Opinion
B317586
07-13-2023
LITCHFIELD CAPITAL, LLC, Cross-complainant and Appellant, v. COUNTY OF LOS ANGELES, Cross-defendant and Respondent; THE PEOPLE ex rel. DEPARTMENT OF TRANSPORTATION, Respondent.
Garrett &Tully, Ryan C. Squire, Scott B. Mahler, and Heather A. McConnell, for Cross-complainant and Appellant. Nossaman, Lloyd W. Pellman, Brendan Macaulay, Jennifer L. Meeker, and Raven McGuane, for Cross-defendant and Respondent County of Los Angeles. Erin E. Holbrook, Chief Counsel, Jerald M. Montoya, Deputy Chief Counsel, and Tucker Wisdom-Stack, for Respondent the People ex rel. Department of Transportation.
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, No. BC668604, Monica Bachner, Judge. Reversed and remanded.
Garrett &Tully, Ryan C. Squire, Scott B. Mahler, and Heather A. McConnell, for Cross-complainant and Appellant.
Nossaman, Lloyd W. Pellman, Brendan Macaulay, Jennifer L. Meeker, and Raven McGuane, for Cross-defendant and Respondent County of Los Angeles.
Erin E. Holbrook, Chief Counsel, Jerald M. Montoya, Deputy Chief Counsel, and Tucker Wisdom-Stack, for Respondent the People ex rel. Department of Transportation.
EDMON, P.J.
Litchfield Capital, LLC (Litchfield) appeals from a judgment of dismissal in favor of the County of Los Angeles (County) on Litchfield's second amended cross-complaint. The trial court entered judgment after granting the County's motion for judgment on the pleadings and later sustaining its demurrer to Litchfield's second amended cross-complaint.
According to Litchfield's cross-complaint, the County sold a parcel of property in 1968 to satisfy unpaid bond assessments. That property continued to change owners until Litchfield purchased it in 2012. Five years later, the State of California filed a quiet title action against Litchfield and others, asserting that the property belonged to the State and that the County never had a right to sell it in the first place. Litchfield, in turn, filed a cross-complaint against the State and County seeking to quiet title to the property in its favor, and alleging that, in the event title was quieted in favor of the State, it would be entitled to compensation for the taking of its property.
The trial court granted judgment on the pleadings in favor of the County on Litchfield's quiet title claim, concluding that the County, which disclaimed any interest in the property, had no adverse claim against the property. The court also rejected Litchfield's contention that the County was a necessary party to the proceedings based on its former bond assessments on the property.
The court further determined that Litchfield's takings claim against the County failed because the County had not taken the property. But the court granted Litchfield leave to amend its cross-complaint to allege a cause of action against the County for compensation under the Revenue and Taxation Code.
All subsequent undesignated statutory references are to the Revenue and Taxation Code.
Litchfield filed a first amended cross-complaint alleging that it was entitled to relief against the County under provisions of the Revenue and Taxation Code relating to tax sales of real property. The trial court sustained the County's demurrer to the first amended cross-complaint, concluding that Litchfield failed to adequately allege that the sale of the property was a tax sale within the meaning of the relevant statutes. This time, the court granted Litchfield leave to amend its cross-complaint to allege common law causes of action against the County for a refund of property taxes.
Litchfield then filed a second amended cross-complaint seeking a property tax refund from the County based on unjust enrichment and related common law causes of action. According to Litchfield, if the State owned the property, then the County had no right to collect property taxes from Litchfield. The trial court sustained the County's demurrer to the second amended cross-complaint without leave to amend, concluding that Litchfield failed to allege facts sufficient to support its common law claims. The trial court then entered a judgment of dismissal in favor of the County on Litchfield's cross-complaint.
On appeal, Litchfield contends that the County was a necessary party to the action and that the court erred by dismissing it. Litchfield further argues that its second amended cross-complaint stated viable common law causes of action against the County for a property tax refund.
We reject these arguments. The County was not a necessary party to either the State's or Litchfield's quiet title actions because the County had no adverse claim against the property. Furthermore, Litchfield may not pursue common law causes of action against the County for a property tax refund because its exclusive remedy is statutory. However, because there is a reasonable possibility Litchfield can state a claim for a property tax refund against the County pursuant to the Revenue and Taxation Code, we reverse and remand this matter to the trial court for further proceedings.
FACTUAL AND PROCEDURAL BACKGROUND
I. The Malibu property
Because this is an appeal from orders granting judgment on the pleadings and sustaining a demurrer, we accept as true all material facts properly pleaded. (Burd v. Barkley Court Reporters, Inc. (2017) 17 Cal.App.5th 1037, 1042 [" 'The standard of review for a motion for judgment on the pleadings is the same as that for a general demurrer: We treat the pleadings as admitting all of the material facts properly pleaded' "].)
This case concerns a dispute over real property located in Malibu (hereinafter, "the Property"). In 1965, the County issued a street improvement bond pursuant to the Improvement Act of 1911 (Sts. &Hy. Code, § 5000 et seq.), which created an assessment lien on the Property. More than two years later, the assessments remained unpaid.
In 1968, the County issued a Certificate of Sale of the Property to Richard Segerblom. The Certificate of Sale recited that the consideration paid was the amount of the unpaid assessments on the bond, and provided that the Property would be conveyed to Segerblom upon satisfaction of certain conditions. In 1970, the County issued a Treasurer's Deed to Segerblom, who had satisfied the conditions of the Certificate of Sale. The Treasurer's Deed was recorded later that year.
Since then, the Property changed ownership many times. In 2012, title to the Property vested with Litchfield, which has since then paid over $1.2 million in property taxes, penalties, and interest to the County in connection with the Property.
II. The State's quiet title action and Litchfield's crosscomplaint
In 2017, the State filed a quiet title action against Litchfield and others, asserting that it was the fee simple owner of the Property. According to the State's amended complaint, it owned the Property at the time of the County's 1965 assessments. The State further alleged that the County was not authorized under the Improvement Act of 1911 to enforce the assessments against the State. Thus, the State alleged that the County's sale of the Property based on the unpaid assessments was invalid. The State did not name the County as a defendant in its action.
Litchfield filed a verified cross-complaint against the State and the County alleging causes of action for quiet title, injunctive relief, taking of the Property, and breach of contract. Litchfield sought, among other things, an order quieting title in its favor and, in the event title to the Property was quieted in favor of the State, $20 million as compensation for the taking of the Property.
A. The County's motion for judgment on the pleadings
The County answered Litchfield's cross-complaint, admitting that the 1968 sale of the Property to Segerblom was valid and that Litchfield had succeeded to the title of Segerblom.
After answering the cross-complaint, the County filed a motion for judgment on the pleadings. Concerning Litchfield's quiet title cause of action, the County contended that Litchfield failed to identify any adverse claim to the Property by the County. On the contrary, the County emphasized that it disclaimed any interest in the Property and admitted in its answer to Litchfield's cross-complaint that Litchfield was the successor to Segerblom's title.
Regarding Litchfield's takings claim, the County argued that Litchfield failed to allege that the County had taken the Property. Rather, according to Litchfield's cross-complaint, the State, if successful in its quiet title action, would take the Property without paying fair market value.
The County also contended it was immune from liability pursuant to Government Code section 860.2, which provides that a public entity is not liable for "an injury" caused by "[i]nstituting any judicial or administrative proceeding or action for or incidental to the assessment or collection of a tax," or an "act or omission in the interpretation or application of any law relating to a tax."
Also, the County argued that Litchfield's claims were time-barred.
In opposition, Litchfield argued that the County was a necessary and indispensable party to the action because the dispute over title to the Property arose from the County's former assessment lien.
