Petition — Ball v. County of Los Angeles
Supreme Court brief1979
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7~ Supreme Court, U, &
{ FILED
NOV 80 1978
__MHOHAEL RODAK, JR., CLERK
IN THE
SUPREME COURT OF THE UNITED STATES
October Term, 1978
No.
WE 827
HELEN BALL, INDIVIDUALLY AND ON BEHALF
OF ALL OTHERS SIMILARLY SITUATED,
Petitioner,
vs.
COUNTY OF LOS ANGELES,
Respondent.
Petition For Writ Of Certiorari To The
Supreme Court Of The State Of California
VOLNEY F. MORIN
VOLNEY F. MORIN, JR.
VOLNEY F. MORIN, INC.
LAW CORPORATION _
1341 Cahuenga Boulevard
Los Angeles, Calif. 90028
Attorneys for Petitioner.
Unicorn Press, Legal Printers, Santa Ana, CA, Phone 546-7320
ad
—_—- — — ee
SUBJECT INDEX
Page
eC eaten, 4 Sdekabaesbre. +s ones a
ee Pat ee aa as wong ees S eae as 2
ee errr ree 2
Constitutional Provisions and Statutes Involved....... 3
ES ERS eee ee 7
A. Statement of Substantive Facts............ 7
B. Statement of Procedural Facts............ 9
Reasons for Granting the Writ...................45. 10
A. Ball Denied Equal Protection Of Law By
Discriminatory And Arbitrary Legislation
For Payment Of Interest On Tax Refunds... 10
B. California Revenue And Taxation Code As
Presently Constituted Is Discriminatory And
Arbitrary In Its Policy Of Payment Of In-
terest On Overpayments And Refunds Of
EE SEs eee eb a6 Aah as wk SH wees 14
C. The Supreme Court And Lower Federal
Courts Have Already Affirmed The Proposi-
tion That Citizens Are Entitled To Recovery
Of Interest In Connection With A Refund Of
ot My 2a ag Ee EN oe de 24
APPENDIX INDEX
Page
Appendix A.
Minute Order, Supreme Court Of The State
Of California, dated August 24, 1978......
Appendix B.
Ball v County of Los Angeles, 82 Cal. App.
3d 312, Court of Appeals, 2d District, dated
Sk Se POU eee re. ree
Appendix C,
Order Dismissing Complaint and Entry of
Summary Judgment in Favor of Defendant
and Against Plaintiff, dated February 3,
1978, of the Superior Court of the State of
California for the County of Los Angeles. . .
Appendix D.
Reporter's Transcript on Appeal..........
Appendix E.
Appellant's Opening Brief to Court of Ap-
aia VIN e ON Le emai
Appendix F.
Petition for Hearing In The Supreme Court
of the State of California.................
Appendix G.
Text of Pertinent Sections of California
Revenue and Taxation Code..............
Appendix H.
Lease Between Helen Ball, Lessor and City
of Los Ans, Lees i: ois aes
ii
15
17
26
49
70
TABLE OF AUTHORITIES CITED
Cases Page
Airway Electric Appliance Corp. v. Day (1924), 266
U.S. 71, 69 L.Ed. 169, 45 Sup. Ct. Rep......... 12
Ball v. County of Los Angeles (1978), 82 Cal. App.
PRL baelsnks x SUA Whe a oc tee oh Ree 2, 7-8, 10
Barbier v. Connolley (1885), 113 U.S. 27, 28 L.Ed.
Ss ee te I Slee Pd akc mkotoes chRd ca te 12
Billings v. United States (1914), 232 U.S. 261, 34
ee Fe eee re eee 17
Boott Cotton Mills v. City of Lowell (1893), 159
bias: TER OU Wie, Beer he Ge ieee. 24
Bryam v. Thruston County (1926), 141 Wash. 28,
251 P. 103; 141 Wash. 28, 252 P. 943 (1927 re-
CIS F555 SSE ail ah 20-21
Chicago and Northwestern Ry. v. Schmidt (1970),
85S.D. 223, 1SON.W. 2d 233...........0.005. 23
Chicago St. P. M. & O. Ry. v. Mundt (1930), 56
Dads Wes ES Oe sia ce Won be idscves on 22-23
Cities Service Oil Co. v. City of Pittsburg (1972),
SO es ET Pin Re ccc rte vas sb aeny' 19
Department of Mental Hygiene v. McGilvery
(1958), 50 Cal. 2d 742, 329 P. 2d 689........... 3
Doric Co. v. King County (1962), 59 Wash. 2d 741,
PN MN ae ae a NG ss allan ainhs and 4h Bie 0p 21
Eisenstadt v. Baird (1972), 405 U.S. 438, 31 L.Ed.
ee rah bie w'ala 5 9 dey 4.6.4 90:1 12, 16
Erskine v. Van Arsdale (1872), 15 Wall. (U.S.), 75,
A eae Mh etl Sk AL ae Bae Ad a As 17, 24
TABLE OF AUTHORITIES CITED (Continued)
Cases Page
Ford Motor Co. v. City of Detroit (1973), 43 Mich.
App: B66, 306 MW. BB SOBs 5 cin cc kee Ceca 22
Great Northern Railway Co. v. Stevens County
(1919), 108 Wash. 238, 183 P. 65.............. 21
Green v. State of California (1887), 73C.29....... 13, 14
Gulf, C. & S. F. R. Co. v. Ellis (1896), 165 U.S. 150,
41 L.Ed. 666, 17 Sup. Ct. Rep. 255............ 12
Haiku Sugar Co. v. Johnstone (1918), 249 Fed. 103,
001 C.C.A. OOD. on... ccs ccdweenvaeen 17
International Paper Co. v. Burrill (1919), 260 Fed.
O00 OO. a. 6 ace khcen doe eee 17
Kentucky R. Tax Cases (1885), 115 U.S. 321, 29
L.Ed. 414, 6 Sup. Ct. Rep. 57... cc cccsevees ll
Ketchikan Spruce Mills v. Kewey (1957), 17 Alaska
hE TE ee ee ne 18
Lelande v. Lowery (1945), 26 Cal. 2d 224, 157 P. 2d
BR ses n'k 6.0.5) bp ous oe ne 3
Lindsley v. Natural Carbonic Gas Co. (1911), 220
U.S. 61, 55 L.Ed. 369, 31 S. Ct. 337............ 12-13
Los Angeles v. Southern Cal. Tel. Co. (1948), 32
Cal. 2d 378, 196 P. 2d 773; appeal dismissed, 336
U.S. 929, 93 L.Ed. 1090, 69S. Ct. 737.......... 3-4
Louisville Gas & Electric Co. v. Coleman (1928),
277 U.S. 32, 72 L.Ed. 770, 48S. Ct. 423........ 11, 13
Magoun v. Illinois Trust & Sav. Bank (1897), 170
U.S. 283, 42 L.Ed. 1037, 18 Sup. Ct. Rep. 594... ll
McDonald v. Board of Election Commissioners
(1969), 394 U.S. 802, 22 L.Ed. 2d 739, 89 S. Ct.
iv
TABLE OF AUTHORITIES CITED (Continued)
Cases Page
Metropolitan Life Insurance Co. v. State (1924), 194
EP PE rte Us eee 24
Mullaney v. Hess (1951), 189 F. 2d 417 (9th Cir.)... 18
National Home v. Parrish (1913), 229 U.S. 494, 57
ae OY Re ere ee 17
People v. England (1934), 140 Cal. App. 310, 35 P.
i Thea hae ie a a 3
People v. Stevens (1877), 71 N.Y. 527............. 14
People v. Sullivan (1943), 60 Cal. App. 2d 539, 114
IT See aes ss cast kes s cat 3
Philadelphia and Reading Coal and Iron Co. v.
School District of Borough of Tamaqua (1931),
PI 5 484 k-v0: 60.6 os ogee ss 18, 19
Proctor & Gamble Distributing Co. v. Sherman
® 17
Railway Express Agency v. New York (1949), 336
U.S. 106, 93 L.Ed. 553, 31S. Ct. 463........... 13
Redfield v. Bartels (1891), 139 U.S. 694, 35 L.Ed.
a ne wiWeden seas 17
Reed v. Reed (1971), 404 U.S. 71, 30 L.Ed. 2d 225,
ki i a's a cen ess 12, 16
Re Railroad Tax Cases (1882), 8 Sawy. 238, 13 Fed.
as ea Pe aoa nb bidin's Edeas.g0 0+ > ll
Royster Gauna Co. v. Virginia (1920), 253 U.S. 412,
64 L.ED. 989, 40 Sup. Ct. Rep. 560............ 12, 13
San Bernardino v. Way (1941), 18 Cal. 2d 647, 117
I ae CURES, aon vainia s ace cnid's oh s ne 3
Santa Clara County v. Southern P. R. Co. (1883), 9
ee eer eee ere ll
TABLE OF AUTHORITIES CITED (Continued)
Cases Page
Schlesinger v. Wisconsin (1925), 270 U.S. 230, 70
L.Ed. 557, 46 Sup. Ct. Rep. 260............... 12
State, etc., Co. v. Davis (1915), 228 Fed. 246(D.C.) 17
State Tax Commission v. United Verde Extension
Mining Co. (1931), 39 Ariz. 136, 4 P. 2d 395; 39
Ariz. 331, 6 P. 2d 889 (1931 reh. denied)......... 21-22
Williams v. Harvey (1931), 91 Mont. 168, 6 P. 2d
Since ads wales Cs CE 1h aes Lc eek Sc aeres 22
Zimmerman v. Corson County (1917), 39 S.D. 167,
RR of RS Gee 5 ee A en ae 22, 23
Miscellaneous
ee, ey. a a 16
Fe Ail se. ne oC eee 16
Pg Se ee a a Oe wes. Tae 17
$2 Cai Dar; Se eeetion 87S 00.5. . eee i ee ah 3
Statutes
Calif. Civil Code Section 1915...............0c cues 4,14
Calif. Rev. & Tax. Code Section 202(b) (Now 202(a)(2)) 7
Calif. Rev. & Tax. Code Section 2617............... 14
Calif. Rev. & Tax. Code Section 2618............... 14
Calif. Rev. & Tax. Code Section 2704............... 14
Calif. Rev. & Tax. Code Section 2705............... 14
vi
TABLE OF AUTHORITIES CITED (Continued)
Statutes Page
Calif. Rev. & Tax. Code Section 2759............... 14
Calif. Rev. & Tax. Code Section 2760............... 14
Calif. Rev. & Tax. Code Section 2761............... 14
Calif. Rev. & Tax. Code Section 2762............... 14
Calif. Rev. & Tax. Code Section 2922............... 14
Calif. Rev. & Tax. Code Section 2922.5.............. 14
Calif. Rev. & Tax. Code Section 5096............... 10
Calif. Rev. & Tax. Code Section 5097............... 10
Calif. Rev. & Tax. Code Section 5099............... 10
Calif. Rev. & Tax. Code Section 5101............... 10
Calif. Rev. & Tax. Code Section 5103............... 10
Calif. Rev. & Tax. Code Section 5104.............. 4, 10
Calif. Rev. & Tax. Code Section 5105.............. 4, 10
Calif. Rev. & Tax. Code Section 5105.5............. 4,10
Calif. Rev. & Tax. Code Section 5106............... 4
Calif. Rev. & Tax. Code Section 5107............... 4,9
Calif. Rev. & Tax. Code Section 5108............... 4
Calif. Rev. & Tax. Code Section 5141.............. 4, 10
Calif. Rev. & Tax. Code Section 5141.5.............. 4
Calif. Rev. & Tax. Code Section 5142.............. 4, 10
Calif. Rev. & Tax. Code Section 5143............... 4,9
Calif. Rev. & Tax. Code Section 5150.............. 4, 10
Calif. Rev. & Tax. Code Section 5151............... 4
Calif. Rev. & Tax. Code Section 6907............... 4
Calif. Rev. & Tax. Code Section 6936............... 4
Calif. Rev. & Tax. Code Section 8130............... 4
Calif. Rev. & Tax. Code Section 8151............... 4
Calif. Rev. & Tax. Code Section 9155............... 5
Calif. Rev. & Tax. Code Section 9174............... 5
Calif. Rev. & Tax. Code Section 10901.............. 5
Calif. Rev. & Tax. Code Section 11555.............. 5
Calif. Rev. & Tax. Code Section i11576.............. 5
vii
TABLE OF AUTHORITIES CITED (Continued)
Statutes Page
Calif. Rev. & Tax. Code Section 11934.............. 5
Calif. Rev. & Tax. Code Section 12983.............. 5
Calif. Rev. & Tax. Code Section 13107.............. 5
Calif. Rev. & Tax. Code Section 14374.............. 5
Calif. Rev. & Tax. Code Section 14375.............. 5
Calif. Rev. & Tax. Code Section 16271.............. 5
Calif. Rev. & Tax. Code Section 16272.............. 5
Calif. Rev. & Tax. Code Section 19062.............. 5
Calif. Rev. & Tax. Code Section 19062.11............ 5
Calif. Rev. & Tax. Code Section 19091.............. 5
Calif. Rev. & Tax. Code Section 26080.............. 6
Calif. Rev. & Tax. Code Section 26081.............. 6
Calif. Rev. & Tax. Code Section 26107.............. 6
Calif. Rev. & Tax. Code Section 30366.............. 6
Calif. Rev. & Tax. Code Section 30406.............. 6
Calif. Rev. & Tax. Code Section 32405.............. 6
Calif. Rev. & Tax. Code Section 32417.............. 6
Calif. Rev. & Tax. Code Section 38606.............. 6
Calif. Rev. & Tax. Code Section 38616.............. 6
Calif. Rev. & Tax. Code Section 39202.............. 6
Calif. Rev. & Tax. Code Section 40116.............. 6
Calif. Rev. & Tax. Code Section 40130.............. 6
Calif. Rev. & Tax. Code Section 41105.............. 7
Calif. Rev. & Tax. Code Section 41113.............. 7
Calif. Rev. & Tax. Code Section 42505.............. 7
Calif. Rev. & Tax. Code Section 42515.............. 7
Constitution of the State of California,
Aste 1 Biola BB. ia eG Ss OE 3
Constitution of the State of California
Aabebe 8 Gatien Ga ssn. a ah SO 3
Constitution of the State of California
Artiote XIE Section 16. 220 0 6 oo i ee UR es, 15
TABLE OF AUTHORITIES CITED (Continued)
Statutes
Constitution of the United States
Fourteenth Amendment, Section 1
United States Code,
po Ee ee
United States Code,
_: # — 8 A ene
ix
Page
IN THE
SUPREME COURT OF THE UNITED STATES
October Term, 1978
No.
HELEN BALL, INDIVIDUALLY AND ON BEHALF
OF ALL OTHERS SIMILARLY SITUATED,
Petitioner,
vs.
COUNTY OF LOS ANGELES,
Respondent.
Petition For Writ Of Certiorari To The
Supreme Court Of The State Of California
Petitioner, Helen Ball, individually and on behalf of all
others similarly situated, prays that a Writ of Certiorari
issue to review the denial of hearing by the Supreme Court
of the State of California rendered on August 24, 1978, and
to remand the case to the Supreme Court of the State of
California for determination of Ball’s appeal. Additionally,
petitioner prays that this Court review the opinions and
decisions of the Court of Appeals, Second Appellate
District, State of California, rendered on June 29, 1978, and
determine whether the Court of Appeals improperly
affirmed the Summary Judgment of the Superior Court of
Los Angeles County, rendered on February 3, 1977.
on
OPINIONS BELOW
The denial on August 24, 1978, by the Supreme Court of
the State of California, of the Petition for Hearing is
reported at Minutes, Supreme Court, San Francisco, August
24, 1978, and is set forth in Appendix A. The opinion and
decision of June 29, 1978, of the Court of Appeals, Second
Appellate District, State of California, on appeal is reported
at 82 Cal. App. 3d 312, and is set forth in Appendix B.
Order Dismissing Complaint and Entry of Summary Judg-
ment in Favor of Defendant and Against Plaintiff, dated
February 3, 1977, of the Superior Court of the State of
California, for the County of Los Angeles, is set forth in Ap-
pendix C.
JURISDICTION
The first Order of the Court of Appeals for the Second
Appellate District was entered on June 29, 1978, and the
denial of the Petition for Hearing was entered August 24,
1978. This Petition for Writ of Certiorari was filed within
90 days from the last Order as required by Section 2101(c) of
Title 28 of the United States Code. The jurisdiction of this
Court is invoked under Section 1257(3) of Title 28 of the
United States Code.
QUESTIONS PRESENTED
1. Whether the California Court of Appeals in affirm-
ing the Summary Judgment of the Superior Court denied
Ball’s equal protection of the laws.
2. Whether the Statutes of the State of California as
contained in the Revenue and Taxation Code deny citizens
equal protection under laws as they presently exist, for pay-
ing interest on tax refunds.
3. Whether the conflict of laws of the United States and
the States deny United States Citizens equal protection
under the laws as they presently exist for paying interest on
tax refunds.
CONSTITUTIONAL PROVISIONS AND
STATUTES INVOLVED
The Constitutional provision at the heart of this Petition
is the Fourteenth Amendment which states in Section 1.
Citizens of the United States:
“All persons born or naturalized in the
United States, and subject to the jurisdiction
thereof, are citizens of the United States and
of the State wherein they reside. No State
shall make or enforce any law which shall
abridge the privilége or immunities of
citizens of the United States; nor shall any
State deprive any person of life, liberty, or
property, without due process of law, nor
deny to any person within its jurisdiction the
equal protection of the laws,”
The provisions of the Constitution of the State of Cali-
fornia, Article 1 Declaration of Rights, Section 11 (Uniform
general laws) states:
“All laws of a general nature shall have a
uniform operation.”
Section 21 (Privileges and immunities) states:
“No special privileges of immunities shall be
granted which may not be altered, revoked,
or repealed by the Legislature; nor shall any
citizen, or class of citizens, be granted
privileges or immunities which, upon the
same terms, shall not be granted to all
citizens.”
