (1961) 56 Cal.2d 524, 529, 15 Cal.Rptr. 630, 364 P.2d 462 and the holding of People ex rel. Franchise Tax Bd. v. Superior Court (1985) 164 Cal.App.3d 526, 529, 210 Cal.Rptr. 695, et seq.   In brief summary, the rule being recited by such cases as appellant correctly states is:  the taxpayer must comply with the administrative inquiry and search provided (1) that the inquiry is one which the agency demanding production is authorized to make;  (2) that the demand be not too indefinite;  and (3) that the information sought be reasonably relevant.   Appellant then argues that all of these conditions exist in this case.   The information is needed in order to adequately and accurately assess pipelines including lands and rights of way in this state.   Appellant then concludes that whether or not the Board is exceeding its jurisdiction in its definition of what constitutes a pipeline is an issue that can only be raised after administrative remedies have been exhausted.

The basic rules as set forth by appellant are correct;  but tested thereby, the instant case discloses a missing ingredient necessary to enable appellant to demand the information.   Missing is the authority to demand production of information concerning lands and rights of way.   That the authority exists is but the ipse dixit of appellant.   That is the very crux of the issue in this case and one which is not subject to preliminary determination or solution by administrative remedy.   Administrative remedies may well apply to an excessive exercise of granted authority.   But the authority to assess land has not been granted appellant.   The information to the extent necessary to assess pipelines alone may be obtained without the added information.   It has been obtained for 46 years.   Any additional information to the extent needed or necessary to assess lands or rights of way or which is solicited merely to help or enable appellant to try to assess the lands may not be compelled.   Appellant has no direct, basic and expressly granted power to assess land.   Authority to provide information to facilitate appellant's effort to exercise this non-existent power cannot be implied from a different expressed power.

4. Expansion of Jurisdiction under Article XIII, Section 19

California Constitution, article XIII, section 19, provides in relevant part:  “The Board shall annually assess (1) pipelines․”  It does not expressly include lands or rights of way.   Appellant argues that the word “pipelines” implies inclusion of the lands and rights of way on which pipelines are located.   But in the definition which we set out earlier in the opinion given in General Pipe Line, lands and rights of way were omitted.   Appellant argues that neither this court nor the General Pipe Line case expressly excludes lands nor do they prohibit appellant from “assuming jurisdiction to assess the lands underlying the pipelines.”   Appellant now asserts that whether or not lands and rights of way should be included in the definition and to be assessed has been an open question for 46 years.   We disagree.   There has been no question for 46 years.   True, the definition of pipeline in the General Pipe Line case did not expressly include lands and rights of way.   But, more significantly, it did not include lands or rights of way in the definition.   The constitutional provision is the organic command and authority to a state agency to perform a particular task—assess pipelines.   Except as specifically authorized by it, the constitutional provision did not empower that agency to expand its duties nor to “assume jurisdiction” over any other property or activity of a taxpayer.   We cannot assume that the constitutional command to assess pipelines was one where the Legislature, which drafted the constitutional amendment in 1933 or the people who voted on it, accidentally or inadvertently neglected to include land.

Much discussion is devoted by the parties in their presentations to the trial court and here as to the background and the issues presented to the Supreme Court in the General Pipe Line case through the briefs and the arguments there submitted.   We need not go behind the plain language of the decision or the constitutional phrase which it interpreted.   As defined there is no ambiguity.   True there is a limited power given the appellant but a limited power does not mean an ambiguous term was used.   Any expansion of that power should be by constitutional amendment or possibly by statute certainly at least not by the agency to whom a specific limited power has been given.   The word “pipeline” means what the Supreme Court said it meant in General Pipe Line —no more, no less.  (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 20 Cal.Rptr. 321, 369 P.2d 937.)   Accordingly, we find that appellant has no state constitutional or other authority to assess the lands or rights of way of respondent and hence has no legitimate need or right to the information which it attempted to compel respondents to produce.

The judgment is affirmed.

The instant proceeding is quite unique.   It was determined in ITT World Communications, Inc. v. City and County of San Francisco (1985) 37 Cal.3d 859, 210 Cal.Rptr. 226, 693 P.2d 811, that property subject to assessment by the appellant Board will escape the constrictions Proposition 13 has placed on this state's many counties.  (See Cal. Const., art. XIII A, § 1, subd. (a), and § 2, subd. (a).)  The Board, whether altruistically motivated or no, now seeks to augment these counties' income by declaring subject to its authority, property it never previously has assessed and which, for nearly fifty years, it has acknowledged, at least sub silentio, to be without its jurisdiction.   By their present action respondent oil companies have sought to obtain an expedited resolution of the propriety of the Board's endeavor.

Were not the relationship between (1) the numerous taxing entities, i.e., the counties, and (2) the assessing and information demanding authority, i.e., the Board, so peculiar, and were not these parties now in such close proximity to our Supreme Court, the only tribunal that can truly decide the underlying determinative question, I would entertain the gravest doubts that review in this fashion should be permitted.   Nonetheless, believing this case to be of such a sufficiently sui generis nature that our temporal resolution of its key question will not significantly breach the generally applicable barrier provided by section 32 of article XIII of the California Constitution, I agree that we may consider the issue tendered.

Too, there clearly are most excellent policy reasons why the Board's power to assess the lands underlying pipelines should be considered, or reconsidered, at this time.   However, I can conceive of a no more vain method of approaching this task than reading excerpts from the briefs and the file in Pipe Line Co. v. State Bd. of Equalization (1936) 5 Cal.2d 253, 54 P.2d 18, provided us by the litigants.   If the mental processes of Justices Waste, Seawell, Shenk, Curtis, Conrey, Langdon and Thompson a half century ago need now be plumbed, that task must fall upon their successors, not this intermediate appellate tribunal.   I, therefore, concur in my colleagues' decision that the long standing deference the appellant Board has shown to a restrictive interpretation of the Pipe Line decision requires that we affirm the present judgment.

BEACH, Associate Justice.

ROTH, P.J., concurs.