Additionally, Litchfield argued that its takings claim was directed at both the State and the County, and that it would be entitled to compensation from both parties in the event the State prevailed in its quiet title action. Citing sections of the Revenue and Taxation Code providing for purchase price and property tax refunds in the event a tax sale is determined to be void (see §§ 3728, 3729, 3731), Litchfield further contended that if the State prevailed in its action, Litchfield would be entitled to a refund of the purchase price and property taxes from the County.
Last, Litchfield disputed that the County was immune under Government Code section 860.2 or that Litchfield's claims were time-barred.
The trial court granted the County's motion. Regarding Litchfield's quiet title cause of action, the court agreed with the County that Litchfield failed to allege that the County claimed any present interest in the Property. The court also rejected Litchfield's argument that the County's former bond assessment lien on the Property made the County a necessary and indispensable party to the action. Finding that Litchfield failed to present any grounds for amending its quiet title cause of action against the County, the court dismissed the County from Litchfield's quiet title cause of action without leave to amend.
The court also agreed that Litchfield failed to state a takings claim against the County, but permitted Litchfield leave to amend its cross-complaint to allege a statutory refund cause of action against the County under the Revenue and Taxation Code.
Concerning Litchfield's injunctive relief and breach of contract causes of action, the trial court granted the County's motion for judgment on the pleadings without leave to amend. It did not rule on the County's immunity or statute of limitations arguments.
B. The County's demurrers
i. Litchfield's first amended cross-complaint
Litchfield filed a verified first amended cross-complaint. It asserted causes of action against the County for taking of the Property and declaratory relief, alleging that in the event the court quieted title to the Property in favor of the State, Litchfield was entitled to damages. Litchfield claimed that it was entitled to damages from the County pursuant to "sections 3728, 3729, and 3731, and any other applicable statutes and laws."
The County demurred to the first amended cross-complaint. Among other things, it contended that sections 3728, 3729, and 3731 applied only to a tax sale, and that the County's sale of the Property was a bond foreclosure, not a tax sale.
Litchfield's opposition argued that the County was estopped from denying its sale of the Property was a tax sale based on the County's earlier reliance on Government Code section 860.2. Litchfield further argued that the sale of the Property pursuant to the Improvement Act of 1911 was based on the County's taxing power, and thus constituted a tax sale.
The trial court agreed with the County that sections 3728, 3729, and 3731 were inapplicable and sustained its demurrer to the takings and declaratory relief causes of action. Because Litchfield requested leave to amend to allege unjust enrichment and common counts, the court granted Litchfield further leave to amend.
ii. Litchfield's second amended crosscomplaint
Litchfield filed a verified second amended cross-complaint. It again asserted takings and declaratory relief claims against the County. Litchfield alleged that in the event the court quieted title to the Property in favor of the State, the County would be unjustly enriched in the amount of the property taxes paid by Litchfield in connection with the Property. It further asserted that it was entitled to just compensation "based on multiple grounds, including but [not] limited to restitution, common counts, money had and received, and unjust enrichment."
The County filed another demurrer. Its demurrer relied on several grounds, including that Litchfield failed to plead the essential elements for restitution, common counts, money had and received, and unjust enrichment; that the County was not liable to Litchfield for "just compensation," which would apply, if at all, only to the State; that "restitution" and "unjust enrichment" were not standalone causes of action; and that Litchfield's entitlement to a tax refund was governed by section 5096 and related provisions, and those provisions barred relief because, among other reasons, Litchfield failed to file an administrative claim for a refund prior to bringing its action against the County.
In its opposition to the demurrer, Litchfield emphasized the allegation that it paid more than $1.2 million in property taxes to the County since 2012 in connection with the Property. That sufficed, according to Litchfield, to support both its takings and declaratory relief causes of action in the event the court determined that the State had superior title to the Property.
The trial court sustained the County's demurrer without leave to amend. The court assumed unjust enrichment was a standalone cause of action, but concluded that Litchfield failed to allege that the County had been unjustly enriched by Litchfield's property tax payments. The court stressed that Litchfield held title to the Property and had made improvements to it, notwithstanding the State's adverse claim to the Property. The court also concluded that Litchfield failed to state a cause of action for money had and received because Litchfield did not allege that its tax payments to the County were to be used for Litchfield's benefit. Concerning restitution, the court concluded it was not a standalone cause of action. The court thus dismissed Litchfield's takings claim without leave to amend.
The court also determined that Litchfield's cause of action against the County for declaratory relief was based on the same underlying allegations and theories of recovery as its takings claim. Because Litchfield failed to sufficiently allege a takings claim, the court ruled that Litchfield's declaratory relief claim failed too. The court thus also dismissed Litchfield's cause of action for declaratory relief without leave to amend.
The court thereafter entered judgment of dismissal in favor of the County on Litchfield's cross-complaint. Litchfield timely appealed.
The State also demurred to Litchfield's second amended cross-complaint. The trial court sustained the State's demurrer to Litchfield's takings and injunctive relief claims, but allowed Litchfield leave to amend its injunctive relief claim. The State and County inform us that Litchfield did not amend its cause of action for injunctive relief. Litchfield dismissed its cause of action for quiet title against the State prior to trial, leaving only the State's quiet title claim at issue.
C. Post appeal proceedings
Following a bench trial on the State's quiet title action, the trial court issued a decision quieting title to the Property in favor of the State. The court concluded that the County's original bond assessment was not enforceable against the State pursuant to the provisions of the Improvement Act of 1911, and that the County therefore lacked authority to sell the Property.
Litchfield filed a notice of appeal from the judgment quieting title to the Property in favor of the State. That appeal is pending before this court.
DISCUSSION
Litchfield contends that the County was a necessary and indispensable party both in the State's quiet title action and in its cross-action against the State and County, and that the trial court therefore erred by dismissing the County. Litchfield further argues that it stated claims against the County for declaratory relief, just compensation for the taking of property, unjust enrichment, money had and received, and "common counts," and that the trial court thus erred in dismissing its second amended cross-complaint against the County without leave to amend.
We address each contention in turn.
The State has filed a brief in this appeal contending that Litchfield mistakenly named it as a respondent. The State takes no position on the merits of Litchfield's appeal, and notes that Litchfield's appeal does not seek any relief against the State. For these reasons, the State requests that it be excluded from any award of costs. We do not award costs in this appeal, so the State's request is moot.
I. Compulsory joinder
A. Applicable law and standard of review
Compulsory joinder is governed by Code of Civil Procedure section 389. (Bianka M. v. Superior Court (2018) 5 Cal.5th 1004, 1016.) Subdivision (a) provides as follows: "A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest. If he has not been so joined, the court shall order that he be made a party." (Code Civ. Proc., § 389, subd. (a).)
Where such a person-sometimes called a "necessary" party-cannot be joined, "subdivision (b) requires the court to consider 'whether in equity and good conscience' the suit can proceed without the absent party, or whether the suit should instead be dismissed without prejudice, 'the absent person being thus regarded as indispensable.'" (Bianka M. v. Superior Court, supra, 5 Cal.5th at p. 1017, quoting Code Civ. Proc., § 389, subd. (b).) The four factors the court considers in making that determination include "(1) to what extent a judgment rendered in the person's absence might be prejudicial to him or those already parties; (2) the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; (3) whether a judgment rendered in the person's absence will be adequate; (4) whether the plaintiff or cross-complainant will have an adequate remedy if the action is dismissed for nonjoinder." (Code Civ. Proc., § 389, subd. (b).)