These provisions have been interpreted by the California
courts as being the equivalent of the Equal Protection
Clause of the Fourteenth Amendment (Department of Men-
tal Hygiene v McGilvery, 50 Cal. 2d 742, 754, 329 P. 2d
689, 695; Lelande v Lowery, 26 Cal. 2d 224, 157 P. 2d 639;
San Bernardino v Way, 18 Cal. 2d 647, 117 P. 2d 354; Peo-
ple v Sullivan, 60 Cal. App. 2d 539, 141 P. 2d 200; People v
England, 140 Cal. App. 310, 35 P. 2d 565; 11 Cal. Jur. 2d
Section 272, and cases cited therein. See also Los Angeles v
silt
Southern Cal. Tel. Co., 32 Cal. 2d 378, 196 P. 2d 773, ap-
peal dismissed, 336 U.S. 929, 93 L.Ed. 1090, 69 S. Ct. 737).
The Statutes involved include California Civil Code Sec-
tion 1915, providing the underlying basis for interest; and
the California Revenue and Taxation Code: (Appendix G).
Division 1 Property Taxation ~
Part 9 Corrections, Cancellations, and Refunds
Chapter 5 Refunds
Article 1 Refunds Generally
Sections 5104, 5105, 5105.5, 5106, 5107, 5108!
Article 2 Payment Under Protest and Suit to
Recover
Sections 5141, 5141.5, 5142, 5143?
Article 2.5 Interest on Refunds
Sections 5150, 5151°
Division 2 Other Taxes
Part 1 Sales and Use Taxes
Chapter 7 Overpayments and Refunds
Article 1 Claim for Refund
Section 6907
Article 2 Suit for Refund
Section 6936
Part 2 Motor Vehicle Fuel License Tax
Chapter 7 Overpayments and Refunds
Article 2. Claim for Refund
Section 8130
Article 3 Suit for Refund
Section 8151
‘Sections 5104, 5105, 5105.5 Repealed by Stats 1976 Chapter 499 Sec-
tions 7, 8, 9 and Renumbered Sections 5142 and 5150; Section 5108
Amended and Renumbered Section 5151 by Stats 1976 Chapter 499 Sec-
tion 10.
*Articie 2 Sections 5136-5154 Repealed by Stats 1976 Chapter 499 Sec-
tion 11; Article 2 Sections 5140-5149.5 Added by Stats 1976 Chapter 499
Section 12.
Article 2.5 Interest on Refunds Sections 5150 and 5151 Added by Stats
1976 Chapter 499 Section 13.
Part 3 Use Fuel Tax
Chapter 6 Overpayments and Refunds
Article 1 Claim for Refund
Section 9155
Article 2 Suit for Refund
Section 9174
Part 5 Vehicle License Fee
Chapter 3 Collections and Refunds
Article 3. Refunds
Section 10901
Part 6 Private Car Tax
Chapter 5 Overpayments and Refunds
Article 1 Claim for Refund
Section 11555
Article 2 Suit for Refund ©
Section 11576
Part 6.7 Documentary Transfer Tax Act
Chapter 4 Administration
Section 11934
Part 7 Insurance Taxation
Chapter 7 Cancellations and Refunds
Article 2. Refund or Credit for Collected Taxes
Section 12983
Chapter 8 Taxpayer’s Suits
Section 13107
Part 8 Inheritance Tax
Chapter 10 Refunds
Sections 14374, 14375
Part9 Gift Tax
Chapter 9 Refunds
Article 3 Interest on Refunds
Sections 16271, 16272
Part 10 Personal Income Tax
Chapter 20 Overpayments and Refunds
Article 1 Claim for Refund
Sections 19062, 19062.11
Article 2 Suit for Refund
Section 19091
Part 11 Bank and Corporation Tax Law
Chapter 22 Refunds and Credits
= me
Article 1 General Provisions
Sections 26080, 26081
Article 2 Suit for Refund
Section 26107
Part 13 Cigarette Tax
Chapter 6 Overpayments and Refunds
Article 1 Claim for Refund
Section 30366
Article 3 Suit for Refund
Section 30406
Part 14 Alcoholic Beverage Tax
Chapter 8 Overpayments and Refunds
Article 1 Claim for Refund
Section 32405
Article 2. Suit for Refund
Section 32417
Part 18.5 Timber Yield Tax
Chapter 7 Overpayments and Refunds
Article 1 Claim for Refund
Section 38606
Article 2. Suit for Refund
Section 38616
Part 19 State Litter Control, Recycling, and
Resource Recovery Assessment*
Chapter 3 Administration
Section 39202 (Provisions of Division 2 Part 1
Chapter 7 apply)
Part 19 Energy Resources Surcharge Law°
Chapter 5 Overpayments and Refunds
Article 1 Claim for Ru.und
Section 40116
Article 2 Suit for Refund
Section 40130
Part 20 Emergency Telephone Users Surcharge Law*
‘Part 19 Sections 39000-39251 Added by Stats 1977 Chapter 1161 See-
tion 4 and Repealed by Stats 1978 Chapter 87 Section 16,
‘Part 19 Sections 40001-40191 Repealed by Stats 1978 Chapter 87 Sec-
tion 16,
“Part 20 Added by Stats 1976 Chapter 443 Section 7,
~
Chapter 5 Overpayments and Refunds
Article 1 Claim for Refund
Section 41105
Article 3 Suit for Refund
Section 41113
Part 21 State Litter Control, Recycling, and
Resource Recovery Assessment’
Chapter 6 Overpayments and Refunds
Article 1 Claim for Refund
Section 42505
Article 2 Suit for Refund
Section 42515
STATEMENT OF CASE
A. Statement of Substantive Facts
Helen Ball owns real property which she leased to the
City of Los Angeles as a library materials depository bet-
ween 1971 and 1974. She received erroneous tax bills from
the County of Los Angeles and paid taxes on the property in
each of the three years. Helen Ball subsequently discovered
the assessment was improper and the tax bills were sent er-
roneously as said property was exempt from taxation under
Revenue and Taxation Code Section 202, Subdivision (b)
(now Rev. & Tax. Code, Section 202(a)(2)).
Application for exemption from property taxes was filed
on April 10, 1974 and processed and verified by the County
between April and July of 1974. Helen Ball requested a re-
fund of taxes erroneously collected, plus interest. The Coun-
ty refunded to Helen Ball the erroneously collected taxes
without dispute, however, it refused to reimburse her for
the use of her money, i.e. pay interest.
In its opinion, the California Court of Appeals below
stated at page 315:
“The question presented by this appeal is
whether a taxpayer is entitled to recover in-
terest on tax payments erroneously collected
"Part 21 Enacted by Stats 1978 Chapter 87 Section 17,
oe
by the County on exempt property when the
County promptly refunds the erroneous
payments upon being put on notice of its er-
ror.” (Ball v County of Los Angeles, 82 Cal.
App. 3d 312, 315) (Emphasis added).
Further, at page 320, the Court of Appeals stated:
“This plan is fair. The tax payments at issue
were apparently collected by mutual
mistake. Neither Ball nor the County seem to
have been aware of the applicability of the
exemption,” (Emphasis added),
It is submitted that the question posed by the Court
below is incorrect, While it is true the taxes were assessed by
mistake and erroneously collected, the payments by the tax-
payer were not by mistake nor erroneous.
Ball relied on paragraph 12 of the Lease to direct the pay-
ment of taxes, which states:
“TAXES 12. Lessor shall pay all taxes or
assessments levied upon real property herein
demised, but shall not be liable for any taxes
or assessments levied against the personal
property or fixtures of the Lessee.” (Appen-
dix H).
A taxpayer must be able to pay statements for taxes in
good faith, upon the expectation that if the statement is in-
correct, then the payment made therefore will not only be
refunded, but will be refunded with interest. It matters not
that the refund is prompt or imprompt. The sole point is
that the use of money requires payment for the use of
money.
Again, in its opinion filed on June 29, 1978, at page 320,
the Court below continued on with its view as to prompt-
ness, saying:
“Ball is denied interest on her tax refund
under such a plan because she received her
refund shortly after she presented her ap-
plication for exemption to the County —
shortly after the County had been given
=
notice that these taxes had been erroneously
collected from her.” (Emphasis added).
Here again, the fact that the refund was received “short-
ly” is of no moment. The point, as with promptness, is that
whether the refund was received shortly or promptly, after
the taxpayer presented her application, she should have
been paid for the use of her money.
B. Statement of Procedural Facts
Petitioner commenced this action in Los Angeles
Municipal Court on May 12, 1975. County demurred on
grounds it lacked authority to pay interest; the demurrer
was overruled and the County did not appeal. The
Honorable Robert Fainer (now Superior Court Judge)
presiding, stated:
“The demurrer of the defendant, County of
Los Angeles, to the complaint is overruled.
The County of Los Angeles has the authority
to refund “taxes” and the term “taxes” as
used in Revenue and Taxation Code Sections
5107 and 5143 includes penalties, interest
and costs. This is not an action to determine
the legality of any tax, but is an action to
recover the balance of taxes due after a re-
fund, to wit, the interest thereon.”
On November 10, 1975 a Second Amended Complaint
was filed commencing this class action and was sub-
sequently transferred to Los Angeles Superior Court. Coun-
ty again demurred. In his ruling, Honorable Charles H.
Phillips supported Judge Fainer’s opinion and denied Coun-
ty’s demurrer.
Upon the suggestion of Honorable Campbell M. Lucas,
made to counsel for both parties, in order that legal issues
could be ruled upon without first trying the factual issues
which seemed not to be in dispute, and in order that the
legal issues presented herein could expeditiously proceed
thereafter to this Honorable Court, if necessary, County fil-
ed its Motion for Summary Judgment. Said Motion was
=
granted by Honorable Campbell M. Lucas and entered in
favor of County. (See Order for Dismissal and Summary
Judgment and Reporter's Transcript on Appeal, Appendix
C and D).
Helen Ball appealed advancing the premise that all par-
ties before a court of law are entitled to equal protection
under the law as provided for by the Fourteenth Amend-
ment of the Constitution of the United States (See page 7-8
of Appellant's Opening Brief (Appendix E); Footnote 1, Ball
v County of Los Angeles, (supra) (Appendix B); and page
10-11 of Petition for Hearing in the Supreme Court of
California (Appendix F)). Judgment was affirmed for the
County by the Court of Appeals and filed )une 29, 1978.
Ball then petitioned for a hearing before the Supreme
Court of The State of California as set forth in Appendix F.
Petition for Hearing was denied as entered in Minutes of the
Supreme Court of the State of California of August 24, 1978
(Appendix A).
REASONS FOR GRANTING WRIT
A. Ball Denied Equal Protection Of Law By
Discriminatory And Arbitrary Legislation For
Payment Of Interest On Tax Refunds.
Taxpayers in the State of California who discover an
overpayment of Property Taxes or that they are entitled to a
refund on said taxes must by law file a claim with the Coun-
ty and exhaust all administrative remedies prior to filing suit
for refund as provided by law. Sections 5096, 5097, 5099,
5103 (now 5141), 5104 (now 5142) of Revenue and Taxation °
Code.
A claim for refund if acknowledged as valid by Board of
Supervisors will be paid by warrant upon the appropriate
fund (Section 5101) with no provision for interest. If claim is
denied, taxpayer may then file suit per Section 5103 (now
5141). When the Court acknowledges the claim as valid, in-
terest may be recovered per Sections 5105 and 5105.5 (now
5150).
-—10—
Under both of these situations the taxpayers are in the
basic underlying similar circumstance of having a valid
claim against the County for refund of erroneously collected
taxes and the County has had the use of their money
withoui just compensation,
There is no equitable reason on one hand, that the Coun-
ty can have the use of taxpayers’ money without just com-
pensation (interest) only because the Board of Supervisors
acknowledges the validity of the claim when presented,
where on the other hand if a claim is denied and a Court of
Law acknowledges the same claim as valid, taxpayers are
allowed just compensation (interest) for the use of their
money by the County.
It is therefore submitted that this different treatment of
taxpayers who have a claim of refund and for just compen-
sation of the use of their money by the County is not fair,
equitable nor affords equal protection under the law.
As this Honorable Court put forth in Louisville Gas &
Electric Co. v Clell Coleman (1928), 277 U.S. 32, 37, 72
L.Ed. 770, 774, 48 S. Ct. 423:
“In the first place, it may be said generally
that the equal protection clause means that
the rights of all persons must rest upon the
same rule under similar circumstances, Ken-
tucky R. Tax Cases, 115 U.S. 321, 327, 29
L.Ed. 414, 419, 6 Sup. Ct. Rep. 57; Magoun
v Illinois Trust & Sav. Bank, 170 U.S. 283,
293, 42 L.Ed. 1037, 1042, 18 Sup. Ct. Rep.
594, and that it applies to the exercise of all
the powers of the state which can affect the
individual or his property, including the
power of taxation. Santa Clara County v
Southern P. R. Co., 9 Sawy. 165, 18 Fed.
385, 388-399; Re Railroad Tax Cases, 8
Sawy. 238, 13 Fed. 722, 733. It does not,
however, forbid classification; and the
power of the state to classify for purposes of
taxation is of wide range and flexibility, pro-
vided always, that the classification “must be
|
reasonable, not arbitrary, and must rest
upon some ground of difference having a fair
and substantial relation to the object of the
legislation, so that all persons similarly cir-
cumstanced shall be treated aiike.” F. S.
Royster Guano Co. v Virginia, 253 U.S. 412,
415, 64 L.Ed. 989, 990, 40 Sup. Ct. Rep.
560; Airway Electric Appliance Corp. v
Day,266 U.S. 71, 85, 69 L.Ed. 169, 177, 45
Sup. Ct. Rep. 12; Schlesinger v Wisconsin,
270 U.S. 230, 240, 70 L.Ed. 557, 564, 43
A.L.R. 1224, 46 Sup. Ct. Rep. 260. That is
to say, mere difference is not enough: the at-
tempted classification “must always rest
upon some difference which bears a
reasonable and just relation»to the act in
respect to which classification is proposed,
and can never be made arbitrarily and with-
out any such basis.” Gulf, C & S F R Co. v
Ellis, 165 U.S. 150, 155, 41 L.Ed. 666, 668,
17 Sup. Ct. Rep. 255.” (Emphasis in
original).
sley v Natural Carbonic Gas Co., 220 U.S.
61, 55 L.Ed. 369, 31 S. Ct. 337 (1911);
Railway Express Agency v New York, 336
U.S. 106, 93 L.Ed. 553, 69 S. Ct. 463 (1949);
McDonald v Board of Election Commis-
sioners, 394 U.S. 802, 22 L.Ed. 2d 739, 89 S.
Ct. 1404 (1969). The Equal ‘Protection
Clause of that amendment does, however,
deny to States the power to legislate that dif-
ferent treatment be accorded to persons plac-
ed by a statute into different classes on the
basis of criteria wholly unrelated to the ob-
jective of that statute. A classification ‘must
be reasonable, not arbitrary, and must rest
upon some ground of difference having a fair
and substantial relation to the object of the
legislation, so that all persons similarly cir-
cumstanced shall be treated alike.’ Royster
Guano Co. v Virginia, 253 U.S. 412, 415, 64
L.Ed. 989, 990, 40 S. Ct. 560 (1920).”
It is respectfully submitted that the treatment and
classification of taxpayers in California with regard to pay-
It was also stated in recent decisions of this Court that dif- ing just compensation or interest on property tax refunds by
ferent treatment of persons placed into different classes by claim or suit does not meet the principles as set forth in
statute cannot be legislated, as set forth in Thomas S. Louisville Gas & Electric Co. v Coleman (supra). The dif-
Eisenstadt v William R. Baird (1972), 405 U.S. 438, ference in classification and treatment is unreasonable and
446-447, 31 L.Ed. 2d 349, 358-359, 92 S. Ct. 1092:
“The basic principles governing application
of the Equal Protection Clause of the Four-
teenth Amendment are familiar. As The
Chief Justice only recently explained in Reed
v Reed, 404 U.S. 71, 75-76, 30 L.Ed. 2d 225,
229, 92 S. Ct. 251 (1971):
“In applying that clause, this Court has
consistently recognized that the Fourteenth
Amendment does not deny to States the
power to treat different classes of persons in
different ways. Barbier v Connolly, 113 U.S.
27, 28 L.Ed. 923, 5S. Ct. 357 (1885); Lind-
a
arbitrary, having no fair and substantial relation to the ob-
ject of the legislation.
In Christopher Green v State of California (1887), 73 C.
29, 30, the California Supreme Court set forth the following
principle of conduct between individuals and state which
has been subsequently followed:
“A state, in its conduct with individuals,
must be judged by the same rules which
govern in similar cases between individuals;
and whenever by its own consent, it comes
into court for the adjudication of its rights
and obligations, those rights and obligations
should be adjusted upon the same principles
as if both parties to the suit were private in-
dividuals. (People v Stevens, 71 N.Y. 527.)”
California Revenue and Taxation Code in all its parts
authorizes assessment of penalty and interest if returns or
payment of taxes are delinquent and additional penalties for
intentional failure or fraud. (See Sections 2617, 2618, 2704,
2705, 2759-2762, 2922, 2922.5 re penalty and interest for
Property Taxes). There is no requirement for suit against
the taxpayer to collect these penalties and interest. Yet the
County, supposedly judged by the same rules, refuses to pay
interest on refund of property taxes unless taxpayer is forced
to sue,
The theory of interest as set forth in California Civil Code
Section 1915 is: ,
“Interest is the compensation allowed by law
or fixed by the parties for the use, or for-
bearance, or detention of money.”
The delinquent taxpayer detains money belonging to the
state and must pay penalty and interest without suit for the
use and detention of state’s money. However, ‘vhen the
state erroneously collects taxes, it has the use of the tax-
payer's money but refuses to pay interest for the use and
detention of that money unless the taxpayer is forced to sue.
It is therefore submitted that this treatment and
classification by the state is neither fair, equitable nor in
keeping with the principle of Green v State of California
(supra).
B. California Revenue And Taxation Code As
Presently Constituted Is Discriminatory And Ar-
bitrary In Its Policy Of Payment Of Interest On
Overpayments And Refunds Of Taxes.
California Revenue and Taxation Code contains approx-
imately 18 various types of taxes imposed by law upon the
citizens of the State. All Parts provide for the State to assess
and collect, without suit, penalties for delinquent returns
ae
and/or payments plus interest for the use of money due the
State by taxpayers from the date due until paid.
One Part, Vehicle License Fee, provides for a refund of
erroneously collected fees but no provision for interest.
Two Parts, Property Taxation and Documentary
Transfer Tax, have provisions for refunds of erroneously
collected tax by 1) claim against the agency, but does not
provide for interest by this method; 2) suit of agency with
provisions for interest.
The fifteen remaining taxes provide for refund by claim
against the agency and for suit to recover erroneously paid
taxes and both methods of recovery provide for interest for
the use of taxpayer's money.
The last paragraph of Section 15 of Article XIII, Revenue
and Taxation, of the Constitution of the State of California
requires allowance of interest on recovery of an illegally col-
lected tax:
“No injunction or writ of mandate or other
legal or equitable process shall ever issue in
any suit, action or proceeding in any court
against this State, or any officer thereof, to
prevent or enjoin the collection of any tax
levied under the provisions of this article; but
after payment thereof action may be main-
tained to recover, with interest, in such
manner as may be provided by law, any tax
claimed to have been illegally collected.”
(Emphasis added).
The filing of a claim for refund is an action provided by
law and the law requires exhaustion of all administrative
remedies prior to the state allowing suit. The California
Constitution does not specify legal action by suit to recover
taxes paid.
It is clear that the Constitution of the State of California
and fifteen Parts of the Revenue and Taxation Code intend
that the state pay interest for the use of a taxpayer’s money
received and collected illegally. Erroneous collection of
taxes is illegal and the taxpayer should be reimbursed for the
use of this money by the County just as by law the County
—
requires interest from the taxpayer for the use of its money
not paid when due the County.
It has been set forth by this donorable Court in
Eisenstadt v Baird and Reed v Reed (supra) that a State is
not denied “the power to treat different classes of persons in
different ways” but does not have “the power to legislate
that treatment be accorded to persons placed by a statute
into different classes on the basis of criteria wholly
unrelated to the objective of that statute.”
The State of California, by statute, has classified persons
into various tax categories making them similar in cir-
cumstances, basically all being taxpayers. However,
California has by statute accorded a different treatment of
these taxpayers with regard to payment of interest, for the
use of their money by illegally or erroneously collected
taxes, contrary to the case law established by this Court and
the Constitution of the State of California. The criteria ‘of
paying interest on refunds to some and not others is wholly
unrelated to the objective of the Revenue and Taxation
Code which under the Constitution of the State of Califor-
nia is to create revenue by lawful means for the State.
Property taxpayers are denied the same treatment as
other taxpayers. All must exhaust administrative remedies
before initiating suit, however, property taxpayers are
denied compensation for the use of their money by the State
through these remedies unlike other taxpayers and are
therefore denied the possibility of recovery by suit in order
to be made whole, denying them their constitutional right
to equal protection under the law.
C. The Supreme Court And Lower Federal
Courts Have Already Affirmed The Proposition
That Citizens Are Entitled To Recovery Of In-
terest In Connection With A Refund Of Tax.
The subject of the right of a taxpayer to collect interest on
a tax refund is annotated in 57 A.L.R. 357, 76 A.L.R. 1012,
wa
— — —_——-—
— ee es
and 112 A.L.R. 1183. While there is some conflict among
the authorities on this issue, it appears from these annota-
tions that a majority of jurisdictions mandate recovery on
interest.
The Honorable Learned Hand declared in Proctor Gam-
ble Distributing Co. v Sherman (1924), 2 F. 2d 165, 166
(D.C.N.Y.):
. . it is not an adequate remedy, after tak-
ing away a man’s money as a condition of
allowing him to contest his tax, merely to
hand it back, when, no matter how long
after, he established that he ought never to
have been required to pay at all. Whatever
may have been our archaic notions about in-
terest, in modern financial communities a
dollar today is worth more than a dollar next
year, and to ignore the interval as im-
material is to contradict well-settled beliefs
about value, and, if I get no compensation
for its loss, my remedy does not altogether
right my wrong.”
The United States Supreme Court has recognized for over
100 years that: “Where an illegal tax has been collected, the
citizen who has paid it, and has been obliged to bring suit
against the collector, is, we think, entitled to interest in the
event of recovery, from the time of the illegal exaction.” Er-
skine v Van Arsdale (1872) 15 Wall. (U.S.) 75, 77, 21 L.Ed.
63. See also: Redfield v Bartels (1891), 193 U.S. 694, 11 Sup.
Ct. 683, 35 L.Ed. 310; National Home v Parrish (1913), 229
U.S. 494, 33 Sup. Ct. 944, 57 L.Ed. 1296; Billings v United
States(1914), 232 U.S. 261, 286, 34 Sup. Ct. 421, 58 L.Ed.
596; State, etc., Co. v Davis (1915) (D.C.), 228 Fed. 246,
250; Haiku Sugar Co. v Johnstone (1918), 249 Fed. 103,
109, 161 C.C.A. 155; International Paper Co. vBurrill
(1919) (D.C.), 260 Fed. 664, 667.
In International Paper Co. v Burrill (supra), at page 669,
the Court held: “As the money was wrongfully obtained by
the defendant through implied duress, and as it is no
defense that the defendant has paid the money into the
an ae
treasury of the commonwealth, there must be judgment for
the plaintiff for the amount of the tax, with interest thereon
from the date of payment, May 22, 1916.”
Modernly, the “adequacy of remedy at law” issue was
raised in Mullaney v Hess (1951), 189 F. 2d 417 (9th Cir.).
Applying Alaska law, the Court stated:
“We think that the weight of authority is
that interest is recoverable on tax refunds in
absence of express statutory authority
therefor. The reasoning of these cases is in
harmony with the modern view they
express.” Id. at 420.
In 1957 in Ketchikan Spruce Mills v Kewey (1957), 17
Alaska 336, the United States District Court for Alaska also
permitted recovery of interest under a territorial statute
which provided for refund of taxes but made no mention of
interest.
Of all the states, Pennsylvania has the most thoroughly
developed case law on the question of interest on refunds of
real property taxes. There has, moreover, been an evalua-
tion of principles in that state which will be illuminating in
the case of Helen Ball. ‘
The underlying principles were enunciated in the leading
and often cited case of Philadelphia and Reading Coal and
Iron Co. v School District of Borough of Tamaqua (1931),
304 Pa. 489, 156 A. 75. Plaintiff won a judgment that real
property taxes for the benefit of the school district had been
improperly assessed. The court held:
“One further question raised in argument re-
mains to be determined, whether or not
plaintiff is entitled to interest on the amount
paid in excess of the proper levy. The judg-
ment as it now stands is for the total excess
payment, $8,547.75, with interest at 6 per
cent, from September 21, 1923, the date of
payment by plaintiff, the whole amounting
to $12,137.80. The precise point does not ap-
pear to have been raised before in this court,
and we are thus free to deal with it
a on
unhampered by precedent. It is unnecessary
to review the wealth of conflicting
authorities in other jurisdictions .. . . The
weight of authority appears to be that,
where the taxpayer is entitled to a refund on
an excess payment of taxes, whether such
right accrues by virtue of statute or not, the
taxpayer is entitled to interest on the refund
if no statute or public policy militates against
it. Such is the law in the United States courts
. as well as several other states.... With
this view we agree.” 156 A. at 77 (Citations
omitted).
In Cities Service Oil Co.v City of Pittsburgh (1972), 449
Pa. 481, 297 A. 2d 466, the court discussed the various rules
in a context of mercantile license taxes paid for the benefit
of a school district. The court’s decision appears to be equal-
ly applicable to real estate taxes, especially since the whole
line of decisions originated with Tamaqua. It was held, in
broad and useful language:
“If a taxpayer is entitled to a tax refund, he is
also entitled to interest on the refund so long
as no statute or public policy militates
een Bee eis Ss The commonwealth
Court, in determining the date from which
to compute the interest due Cities Service,
stated, ‘. . . before interest will accrue there
must be an improper detention by the taxing
authority; and the taxpayer must make a de-
mand for refund. . . However, the taxing
authority's detention of the taxpayer's money
is not improper until there has been a deci-
sion to this effect.’ . . .
“We agree that there must be an improper
detention and that the taxpayez must make a
demand for refund. We disagree that in all
cases improper detention commences from
the date of a decision to that effect. Rather,
we believe that a court can decide that a tax-
as.
P. 103, upon reargument, 141 Wash. 28, 252 P. 943 (1927),
interest was allowed on real property taxes illegally assessed
and paid under protest. The court referred to an older case
which awarded interest but gave no reason for the award:
ing body has improperly detained the tax-
payer's money from a point in time prior to
the determination that the detention is im-
proper... .
“Here the taxpayer has asked that interest
be computed from the date of payment and
demand for refund. Courts in charging and
allowing interest need not limit themselves
by hard and fast rules but should charge and
allow interest in accordance with principles
of equity ... . That the taxpayer’s money
was improperly detained and demand for re-
fund made should be sufficient to justify a
court’s exercise of its equity powers. Here,
however, the taxpayer paid the taxes
promptly once they were assessed; inflation
had deteriorated the value of the dollar that
was improperly detained by the City and
School District; and the City and School
District, never having any right to the
money, were able to borrow less or invest the
money. Since the City and School District
benefited from the use of the taxpayer's
money, it is only fair that the taxpayer
receive simple interest for the period the
“It is also contended that in any event the in-
terest allowed from the date of the payment
of the illegal tax under protest is improper,
citing authority from other jurisdictions to
the effect that interest is never allowed on il-
legal taxes sought to be recovered after pay-
ment. We seem to have settled this question
in this state in the case of Great Northern
Railway Co. v Stevens County, 108 Wash.
238, 183 P. 65, where we gave directions to
enter judgment in favor of the company
against the County for the amount of the il-
legal tax, with legal interest from March 6,
1918, the date on which the railway com-
pany was compelled to, and did, pay an ex-
cessive an illegal tax.
“After having examined and considered all
the questions raised in the case, we are con-
vinced that the judgment was right.” 251 P.
at 110. See also Doric Co. v King County, 59
Wash. 2d 741, 370 P. 2d 254 (1962).
In Arizona, the principal decision is State Tax Commis-
sion v United Verde Extens'on Mining Co. (1931), 39 Ariz.
136, 4 P. 2d 889. The Court relied upon statutory authoriza-
tion for the award of interest but gave as its reason an
equitable argument:
“(I)n reason and logic, when the state com-
pels one of its citizens under the pain of
forfeiting all rights of recovery, to pay in ad-
the date of payment and demand.” 297 A. 2d vance of suit a sum of money which it is
at 468-469 (Citations omitted; emphasis afterwards adjudged was illegally demand-
added), ed, the same principle of common justice
uld require that the state, to make the
The equitable principles enunciated in that case should would req ,
be applied in the case of Helen Ball. citizen whole, should repay not merely the
In Bryam v Thurston County (1926), 141 Wash. 28, 251 sum illegally so obtained, but interest from
money was improperly detained.
“Moreover, if taxing authorities are
authorized to collect combined interest and
penalties on back taxes to their original due
dates (at a rate greater than the simple in-
terest sought here on a refund), we see no
hardship in requiring them to pay simple in-
terest on amounts i:snproperly detained from
CC tt it
—20— = ae
the date the money was paid to it. Were this
a case of a small taxpayer, who, in order to
maintain his suit, was compelled to borrow
money to pay the illegal tax, it would be
recognized at a glance that full justice could
only be done by repaying to him, not only
the sum so paid, but interest thereon, and in
principle no difference exists because the tax-
payer in this case happens to be a large cor-
poration which presumably had in_ its
treasury the funds to pay the tax.” 4 P. 2d at
399.
The reasoning of the United Verde case was relied upon
in Williams v Harvey (1931), 91 Mont. 168, 6 P. 2d 418,
which was, however, also a case based primarily on statute.
See also Ford Motor Co. v City of Detroit (1973), 43 Mich.
App. 248, 204 N.W. 2d 348.
In South Dakota, the leading case is Zimmerman v Cor-
son County (1917), 39 S.D. 167, 163 N.W. 711. The Court
spoke of interest in the context of whether an injunction
should be issued, a disallowance of interest resulting in “no
adequate remedy at law.” It was held:
to the contrary, it should come into court on
the same basis as to liability for interest and
costs, in the event of adverse decision, as any
other suitor... .
“, . . Conceding that sovereignty is not
subject to suit without its consent, and that a
suit to recover taxes paid may be deemed a
suit against the sovereign, nevertheless when
the sovereign consents to suit it ought not to
be given an unfair and arbitrary advantage
therein, beyond what is accorded to other
suitors similarly circumstanced, unless
necessity or the language of a statute so re-
quires. We think Zimmerman v Corson
County announces a rule consonant with
justice and supported by many decisions,
and we are not now disposed to depart from
it merely because it was not treated at more
length when announced, or because there is
and has been some conflict in the decisions
relating to the point.” 229 N.W. at 395.
“Respondent's suggestion that the remedy is See also Chicago and Northwestern Ry. v Schmidt (1970),
not adequate for the reason that the statute 85 S.D. 223, 180 N.W. 2d 233 (plaintiff entitled to interest
does not in terms authorize a recovery of in- but employed erroneous procedure).
terest is without merit. It cannot be doubted In Indiana, the court rejected contractual arguments in a
that plaintiff would be entitled to interest case involving taxes on the receipts of an insurance company
upon any sum wrongfully collected by the and relied on cases of the United States Supreme Count:
County; nor can we agree with respondent's “(In actions to recover back money
suggestion that the enforced collection of a
tax, unlawful in whole or in part, may result
in irreparable injury such as to entitle the
plaintiff to a remedy by injunction.” 163
N.W., at 713,
Likewise in Chicago St. P. M. &. O. Ry. v Mundt (1930),
56 S.D. 530, 229 N.W. 394, it was held:
“It seems to us the fair, just and reasonable
rule that, when the sovereign submits itself
to suit, unless the statute expressly provides
unlawfully enacted in the name of the state
by a public officer, of which the state has
had the possession and use, and of the use of
which the owner has been deprived since it
was so paid under compulsion, a different
rule has been applied. For many years the
Supreme Court of the United States has
uniformly held that ‘in suits against collec-
tors to recover moneys illegally exacted as
taxes and paid under protest *** interest is
—23—
recoverable without any statute to that ef-
fect, and this, although the judgment is not
to be paid by the collector but directly from
the treasury.’ Erskine v Van Arsdale, 15
Wall. (U.S.) 75, 77, 21 L.Ed. 63 (1872)....
“The rule thus adopted is just and equitable
and should be followed in the absence of any
positive law to the contrary.” Metropolitan
Life Insurance Co. v State, 194 Ind. 657, 144
N.E. 420, 422 (1924) (Citations omitted).
An older case, much cited, held under statutory authority
that interest should be paid from the date of demand. Boott
Cotton Mills v City of Lowell (1893), 159 Mass. 383, 34
N.E. 367.
CONCLUSION
It is evident that the majority of jurisdictions favors pay-
ment of interest for the use of a taxpayer's money by the
state.
It is not an adequate remedy, after using a taxpayer's
money, merely to hand it back to him no matter how long
after he established he need not have paid it al all. With the
economic situation of a dollar today being worth less next
year, it is not fair, equitable or just that states can legislate
laws denying a citizen what he justly and rightfully deserves
and that which other citizens in different jurisdictions justly
and rightfully obtain. It denies them their constitutional
right to equal protection under the laws of the land.
The Constitution of the State of California requires in-
terest to be paid for the use of taxpayers money from illegal-
ly collected taxes and the Fourteenth Amendment to the
Constitution of the United States provides equal protection
under the laws. Inasmuch as Helen Ball has been denied her
rights under law, review by certiorari is the only effective
means of assuring that Helen Ball will not lose those rights.
It is therefore urged that this Court review and remand
this case to the Supreme Court of the State of California
with an order that the Supreme Court of the State of
a.
California decide the merits of Ball’s appeal which was
directed to the issue of whether Ball was entitled to interest
for the use of money illegally and erroneously collected as
taxes as provided in the Constitution of the State of Califor-
nia.
Petitioner also urges that this Court decide whether the
Court of Appeals, Second Appellate District, State of
California improperly affirmed the Summary Judgment of
the Superior Court of Los Angeles County, thereby denying
Ball of her constitutional right to equal protection of the law
and what is justly and rightfully hers.
Respectfully submitted,
HELEN BALL, INDIVIDUALLY
AND ON BEHALF OF ALL
OTHERS SIMILARLY SITUATED,
By VOLNEY F. MORIN, JR.,
VOLNEY F. MORIN,
VOLNEY F. MORIN, JR.,
VOLNEY F. MORIN, INC.
LAW CORPORATION
Attorneys for Petitioner.
pe ET
APPENDIX A.
MINUTES
SUPREME COURT
SAN FRANCISCO, AUG. 24, 1978
— (2d Civ 52206, Div 3)—Ball v. County
of Los Angeles. (82 Cal. App. 3d 312.) Ap-
pellant’s petition denied.
APPENDIX B.
COURTS OF APPEAL
SECOND APPELLATE DISTRICT
DIVISION THREE
312 BALL V. COUNTY OF LOS ANGELES
82 Cal. App. 3d 312; ______ Cal. Rptr.
(Civ. No. 52206. Second Dist., Div. Three. June 29, 1978.)
HELEN BALL, Plaintiff and Appellant, v.
COUNTY OF LOS ANGELES,
Defendant and Respondent.
SUMMARY
Plaintiff commenced an action against a county, alleging
that she was entitled to recover interest on property taxes
voluntarily refunded to her by defendant. The refund was
promptly paid by the county upon receipt and verification
of information that certain property owned by plaintiff and
upon which she had paid tax was exempt from taxation.
The trial court granted a motion for summary judgment in
favor of defendant county. (Superior Court of Los Angeles
County, No. CA 000289, Campbell M. Lucas, Judge.)
The Court of Appeal affirmed. The court held that there
was no right to interest as payment for the use of money
unless the right has been created by statute or by an express
or implied contract. In California, there is no implied con-
tract of any kind that the state or county will pay interest on
its indebtedness. The court also held that Rev. & Tax.
Code, Section 5107, does not authorize accrued interest on a
tax refund. The court further held that the existence of
specific sections in the Revenue and Taxation Code express-
a
ly providing for the payment of interest on tax refunds
negates any conclusion that a taxpayer's entitlement to in-
terest is provided for generally. Under the doctrine of “the
expression of one excludes the other” the failure of the
Legislature to provide expressly for the payment of interest
on certain refunds while expressly providing for such pay-
ment on other refunds indicates an intention to exclude
from the omitted refunds the obligation of interest. Finally,
the court held that the Revenue and Taxation Code reveals
a comprehensive legislative plan which authorizes recovery
of interest on a tax refund only where a county, with notice
of an improper assessment has’ failed to grant a tax refund.