Because the determination of whether a party is necessary or indispensable is one in which the court" 'weighs "factors of practical realities and other considerations," '" "we review the trial court's ruling for abuse of discretion." (TG Oceanside, L.P. v. City of Oceanside (2007) 156 Cal.App.4th 1355, 1366.)
B. Analysis
i. Complete relief in the quiet title actions
Litchfield argues that "[c]omplete relief of the claims between the State and Litchfield was not possible without the County as a party to Litchfield's cross-action. After all, the County's right to sell the Property and collect taxes are essential issues in this lawsuit."
In the trial court, Litchfield argued the County was a necessary and indispensable party because the County's former assessment lien on the Property was "at the heart of this entire lawsuit," and Litchfield's interest in the Property "can be traced back to the County's tax lien." Litchfield did not clearly contend that complete relief could not be granted in the County's absence, or that the County's absence could subject Litchfield to inconsistent obligations. To the extent Litchfield's arguments on appeal were not raised below, it has forfeited them. (Delta Stewardship Council Cases (2020) 48 Cal.App.5th 1014, 1074 [" 'It is axiomatic that arguments not raised in the trial court are forfeited on appeal.' "].) Nevertheless, in the interests of justice we address each of its contentions.
We agree with the County that Litchfield has failed to support this contention with reasoned argument and has thus waived it. (See Cahill v. San Diego Gas &Electric Co. (2011) 194 Cal.App.4th 939, 956 ["' "When an appellant fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived."' "].) Although Litchfield's opening brief cites Washington Mutual Bank v. Blechman (2007) 157 Cal.App.4th 662 (Washington Mutual Bank), and Save Our Bay, Inc. v. San Diego Unified Port District (1996) 42 Cal.App.4th 686 (Save Our Bay), it does not explain how either case applies here." 'We are not bound to develop [Litchfield's] argument for [it].'" (Cahill v. San Diego Gas &Electric Co., supra, at p. 956.)
Even if we reach Litchfield's argument-and assuming it concerns the State's and Litchfield's quiet title actions-we fail to see how the County's dismissal deprived the trial court of the ability to order complete relief to either the State or Litchfield. (See Code Civ. Proc., § 389, subd. (a)(1).)
"The purpose of a quiet title action is to establish title against any adverse claims to property or any interest therein." (Water for Citizens of Weed California v. Churchwell White LLP (2023) 88 Cal.App.5th 270, 281; see Code Civ. Proc., § 760.020, subd. (a) ["An action may be brought under this chapter to establish title against adverse claims to real or personal property or any interest therein."].) "For purposes of quiet title actions, a claim 'includes a legal or equitable right, title, estate, lien, or interest in property or cloud upon title.'" ([Code Civ. Proc.,] § 760.010, subd. (a).) The term 'claim' 'is intended in the broad[est] possible sense.'" (Water for Citizens of Weed California v. Churchwell White LLP, at p. 281)
"A quiet title judgment cannot be entered in the absence of all parties with an interest in the property at issue." (Ranch at the Falls LLC v. O'Neal (2019) 38 Cal.App.5th 155, 173.) Thus, "[a] quiet title action may name as a defendant any party who might assert a claim to title in the property." (Eleanor Licensing LLC v. Classic Recreations LLC (2018) 21 Cal.App.5th 599, 617; see Code Civ. Proc., § 762.010 ["The plaintiff shall name as defendants in the action the persons having adverse claims to the title of the plaintiff against which a determination is sought."].)
As the trial court concluded in granting the County's motion for judgment on the pleadings, "Litchfield does not allege or argue that the County has a present lien or interest on the Property," and "[t]he fact the dispute originates from the County's prior interest in the Property does not mean the County is presently asserting an interest such that it would be a necessary party to the action." On appeal, Litchfield does not dispute that the County disclaimed any interest in the Property. Litchfield also fails to cite authority supporting the conclusion that, despite the County's present disclaimer of interest, the County's former lien constitutes an adverse claim to the Property such that it was a necessary party to the competing quiet title actions. We thus reject Litchfield's argument that the trial court was unable to order complete relief in the quiet title actions in the absence of the County.
In its reply brief, Litchfield argues that it was authorized by sections 3950, 3951, and 3955 to join the County in its quiet title cross-claim. We do not address this argument, raised for the first time in Litchfield's reply brief. (See Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764 [" 'Points raised for the first time in a reply brief will ordinarily not be considered, because such consideration would deprive the respondent of an opportunity to counter the argument.' "].) Regardless, even if the County were properly joined in the first instance, that would have no bearing on the trial court's ability to dismiss the County once it disclaimed any present interest in the Property.
We also find Litchfield's reliance on Washington Mutual Bank and Save Our Bay misplaced. In Washington Mutual Bank, the court held that a lender and trustee were indispensable parties in an action by a former property owner to set aside the trustee's foreclosure sale of the property, which resulted in a default judgment declaring the sale void. (Washington Mutual Bank, supra, 157 Cal.App.4th at pp. 667-669.) The court concluded that the lender and trustee "had a stake in the outcome of proceedings to invalidate the trustee's sale on foreclosure," emphasizing that the judgment "purported to cancel their legal rights with respect to the sale." (Id. at p. 668.) The court further concluded that "[b]ecause [the lender] and [trustee] always maintained the right to obtain the relief granted to them in the instant action [declaring the trustee's sale valid], the default judgment was essentially illusory." (Ibid.)
In Save Our Bay, the court held that a landowner whose land was to be acquired to complete a proposed development project was an indispensable party to an action challenging the adequacy of the environmental impact report for the project. (Save Our Bay, supra, 42 Cal.App.4th at pp. 689-690.) The court emphasized that the landowner was involved in negotiations over enactment of an ordinance authorizing purchase of the land for the project. (Id. at p. 696.) The court also noted that the landowner negotiated escrow terms for the sale of its land for the project that provided for termination of the sale if a suit was filed over the environmental impact report. (Ibid.) Citing both factors, the court concluded that the landowner "necessarily was to be affected, and possibly injured, by a judgment in the proceeding." (Ibid.)
Washington Mutual Bank and Save Our Bay are distinguishable. The lender and trustee in Washington Mutual Bank had a significant ongoing interest in the property and dispute at issue in the litigation. So too did the landowner in Save Our Bay. By contrast, the County disclaimed any interest in the property at issue in the State's and Litchfield's quiet title claims. Not only does Litchfield fail to point to anything in the record calling the County's disclaimer into question, but it also fails to explain how the County maintains any interest in the Property in the face of that disclaimer.
We agree with the County that to the extent Litchfield argues the County has a continued interest in taxing the Property, Litchfield cannot claim that interest on the County's behalf. (See Hartenstine v. Superior Court (1987) 196 Cal.App.3d 206, 222 [rejecting argument that State of California was a necessary party based on its interest in "enforcing its laws" because "[n]o such claim has been made by California in the case here, nor may [petitioner] make such a claim on California's behalf"].)
In its reply brief, Litchfield argues the County "attempts to wash its hands of its responsibilities by alleging that it is not an indispensable party because it does not currently claim an interest in the Property. However, this is an overly narrow view of what constitutes an indispensable party." Yet none of the cases cited by Litchfield in support of its contention concerns a party with only a former interest in the dispute at issue, as is the case with the County. (See Tracy Press, Inc. v. Superior Court (2008) 164 Cal.App.4th 1290 [city council member was indispensable party to mandamus action seeking access to city council member's e-mails]; Miracle Adhesives Corp. v. Peninsula Tile Contractor's Assn. (1958) 157 Cal.App.2d 591 [union was indispensable party to lawsuit challenging legality of provision in union's collective bargaining agreement].)
ii. Complete relief in Litchfield's cross-action to obtain a property tax refund
Litchfield also argues that it was deprived of its right to obtain a property tax refund from the County when the trial court dismissed the County from Litchfield's cross-action before resolving the State's quiet title claim. We understand this argument to be based on the "complete relief" provision of the joinder statute. (See Code Civ. Proc., § 389, subd. (a)(1) [absent party shall be joined if "in his absence complete relief cannot be accorded among those already parties"].)
According to Litchfield, if the State never lost ownership of the Property, then the County could neither legally assess the Property nor collect property taxes from Litchfield because State-owned property is exempt from taxation. (See Cal. Const., art. XIII, § 3, subd. (a) ["The following are exempt from property taxation: (a) Property owned by the State."]; L&B Real Estate v. Housing Authority of County of Los Angeles (2007) 149 Cal.App.4th 950, 953 (L&B Real Estate) ["Government-owned property is exempt from taxation."].) Thus, Litchfield argues it is entitled to a property tax refund from the County under section 5096, which provides, in relevant part: "Any taxes paid before or after delinquency shall be refunded if they were: . . . (b) Erroneously or illegally collected. (c) Illegally assessed or levied." (§ 5096, subds. (b), (c); see Plaza Hollister Ltd. Partnership v. County of San Benito (1999) 72 Cal.App.4th 1, 34 (Plaza Hollister) [§ 5096 et seq. provides a "comprehensive statutory refund process for recovering property tax payments"].) Litchfield further contends that the trial court "deprived Litchfield of its statutory right to a refund of its property taxes when it dismissed the County before adjudicating the State's action ...."
We find Litchfield's argument unpersuasive for several reasons. As an initial matter, Litchfield's argument does not present a compulsory joinder issue at all: The County was joined in this action when Litchfield named it as a cross-defendant. Thus, Litchfield's inability to obtain complete relief against the County on its property tax refund claim was not the result of the County's absence from this action, but rather from Litchfield's failure to state a claim for relief against the County.
Litchfield also fails to adequately explain how the trial court's dismissal of the County before resolving the State's quiet title action deprived Litchfield of the right to obtain a property tax refund. The trial court allowed Litchfield ample opportunity to plead a cognizable cause of action against the County for a property tax refund. Also, it is clear from the trial court's orders that it understood Litchfield's alleged entitlement to a property tax refund from the County assumed the State, and not Litchfield, was the rightful owner of the Property. The County's dismissal from the action before resolution of the State's quiet title claim therefore had no impact on Litchfield's ability to obtain complete relief on its property tax refund claim.
Last, although Litchfield argues on appeal that it is entitled to a property tax refund from the County under section 5096-a point we address later herein-it never pled such a cause of action in the trial court. Its initial cross-complaint did not seek any relief under the Revenue and Taxation Code. Its first amended cross-complaint sought relief under "sections 3728, 3729, and 3731, and any other applicable statutes and laws." But in response to the County's demurrer contending that those sections were inapplicable to a bond foreclosure sale, Litchfield failed to cite section 5096 as an additional basis for a refund. Its second amended cross-complaint also failed to rely on section 5096 or any other provision of the Revenue and Taxation Code, relying instead on common law theories of relief. It thus appears that Litchfield's failure to seek relief under section 5096, and not the County's dismissal, was the reason for Litchfield's inability to obtain such relief.
iii. Inconsistent obligations
Litchfield also argues that the County's dismissal from these proceedings subjected Litchfield to the risk of inconsistent obligations. (See Code Civ. Proc., § 389, subd. (a)(2)(ii) [absent party shall be joined if it "claims an interest" in the action and its absence subjects existing parties to "substantial risk" of "inconsistent obligations by reason" of absent party's claimed interest].) Litchfield contends that the trial court's ruling quieting title to the Property in favor of the State necessarily means Litchfield did not owe any property taxes on the Property. And yet, argues Litchfield, the trial court's dismissal of the County before quieting title in favor of the State left Litchfield "with no recourse against the County for the recovery of its property taxes ...."
Again, Litchfield's argument fits poorly into the framework for compulsory joinder because the County was a party to Litchfield's cross-complaint. Litchfield also fails to identify the County's claimed interest in this proceeding or explain how the County's absence subjected Litchfield to a substantial risk of inconsistent obligations.
In any event, we reject this argument for the reasons described earlier. As noted already, the trial court understood that Litchfield's alleged entitlement to a property tax refund from the County assumed the State, not Litchfield, was the rightful owner of the Property. And the trial court gave Litchfield ample opportunity to plead a valid cause of action against the County for a property tax refund. Litchfield's failure to state a valid claim to such relief, and not the County's dismissal from the action before resolution of the State's quiet title proceeding, was the cause of Litchfield's predicament.
iv. Complete relief under Streets and Highways Code section 5003
Litchfield's final argument is that the County's dismissal from the action deprived Litchfield of its ability to pursue a remedy against the County under Streets and Highways Code section 5003. We understand this argument also to be based on the "complete relief" provision of the joinder statute. (See Code Civ. Proc., § 389, subd. (a)(1).)
Streets and Highways Code section 5003 is part of the Improvement Act of 1911 (Sts. &Hy. Code, § 5000 et seq.), the statutory basis for the County's original assessment on the Property. In general, the Improvement Act of 1911 provides for the creation of assessment districts for the purpose of constructing and maintaining public improvements and allows a legislative body to make the expense of improvements chargeable to real property within the district. (Sts. &Hy. Code, §§ 51805182; see Goodman v. Williams (2003) 107 Cal.App.4th 294, 296.) Such assessments may then "be levied and collected in the same manner and by the same officers as taxes for county purposes are levied and collected. (Sts. &Hy. Code, § 5821.) Relevant here, the legislative body may also issue bonds to represent the assessment on each lot or parcel of land. (Sts. &Hy. Code, §§ 6400, 6422.) "The assessment is a lien upon the property affected, until such time as the bond issued to represent the assessment, accrued interest on the bond, and any penalties are fully paid." (Goodman v. Williams, supra, 107 Cal.App.4th at p. 296.)
The provision Litchfield relies on, Streets and Highways Code section 5003, states as follows: "This division shall be liberally construed in order to effectuate its purposes. No error, irregularity, informality, and no neglect or omission of any officer, in any procedure taken under this division, which does not directly affect the jurisdiction of the legislative body to order the work or improvement, shall avoid or invalidate such proceeding or any assessment for the cost of work done thereunder. The exclusive remedy of any person affected or aggrieved thereby shall be by appeal to the legislative body in accordance with the provisions of this division." (Sts. &Hy. Code, § 5003, italics added.)
Litchfield points to the trial court's decision in the State's quiet title action, which concluded that the County's 1968 sale of the Property was not authorized by the Improvement Act of 1911. Relying on the italicized statutory language above, but without any further analysis or citation to case authority, Litchfield argues that its exclusive remedy for its loss of title to the Property was against the County pursuant to Streets and Highways Code section 5003, and that the State's failure to name the County as a party left Litchfield "no choice but to name the County as a cross-defendant in its cross-action." The County counters that Litchfield was required to exhaust its administrative remedies under the statute before seeking relief in the courts.
We reject Litchfield's contention and thus need not reach the County's exhaustion argument. As before, Litchfield's argument does not present a compulsory joinder problem because the County was a party to its cross-complaint. Litchfield's ability to obtain relief under Streets and Highways Code section 5003 was therefore not affected by the County's absence from these proceedings.
Litchfield also fails to convince us that it has been "affected or aggrieved" within the meaning of Streets and Highways Code section 5003. True, according to Litchfield's second amended cross-complaint it was the County's initial assessment that led to the subsequent bond foreclosure and sale of the Property to Segerblom in 1968. But Litchfield was not "affected or aggrieved" by the County's assessment of the Property or subsequent bond foreclosure from more than fifty years ago. The harm it complains of stems instead from its alleged purchase of the Property in 2012 from a seller who may have lacked valid title, and its payment thereafter of property taxes even though the Property might have been tax-exempt.