Thus, plaintiff was not entitled to a refund. She received
her refund shortly after she presented her application for ex-
emption to the ——
(82 Cal. App. 3d 313)
county and shortly
after the county had been given notice that these taxes had
been erroneously collected from her. (Opinion by Cobey,
Acting P.J., with Allport, and Potter, JJ., concurring.)
HEADNOTES
Classified to California Digest of Official Reports, 3d Series
(1) Interest Section 2—When Interest Recoverable or
Allowable. It is well established that there is no right to
interest as payment for the use of money unless the
right has been created by statute or by an express or
implied contract.
(2) Interest Section 2—When Interest Recoverable or
Allowable. The state, or subdivisions thereof, are
liable for interest for the use of a taxpayer’s money only
if there is a specific statute authorizing the payment of
interest on refund.
(3a, 3b) Property Taxes Section 63 —Collection and Pay-
ment—Actions to Recover Taxes—Interest.—-In an ac-
tion against a county to recover interest on property
sin
taxes voluntarily refunded by the county, Rev. & Tax.
Code, Section 5107 does not authorize the payment of
interest by the county for the use of a taxpayer's
money. Section 5107 is a general definitional section
which makes clear that interest collected from the tax-
payer in connection with tax payments will be includ-
ed in any refund of those taxes. The section defines on-
ly the scope of tax refunds and does not constitute
authorization for the payment of interest by a county.
(See Cal. Jur. 2d, Taxation, Section 382; Am. Jur. 2d, In-
terest and Usury, Section 34.)
(4) Statutes Section 39—Giving Effect to Statute—Con-
firmation of Parts—Construction of Statute in Con-
text.—A cardinal rule of statutory interpretation is
that code sections are not to be read in isolation but
construed in context.
(5) Property Taxes Section 63—Collection and
Payment—Actions to Recover Taxes—Interest.— The
existence of various sections in the Revenue and Taxa-
tion Code expressly providing for the payment of in-
terest on tax refunds negates the conclusion that a tax-
payer's entitlement
(82 Cal. App. 3d 314)
to interest is
provided for generally. Under the doctrine of “the ex-
pression of one excludes the other,” the failure of the
Legislature to provide expressly for the payment of in-
terest on certain refunds while expressly providing for
such payment on other refunds indicates an intention
to exclude from the omitted refunds the obligation of
interest.
(6) Property Taxes Section 63—Collection and
Payment—Actions to Recover Taxes—Recovery of In-
terest. —The Revenue and Taxation Code reveals a
comprehensive legislative plan which authorizes
recovery of interest on a tax refund only where a coun-
ty, with notice of an improper assessment, has failed to
grant a tax refund. Interest is denied on tax refunds
unless and until the county receives notice of its error,
malign
and interest does not begin to accrue until the date of
the filing of the claim for refund.
(7) Restitution and Constructive Contracts Section
1—Interest.— Where money has been improperly paid
‘.y one private party to another under a mutual
mistake, interest will not begin to accrue until the
mistake is discovered and a demand for restitution
made, Interest is not recoverable until and unless an
individual has notice of his duty to make restitution.
(8) Counties Section 16—Claims—Interest.—Where the
government owes a liquidated claim upon a definite
date, that claim does not draw interest until demanded
based on the consideration that it would be inconve-
nient and burdensome for the officials of a municipali-
ty or county to seek its creditors and tender payment of
their claims, and also that it would be oppressive and
unjust to permit creditors of a municipality or county
with good credit to turn claims into investments
through omitting to present them and collecting in-
terest thereon.
COUNSEL
Volney F. Morin and Volney F. Morin, Jr., for Plaintiff and
Appellant.
John H. Larson, County Counsel, and Charles J. Moore,
Deputy County Counsel, for Defendant and Respondent.
(82 Cal. App. 3d 315)
OPINION
COBEY, Acting P.J.—Helen Ball, suing individually and
on behalf of all others similarly situated, appeals from a
summary judgment entered in favor of the County of Los
Angeles (hereafter County) on her complaint alleging that
she is entitled to recover interest on property taxes volun-
tarily refunded to her by the County. The refund was paid
by the County upon receipt and verification of information
that certain property owned by Ball and upon which she
= =
had paid tax was exempt from taxation. The appeal lies.
(Code Civ. Proc., Sections 437c, 904.1, subd. (a).)
The question presented by this appeal is whether a tax-
payer is entitled to recover interest on tax payments er-
roneously collected by the County on exempt property when
the County promptly refunds the erroneous payments upon
being put on notice of its error.' We will answer this ques-
tion in the negative. A taxpayer has no right to recover in-
terest from the County unless interest is provided for by
statute and such is not the case here.
FACTS?
During the three year period between 1971 and 1974 Ball
owned real property which she leased to the City of Los
Angeles as a library materials depository. Due to the nature
of the property's use, Ball was entitled to exemption of it
from property taxation. (Former Rev. & Tax. Code, Section
202, subd. (b).)° Nevertheless, no application for exemption
‘Ball raises two additional contentions which need not be dealt with at
length. First, she contends that two trial court rulings prior to the sum-
mary judgment—overruling demurrers raising the same issue raised by
the County's motion for summary judgment—established her right to in-
terest on the refunds as the law of the case and therefore should have been
determinative of the motion for summary judgment, The fetal defect in
this contention is that this doctrine applies only to a prior decision in the
case determined by an appellate court. The rulings of a trial court during
an earlier stage in the proceeding are not conclusive, (See Davies v Krasna
(1975) 14 Cal. 3d 502, 507 (121 Cal. Rptr. 705, 535 P. 2d 1161, 79 A.L.R.
3d 807); 6 Witkin, Cal. Procedure (2d ed. 1971) Sections 633-634, pp.
4552-4553.)
Ball's second additional contention is that she is entitled to interest on
her refund as a matter of her constitutional right to equal protection of the
law. (See U.S. Const., 14th Amend.) In response we need only note that
this contention is unsupported by apposite authority.
*The parties agree that there is no dispute between them with regard to
the facts,
*This exemption has been recodified as Revenue and Taxation Code sec-
tion 202, subdivision (a)(2). All references to former code sections refer to
sections in effect at the time of the action at issue.
walfhenn
(82 Cal. App. 3d 316)
frdém property taxes was filed with the County until April
10, 1974, and taxes were collected on the property in each of
the three years.‘
The County processed and verified Ball’s exemption
claim between April and July of 1974. The County did not
dispute Ball’s right to a refund and on August 12, 1974, a
warrant was issued to Bal! refunding to her taxes paid on
the exempt property between 1971 and 1974. No interest
was included in the refund payment.
DISCUSSION
1. County Is Liable for Interest Only Where Such Liability
Is Created by Statute
(1) It is well established that there is no right to interest
as payment for the use of money unless the right has been
created by statute or by an express or implied contract. (45
Am. Jur. 2d, Interest and Usury, Sections 34-35, pp. 39-40;
cf. Civ. Code, Section 1428.) There is a split of authority,
however, on the question of governmental liability for in-
terest on tax refunds. In some jurisdictions it is held that
there is an implied contract between the state and the tax-
payer that the state will be liable for interest for the period
of time it has the use of the taxpayer's money. Therefore
these jurisdictions have adopted the rule that a state or
municipal corporation which must refund all or part of a
tax which has been paid is liable for interest on the refund
even in the absence of a statute which specifically authorizes
payment of interest. (Annot., Right to Interest on Tax Re-
fund or Credit in Absence of Specific Controlling Statute
*A request for refund of tax payments will be acted upon if the claim for
refund is filed within four years after the making of the payment. (Rev. &
Tax. Code, Section 5097, subd. (b).) Legislation which became effective
subsequent to the case at bench, however, now requires submission of an
annual application for exemption and allows only a partial refund if the
taxpayer fails to file a timely application. (Rev. & Tax. Code, Sections
255, 270; 58 Ops. Cal. Atty. Gen. 538, 539-541 (1975).)
a
(1963) 88 A.L.R. 2d 823, 825-827, Section 2, and cases
cited.) Other jurisdictions have rejected the implied con-
tract theory and follow the rule that there is no liability for
interest on a refund in the absence of a statute that
specifically creates a liability for such interest. (Idem., 88
A.L.R. 2d 823, 835-840, Section 5, and cases cited.)
Several rationales have been advanced for the rule requir-
ing specific statutory creation of governmental liability for
interest on tax refunds. The rule has been said to be based
upon the doctrine that requires the state’s consent before the
state becomes liable. (Columbia Steel Co. v. State (1949) 34
Wn. 2d 700 (209 P. 2d 482, 489); cf. Sovereign Immunity
(82 Cal. App. 3d 317)
Study (Feb. 1963) 5 Cal. Law Revision Com. Rep., pp.
17-21.) It is suggested that the rule is supported by the
theory that a contract for interest is implied only when there
is either delay or default on the part of the debtor and such
delay or default will not be attributed to the government
since it is presumed that the government always stands
ready to pay what it owes promptly. (Monarch Mills v.
South Carolina Tax Commission (1929) 149 S.C. 219 (146
S.E. 870, 872); cf. Evid. Code, Section 664; Tripp v. Swoap
1976) 17 Cal. 3d 671, 683 (131 Cal. Rptr. 789, 552 P. 2d
749).) The rule has been said to rest upon the practical con-
sideration that the tax collector has no money to pay interest
in the absence of statutory authority to establish a fund for
that purpose. (Lakefront Realty Corporation v. Lorenz
(1960) 19 Ill. 2d 415 (167 N.E. 2d 236, 240-241).) Finally,
several jurisdictions found the rule to be required by state
constitutional provisions prohibiting payments from the
state treasury in the absence of a legislative act or resolu-
tion. (New England Mut. Life Ins. Co. v. Reece (1935) 169
Tenn. 84 (83 S.W. 2d 238, 242); Kaemmerling v. State
(1924) 81 N.H. 405 (128 A. 6, 7); see Cal. Const., art. XVI,
Section 7; Richter v. Board of Supervisors (1968) 259 Cal.
App. 2d 99, 105 (66 Cal. Rptr. 52).)
(2) California has adopted the rule which requires a
specific statutory provision to create governmental liability
for interest. ““(W)hatever the law may be elsewhere it has
a Oe
always been the rule in California that there is no implied
contract of any kind that the state will pay interest on its in-
debtedness for it is liable only when made so by statute.”
(Gregory v. State of California (1948) 32 Cal. 2d 700, 703
(197 P. 2d 728, 4 A.L.R. 2d 924); People v. Union Oil Co.
(1957) 48 Cal. 2d 476, 480 (310 P. 2d 409); Jones-Hamilton
Co. v. Franchise Tax Bd. (1968) 268 Cal. App. 2d 343, 350
(73 Cal. Rptr. 896).) Therefore the County’ is liable to Ball
for interest for the use of her money only if there is a specific
statute authorizing the payment of interest on her refund.
2. The Statutory Scheme Denies Interest on Ball’s Refund
(3a) Ball contends that accrued interest on her tax re-
fund is authorized by Revenue and Taxation Code section
5107 and former section 5143.° We disagree. We do not
believe that these sections authorize the
(82 Cal. App. 3d 318)
payment of interest
by the County for the use of a taxpayer’s money. For reasons
set forth below, we believe that these sections are merely
general definitional sections which make clear that interest
collected from the taxpayer in connection with tax
payments (i.e. upon delinquent payment of taxes) will be
included in any refund of those taxes. Specific sections of the
Revenue and Taxation Code govern the payment of interest
on tax refunds and indicate a comprehensive plan that
denies interest on erroneously collected taxes during the
period within which the taxpayer has failed to put the
County on notice of the erroneous levy.
(4) A cardinal rule of statutory interpretation is that
code sections are not to be read in isolation but construed in
context. (Tripp v. Swoap, supra, 17 Cal. 3d at p. 679;
*Counties in California are subdivisions of the state. (Cal. Const., art.
XI, Section 1; Gov. Code, Section 23000; Byers v. Board of Supervisors
(1968) 262 Cal. App. 2d 148, 155 (68 Cal. Rptr. 549).)
*Section 5143 was subsequently repealed. (Stats. 1976 ch. 499, Section
11, p. 1240.) All section references hereafter are to sections of the Revenue
and Taxation Code unless otherwise noted.
sili
Stanley v. Justice Court (1976) 55 Cal. App. 3d 244, 249
(127 Cal. Rptr. 532).) (3b) Section 5107 and former section
5143 were once both part of the chapter of the Revenue and
Taxation Code regarding refunds. Section 5107 remains a
part of an article related to refunds generally. Section 5143
was part of the article regarding recovery of taxes paid
under protest. These two sections have identical language.
They both state that “as used in this article, ‘tax’ or ‘taxes’
include penalties, interest, and costs.”
Although both these sections define “tax” as including in-
terest, when read in context, it becomes clear that they refer
only to the return of funds collected from the taxpayer.
Whenever the word “tax” is used throughout the articles it is
modified by the words “paid,” “collected,” “recovery,” or
“refund.” Each of these modifiers implies that the “tax,”
defined to include penalties, interest, and costs, has already
been collected from the taxpayer by the County. Thus,
these sections define only the scope of tax refunds.
Such definition is necessary since tax refunds under sec-
tion 5096 include both delinquent and nondelinquent taxes.
The former may have interest, costs, and penalties added to
the tax assessment itself. (See Section 6591.)
(5) Likewise, an examination of the articles of which
these two sections were a part reveals the existence of
various sections expressly providing for the payment of in-
terest on tax refunds. (Former Sections 5105, 5108, 5141;’
’These sections were subsequently repealed, but largely reenacted in
other section. (See Sections 5150, 5151.)
Section 5105 stated: “In any action in which the recovery of taxes is
allowed by the court, the plaintiff is entitled to interest on the taxes for
which recovery is allowed at a rate per centum per annum equal to the
rate per centum per annum that the defendant has received, through in-
vestment or by bank deposit, on the amount allowed and recovered as
taxes from the date of the filing of the claim for refund to the date of entry
of judgment, and such accrued interest shall not apply to taxes paid before
the effective date of this action.”
Current section 5150 was derived from former section 5105.
Section 5108 stated:
“Interest at the rate of 6 percent per annum shall be paid, when such in-
terest is ten dollars ($10) or more, on amounts refunded under Section
=
Ehrman and Flavin, Taxing Cal. Property, Sections 494,
495, 497,
(82 Cal. App. 3d 319)
pp. 474, 477, 479;
(1976 supp.) Section 496b, pp. 308-309; Marshall, State and
Local Taxation, Section 128, subd. (c), p. 166; (1977 pocket
pt.) Section 128, subd. (i), pp. 113-114.) While these last
mentioned sections do not apply to the cases at bench,* the
existence of these specific sections negates the
5096.3 or 5096.7, or refunded as a result of the reduction of assessed value
following an application for equalization by a board of equalization or by
a court action to recover taxes. However, no interest shall be paid under
the provisions of this section if the taxpayer has been given the notice re-
quired by Section 2635 and has failed to apply for the refund within 30
days after the mailing of such notice.
“Interest allowed under this section shall be computed from the date of
the recording of the deed to the public agency acquiring the property in
eminent domain to the date of the filing of the claim for refund, or from
the date of the payment of the tax on property subject to an application
for equalization of the assessed value thereof to the date of the determina-
tion of the equalized value of the property; provided, however, that no in-
terest shall be paid under the provisions of this section if such period of
time is 30 days or less.
“The interest charged shall be apportioned to the appropriate funds, as
determined by the county auditor.”
Current section 5151 was derived from former section 5108.
Section 5141 stated:
“If the court finds that the assessment complained of is void in whole or
in part, it shall render judgment for the plaintiff for the amount of the
taxes paid on so much of the assessment as is found to be void. In such
event but only where taxes are paid after the effective date of this act, the
plaintiff is entitled to interest on the taxes for which recovery is allowed at
a rate per centum per annum equal to the rate per centum per annum that
the defendant has received, through investment or by bank deposit, on the
amount allowed and recovered as taxes from the date of payment under
protest to the date of entry of judgment, and such accrued interest shall be
included in the judgment. The taxes paid on so much of the assessment as
is not found to be void shall constitute valid taxes which, if paid after
delinquency, shall carry penalties, interests and costs.”
Current sections 5144 and 5150 were derived from former section 5141.
*Former section 5105 is inapplicable to the case at bench because it en-
titles a taxpayer to interest only on a refund obtained by court order and
wn
(82 Cal. App. 3d 320)
conclusion that a
taxpayer's entitlement to interest is provided for generally.
Under the doctrine of “the expression of one excludes the
other” the failure of the Legislature to provide expressly for
the payment of interest on certain refunds while expressly
providing for such payment on other refunds indicated an
intention to exclude from the omitted refunds the obligation
of interest. (Hill v. City of Eureka (1939) 35 Cal. App. 2d
154, 158 (94 P. 2d 1025); County of Madera v. Superior
Court (1974) 39 Cal. App. 3d 665, 670 (114 Cal. Rptr.
283).)
(6) These sections also reveal a comprehensive
legislative plan which authorizes recovery of interest on a
tax refund only where the county, with notice of an im-
proper assessment, has failed to grant a tax refund.® Under
these sections interest is denied on tax refunds unless and un-
til the county receives notice of its error—notice given by re-
no resort to court action was required here in order that the taxpayer
might recover her refund. The erroneously collected tax payments were
promptly refunded by the County upon the filing of her application for
exemption.
Former section 5108 is inapplicable because it entitles a taxpayer to in-
terest only on refunds that result from a reduction in assessed valuation
following an application for equalization by a board of equalization or by
a court action to recover taxes. The refund here was based upon an appli-
cation for exemption rather than an application for equalization and was
granted by the County rather than a board of equalization or court.