What's more, we note that Litchfield's opening brief omits any mention that the trial court rejected a similar argument by Litchfield in the State's quiet title action. As the trial court recited in its decision quieting title to the Property in favor of the State, Litchfield contended the State's "exclusive remedy is to appeal to the County of Los Angeles, citing [Streets and Highways Code] Section 5003." The trial court disagreed, concluding that the State was "not attempting to 'avoid or invalidate [a] proceeding or [any] assessment,' but the subsequent sale." Litchfield fails to identify any error with the trial court's reasoning, or explain how a different result applies to Litchfield's current attempt to invoke the statute.
Finally, although Litchfield contends its exclusive remedy was against the County pursuant to Streets and Highways Code section 5003, it never pled a cause of action against the County under the Improvement Act of 1911. As best we can tell, the only time Litchfield raised Streets and Highways Code section 5003 in the trial court was in opposition to the State's quiet title action. Hence, even assuming Streets and Highways Code section 5003 applied here, Litchfield's failure to plead a cause of action under that statute, and not the trial court's dismissal of the County from the action, was the reason Litchfield was unable to obtain relief under that statute.
II. The trial court properly sustained the County's demurrer to Litchfield's second amended crosscomplaint
A. Standard of review
"A demurrer tests the legal sufficiency of the factual allegations in a complaint. We independently review the sustaining of a demurrer and determine de novo whether the complaint alleges facts sufficient to state a cause of action or discloses a complete defense. [Citation.] We assume the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded and matters of which judicial notice has been taken. [Citation]. We construe the pleading in a reasonable manner and read the allegations in context. [Citation.] We must affirm the judgment if the sustaining of a general demurrer was proper on any of the grounds stated in the demurrer, regardless of the trial court's stated reasons. [Citation.]
"It is an abuse of discretion to sustain a demurrer without leave to amend if there is a reasonable probability that the defect can be cured by amendment. [Citation.] The burden is on the plaintiff to demonstrate how the complaint can be amended to state a valid cause of action. [Citation.] The plaintiff can make that showing for the first time on appeal." (Chapman v. Skype, Inc. (2013) 220 Cal.App.4th 217, 225-226.)
B. Analysis
Litchfield contends that its second amended crosscomplaint adequately pled common law causes of action against the County for unjust enrichment, money had and received, and common counts, as well as a cause of action for declaratory relief. The gist of its claims is the same: The County was unjustly enriched by Litchfield's payment of property taxes for the Property because the State, not Litchfield, was the rightful owner of the Property. Litchfield thus seeks a refund of the property tax payments it made to the County in connection with the Property.
While the heading of Litchfield's argument in its opening brief states that it "sufficiently alleged causes of action for just compensation and unjust enrichment," Litchfield does not separately address a cause of action for "just compensation." We thus do not distinguish between the two causes of action for purposes of our analysis. Also, we note that Litchfield fails to cite any case supporting a standalone cause of action for "just compensation."
The County contends Litchfield's second amended crosscomplaint fails to state a claim for several reasons. First, emphasizing the comprehensive statutory refund process under section 5096 et seq., it argues that Litchfield's exclusive remedy was statutory. Second, it argues Litchfield failed to allege facts necessary to support its common law causes of action and that the County has no liability for quasi-contract claims as a matter of law. Because Litchfield's declaratory relief cause of action is derivative of the common law causes of action, the County contends Litchfield's declaratory relief action likewise fails. Third, the County contends it is immune from non-statutory claims pursuant to Government Code section 860.2. Fourth, the County argues Litchfield's claims are time-barred.
As explained below, we agree with the County's first contention, namely, that there is no common law remedy for a property tax refund under the circumstances presented here and that the statutory refund process was Litchfield's exclusive remedy for obtaining such relief. We thus do not reach the County's remaining contentions.
We requested supplemental briefs from the parties regarding this and related issues. We have read and considered those briefs.
i. Statutory framework for property tax refunds
We begin our analysis by giving a brief overview of the statutory refund process for recovering property tax payments. (See §§ 5096-5170.)
Section 5096 provides six specific grounds for property tax refunds. It provides that that "[a]ny taxes paid before or after delinquency shall be refunded if they were," relevant here, "(b) Erroneously or illegally collected" or "(c) Illegally assessed or levied." (§ 5096, subds. (b), (c).) Other grounds include paying taxes more than once (§ 5096, subd. (a)) and paying taxes on an assessment in excess of the value of the property (§ 5096, subds. (f), (g)).
Section 5097 provides that "[a]n order for a refund under this article shall not be made, except on a claim" that is "[v]erified by the person who paid the tax" and, subject to certain exceptions, filed with the county board of supervisors within the time allotted by subdivision (a)(2). (§ 5097, subd. (a).) Section 5097.02 provides that the claim "shall be in writing, specifying: (a) Whether the whole assessment is claimed to be void or, if only a part, what portion," and "(b) The grounds on which the claim is founded." "Where the taxes sought to be refunded or recovered have been paid after delinquency, the amount of penalties, interest or costs refundable or recoverable under this article shall be computed only on the taxes refunded or recovered." (§ 5106.)
The filing of a refund claim is generally a prerequisite to an action for a refund. Under section 5140, "[t]he person who paid the tax . . . may bring an action only in the superior court . . . against a county . . . to recover a tax which the board of supervisors of the county . . . refused to refund on a claim filed pursuant to Article 1 (commencing with Section 5096) of this chapter." (§ 5140.) "No action shall be commenced or maintained under this article . . . unless a claim for refund has first been filed pursuant to Article 1 (commencing with Section 5096). [¶] No recovery shall be allowed in any refund action upon any ground not specified in the refund claim." (§ 5142, subd. (a).)
Ordinarily, a party seeking a property tax refund must also file "an application for assessment reduction (also referred to as an assessment appeal) under section 1603, subdivision (a), through a 'verified, written application showing the facts claimed to require the reduction and the applicant's opinion of the full value of the property.'" (LA Live Properties, LLC v. County of Los Angeles (2021) 61 Cal.App.5th 363, 371 (LA Live Properties); see also Steinhart v. County of Los Angeles (2010) 47 Cal.4th 1298, 1308 ["a taxpayer ordinarily may not file or pursue a court action for a tax refund without first applying to the local board of equalization for assessment reduction under section 1603 and filing an administrative tax refund claim under section 5097"].)
A refund action generally must "be commenced within six months from and after the date that the board of supervisors . . . rejects a claim for refund in whole or in part." (§ 5141.) Separate timing rules apply for taxpayers who are redeeming property under an installment plan or paying escape assessments in installments. (§§ 5145, 5145.5.)
"If a claim for refund relates only to the validity of a portion of an assessment, an action may be brought . . . only as to that portion." (§ 5143.) "If the court finds that an assessment is void in whole or in part, it shall render judgment for the plaintiff for the amount of the taxes paid on that portion of the assessment that is found to be void." (§ 5144.) Section 5151 specifies the interest rates applicable where a refund is ordered. (§ 5151.)
ii. Exclusivity of statutory remedies for obtaining a tax refund
a. Article XIII, section 32 of the California Constitution
Article XIII, section 32 of the California Constitution supports our conclusion that Litchfield's exclusive remedy for obtaining a property tax refund is statutory. It states: "No legal or equitable process shall issue in any proceeding in any court against this State or any officer thereof to prevent or enjoin the collection of any tax. After payment of a tax claimed to be illegal, an action may be maintained to recover the tax paid, with interest, in such manner as may be provided by the Legislature." (Cal. Const., art. XIII, § 32, italics added.)
Although the first sentence of article XIII, section 32 refers to actions against the "State," courts have applied its provisions, and particularly its "pay first, litigate later" principle, to actions against local governments. (See, e.g., Water Replenishment District of Southern California v. City of Cerritos (2013) 220 Cal.App.4th 1450, 1466-1468 [rejecting argument that "pay first, litigate later" doctrine enshrined in art. XIII, § 32 applies only to actions against the state or state officers]; Rickley v. County of Los Angeles (2004) 114 Cal.App.4th 1002, 1013-1014 [citing art. XIII, § 32 in support of conclusion that "pay first, litigate later" rule applied to plaintiff's action against county]; see also Morgan v. Ygrene Energy Fund, Inc. (2022) 84 Cal.App.5th 1002, 1013, fn. 7 [noting that art. XIII, § 32 "has been held to also apply to local taxes as a matter of public policy"].)
This provision "requires that tax refund actions be brought solely according to procedures established by the Legislature. It vests power over tax procedure in the Legislature, and limits or governs the authority of the courts over tax collection disputes. [Citation.] This deference also serves the state's interest in being able to plan for needed public expenditures, and 'rests on the premise that strict legislative control over the manner in which tax refunds may be sought is necessary so that governmental entities may engage in fiscal planning based on expected tax revenues.'" (Loeffler v. Target Corp. (2014) 58 Cal.4th 1081, 1102, italics omitted.)
This "strict legislative control" over property tax refunds is reflected in the provisions of section 5096 et seq., enacted to implement this constitutional mandate. (See Pacific Gas and Electric Co. v. State Board of Equalization (1980) 27 Cal.3d 277, 283-284 [noting that the "specific statutory refund procedure" of §§ 5096 and 5140 implements the policy underlying art. XIII, § 32]; IBM Personal Pension Plan v. City and County of San Francisco (2005) 131 Cal.App.4th 1291, 1299 ["To implement article XIII, section 32, the Legislature enacted a specific statutory refund procedure for taxpayers whose property has been improperly assessed," citing §§ 5096 et seq. and 5140 et seq.].)
As one court explained, article XIII, section 32 "has two necessarily implied corollaries. First, the '[a]dministrative tax refund procedures [enacted by the Legislature] are to be strictly enforced' [citation]; 'substantial compliance' with those procedures will not do. [Citations.] Second, and most pertinent here, courts may not 'expand[ ] the methods for seeking tax refunds expressly provided by the Legislature.' " (McClain v. Sav-On Drugs (2017) 9 Cal.App.5th 684, 696 (McLain).)
While McLain recognized that courts retain limited authority to fashion "a new tax refund remedy," such authority exists only where, among other things, "the person seeking the new tax refund remedy has no statutory refund remedy available." (McLain, 9 Cal.App.5th at p. 700.) Assuming such authority exists, it is inapplicable here-as discussed herein, Litchfield asserts it has an available statutory refund remedy under section 5096 et seq.
b. Decisional law
Apart from article XIII, section 32 of the California Constitution, we find support for our conclusion in cases that have long recognized a general rule that where there is a statutory right to a tax refund, that remedy is exclusive. (See, e.g., People v. Chambers (1951) 37 Cal.2d 552; Southern Service Co. v. County of Los Angeles (1940) 15 Cal.2d 1 (Southern Service), cited with approval in Franchise Tax Board v. Superior Court (2011) 51 Cal.4th 1006.)
In Southern Service, for example, the plaintiff brought an action under former Political Code section 3804 to recover property taxes alleged to have been illegally collected pursuant to an excessive tax rate adopted for the tax year 1933-1934. (Southern Service, supra, 15 Cal.2d at p. 5.) Following judgment, both the plaintiff and defendant appealed. (Ibid.) While the appeals were pending, the Legislature enacted a statute terminating the plaintiff's right to a refund of" 'any tax voluntarily paid which was levied prior to January 1, 1939, claimed to be erroneous or illegal,'" where certain other conditions were met. (Id. at p. 6.) The defendant moved to dismiss the plaintiff's appeal based on the recent legislation. (Ibid.)
The California Supreme Court granted the defendant's motion and dismissed the plaintiff's appeal. (Southern Service, supra, 15 Cal.2d at pp. 15-16.) The court noted that it "is the settled law of this state that illegal taxes voluntarily paid may not be recovered by the taxpayer in the absence of a statute permitting a refund thereof; and in the absence of such statute only illegal taxes paid under duress, coercion or compulsion are considered to have been involuntarily paid and therefore recoverable." (Id. at p. 7.) After finding that the plaintiff's payments were voluntary, the court held that "the plaintiff possessed no right or remedy pursuant to section 3804 of the Political Code which existed apart from the statute itself and which the legislature could not cut off by repeal." (Id. at 11.) Particularly apt here, the court emphasized that "[a] right to a credit or refund of taxes is purely statutory." (Ibid., italics added.)
We are further guided by People v. Chambers, supra, 37 Cal.2d 552. Similar to the allegations in the present case, a county wrongly assessed taxes on a property deeded to the state, which led to an invalid tax sale. (Id. at 555.) The state thereafter sued the tax sale purchaser to quiet title. (Ibid.) The trial court quieted title in favor of the state, conditioned on its reimbursement to the tax sale purchaser of "the amount he paid for the property at the tax sale to him and for taxes subsequently levied on the property" by the county. (Id. at 561.)
On appeal, the California Supreme Court reversed that portion of the judgment. It held that "in the absence of statute, a purchaser from the state or public agency at a tax sale cannot recover from the seller the purchase price paid or the taxes subsequently assessed even though the taxes were illegally assessed or levied, the property was not subject to taxation or the tax deed was void." (People v. Chambers, supra, 37 Cal.2d at p. 561.) Relying in part on Southern Service, the court then stated, "Where a statute provides for recovery, that remedy is exclusive." (Ibid., italics added, citing Southern Service, supra, 15 Cal.2d at p. 11.) The court concluded that the applicable refund provision in the Revenue and Taxation Code provided for a refund of the purchase price by the county, but not the state. (Id. at p. 562.)
The holding in People v. Chambers has since been described in unequivocal terms: "[W]here a tax statute provides a remedy, that remedy is exclusive." (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 40 (Quelimane), citing People v. Chambers, supra, 37 Cal.2d at p. 561.) Quelimane further observed, apparently with approval, that People v. Chambers was followed by two appellate decisions concluding that "a purchaser at a tax sale is limited to the remedies provided by the Revenue and Taxation Code and has no right to common law remedies for defects in the tax sale proceeding." (Quelimane, at pp. 40-41, citing Van Petten v. County of San Diego (1995) 38 Cal.App.4th 43, and Craland, Inc. v. State of California (1989) 214 Cal.App.3d 1400; see also L&B Real Estate, supra, 149 Cal.App.4th at p. 959 ["sole remedy" to obtain refund of purchase price from tax sale "lies in section 3729, which provides for proceedings where L&B can seek and obtain a refund from the County"]; Ribiero v. County of El Dorado (2011) 195 Cal.App.4th 354, 357 [holding that "statutory remedies are exclusive at tax sales" and rejecting dissatisfied buyer's attempt to invoke equitable remedy of rescission due to mistake]; but see Schultz v. County of Contra Costa (1984) 157 Cal.App.3d 242 [rejecting argument that remedies under Revenue and Taxation Code are the exclusive means of recovery by a tax sale purchaser].)