Finally, former section 514] is inapplicable because this section entitles
a taxpayer to interest only where taxes were paid under protest and are
later found by a court to be the result of a void assessment. The tax
payments here were neither made under protest nor refunded by court
order,
*This legislative plan is continued in the recently enacted sections deriv-
ed from the former sections of the Revenue and Taxation Code discussed
above. (Sections 5150, 5151.) The importance of notice in the legislative
plan is also seen in the requirement that a tax refund claim must be
presented to and denied by the County before a court action for refund
may be legally commenced. (Sections 5140, 5141, 5142, former Sections
5103, 5104; Signal Oil & Gas Co. v. Bradbury (1960) 183 Cal. App. 2d
40, 43-56 (6 Cal. Rptr. 736).)
a
fund claim, application for equalization, or payment under
protest. Interest does not begin to accrue under former sec-
tion 5105 until “the date of the filing of the claim for re-
fund.” Interest accrues pursuant to former section 5108
from “the date of the payment of tax on property subject to
an application for equalization of the assessed value” and
not even then if the property is reassessed within 30 days.
Former section 5141 authorized payment of interest “from
the date of payment under protest.”
Ball is denied interest on her tax refund under such a plan
because she received her refund shortly after she presented
her application for exemption to the County—shortly after
the County had been given notice that these taxes had been
erroneously collected from her.
This plan is fair. The tax payments at issue were ap-
parently collected by mutual mistake. Neither Ball nor the
County seem to have been aware of the applicability of the
exemption. (7) Even where money has been improperly
paid by one private party to another under a mutual
mistake, interest will not begin to accrue until the mistake is
discovered and a demand for restitution made. (Rest.,
Restitution, Section 156, com. a, p. 619; 45 Am. Jur. 2d, In-
terest and Usury, Sections 88, 90, pp. 79-81; Anderson v.
Pacific Bank (1896) 112 Cal. 598, 603 (44 P. 1063); Bank of
China v. Wells Fargo Bank & Union Trust Co. (9th Cir.
1953) 209 F. 2d 467, 472.) Interest is not
(82 Cal. App. 3d 321)
recoverable until and
unless an individual has notice of his duty to make restitu-
tion.
(8) This rule applies with even greater force to funds er-
roneously held by the government due to the extent and
nature of governmental activities. Indeed, where the
government owes a liquidated claim upon a definite date
that claim does not draw interest until demanded bused “on
the consideration that it would be inconvenient and
burdensome for the officials of a municipality (or county) to
seek its creditors and tender payment of their claims, and
also that it would be oppressive and unjust to permit
~
creditors of a municipality (or county) with good credit to
turn claims into investments through omitting to present
them and then collecting interest thereon.” (56 Am. Jur. 2d,
Municipal Corporations, Counties, and other Political Sub-
divisions, Sections 833, 842, pp. 823-824, 828; South Yuba
Water Co. v. Auburn (1911) 16 Cal. App. 775, 780 (118 P.
101); Engebretson v. City of San Diego (1921) 185 Cal. 475,
479 (197 P. 651).) Even in jurisdictions which have adopted
the rule that the state has an implied contract to pay interest
for the use of tax funds which are eventually refunded, in-
terest does not begin to accrue until the taxpayer puts the
state on notice that tax payments have been erroneously col-
lected by making a demand for a refund. (Girard Trust Co.
v. City & County of Philadelphia (1948) 359 Pa. 319 (59 A.
2d 124, 127-128) Van Hise v. Board of Sup’rs (1897) 21
Misc. 572 (48 N.Y.S. 874, 879) overruled on other grounds,
26 Misc. 750 (57 N.Y.S. 281, 288); Atwell v. Zeluff (1872)
26 Mich. 118, 119-120; Boston and Sandwich Glass Co. v.
City of Boston (1842) 45 Mass. 181, 190.)
DISPOSITION
The summary judgment for the County of Los Angeles is
affirmed.
Allport, J., and Potter, J., concurred.
=
APPENDIX C
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
HELEN BALL, individually and on
behalf of all others similarly
situated,
Plaintiff,
Vv.
COUNTY OF LOS ANGELES,
Defendant.
NO. CA 000 289,
ORDER DISMISSING COMPLAINT AND FOR ENTRY
OF SUMMARY JUDGMENT IN FAVOR OF
DEFENDANT AND AGINST PLAINTIFF
The motion of defendant County of Los Angeles for an
order pursuant to Section 437(c) of the Code of Civil Pro-
cedure dismissing the complaint herein and entering judg-
ment for defendant was regularly heard on February 3,
1977. Charles J. Moore, Deputy County Counsel, appeared
as attorney for defendant, and Volney F. Morin and Volney
F. Morin, Jr., appeared as attorneys for plaintiff. The Court
finds that there is no triable issue of fact and that the action
has no merit.
IT IS ORDERED that the complaint is dismissed and
that judgment be entered in accordance with this order in
favor of the County of Los Angeles and against Helen Ball as
~~
requested in the Answer to the Second Amended Com-
plaint.
Dated: January 3, 1977. *
/s) CAMPBELL M. LUCAS
Judge of the Superior Court
* Clerical error dated order January 3, 1977 instead of
February 3, 1977, the date of hearing.
acim
APPENDIX D
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
DEPARTMENT NO. 59
HON. CAMPBELL M. LUCAS, JUDGE
HELEN BALL, individually and on
behalf of all others similarly
situated,
Plaintiff,
VS.
COUNTY OF LOS ANGELES,
)
)
)
)
)
)
)
)
Defendant. )
NO. CA 000,289
REPORTER’S TRANSCRIPT ON APPEAL
Thursday, February 3, 1977
APPEARANCES:
For the Plaintiff: VOLNEY F. MORIN, SR.
VOLNEY F. MORIN, JR.
For the Defendant: JOHN H. LARSON,
COUNTY COUNSEL
By: CHARLES J. MOORE,
Deputy
Page 1
LOS ANGELES, CALIFORNIA
THURSDAY, FEBRUARY 3, 1977
A.M. SESSION
THE COURT; Good morning, gentlemen.
(All counsel respond, “Good morning.”)
a
THE COURT: Ball vs. County of Los Angeles.
Your appearances, please?
MR. MOORE: Charies Moore, Deputy County
Counsel, on behalf of the County.
MR. MORIN, JR.: Volney F. Morin, Jr. for Helen Ball
and the other plaintiffs.
MR. MORIN, SR.: Volney F. Morin, Sr., for Helen
Ball and all the other individuals similarly situated.
THE COURT: Counsel, I think in reading the moving
papers and the papers in opposition, that there is no dispute
over the facts of the matter, and this really turns on the
question of law.
Is that correct?
MR. MOORE: Yes, Your Honor.
MR. MORIN, JR.: Yes, sir.
THE COURT: I have read the moving in opposition
papers. And do you wish to argue, Mr. Moore?
MR. MOORE: Your Honor, I would reserve my open-
ing argument. I believe that I would like to rely on my mov-
ing pepers at this time, and of course, answer any questions
you have.
THE COURT: All right, Mr. Morin?
MR. MORIN, JR.: I would only like to supplement the
Page 2
papers that we have supplied in opposition by bringing the
court’s attention to Civil Code 437(c), and remind the court
perhaps that the County has a burden to show that the ac-
tion has no merit and that they are entitled to a judgment as
a matter of law.
That was not discussed in my memorandum in opposi-
tion, but I feel strongly that the action does have merit, and
they are not entitled to a judgment as a matter of law.
THE COURT: Do you wish to add anything, Mr.
Moore?
MR. MOORE: I'll apologize for the absence of the reply
brief. I received the opposition on Monday, and I didn’t feel
I would be giving the court enough time to submit a reply.
The only point raised in the opposition papers concerns
the law of the case doctrine. The points and authorities have
wean
indicated that since this matter has been the subject of a
hearing, the County demurred and the demurrer was over-
ruled, the law of the case doctrine applies, and I would wish
to merely point out to the court that as far as the law of the
case doctrine, the effect of the First Appellate decision on all
subsequent proceedings, it is the rule which requires the
trial court to follow that rule which has been laid down by
the Appellate Court on former appeals.
It is the County’s position that the application of the
law of the case doctrine is inappropriate in this case and
that surely we're entitled to judgment at this point, not-
withstanding the fact that we have demurred and the
demurrer was overruled.
Page 3
THE COURT: Thank you.
As I understand the papers, gentlemen, we have a
situation where by statute it is provided that if you bring a
lawsuit for the recovery of taxes and any interest or
penalties that may have collected pursuant to those taxes,
that you can recover interest if you are successful in the
lawsuit.
But where there is merely a reimbursement by the
County, there is no statutory provision for the payment of
interest; that in a nutshell, the circumstances, the present
state of the statute, leaving aside for the moment the dispute
about whether or not the word “taxes” includes interest,
that would be claimed, that is, the interest for the use of the
money by the County.
MR. MORIN, JR.: Your Honor, I th‘nk the statutes are
not clear in that regard.
THE COURT: Let’s talk about that. If you bring a
lawsuit, there is a clear statute that if you sue for the return
of taxes paid, or penalties paid, or imposed for failure to
pay, that you can get that back with interest, if you go
through the court system.
MR. MORIN, JR.: — I believe that is the case.
THE COURT: But if you just make an application for
refund, there is nothing in the statute about the interest for
the time the County has held the money, other than the
= =
discussion that has been had about the definition of “taxes.”
MR. MORIN, JR.: Other than that, but I think you're
overlooking that definition and this is very important, so
Page 4
you really can’t consider it separately from that definition.
THE COURT: All right, just as long as I understand
the basic situation because my ruling is going to be to grant
the motion for summary judgment.
I don’t have the power that the Supreme Court has to
make new law, as they often do.
MR. MORIN, JR.: Have you considered the fact that
this is really an action for the recovery of taxes and interest,
and it was characterized as such by Judge Fainer in the
Municipal Court?
THE COURT: I have considered it, but I don’t agree
with your interpretation that this is an action to recover in-
terest in the sense that “interest” is used in the definition of
“taxes,”
My interpretation is, if as a part of the taxes collected
there has been an imposition by the County of penalty and
interest, that interest which has been paid to the County
would be recoverable. Interest for the use of the money is a
different situation, and in the court’s mind does not fall
within that definition.
MR. MORIN, JR.: You're referring to Civil Code 1915?
THE COURT: No, I'm referring to the Revenue and
Taxation Code section that defines taxes to include interest,
penalties, and costs.
MR. MORIN, JR.: It is your opinion that the definition
applies only to penalties, interest, and costs collected by the
County?
THE COURT: That's correct.
Page 5
MR. MORIN, JR.: Is that decision supported by any
legislative opinion or anything of that type?
THE COURT: You are the one that is supposed to sup-
ply points and authorities. In the absence thereof, I have to
make my own decision on that.
MR. MORIN, JR.: That's exactly the point,
-_
THE COURT: I was really going to say when you sue
to recover taxes, it implies to me that is something that you
have already paid, and you have paid interest as a part of
that tax.
The interest that you're suing for is something over and
above the taxes. It is something that the class claims they are
entitled to by reason of the County’s use of tic money, and
that is unrelated to the question of whether the County had
collected for taxes or otherwise, because the County has
never in fact collected that money.
Also the court is looking at the situation where the
Legislature has restricted action specifically with regard to
lawsuits, and the specifically passed legislation indicates
you may recover interest to the time the County retained
this money, if you are successful in a lawsuit.
In the absence of any further legislation, that is a ques-
tion for the Legislature to take up. There appears to be no
provision for the County paying interest on taxes that have
not been recovered in a lawsuit.
As I think is obvious, the whole reason for this pro-
ceeding today is to shortcut a lot of expensive discovery and
preparation for a fullblown class action and perhaps get
Page 6
a determination on the question of law that would clear it
up for everyone.
My granting the motion is going to clearly frame that
question of law for you. Then it is going to be up to the Ap-
pellate Court as to how they look at it.
So with that explanation of the court, the court will
grant the motion in favor of the defendant County against
the individual plaintiff, Helen Ball.
MR. MORIN, JR.: May I please make a statement,
Your Honor?
THE COURT: Yes.
MR. MORIN, JR.: First of all, with respect to the issues
being raised on demurrer in the court below, the County
has raised the same point in the Municipal Court, and the
Superior Court, relative to this action, and in both cases the
demurrer was overruled and the judge that decided that
aae..
question ruled that the County did have the authority to re-
fund taxes and the term included penalties and costs under
the Revenue and Taxation Code 1507 and also 5143.
The fact of the matter is that the County of Los Angeles
does collect penalties for delinquent payments of taxes, and
the collection for that extra money is because the payment
was not made on time, and I think the underlying reason, I
am sure, is that the taxpayer has the use of his money,
which rightfully should be the County’s.
THE COURT: Mr. Morin, I have considered these
matters. Please keep in mind you're arguing after the deci-
sion.
And I’m going to indicate I see a considerable
Page 7
difference from a
situation where a taxpayer pays a tax under duress or coer-
cion, and perhaps pays it under protest, but nonetheless has
to pay it, and a situation such as Mrs. Ball’s, where there
was no need to ever pay the tax, if she properly had filed her
exemption. The fault lies with her rather than the County.
MR. MORIN, JR.: Helen Ball paid her taxes, as all
County taxpayers must, upon the pain of forfeiture in order
to retain her property.
THE COURT: At that time didn’t she have a right to
an exemption because that property was being used by a
free public library?
MR. MORIN, JR.: Indeed, she did.
THE COURT: And if she had filed her claim or exemp-
tion, certainly she wouldn’t have had to pay the tax.
This is a different situation than where you pay the tax
and then challenge the constitutionality of the tax and then
you find that the constitutionality of the tax was at fault,
and it was an illegal tax.
This tax, in the court’s opinion, would never have been
collected, and the money would never have been held by
the County, and the County would never have had the use
of it, if Mrs. Ball had done what the law gives her a right to
do, namely to say to the County, “I don’t owe you any
money because it is exempt.”
—22—
MR. MORIN, JR.: I recognize that, and I recognize
your opinion, and I’m merely trying to frame in my mind,
and perhaps for the benefit of any reviewing court, the
arguments that we
Page 8
presented in our
opposition to the County's motion for summary judgment.
It occurs to me that the underlying basis of our claim,
and I feel very strongly about it, is that the County collected
the penalties from the taxpayer, and had the use of the
money, when it should not have been the County’s.
I don’t think it’s fair, and I think that equitable prin-
ciples should apply, and the County should pay interest
when the County collected money from the taxpayer which
it was not entitled to, just like the taxpayer pays interest
when it doesn’t pay the County the money that is due the
County.
In this case the County has had the use of the taxpayer’s
money, and the taxpayer is receiving no interest for such
use.
We're not asking for any punitive damages or for
anything by way of mistake or fraud or duress or anything
of that sort. We’re merely talking about the compensation
for the use of the money, and the case law in California has
not been developed in this point, and the case law in the
majority of the other jurisdictions is clear where the
Government has the use of the taxpayer’s money, that in-
terest is due the taxpayer.
THE COURT: Well, Mr. Morin, you mentioned
equitable considerations and fairness. I don’t believe your
complaint is framed for equitable relief. As I understand it,
it is just a complaint for damages. There is no inadequate
remedy at law here, and I’m not sitting as a court of equity,
Page 9
particularly when I’m just looking at a point of law.
Your suit was for damages, not for equitable relief.
MR. MORIN, JR.: It is clear that we are seeking money
damages, but I think equitable principles ap»ly in this case,
—23—
and I fail to see how the court failes to consider principles of
fairness and fair treatment under the law.
I'm also moving on to a different point. I believe that
the counsel has not proven the action has no merit or that
they are entitled to a judgment as a matter of law. They did
not meet the requirements of CCP 437(c).
THE COURT: Well, we have all agreed that there is no
triable issue of fact, and the right of interest for your client
depends on a queston of law. It turns on a question of law,
yes or no.
MR. MORIN, JR.: Well, where do we go from here?
THE COURT: I believe your clients have no right
under the present state of the law. It doesn’t mean that the
Legislature cannot change the law, and it doesn’t mean that
the Supreme Court cannot change it, but I have to make my
ruling under the law as it now stands, and I have made that
ruling.
I don’t believe there is anything left in the case than
considering the matter on appeal.
MR. MORIN, JR.: All right, Your Honor, thank you
very much,
THE COURT: I thought when we had our informal
conference earlier that is what we were really looking at, to
see
Page 10
if we could
get a determination on it, not necessarily a binding one for
me or Judge Fainer or Judge Phillips, but from an Appellate
Court, which decision would have some teeth in it.
Certainly, you are entitled to go on from here and take
the matter up on appeal.
But the fact that a demurrer has been sustained doesn't
prevent other demurrers from being brought. It doesn’t pre-
vent a motion for judgment under the pleadings, and it
doesn’t prevent a summary judgment motion, and it doesn’t
prevent the matter from being raised on appeal.
You are going to have something in your favor if you
can say there was a split on the Superior Court level, but
really this is an Appellate Court question.
=
So all I can do is give both sides my blessing and say
some day we will have it resolved.
Is notice waived, counsel?
MR. MORIN, JR.: Yes
MR. MOORE: Yes, Your Honor.
THE COURT: Thank you, gentlemen.
APPENDIX E
2nd Civil No.
52206
IN THE COURT OF APPEAL
OF THE
STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
HELEN BALL, individually and on
behalf of all others similarly
situated,
Plaintiffs and APPELLANTS,
VS.
COUNTY OF LOS ANGELES,
)
)
)
)
)
)
)
)
Defendant and RESPONDENT. _ )
APPELLANTS’ OPENING BRIEF
STATEMENT OF THE CASE
RELIEF SOUGHT
Appellant, Helen Ball, for herself and for all others
similarly situated, seeks reimbursement from County of Los
Angeles (County) for use of her and their money.
Appellant, Helen Ball, for herself and for all others
similarly situated asks that the ORDER DISMISSING
COMPLAINT AND FOR ENTRY OF SUMMARY JUDG-
MENT in favor of defendant, County, of the Honorable
Campbell M. Lucas, dated February 3, 1977 be vacated,
and that this Court determine that the County does have
authority under the California Revenue and Taxation Code
to reimburse taxpayers for the use of their money; that this
Court
Page 2
ORDER County to
reimburse (pay interest to) taxpayers for the use of their
money due to an overpayment of tax, because of an im-
proper assessment or for any other reason taxpayer has over-
paid taxes to County; and that this Court ORDER said
reimbursement be compounded annually from the date
claims for refunds accrued to date of payment, and
thereafter pay interest on the interest, which had not been
paid. Appellant, Helen Ball, for herself and for all others
similarly situated, asks that this class action be returned to
Los Angeles Superior Court for completion of the trial.
Judgment or Ruling of the Superior Court sought to be
vacated, is attached as Exhibit !.