Nor has this exclusivity principle been limited to cases involving tax sales. In property tax refund actions under section 5096 et seq., courts have similarly recognized that the "right to a refund is strictly statutory." (Sea World v. County of San Diego (1994) 27 Cal.App.4th 1390, 1408 [declining to excuse late-filed refund claim "where the Legislature has spoken and provided a taxpayer with specific legal remedies for claiming a tax refund for overpayment"]; Rickley v. County of Los Angeles, supra, 114 Cal.App.4th at p. 1015 [dispute over whether property taxes are owed "must be resolved by the prescribed constitutional and statutory remedies"]; Osco Drug, Inc. v. County of Orange (1990) 221 Cal.App.3d 189, 195 [observing in action for refund pursuant to § 5096 et seq., that "[b]ecause the right to a refund of taxes is purely statutory, we must look to the terms of the governing statutes to determine whether [the plaintiff] has a remedy"]; Chrysler Credit Corp. v. Ostly (1974) 42 Cal.App.3d 663, 680 [applying provisions of § 5096 et seq., and concluding that the "right to recovery of taxes is purely statutory and is granted upon conditions"]; Sierra Investment Corp. v. Sacramento County (1967) 252 Cal.App.2d 339, 342 [addressing action under § 5096 and concluding that "it is settled that taxes freely and voluntarily paid may not be recovered by a taxpayer in the absence of a statute permitting the refund thereof"].)
iii. Litchfield's exclusive remedy is statutory
Based on the authorities discussed above, we conclude that Litchfield's exclusive remedy to obtain a property tax refund against the County was pursuant to an action under the Revenue and Taxation Code.
In fact, despite pleading common law causes of action in its second amended cross-complaint, on appeal Litchfield agrees it has a statutory remedy for a property tax refund under section 5096 et seq. As noted earlier, Litchfield invoked that statute in its opening brief on appeal, contending it is entitled to a refund for property taxes "[e]rroneously or illegally collected," or "[i]llegally assessed or levied." (§ 5096, subds. (b), (c).) Its reply brief similarly asserts that it is entitled to a property tax refund pursuant to section 5096. Hence, because Litchfield concedes "a tax statute provides a remedy, that remedy is exclusive." (Quelimane, supra, 19 Cal.4th at p. 40; People v. Chambers, supra, 37 Cal.2d at p. 561.)
Litchfield also contends that its second amended crosscomplaint adequately pled causes of action against the County for unjust enrichment, money had and received, and common counts. None of the many cases it cites, however, concerns an action for a property tax refund. Given our conclusion that Litchfield's exclusive remedy to obtain such relief was pursuant to an action under the Revenue and Taxation Code, we find Litchfield's reliance on these cases unavailing. Moreover, because Litchfield's declaratory relief cause of action is derivative of its failed common law causes of action, its declaratory relief cause of action fails too. (Smyth v. Berman (2019) 31 Cal.App.5th 183, 191-192; Ball v. FleetBoston Financial Corp. (2008) 164 Cal.App.4th 794, 800 [demurrer to declaratory relief cause of action properly sustained where it was" 'wholly derivative'" of other failed claims].)
See Hartford Casualty Insurance Co. v. J.R. Marketing, LLC (2015) 61 Cal.4th 988 [action by insurer to obtain excess legal fees against counsel representing insured]; Ghirardo v. Antonioli (1996) 14 Cal.4th 39 [action by seller of real property to recover balance due on promissory note]; Weitzenkorn v. Lesser (1953) 40 Cal.2d 778 [action alleging unlawful use of literary property]; Mains v. City Title Insurance Co. (1949) 34 Cal.2d 580 [action against title company to obtain full sale price for property purchased at probate sale]; Philpott v. Superior Court (1934) 1 Cal.2d 512 [action for damages relating to sale of stock shares]; Pollak v. Staunton (1930) 210 Cal. 656 [same]; Professional Tax Appeal v. Kennedy-Wilson Holdings, Inc. (2018) 29 Cal.App.5th 230 [action against property owner to recover share of property tax reduction owed under contract]; Golightly v. Molina (2014) 229 Cal.App.4th 1501 [action against county challenging procedure by which county entered into agreements with social service organizations]; Gutierrez v. Girardi (2011) 194 Cal.App.4th 925 [class action against law firm for misappropriating settlement proceeds]; Supervalu, Inc. v. Wexford Underwriting Managers, Inc. (2009) 175 Cal.App.4th 64 [action by workers' compensation insurer against insured regarding coverage]; Federal Deposit Insurance Corp. v. Dintino (2008) 167 Cal.App.4th 333 [action by bank against borrower arising from nonpayment of home loan]; Torres v. City of Yorba Linda (1993) 13 Cal.App.4th 1035 [action challenging validity of amended redevelopment project]; Los Altos Property Owners Assn. v. Hutcheon (1977) 69 Cal.App.3d 22 [action to enjoin consolidation of junior high schools]; Western Title Insurance & Guaranty Co. v. Bartolacelli (1954) 124 Cal.App.2d 690 [action by title company against purchaser of real property]; Lehner v. McLennan (1921) 54 Cal.App. 491 [action for breach of contract by contractor]; see also In re Burke (Bankr. 9th Cir. Nov. 25, 2019, No. NC-18-1260-STaB) 2019 WL 6332370 [unjust enrichment action by lender against debtor not barred by discharge of bankruptcy petition]; In re Samsung Galaxy Smartphone Marketing and Sales Practices Litigation (N.D. Cal. Dec. 24, 2020, No. 16-cv-06391-BLF) 2020 WL 7664461 [putative consumer class action regarding smartphone batteries]; Wallace v. SharkNinja Operating, LLC (N.D. Cal. March 9, 2020, No. 18-cv-05221-BLF) 2020 WL 1139649 [putative class action against blender manufacturer].)
III. Leave to amend
In neither its opening nor reply brief did Litchfield seek leave to amend its cross-complaint to assert a cause of action under section 5096 (or any other provision of the Revenue and Taxation Code). Instead, its sole argument regarding further leave to amend, raised for the first time in its reply brief, is as follows: "In sustaining the County's demurrer without leave to amend, the trial court placed Litchfield in an untenable situation. Specifically, the trial court held that Litchfield could not be entitled to unjust enrichment or declaratory relief until there was a determination that Litchfield did not own the Property. [¶] If this was the trial court's reason for sustaining the County's demurrer, Litchfield could have cured it through amendment. For example, Litchfield could have pleaded that an actual controversy exists because the State alleged the County's assessment and sale of the Property was invalid. Consequently, the State's allegation created a controversy between Litchfield and the County regarding whether the County was entitled to keep the property taxes that Litchfield paid."
Litchfield's argument is based on a misunderstanding of the trial court's ruling. The trial court's order sustaining the County's demurrer did not hinge on the fact that it had not yet determined that the State was the rightful owner of the Property. As we have discussed already, the trial court's rulings regarding the viability of Litchfield's causes of action assumed that the State, and not Litchfield, was the rightful owner of the Property.
Even so, given Litchfield's discussion of section 5096, we asked for further briefing from the parties regarding whether Litchfield seeks leave to amend to state a claim under section 5096 et seq. Litchfield informed us that it does seek such leave, and we agree that there is a reasonable possibility it can state a claim under section 5096. (See Blank v. Kirwan (1985) 39 Cal.3d 311, 318 [where demurrer "is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment"].) Indeed, if after resolution of Litchfield's pending appeal of the quiet title action, the State is ultimately determined to be owner of the Property, then the Property is tax-exempt. (See Cal. Const., art. XIII, § 3, subd. (a); L&B Real Estate, supra, 149 Cal.App.4th at p. 953.) In that event, Litchfield contends it is entitled to a property tax refund from the County because such taxes were "[e]rroneously or illegally collected," or "[i]llegally assessed or levied." (§ 5096, subds. (b), (c); see Morgan v. Ygrene Energy Fund, Inc., supra, 84 Cal.App.5th at p. 1016 ["By statute, the [county] board 'shall' refund property tax that is erroneously or illegally assessed."].) Of course, we don't decide the issue on the merits-that is, that Litchfield is entitled to a refund; rather, we merely decide Litchfield is entitled on remand to attempt to state a claim for a refund pursuant to section 5096.