NATURE OF THE ACTION
County sent Helen Bal! a Secured Property Tax Bill (Bill)
which she paid. Thereafter she discovered the Bill had been
sent, and payment thereof had been made, erroneously. She
requested, and obtained, reimbursement of the money she
paid; she requested but was denied, reimbursement for use
of the money she paid.
It does not matter whether the reimbursement she seeks is
considered to be interest, or penalty, or costs. The Califor-
nia Legislature has stated, and then restated, that all three
words are included under the generic term “taxes”. Part 4,
chapter 5 of California Revenue and Taxation Code governs
refunds of
Page 3
taxes. Both
Article 1, Refunds Generally, Section 5107 (1941) and Arti-
cle 2, Payment Under Protest and Suit to Recover, Section
5143 (1941), state: “As used in this article, ‘tax’ or ‘taxes’ in-
cludes penalties, interest, and costs.”
It is clear the California Legislature has twice spoken and
each time, in identical words, it has expressed its intention
that refunds of taxes includes refunds of taxes, penalties, in-
terest, and costs. The taxpayer is to be made whole.
= =
For over one hundred years California law has recognized
that: “Interest is the compensation allowed by law or fixed
by the parties for the use, or forebearance, or detention of
money.” (Civil Code Section 1915; enacted in 1872 and
amended by Code Amendments Ch 612 Section 202 P245
(1873-1874) to read as at present.)
The County charges and collects money for delinquent
taxes - presumably under the theory expressed in Civil Code
Section 1915 and specifically authorized by Revenue and
Taxation Code Sections 2617, 2618, 2704 and 2705. That is,
the taxpayer has use of his money and the County has to
forbear the use of the taxpayer's money. Money is collected
for delinquent taxes by County even though there has been
no action in which the recovery of taxes is allowed by the by
the court pursuant to Revenue and Taxation Code Section
5105.
The subject of the right of a taxpayer to collect interest on
a tax refund is annotated in 57 A.L.R. 347, 76 A.L.R. 1012
and 112 A.L.R. 1183. While there is some minor conflict
Page 4
among the authorities on this issue, it appears from these
annotations that a majority of jurisdictions do permit
recovery of interest by a taxpayer.
SUMMARY OF MATERIAL FACTS
County has denied the claim of Helen Ball. (See attached
Exhibit 2, letter dated October 24, 1975, from County of
Los Angeles Department of Auditor-Controller.) County
continues to deny the claim of Helen Ball and all other tax-
payers similarly situated for reimbursement for County's
use of their money, by raising two arguments:
1. The County has no authority, and
2. The County’s authority is strictly
regulated by the Revenue and Taxation
Code.
COUNTY HAS AUTHORITY TO PAY INTEREST
County demurred in earlier proceedings in this case in the
Municipal Court on the grounds it lacked authority to pay
interest - the same grounds advanced below. On July 2,
1975, the Honorable Robert Fainer, sitting in Law and Mo-
tion, ruled:
“The demurrer of the defendant, County of
Los Angeles, to the complaint is over-ruled.
The County of Los Angeles has the authority
to refund “taxes” and the term “taxes” as us-
ed in Revenue and Taxation Code Sections
5107 and 5143 includes penalties, interest
and costs. This is not an action to determine
the legality
Page 5
of any tax,
but is an action to recover the balance of
taxes due after a refund, to wit, the interest
thereon.”
Notice of Judge Fainer’s Ruling, and Proof of Service By
Mail, dated December 2, 1975, were filed on December 3,
1975.
From Judge Fainer’s ruling, County did not appeal.
The ruling in the Municipal Court in favor of Helen Ball,
was based on the same code sections; the same issues; the
same arguments; and the same facts as are now before this
court,
On November 10, 1975, the Second Amended Complaint
for Damages, which commenced this class action, was filed.
On December 9, 1975, the Clerk of the Superior Court
mailed his Notice of Transfer of Action, from the Municipal
Court to Superior Court.
On January 14, 1976, County demurred once again. This
time to the Second Amended Complaint and the present
class action.
Said demurrer was opposed by appellant and in the
Points and Authorities in support of such opposition,
Revenue and Taxation Code Section 5107 and Section 5143
—29—
were fully discussed. In appellant's Supplement to
Memorandum in Opposition to Demurrer, and Points and
Authorities in support thereof, the ruling of the Honorable
Robert Fainer, referred to above, was discussed in full, so as
to make certain his ruling was a part of the record herein.
On February 2, 1976, in Department 84, the Honorable
Charles H. Phillips presiding, the demurrer of the County
was
Page 6
overruled, the
Court saying: “General demurrers overruled on the merits
per the points and authorities and the reasons stated by
Judge Fainer.”
From Judge Phillips’ ruling, County did not appeal.
EARLIER RULINGS IN THIS CASE
SHOULD BE FOLLOWED
It is respectfully submitted that the rulings of Honorable
Robert Fainer and Honorable Charles H. Phillips should be
followed by this Court, under the theory of the Law Of The
Case.
“A decision which determines the rights of
the parties under a given state of facts
becomes the law of that case and is not sub-
ject to revision on a later appeal, even
though the prior decision is admittedly er-
roneous. Dewey v. Gray 2 C 374; Phelan v.
San Francisco 20 € 39. Indeed, it is when the
former rule is deemed erroneous that the
doctrine of the law of the case becomes most
important...” People v. Holladay 93 C 241,
29 P 54; Tally v. Ganahl 151 C 418, 90 P
1049; Westerfeld v. New York Life Ins. Co.
157 C 339, 107 P 699; Union Oil Co. v.
and
“The law of the case is not less binding upon
the courts and the parties because questions
of great public interest are involved such as,
for instance, may be affected by the con-
struction of an act of Congress. Leese v.
Clark 20 C 387 (Mexican Land Grants con-
firmed by Congress). While the importance
of the questions involved should induce a
careful consideration in the first place, it can
have no effect upon the conclusiveness of a
decision once made. Leese
Page 7
v. Clark 20 C 387;
Blatz Brew. Co. v. Collins 88 CA2d 438, 199
P2d 34.” 4 Cal. Jur. 2d Section 699
and
“It follows that an announced principle
which is the law of the case must be adhered
to and observed throughout the subsequent
progress of the case both in the lower court
and upon subsequent appeal, although the
appellate court believes upon further con-
sideration that the former decision in that
particular is erroneous, Burns v. Jackson 53
CA 345, 200 P 80; George v. Los Angeles 51
CA 2d 311, 124 P2d 872; and this fowl be
uniformly followed unless there are unusual
circumstances leading to injustice or un-
fairness. Allen v. California Mut. Bldg. &
Loan Assn. 22 C2d 474, 139 P2d 321. The
law of the case doctrine is not limited,
however, to cases in which the first decision
is deemed erroneous. The principle is equally
applicable where the prior decision is un-
questionably correct...”
5 Cal. Jur. 3d Section 641.
Reconstruction Oil Co. 58 CA2d 30, 135 P2d
621.”
Courts are charged with responsibility of interpreting
laws enacted by the legislative branch of the government.
aS
And when a court interprets a law, then a county has
whatever power a court says it has. If it is to pay interest
under the law, then a county has authority to pay interest.
This Appeal is advanced on the premise that all parties
before a court of law are entitled to equal treatment under
the law. The XIV Amendment to the United States Con-
stitution provides at Section 1:
“All persons born or naturalized in the
United States, and subject to the jurisdiction
thereof, are citizens of the United States and
of the State wherein they reside. No State
shall make or enforce any law which shall
abridge the
Page 8
privileges or
immunities of citizens of the United States;
nor shall any State deprive any person of life,
liberty, or property, without due process of
law; nor deny to any person within its
jurisdiction the equal protection of the
laws.”
A County government and an elderly widow must abide the
same rules and are entitled to the same rights and privileges.
Helen Ball advances for herself and for all other taxpayers
similarly situated, the proposition that if County charges
and collects money (interest) for delinquent payment of pro-
perty taxes, then County must refund money (interest)
when it has use of taxpayers’ money due to an overpayment
of tax.
The Honorable Learned Hand declared in Proctor &
Gamble Distributing Co. v. Sherman 2 F. 2d 165, 166
(D.C.N.Y. 1924):
* ..it is not an adequate remedy, after taking
away a man’s money as a condition of allow-
ing him to contest his tax, merely to hand it
back, when, no matter how long after, he
established that he ought never to have been
required to pay at all.”
The facts in the case of Helen Ball are not in dispute.
ails
Helen Ball does not claim for herself or any other taxpayer
that a penalty should be assessed against the County of Los
Angeles for any willful or improper conduct.
Instead, her claim is based on the argument that Civil
Code Section 1915 provides the underlying basis for in-
terest. Revenue and Taxation Code Section 5107 and Sec-
tion 5143 authorize the County to pay interest on taxes
which were improperly assessed, and thereafter paid, with
or without protest, and this Court should order the
Page 9
County to do
that which it is unwilling to do - treat the taxpayers in the
same way it demands it be treated.
CALIFORNIA STATUTORY LAW
California law regulating the imposition of real property
taxes is primarily statutory, currently coditied for the pur-
poses of this brief in the Revenue and Taxation Code Sec-
tions 1-36, 101-134 (general provisions), 290-900 (assess-
ment), 1601-2125 (equalization), 2501-2862 (collection),
and 4801-516l-(corrections, cancellations, and refunds).
The history of the California property tax is one of recurr-
ing cycles of abuse and reform. Ehrman and Flavin, Taxing
California Property: Assessment, Equalization and Collec-
tion, ch. 1 (1967) (hereafter Ehrman and Flavin). The last
major reform was in 1966. Id. Section 27. This was designed
to remove a “cloak of mystery which surrounds the processes
of assessment and equalization and to provide remedies for
unequal assessment.” Id, Sections 27-44. The relevant
statutes were enacted at various times, mostly in 1941 and
1955, but a liberalizing section on refunds, Revenue and
Taxation Code Section 5108, was enacted in 1970.
In general, assessments are performed by assessors in the
counties. Revenue and Taxation Code Section 404. Essen-
tially “assessment” means establishing the value of the pro-
perty. Ehrman and Flavin, supra, Sections 184-185. The
State Board of Equalization provides regulations to govern
assessors, Government Code Section 15606,
= =
Page 10
and publishes
the Assessor’s Handbook for the use of assessors. Ehrman
and Flavin, supra, Section 430.
“Equalization” means the adjustment of individual
assessments so that one taxpayer is not taxed at a greater
proportional rate than another. Ehrman and Flavin, supra,
Section 440. The California Constitution provides both for
county boards of equalization, CAL. CONST. art. Xill,
Section 9, and for the state board, CAL. CONST. art XIII,
Section 9.5. The constitutional provisions are implemented
by provisions in the code relating to the county board of
supervisors, acting as the county board of equalization,
Revenue and Taxation Code Sections 1601-1615, and by
local assessment appeals boards, Revenue and Taxation
Code Sections 1620-1629, Sections 1750-1765. Ehrman and
Flavin, supra, Section 440. County employs an assessment
appeals board, Id, Section 475, and Los Angeles County
equalization procedures are governed by special code provi-
sions. Revenue and Taxation Code Sections 1760-1764.
Revenue and Taxation Code Section 5105 states:
Recovery of interest.
In any action in which the recovery of taxes
is allowed by the court, the plaintiff is entitl-
ed to interest on the taxes for which recovery
is allowed at a rate per centum per annum
equal to the rate per centum per annum that
the defendant has received, through invest-
ment or by bank deposit, on the amount
allowed and recovered as taxes from the date
of the filing of the claim for refund to the
date of entry of judgment, and such accrued
interest shall be included in the judgment.
This section shall not apply to taxes paid
before the effective date of this act.
Page 11
(Added Stats 1941 ch 664 Section 10;
Amended Stats 1961 ch 2151 Section 1.)
It should be remembered that the word “taxes” as used in
iin,
Section 5105 includes “penalties, interest and costs” (Section
5107). Hence, in one relevant part, Section 5105 could
reasonable be accurately restated:
“In any action in which the recovery of
penalties, interest and costs is allowed by the
court, the plaintiff is entitled to interest on
the interest and costs for which recovery is
allowed....”
Section 5105 is applicable for the reason that the i. unt
case is an action for the recovery of “taxes” as defined 1m Sec-
tion 5107.
Section 5105 deserves still closer consideration, having in
mind that it comes under Chapter 5, Refunds, and Article
1, Refunds Generally, and was enacted in 1941. Clearly the
legislature was attempting to fill the void which would oc-
cur if a taxpayer obtained a judgment of recovery and was
left to receive interest only from the date of judgment, as is
the usual case. Here, the legislature seeking to redress that
possible wrong said the plaintiff would recover interest
“...on the amount allowed and recovered as taxes from the
date of filing of the claim for refund to the date of entry of
judgment,...”
It is the position of Helen Ball that the meaning of Section
5107 and in haec verba Section 5143, ("As used it) this Arti-
cle, ‘tax’ or ‘taxes’ includes penalties, interest, and costs.”’) is
clear from a plain reading.
Page 12
The Municipal Court and the Superior Court had no
trouble determining the meaning of these sections. The
Honorable Robert Fainer (with the Honorable Charles H.
Phillips later concurring) held that: “The County of Los
Angeles has the authority to refund ‘taxes’ and the term
‘taxes as used in Revenue and Taxation Code Section 5107
and Section 5143 includes penalties, interest, and costs.”
Revenue and Taxation Code Section 5108 was added to
the Code in 1970 and is thus a later section than any other,
in both Articles 1 and 2 on Refunds. This section provides:
Interest at the rate of 6 per cent per annum
shall be paid, when such interest is ten
ones
dollars ($10) oi more, on amounts refunded .
. as a result of the reduction of assessed
value following ar. application for equaliza-
tion by a board of equalization or by a court
action to recover taxes... .
Interest allowed under this section shall be
computed . . . from the date of the payment
of the tax on property subject to an applica-
tion for equalization of the assessed value
thereof to the date of the determination of
the equalized value of the property; provid-
ed, however, that no interest shall be paid
under the provisions of this section if such
period of time is 30 days or less. (Emphasis
added)
Section 5108 is helpful in the case of Helen Ball because it
points to a liberalization of statutory law in the area of in-
terest on refunds. As will be discussed next, California case
law is less illuminating on the matter of Helen Ball.
Page 13
CALIFORNIA CASE LAW
There is no current California case law that deals with
the question of whether a taxpayer is entitled to interest on
tax refunds. The inclusion of Revenue and Taxation Code
Section 5141 in 1941 (still in force) invalidates earlier deci-
sions.
California courts have not decided a case involving in-
terest on refunds under its modern tax code. Because the
question has not been considered in recent years, it is still
open.
"California case law applies primarily to cases where the
amount of tax is calculated by the taxpayer and not where
the taxes are collected by error in the Jevy or collection pro-
cess. Also, most cases deal with a common fact situation
where the action was brought under Political Code Section
3819 - not the case of Helen Ball.
The first case, and a very early one, in which California
— =
courts spoke of a right to interest on property tax refunds
was Savings and Loan Society v. City and County of San
Francisco, 131 Cal. 356, 63 P. 665 (901), which was con-
cerned with taxes on personal property, also taxed in the
same manner as realty. The court refused to allow interest
from the date of the payment of the tax under protest,
holding as to the relevant Civil Code sections:
The code sections cited relate to interest as
compensation or damage between parties to
an action, and the language of the statute is
general and does not include the state or any
Page 14
of its political subdivisions. The state is not
bound by general words of a statute which
would operate to establish a right of action
against it. . . .The action here is brought
under a new section of the Political Code -
3819 - in which no provision is made for the
payment of interest.
131 Cal. at 363 (citations omitted). The case is distinguish-
able, of course, on the grounds that the cause of action in
the case of Helen Ball is based on entirely different grounds
than Political Code Section 3819, and this case precedes
Revenue and Taxation Code Section 5107 and Section 5143
by forty years.
The next following California cases discussed also precede
enactment of Revenue and Taxation Code Section 5107 and
Section 5143, and are based on Political Code Section 3819.
In another early case, Columbia Savings Bank v. County
of Los Angeles 137 Cal. 467, 70 P. 308 (1902), involving the
taxation of personal property (bonds), the court held on
general principles of equity that interest was owing from the
date of judgment. The court held:
(The taxpayer) is entitled to the return of the
money paid under protest, if the tax was il-
legal. If the tax was legal the county was en-
titled to payment, and the taxpayer is not in-
jured. In such case there was neither “use, or
re
forbearance, or detention of money” (Civ.
Code, Sec. 1915) prior to findings and judg-
ment that the tax was illegal. The statute
under which the payment was made to the
defendant does not provide for the payment
of interest, nor was any money due thereon
from the defendant until its liability was fix-
ed by the judgment of a court of competent
jurisdiction. Nor was this a loan of money by
the plaintiff to the defendant, which would
be presumed to be made upon interest,
Page 15
unless otherwise
stipulated at the time in writing, as provided
in section 1914 of the Civil Code. Whether,
if it were shown that the defendant made a
profit out of the money paid to it under said
statute, the plaintiff would be entitled to
damages to the extent of such profit, not ex-
ceeding the legal rate of interest, is a ques-
tion not presented and not considered. But
the judgment in the case before us fixed the
liability of the defendant, and from that date
the money to which the plaintiff was entitled
was detained from it, and natural justice, as
well as the statute which provides that in-
terest at seven per cent is payable on
judgments recovered in the courts of this
state, justifies the judgment relating to in-
terest. (Civ. Code, Sec. 1920);....
137 Cal. at 471 (emphasis added).
This case is helpful but not controlling because in the case
of Helen Ball it was not necessary to obtain a judgment
ordering a refund. It was so clearly evident that a refund
was justified that County refunded the improperly assessed
tax without need for a trial.
The results of changes in the taxing statutes were
reflected in Wells Fargo and Co. v. City and County of San
Francisco, 25 Cal. 2d 37, 152 P. 2d 625 (1944). The trial
= =
court awarded interest and the award was affirmed on ap-
peal because the attack on the judgment was collateral in
nature. The court stated:
It is well settled that in an action to recover
taxes paid under protest under Section 3819
of the Political Code, interest cannot be
allowed from the time of payment but only
from the time of the adjudication declaring
the money due. 1.
1. Rev. & Tax. Code, Section 5141,
enacted in 1941, provides for interest from
the date of payment under protest, as to
taxes paid after the effective date of the sec-
tion.
Page 16
25 Cal. 2d at 43. Again, the including of Revenue and Taxa-
tion Code Section 5141 (still in force) invalidates earlier
decisions.
No cases subsequent to the enactment of the provisions of
the modern code sections have been uncovered which speak
of the right to recover interest in cases involving real proper-
ty taxation.
SUPR™ME COURT AND FEDERAL CASE LAW
The Supreme Court of the United States has recognized
for over 100 years that: ... Where an illegal tax has been col-
lected, the citizen who has paid it, and has been obliged to
bring suit against the collector, is, we think, entitled to in-
terest in the event of recovery, from the time of the illegal
exaction.” Erskine v. Van Arsdale, 15 Wall. (U.S.) 75, 77
(1872). See also: Redfield v. Bartels, 139 U.S. 694, 11 Sup.
Ct. 683, 35 L.Ed. 310 (1891); National Home v. Parrish,
229 U.S. 494, 496, 33 Sup. Ct. 944, 57 L.Ed. 1296 (1913);
Billings v. United States, 232 U.S. 261, 286, 34 Sup. Ct.
421, 58 L.Ed. 596 (1914); State, etc., Co. v. Davis, (D.C.)
228 Fed. 246, 250 (1915); Haiku Sugar Co. v. Johnstone,
249 Fed. 103, 109, 161 C.C.A. 155 (1918); International
Paper Co. v. Burrill, (D.C.) 260 Fed. 664, 667 (1919).
=
In International Paper Co. v. Burrill, supra, at page 669,
the Court held: “...As the money was wrongfully obtained
by the defendant through implied duress, and as it is no
defense
Page 17
that the defendant has paid the money into the treasury of
the commonwealth, there must be judgment for the plain-
tiff for the amount of the tax, with interest thereon from the
date of payment, May 22, 1916.”
Modernly, the “adequacy of remedy at law” issue was
raised in Mullaney v. Hess, 189 F. 2d 417 (9th Cir. 1951),
Applying Alaska law, the court stated:
We think that the weight of authority is that
interest is recoverable on tax refunds in
absence of express statutory authority
therefor. The reasoning of these cases is in
harmony with the modern view they express.
Id. at 420.
In 1957 in Ketchikan Spruce Mills v. Kewey, 17 Alaska
336 (1957), the United States District Court for Alaska also
permitted recovery of interest under a territorial statute
which provided for refund of taxes but made no mention of
interest.
OTHER STATES CASE LAW
Of all the states, Pennsylvania has the most thoroughly
developed case law on the question of interest on refunds of
real property taxes. There has, moreover, been an evalua-
tion of principles in that state which will be illuminating in
the case of Helen Ball.
The underlying principles were enunciated in the leading
and often cited case of Philadelphia and Reading Coal and
Iron Co. v. School District of Borough of Tamaqua, 304 Pa.
489, 156
Page 18
A. 75 (1931).
Plaintiff won a judgment that real property taxes for the
benefit of the school district had been improperly assessed.
se
The court held:
One further question raised in argument re-
mains to be determined, whether or not
plaintiff is entitled to interest on the amount
paid in excess of the proper levy. The judg-
ment as it now stands is for the total excess
payment, $8,547.75, with interest at 6 per
cent, from September 21, 1923, the date of
payment by plaintiff, the whole amounting
to $12,137.80. The precise point does not ap-
pear to have been raised before in this court,
and we are thus free to deal with it
unhampered by precedent. It is unnecessary
to review the wealth of conflicting
authorities in other jurisdictions . . . .The
weight of authority appears to be that,
where the taxpayer is entitled to a refund on
an excess payment of taxes, whether such
right accrues by virtue of statute or not, the
taxpayer is entitled to interest on the refund
if no statute or public policy militates against
it. Such is the law in the United States courts
. . » as well as several other states. . . .With
this view we agree.
156 A. at 77 (citations omitted; emphasis added).
In Cities Service Oil Co. v. City of Pittsburgh, 449 Pa.
481, 297 A. 2d 466 (1972), the court discussed the various
rules in a context of mercantile license taxes paid for the
benefit of a school district. The court's decision appears to
be equally applicable to real estate taxes, especially since the
whole line of decisions originated with Tamaqua. It was
held, in broad and useful language:
If a taxpayer is entitled to a tax refund, he is
also entitled to interest on the refund so long
as no statute or public policy militates
Page 19
against it,. . .
The Commonwealth Court, in determining
_
the date from which to compute the interest
due Cities Service, states, “. . . before in-
terest will accrue there must be an improper
detention by the taxing authority; and the
taxpayer must make a demand for refund.
... However, the taxing authority's detention
of the taxpayer's money is not improper until
there has been a decision to this effect.”. . .
We agree that there must be an improper
detention and that the taxpayer must make a
demand for refund. We disagree that in all
cases improper detention commences from
the date of a decision to that effect. Rather,
we believe that a court can decide that a tax-
ing body has improperly detained the tax-
payer's money from a point in time prior to
the determination that the detention is im-
proper... .
Here the taxpayer has asked that interest be
computed from the date of payment and de-
mand for refund. Courts in charging and
allowing interest need not limit themselves
by hard and fast rules but should charge and
allow interest in accordance with principles
of equity. . . . That the taxpayer's money was
improperly detained and demand for refund
made should be sufficient to justify a court's
exercise of its equity powers. Here, however,
the taxpayer paid the taxes promptly once
they were assessed; inflation had
deteriorated the value of the dollar that was
improperly detained by the City and School
District; and the City and School District,
never having any right to the money, were
able to borrow less or invest the money.
Since the City and School District benefited
from the use of the taxpayer’s money, it is on-
ly fair that the taxpayer receive simple in-
terest for the period the money was im-
= a
properly detained.
Moreover, if taxing authorities are authoriz-
ed to collect combined interest and penalties
on back taxes to their original due dates (at a
rate greater than the simple interest sought
here on a refund), we see no hardship in re-
quiring them to pay simple interest on
amounts improperly detained from the date
of payment and demand.
Page 20
297 A. 2d at 468469 (citations omitted; emphasis added),
The equitable principles enunciated in that case should be
applied in the case of Helen Ball.
In Byram v, Thurston County, 141 Wash. 28, 251 P. 103
(1926), upon reargument, 14] Wash. 28, 252 P. 943 (1927),
interest was allowed on real property taxes illegally assessed
and paid under protest. The court referred to an older case
which awarded interest but gave no reason for the award:
It is also contended that in any event the in-
terest allowed from the date of the payment
of the illegal tax under protest is improper,
citing authority from other jurisdictions to
the effect that interest is never allowed on i!
legal taxes sought to be recovered after pay-
ment. We seem to have settled this question
in this state in the case of Great Northern
Railway Co. v. Stevens County, 108 Wash.
238, 183 P, 65, where we gave directions to
enter judgment in favor of the company
against the county for the amount of the il-
legal tax, with legal interest from March 6,
1918, the date on which the railway com-
pany was compelled to, and did, pay an ex-
cessive and illegal tax.
After having examined and considered all
the questions raised in the case, we are con-
vinced that the judgment was right.
251 P. at 110. See also Doric Co. v. King County, 59 Wash.
2d 741, 370 P. 2d 254 (1962).
—
In Arizona, the principal decision is State Tax Commis-
sion v. United Verde Extension Mining Co., 39 Ariz. 136, 4
P. 2d 395 (1931), reh. denied, 39 Ariz. 331, 6 P. 2d 889
(1931). The court relied upon statutory authorization for
the award of interest but gave as its reason an equitable
argument:
Page 21 _
(I)n reason and logic, when the state compels
one of its citizens under the pain of forfeiting
all rights of recovery, to pay in advance of
suit a sum of money which it is afterwards
adjudged was illegally demanded, the same
principle of common justice would require
that the state, to make the citizen whole,
should repay not merely the sum illegally so
obtained, but interest from the date the
money was paid to it. Were this a case of a
small taxpayer, who, in order to maintain his
suit, was compelled to borrow money to pay
the illegal tax, it would be recognized at a
glance that full justice could only be done by
repaying to him, not only the sum so paid,
but interest thereon, and in principle no dif-
ference exists because the taxpayer in this
case happens to be a large corporation which
presumably had in its treasury the funds to
pay the tax.
4 P, 2d at 399. The reasoning of the United Verde case was
relied upon in Williams v. Harvey, 91 Mont. 168, 6 P. 2d
418 (1931), which was, however, also a case based primarily
on statute. See also Ford Motor Co. v. City of Detroit, 43
Mich. App. 248, 204 N.W. 2d 348 (1973).
In South Dakota, the leading case is Zimmerman v. Cor-
son County, 39 S.D. 167, 163 N.W. 711 (1917). The court
spoke of interest in the context of whether an injunction
should be issued, a disallowance of interest resulting in “no
adequate remedy at law.” It was held:
Respondent's suggestion that the remedy is
not adequate for the reason that the statute
cml:
does not in terms authorize a recovery of in-
terest is without merit. It cannot be doubted
that plaintiff should be entitled to interest
upon any sum wrongfully collected by the
County; nor can we agree with respondent's
suggestion that the enforced collection of a
tax, unlawful in whole or in part, may result
in irreparable
Page 22
injury such
as to entitle the plaintiff to a remedy by in-
junction.
163 N.W. at 713. Likewise in Chicago St. P. M. &. O. Ry.
v. Mundt, 56 S.D. 530, 229 N.W. 394 (1930), it was held:
It seems to us the fair, just and reasonable
rule that, when the sovereign submits itself
to suit, unless the statute expressly provides
to the contrary, it should come into court on
the same basis as to liability for interest and
costs, in the event of adverse decision, as any
other suitor, . .
. . .Conceding that sovereignty is not subject
to suit without its consent, and that a suit to
recover taxes paid may be deemed a suit
against the sovereign, nevertheless when the
sovereign consents to suit it ought not to be
given an unfair and arbitrary advantage
therein, beyond what is accorded to other
suitors similarly circumstanced, unless
necessity or the language of a statute so re-
quires, We think Zimmerman v. Corson
County announces a rule consonant with
justice and supported by many decisions,
and we are not now disposed to depart from
it merely because it was not treated at more
length when announced, or because there is
and has been some conflict in the decisions
relating to the point.
= =
229 N.W. at 395. See also Chicago and Northwestern Ry. v.
Schmidt, 85 S.D. 223, 180 N.W. 2d 233 (1970) (plaintiff en-
hecause Section 5107 and Section 5143 of the
Revenue and Taxation Code so authorize.
titled to interest but employed erroneous procedure). 3. There is inadequate and outdated California case
In Indiana, the court rejected contractual arguments in a law upon which to base a ruling for the specific facts
case involving taxes on the receipts of an insurance company to Helen Ball.
and relied on cases of the United States Supreme Court: 4. The County does collect interest for delinquent
(I)n actions to recover back money unlawful-
ly enacted in the name of the state by a
public officer, of which the state has had the
taxes; and it should pay for the use of improperly
collected taxes.
Page 24
possession and use, and of the use of which 5. The majority of State Courts and the Federal
the owner Courts, order reimbursement from date of payment,
Page 23 for use of tax money paid in response to an improper
has been assessment, and thereafter subsequently refunded.
deprived since it was so paid under compul- 6. Helen Ball, and all other taxpayers similarly
sion, a different rule has been applied. For
many years the Supreme Court of the United
States has uniformly held that “in suits
against collectors to recover moneys illegally
situated, are entitled to reimbursement for use of
their money paid and subsequently refunded.
WHEREFORE, Appellant, for herself and
all others similarly situated, prays:
exacted as taxes and paid under protest *** 1. That the Superior Court of Los Angeles County
interest is recoverable without any statute to ORDER DISMISSING COMPLAINT AND FOR
that effect, and this, although the judgment ENTRY OF SUMMARY JUDGMENT dated
is not to be paid by the collector but directly February 3, 1977 be vacated;
from the treasury.” Erskine v. Van Arsdale, 2. This Court determine that Los Angeles County does
15 Wall. (U.S.) 75, 77, 21 L.Ed. 63 (1872). have authority under California Revenue and Taxa-
The rule thus adopted is just and equitable tion Code to reimburse taxpayers for the use of their
and should be followed in the absence of any money;
positive law to the contrary. 3. This Court determine that Los Angeles County and
Metropolitan Life Insurance Co. v. State, 194 Ind. 657, 144 its taxpayers must abide the same rules and are en-
N.E. 420, 422 (1924) (citations omitted). titled to the same rights and privileges; if County
An older case, much cited, held under statutory authority charges and collectes interest for delinquent pay-
that interest should be paid from the date of demand. Boott ment of property taxes, then County must be called
Cotton Mills v. City of Lowell, 159 Mass. 383, 34 N.E. 367 upon to refund interest when it has use of taxpayers’
(1893). money due to an overpayment of tax, improper
assessment, or any other reason taxpayer has paid
CONCLUSION too much to Los
Page 25
1. It is the established law of this case that the County Angeles County;
has authority to pay interest on refunds. | 4. This Court ORDER Los Angeles County to reim-
2. The County has authority to pay interest on refunds burse taxpayer for the use of their money due to an
— —_
overpayment of tax, an improper assessment, or for
any other reason taxpayer has paid too much to Los
Angeles County, that said reimbursement be com-
pounded annually from the date claims for refunds
accrued to date of payment, and thereafter interest
on the interest which had not been paid;
5. This class action be returned to the Los Angeles
Superior Court for completion of trial;
6. For such other relief and further order as this Court
deems appropriate.
Dated: November 23, 1977.
Respectfully submitted.
VOLNEY F. MORIN &
VOLNEY F. MORIN, JR.
By /s/ Volney F. Morin, Jr.
VOLNEY F. MORIN, JR.,
Attorneys for Plaintiffs and
Appellants
=
APPENDIX F
2nd Civil No.
52206
IN THE SUPREME COURT
OF THE STATE OF CALIFORNIA
HELEN BALL, etc.,
Plaintiff and Appellant,
COUNTY OF LOS ANGELES,
)
)
)
Vs. . )
)
)
Defendant and Respondent. )
PETITION FOR HEARING
TO THE HONORABLE ROSE ELIZABETH BIRD,
CHIEF JUSTICE, AND TC THE HONORABLE
ASSOCIATE JUSTICES OF THE STATE OF CALIFOR-
NIA:
Appellant, Helen Ball, for herself and for all others
similarly situated, hereby petitions for a hearing to consider
the decision of the Court of Appeal of the State of Califor-
nia, Second Appellate District, Division 3, filed in this ac-
tion on June 29, 1978, affirming a summary judgment
entered in the Superior Court in favor of the County of Los
Angeles (County) on her complaint alleging that she is en-
titled to recover interest on property taxes vol uitarily
refunded to her by the County. Two trial court rulings prior
to the Summary Judgment—
Page 2
overruling demurrers
raising the same issue raised by the County’s Motion For
Summary Judgment, were in favor of Appellant. A copy of
_
the decision of the Court of Appeal showing the date of its
filing is set forth herein as Appendix “A”.
Hearing by this Court is necessary to settle an important
issue of law. Until Appellant raised the present issue,
California courts had not decided a case involving interest
on refunds of property taxes under its modern tax code.
Because such a case has not been decided, it is timely for this
Court to make its decision.
Helen Ball, for herself and for all others similarly
situated, asks this Court to determine that:
1. County does have authority under the California
Revenue and Taxation Code to reimburse taxpayers for the
use of their money;
2. Assuming County does not have express authority
under California Revenue and Taxation Code, such
authority exists, as a matter of United States Constitutional
right and under theory of implied contract;
3. Under either authority this Court should order the
County to reimburse (pay interest to) taxpayers for the use
of their money, said reimbursement to be compounded an-
nually from the date claims for refunds accrued to date of
refund of tax, and thereafter pay interest on the interest un-
til paid;
4. This class action be returned to Los Angeles Superior
Court for completion of trial.
Page 3
STATEMENT OF SUBSTANTIVE FACTS
Helen Ball owns real property which she leased to the Ci-
ty of Los Angeles as a library materials depository between
1971 and 1974. She received erroneous tax bills from Coun-
ty and paid taxes on the property in each of the three years.
Helen Ball subsequently discovered the tax bills were sent
erroneously as said property was exempt from taxation
under Revenue & Taxation Code Section 202, Subdivision
(b) (now Rev. & Tax. Code, Section 202(a)(2));
Application for exemption from property taxes was filed
— =
on April 10, 1974 and processed and verified by the County
between April and July of 1974. Helen Ball requested a re-
fund of taxes erroneously collected and paid, plus interest.
The County refunded to Helen Ball the taxes paid without
dispute, however, it refused to reimburse her interest for the
use of her money.
In its opinion, the Court of Appeal below stated:
“The question presented by this appeal is
whether a taxpayer is entitled to recover in-
terest on tax payments erroneously collected
by the County on exempt property when the
County promptly refunds the erroneous pay-
ments upon being put on notice of its error.”
(Emphasis added)
It is submitted that the question posed by the Court below is
incorrect. While it is true the tax payments were erroneous-
ly collected, the payments by the taxpayer were not er-
roneous. A taxpayer must be able to pay statements for taxes
in good faith, upon the expectation that if the statement is
incorrect,
Page 4
then the payment
made therefor will not only be refunded, but will be refund-
ed with interest. It matters not that the refund is prompt or
imprompt. The sole point is that the use of money requires
payment for the use of money.
Again, in its opinion filed on June 29, 1978, at page 13,
the Court below continued on with its view as to promp-
tness, saying:
“Ball is denied interest on her tax refund
under such a plan because she received her
refund shortly after she presented her ap-
plication for exemption to the County —
shortly after the County had been given
notice that these taxes had been erroneously
collected from her.” (Emphasis added)
Here again, the fact that the refund: was received “short-
ly” is of no moment. The point, as with promptness, is that
whether the refund was received shortly or promptly, after
en ae
the taxpayer presented her application, she should have
been paid for the use of her money.
STATEMENT OF PROCEDURAL FACTS
Appellant commenced this action in Los Angeles
Municipal Court on May 12, 1975. County demurred on
grounds it lacked authority to pay interest; the demurrer
was overruled and the County did not appeal. The
Honorable Robert Fainer (now Superior Court Judge)
presiding, stated:
“The demurrer of the defendant, County of
Los Angeles, to the complaint is overruled.