The County argues otherwise, relying on Litchfield's failure to allege exhaustion of its administrative remedies. In particular, it contends that Litchfield failed to allege that it submitted a claim to the County for a refund in accordance with section 5097. It is correct that filing an administrative refund claim is ordinarily a prerequisite to bringing a property tax refund action. (See §§ 5097, 5142; Plaza Hollister, supra, 72 Cal.App.4th at p. 34 ["The timely filing of a proper claim for refund is a statutory prerequisite to a refund action"].) Litchfield does not dispute that it has not filed an administrative refund claim.
Before Litchfield clarified that it sought leave to amend to assert a cause of action under section 5096 et seq., the County argued that Litchfield's cross-action was untimely under the one-year limitations period of Streets and Highways Code section 6571, and the two-year limitations period of Code of Civil Procedure section 339, subdivision 1. If the County contends that these statutes apply to Litchfield's cause of action under section 5096, it may raise the statutes at the appropriate time following remand. The County further argued that, assuming Litchfield had attempted to state a cause of action under section 5096, the cause of action would have been barred by the four-year limitations period of section 5097 for pursuing an administrative refund claim. But because we conclude that Litchfield can possibly allege an exception to the administrative exhaustion requirements of section 5097, this limitations period is not a bar to granting Litchfield leave to amend. Finally, the County argued that an action under section 5096 would be barred because Litchfield paid property taxes on the Property "freely and voluntarily." We are skeptical of this argument (see Franchise Tax Board v. Superior Court, supra, 51 Cal.4th at p. 1017 ["Under our modern refund statutes, whether a tax payment was voluntary or involuntary is irrelevant. A taxpayer may seek a refund even without protesting the payment."]), but we need not resolve the issue now. For present purposes, we conclude the argument is not a bar to granting Litchfield leave to amend.
The County does not contend that Litchfield was also required to file an application for an assessment reduction under section 1603, subdivision (a). (See LA Live Properties, supra, 61 Cal.App.5th at p. 371.)
There is an exception to exhaustion, however," 'when the assessment is a nullity as a matter of law because, for example, the property is tax exempt, nonexistent or outside the jurisdiction [citations], and no factual questions exist regarding the valuation of the property which, upon review by the board of equalization, might be resolved in the taxpayer's favor, thereby making further litigation unnecessary [citations].'" (Williams &Fickett v. County of Fresno (2017) 2 Cal.5th 1258, 1275 (Williams &Fickett).) In that circumstance, "the nullity exception may appropriately be invoked because 'a dispute will not squarely implicate the county board's valuation expertise, and the other public interests advanced by exhaustion-including the ability of the government to timely anticipate and collect revenue-would not be unduly compromised by allowing a refund action to proceed'" without prior exhaustion. (LA Live Properties, supra, 61 Cal.App.5th at p. 380.)
Litchfield contends this exception applies here because the Property is tax-exempt-at least according to the trial court's ruling quieting title to the Property in favor of the State. The County, on the other hand, disputes the applicability of the nullity exception for two reasons. It first contends that the property taxes are not a nullity as a matter of law because, despite the trial court's ruling quieting title in favor of the State, Litchfield has appealed that ruling. Hence, the County argues that whether the Property is State-owned and thus tax-exempt remains in dispute.
Because we agree that Litchfield can plausibly allege application of the nullity exception here, we need not reach its alternative argument that exhaustion would have been futile.
We are not convinced by this argument. The parties and the trial court have proceeded on the understanding that Litchfield's property tax refund claim assumes the State, not Litchfield, owns the Property. Otherwise, there would be no basis for Litchfield's refund claim. We see no reason, at least for purposes of alleging application of the nullity exception in an amended cross-complaint, that this same assumption should not apply.
The County contends Exchange Bank v. County of Sonoma (1976) 59 Cal.App.3d 608 (Exchange Bank) favors its position, but we find it favors Litchfield. There, the court affirmed application of the nullity exception in a refund action involving taxes levied on a data processing unit alleged to be tax-exempt. (Exchange Bank, at pp. 609-610.) After describing the nullity exception, the court observed as follows: "Here, the facts were not in dispute. The single question was a legal one-whether the IBM unit was personalty or realty, a question that the local board had no special competence to decide." (Id. at p. 610.) The County argues that here, by contrast, the facts are in dispute, and that the nullity exception therefore doesn't apply. We disagree. The critical dispute is a legal one, not a factual one, concerning the rightful owner of the Property. Not only is that legal dispute already before this court in Litchfield's pending appeal, but the County does not argue that the board of supervisors (or board of equalization) is uniquely suited to resolve that dispute.
For these same reasons, we are unpersuaded by the County's next argument that application of the nullity exception would frustrate the principles of administrative autonomy and judicial efficiency. Our Supreme Court has explained that" '[t]he exhaustion doctrine is principally grounded on concerns favoring administrative autonomy (i.e., courts should not interfere with an agency determination until the agency has reached a final decision) and judicial efficiency (i.e., overworked courts should decline to intervene in an administrative dispute unless absolutely necessary). [Citations].'" (Williams &Fickett, supra, 2 Cal.5th at p. 1268.)
Neither concern is particularly compelling here. The trial court already addressed the legal dispute over ownership of the Property-a critical consideration underlying Litchfield's claimed entitlement to a tax refund-in its quiet title ruling, and the appeal of that ruling is already pending before this court. As a result, there is little to be gained either in terms of administrative autonomy or judicial efficiency by requiring exhaustion at this stage of the proceedings. Nor does the County argue that this dispute "squarely implicate[s] the county board's valuation expertise" (Williams &Fickett, supra, 2 Cal.5th at p. 1278), a uniquely important consideration for administrative exhaustion in this context.
Regarding judicial efficiency, we offer a final observation here. Both parties understandably highlight that the outcome of the pending appeal in the quiet title action will impact this case. Litchfield thus asks us to stay our decision in this case pending the outcome of its quiet title appeal, or to consolidate the appeals. And the County suggests that a ruling in favor of the State in the quiet title appeal may prompt the County assessor to decide that a property tax refund is due, obviating the need for Litchfield to pursue a refund action. Thus, on remand, it may be the most prudent course for the trial court to stay this case pending the outcome of the quiet title appeal.
We deny Litchfield's requests.
In sum, we conclude that "there is a reasonable possibility that the defect [in Litchfield's second amended cross-complaint] can be cured by amendment" (Blank v. Kirwan, supra, 39 Cal.3d at p. 318), and thus remand this matter to the trial court for further proceedings consistent with this opinion.
Litchfield's counsel informed us that his firm represents both Litchfield and MG Ventures, LLC in this appeal. But MG Ventures, LLC is not identified as an appellant in the notice of appeal or in Litchfield's opening brief. It was only identified as an appellant in Litchfield's reply brief. We thus take no position concerning the role of MG Ventures, LLC on remand.
DISPOSITION
Judgment in favor of the County on Litchfield's crosscomplaint is reversed and this matter is remanded for further proceedings consistent with this opinion. The parties shall bear their own costs on appeal.
We concur: LAVIN, J., EGERTON, J.