The County of Los Angeles has the authority
to refund “taxes” and the term “taxes” as us-
ed in Revenue and Taxation Code Sections
5107 and 5143 includes
Page 5
penalties,
interest and costs. This is not an action to
determine the legality of any tax, but is an
action to recover the balance of taxes due
after a refund, to wit, the interest thereon.”
On November 10, 1975 a Second Amended Complaint
was filed commencing this class action and was subsequent-
ly transferred to Los Angeles Superior Court. County again
demurred. In his ruling, Honorable Charles H. Phillips sup-
ported Judge Fainer’s opinion and denied County's demur-
rer,
Upon the suggestion of Honorable Campbell M. Lucas,
made to counsel for both parties, in order that legal issues
could be ruled upon without first trying the factual issues
which seemed not to be in dispute, and in order that the
legal issues presented herein could expeditiously proceed
thereafter to this Honorable Court, County filed its Motion
for Summary Judgment. Said Motion was granted by
Honorable Campbell M. Lucas and entered in favor of
County.
ai)
Helen Ball appealed. Judgment for County was affirmed
by the Court of Appeal and filed on June 29, 1978.
ISSUES PRESENTED
I
CALIFORNIA REVENUE AND TAXATION
CODE PROVIDES AUTHORITY FOR COUN-
TY TO PAY INTEREST
Petitioner believes that the Court of Appeal has misinter-
preted the provisions of the Revenue and Taxation Code
Page 6
which authorizes County to pay accrued interest on tax
refunds.
Appellant contends that the Code does provide for the re-
fund of interest under Sections 5107 and 5143.
In its ruling, the Court of Appeal stated:
“A cardinal rule of statutory interpretation is
that code sections are not to be read in isola-
tion but construed in context.”
Appellant fully agrees. However she disagrees with the
Court's contention that when read in context these sections
do not define tax as including interest on the return of funds
collected from taxpayer.
It is submitted that Civil Code Section 1915 provides the
underlying basis for interest; Revenue and Taxation Code
Sections 5107 and 5143 authorize County to pay interest on
taxes which were improperly assessed, and thereafter paid,
with or without protest.
It is the position of Helen Ball that the meaning of Section
5107 and in haec verba Section 5143 ("4s used in this Arti-
cle, ‘tax’ or ‘taxes’ includes penalties, interest, and costs.”),
is clear from a plain reading.
The Municipal Court and the Superior Court had no
trouble determining the meaning of these sections. The
Honorable Robert Fainer (with the Honorable Charles H.
ae a
Phillips later concurring) held that: “The County of Los
Angeles has the authority to refund ‘taxes’ and the term
‘taxes’ as used in Revenue and Taxation Code Section 5107
and Section 4143 includes penalties, interest, and costs.”
Page 7
Revenve and Taxation Code Section 5105 states:
“Recovery of interest.
“In any action in which the recovery of taxes
is allowed by the court, the plaintiff is enti-
tled to interest on the taxes for which
recovery is allowed at a rate per centum per
annum equal to the rate per centum per an-
num that the defendant has _ received,
through investment or by bank deposit, on
the amount allowed and recovered as taxes
from the date of the filing of the claim for re-
fund to the date of entry of judgment, and
such accrued interest shall be included in the
judgment. This section shall not apply to
taxes paid before the effective date of this
act. (Added Stats 1941 ch 664 Section 10;
Amended Stats 1961 ch 2151 Section 1.)”
In commenting on this section in footnote 8 on page 11 of
its decision, the Court of Appeal concluded that the section
was inapplicable because it entitled the taxpayer to interest
only on a refund obtained by a court order, and that™ho
resort to court action was required so that the taxpayer
might recover her refund. It is submitted this is erroneous
for the reason that it is a narrow construction contrary to
established principle that taxpayers should be compelled to
resort to formal litigation in order to obtain interest when,
in point of fact, they should always obtain interest on
money erroneously collected. To encourage taxpayers to
engage in litigation is clearly contrary to public policy.
Section 5105 is applicable for the reason that the instant
case is an action for the recovery of “taxes” as defined in Sec-
tion 5107.
Section 5105 deserves still closer consideration, having in
mind that it comes under Chapter 5, Refunds, and Article
ones
1, Refunds Generally, and was enacted in 1941. Clearly the
legislature was attempting to fill the void which would oc-
cur if a taxpayer obtained a judgment for recovery and was
left to
Page 8
receive interest only
from the date of judgment, as is the usual case. Here, the
legislature seeking to redress that possible wrong, said the
plaintiff would recover interest “. . . on the amount allowed
and recovered as taxes from the date of filing of the claim
for refund to the date of entry of judgment, .. . “
Revenue and Taxation Code Section 5108 was added in
1970 and is thus the most recent. It states:
“Interest at the rate of 6 per cent per annum
shall be paid, when such interest is ten
dollars ($10) or more, on amounts refunded .
. as a result of the reduction of assessed
value following an application for equaliza-
tion by a board of equalization or by a court
action to recover taxes. . . . “Interest allowed
under this section shall be computed .. .
from the date of the payment of the tax on
property subject to an application for equali-
zation of the assessed value thereof to the
date of the determination of the equalized
value of the property; provided, however,
that no interest shall be paid under the provi-
sions of this section if such period of time is
30 days or less.” (Emphasis added)
Section 5108 is helpful in the case of Helen Ball because it
points to a liberalization of statutory law in the area of in-
terest on refunds which this court should follow.
II
CALIFORNIA REVENUE AND TAXATION
CODE AUTHORITY IS NOT NECESSARY TO
REQUIRE COUNTY TO PAY INTEREST
Assuming that the Court of Appeal has correctly inter-
preted Revenue and Taxation Code Sections 5107 and 5143,
it is still the contention of Appellant that she is entitled to
recover interest
Page 9
from County even
absent such a provision by statute on the following grounds:
1. As a matter of constitutional right, the Appellant is
entitled to the same protection and the same provisions as
the taxing authority; and
2. Asa matter of equity it is not fair for County to be
able to demand interest on delinquent taxes and not pay in-
terest on improperly collected taxes.
3. Under the theory of implied contract, Helen Ball is
entitled to interest on her refund.
The Court of Appeal at page 5 recognized “In some
jurisdictions it is held that there is an implied contract be-
tween the state and the taxpayer that the state will be liable
for interest for the period of time it has the use of the tax-
payer's money. Therefore these jurisdictions have adopted
the rule that a state or municipal corporation which must
refund all or part of a tax which has been paid is liable for
interest on the refund even in the absence of a statute which
specifically authorizes payment of interest. (Annot., Right
to Interest on Tax Refund or Credit in Absence of Specific
Controlling Statute (1963) 88 A.L.R. 2d 823, 825827, Sec-
tion 2, and cases cited.)”
Appellant supports this rationale for recovery and
believes that California should adopt this basis for refund
without statutory authority.
Page 10
Ill
TAXPAYERS ARE ENTITLED TO EQUAL
PROTECTION UNDER THE LAW
This Appeal is advanced, in part, upon the premise that
all parties before a court of law are entitled to equal treat-
tin
ment under the law. The Fourteenth Amendment to the
United States Constitution provides:
“All persons born or naturalized in the
United States, and subject to the jurisdiction
thereof, are citizens of the United States and
of the State wherein they reside. No State
shall make or enforce any law which shall
abridge the privileges or immunities of
citizens of the United States; nor shall any
State deprive any person of life, liberty, or
property, without due process of law; nor
deny to any person within its jurisdiction the
equal protection of the laws.”
A California County and an elderly widow must abide by
the same rules and are entitled to the same rights and
privileges. Upon issuance of a tax bill from the County, if a
citizen fails to make payment, whether by mistake, in-
advertence or neglect, the County has the authority to, and
does, charge interest on the amount due. Under equal pro-
tection it is therefore only proper that if the County collects
taxes by mistake, inadvertence or neglect, it must pay in-
terest on the amount erroneously collected.
Helen Ball advances for herself, and for all other tax-
payers similarly situated, the proposition that equal protec-
tion of the laws means that if a county charges and collects
money (interest) for delinquent payment of property taxes,
then, equally, County must refund money (interest) when it
has use of taxpayers’ money due
Page 11
to an overpayment of tax,
The Honorable Learned Hand declared in Proctor &
Gamble Distributing Co. v. Sherman, 2 F. 2d 165, 166
(D.C.N.Y. 1924):
“. . . it is not an adequate remedy, after tak-
ing away a man’s money as a condition of
allowing him to contest his tax, merely to
hand it back, when, no matter how long
after, he established that he ought never to
have been required to pay at all. Whatever
=
may have been our archaic notions about in-
terest, in modern financial communities a
dollar today is worth more than a dollar next
year, and to ignore the interval as im-
material is to contradict well-settled beliefs
about value, and, if I get not compensation
for its loss, my remedy does not altogether
right my wrong.”
The facts herein are not in dispute. Helen Ball does not
claim for herself, or any other taxpayer, that a penalty
should be assessed against County for any willful or im-
proper conduct.
Instead, her claim is based upon the argument that Civil
Code Section 1915 provides the underlying basis for in-
terest. Revenue and Taxation Code Section 5107 and Sec-
tion 5143' authorize the County to pay interest on taxes
which were improperly assessed, and thereafter paid, with
or without protest. Even assuming that statutory authority
does not exist, Helen Ball's claim would rest upon the con-
stitutional premise of equal treatment under the law as
specified in the Fourteenth Amendment and under the
theory of implied contract. This Court should order County
to do that which it is unwilling to do — treat the taxpayer in
the same way it demands to be treated.
Page 12
IV
UNITED STATES SUPREME COURT AND
FEDERAL COURT CASE LAW SUPPORT AP-
PELLANT’S POSITION
The United States Supreme Court has recognized for over
100 years that: “Where an illegal tax has been collected, the
citizen who has paid it, and has been obliged to bring suit
'In this petition all references to California Revenue and Taxation Code
are to sections in effect at the time the application for, and receipt of, re-
fund in 1974, although many Sections have been subsequently amended.
me
against the collector, is, we think, entitled to interest in the
event of recovery, from the time of the illegal exaction.” Er-
skine v. Van Arsdale, 15 Wall. (U.S.) 75, 77 (1862), See
also: Redfield v. Bartels, 139 U.S. 694, 11 Sup. Ct. 683, 35
L.Ed. 310 (1891); National Home v. Parrish, 229 U.S. 494,
33 Sup. Ct. 944, 57 L.Ed. 1296 (1913); Billings v. United
States, 232 U.S. 261, 286, 34 Sup. Ct. 421, 58 L.Ed. 596
(1914); State, etc., Co. v. Davis (D.C.,), 228 Fed. 246, 250
(1915); Haiku Sugar Co. v. Johnstone, 249 Fed. 103, 109,
161 C.C.A,. 155 (1918); International Paper Co. v. Burrill
(D.C.), 260 Fed. 664, 667 (1919).
In International Paper Co. v. Burrill, supra, at page 669,
the Court held: “As the money was wrongfully obtained by
the defendant through implied duress, and as it is no
defense that the defendant has paid the money into the
treasury of the commonwealth, there must be judgment for
the plaintiff for the amount of the tax, with interest thereon
from the date of payment, May 22, 1916.”
Modernly, the “adequacy of remedy at law” issue was
raised in Mullaney v. Hess, 189 F, 2d 417 (9th Cir. 1951).
Page 13
Applying Alaska law, the court stated;
“We think that the weight of authority is
that interest is recoverable on tax refunds in
absence of express statutory authority
therefor. The reasoning of these cases is in
harmony with the modern view they
express,”
Id. at 420.
~ In 1957 in Ketchikan Spruce Mills v. Kewey, 17 Alaska
336 (1957), the United States District Court for Alaska also
permitted recovery of interest under a territorial statute
which provided for refund of taxes but made no mention of
interest.
Vv
APPELLANT ACTED AS A LAW ABIDING
CITIZEN AND NOT MISTAKENLY
Appellant, Helen Ball’s payment of property taxes did not
occur as a mutual mistake between her and County, as sug-
gested in the Court of Appeal’s decision.
Appellant, Helen Ball, acted as any law abiding citizen
would ordinarily act upon receipt of a property tax bill from
an authorized taxing authority. She paid the bill. If law
abiding citizens do not promptly pay bills, the result would
be confusion, late tax payments, and possible collapse of
local governments.
Therefore, Helen Ball was not mistaken, but paid in good
faith, a bill from County.
Page 14
VI
CALIFORNIA CASES DO NOT PROVIDE
CURRENT LAW PERTAINING TO INTEREST
ON TAX REFUNDS
There is no current California case law that deals with
the question of whether a taxpayer is entitled to interest on
property tax refunds.
VII
OTHER STATES CASE LAW FURTHER SUP-
PORTS PETITIONER’S POSITION
Of all the states, Pennsylvania has the most thoroughly
developed case law on the question of interest on refunds of
real property taxes. There has, moreover, been an evalua-
tion of principles in that state which will be illuminating in
the case of Helen Ball.
The underlying principles were enunciated in the leading
and often cited case of Philadelphia and Reading Coal and
Iron Co. v. School District of Borough of Tamaqua, 304 Pa.
489, 156 A. 75 (1931). Plaintiff won a judgment that real
property taxes for the benefit of the school district had been
improperly assessed. The court held:
— we
“One further question raised in argument re-
mains to be determined, whether or not
plaintiff is entitled to interest on the amount
paid in excess of the proper levy. The judg-
ment as it now stands is for the total excess
payment, $8,547.75, with interest at 6 per
cent, from September 21, 1923, the date of
payment by plaintiff, the whole amounting
to $12,137.80. The precise point
Page 15
does not
appear to have been.raised before in this
court, and we are thus free to deal with it
unhampered by precedent. It is unnecessary
to review the wealth of conflicting
authorities in other jurisdictions. . . . The
weight of authority appears to be that,
where the taxpayer is entitled to a refund on
an excess payment of taxes, whether such
right accrues by virtue of statute or not, the
taxpayer is entitled to interest on the refund
if no statute or public policy militates against
it. Such is the law in the United States courts
. . . as well as several other states. . . . With
this view we agree.”
156 A. at 77 (citations omitted).
In Cities Service Oil Co. v. City of Pittsburgh, 449 Pa.
481, 297 A. 2d 466 (1972), the court discussed the various
rules in a context of mercantile license taxes paid for the
benefit of a school district. The court’s decision appears to
be equally applicable to real estate taxes, especially since the
whole line of decisions originated with Tamaqua. It was
held, in broad and useful language:
“If a taxpayer is entitled to a tax refund, he is
also entitled to interest on the refund so long
as no statute or public policy militates
against it, . . . The commonwealth Court, in
determining the date from which to compute
the interest due Cities Service, stated, ‘. . .
lies:
before interest will accrue there must be an
improper detention by the taxing authority;
and the taxpayer must make a demand for
refund. . . . However, the taxing authority’s
detention of the taxpayer’s money is not im-
proper until there has been a decision to this
effect.’ ... .
“We agree that there must be an improper
detention and that the taxpayer must make a
demand for refund. We disagree that in all
cases improper detention commences from
the date of a decision to that effect. Rather,
we believe that a court can decide that a tax-
ing body has improperly detained the tax-
payer's money from a point in time prior to
the determination that the detention is im-
proper... .
Page 16
“Here the taxpayer has asked that interest be
computed from the date of payment and de-
mand for refund. Courts in charging and
allowing interest need not limit themselves
by hard and fast rules but should charge and
allow interest in accordance with principles
of equity .. . . That the taxpayer’s money
was improperly detained and demand for re-
fund made should be sufficient to justify a
court’s exercise of its equity powers. Here,
however, the taxpayer paid the taxes
promptly once they were assessed; inflation
had deteriorated the value of the dollar that
was improperly detained by the City and
School District; and the City and School
District, never having any right to the
money, were able to borrow less or invest the
money. Since the City and School District
benefited from the use of the taxpayer's
money, it is only fair that the taxpayer
— on
receive simple interest for the period the
money was improperly detained.
“Moreover, if taxing authorities are
authorized to collect combined interest and
penalties on back taxes to their original due
dates (at a rate greater than the simple in-
terest sought here on a refund), we see no
hardship in requiring them to pay simple in-
terest on amounts improperly detained from
the date of payment and demand.
297 A. 2d at 468-469 (citations omitted; emphasis added).
The equitable principles enunciated in that case should be
applied in the case of Helen Ball.
In Bryam v. Thurston County, 141 Wash. 28, 251 P. 103
(1926), upon reargument, 141 Wash. 28, 252 P. 943 (1927),
interest was allowed on real property taxes illegally assessed
and paid under protest. The court referred to an older case
which awarded interest but gave no reason for the award:
“It is also contended that in any event the in-
terest allowed from the date of the payment
of the illegal tax under protest is improper,
citing authority from other jurisdictions to
the effect that interest is never allowed on il-
legal taxes sought to be recovered after pay-
ment. We seem to have settled this question
in this state in the case of Great Northern
Railway
Page 17
Co. v. Stevens
County, 108 Wash. 238, 183 P. 65, where we
gave directions to enter judgment in favor of
the company against the County for the
amount of the illegal tax, with legal interest
from March 6, 1918, the date on which the
railway company was‘compelled to, and did,
pay an excessive and illegal tax.
“After having examined and considered all
the questions raised in the case, we are con-
vinced that the judgment was right.”
—_— =
251 P. at 110. See also Dorig Co. v. King County, 59
Wash. 2d 741, 370 P. 2d 254 (1962).
In Arizona, the principal decision is State Tax Commis-
sion v. United Verde Extension Mining Co., 39 Ariz. 136, 4
P. 2d 395 (1931), reh. denied, 39 Ariz. 331, 6 P. 889 (1931).
The Court relied upon statutory authorization for the
award of interest but gave as its reason an equitable argu-
ment:
(I)n reason and logic, when the state compels
one of its citizens under the pain of forfeiting
all rights of recovery, to pay in advance of
suit a sum of money which it is afterwards
adjudged was illegally demanded, the same
principle of common justice would require
that the state, to make the citizen whole,
should repay not merely the sum illegally so
obtained, but interest from the date the
money was paid to it. Were this a case of a
small taxpayer, who, in order to maintain his
suit, was compelled to borrow money to pay
the illegal tax, it would be recognized at a
glance that full justice could only be done by
repaying to him, not only the sum so paid,
but interest thereon, and in principle no dif-
ference exists because the taxpayer in this
case happens to be a large corporation which
pr
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