S. Siwel Co. v. County of Los Angeles

167 P.2d 177, 27 Cal. 2d 724, 1946 Cal. LEXIS 350

• Court: California Supreme Court
• Decided: March 19, 1946
• Docket: L. A. 18935
• Status: Published

Opinions

EDMONDS, J.

Under protest the S. Siwel Co. paid special assessments levied by the city of South Gate, and brought this action to obtain a refund. Upon the appeal from the judgment of dismissal entered after a general demurrer to the complaint was sustained and leave to amend denied, the questions presented for decision concern the validity of the assessments and the scope of certain sections of the Revenue and Taxation Code.

The facts alleged in the complaint and a proposed amended complaint may be summarized as follows: The appellant is the owner of land in the city of South Gate bordering on Wright Road, a highway of general county use. The highway was improved pursuant to a proceeding had under the Acquisition and Improvement Act of 1925, commonly known as the Mattoon Act (Stats. 1925, p. 849; Leering’s Gen. Laws, Act 3276a; repealed by Stats. 1933, chap. 346, p. 949). In 1929, Acquisition and Improvement bonds to the amount of $43,400 were issued and sold. Special assessments were levied against lands in the district, of which the appellant’s property constituted a large part. Levies for the years 1929-1933, inclusive, were paid by the Siwei Company, but assessments of the four subsequent years, 1934-1937, inclusive, were allowed to become delinquent. Only about 9 per cent of such assessments were paid by the property owners and the district was in economic distress.

Prior to June, 1938, bonds in the principal amount of $4,000 and interest had been paid in full, but of the outstanding bonds in the principal sum of $39,400, approximately $16,000 were delinquent in payment of principal and all were delinquent in payment of interest. The country was passing through a period of severe economic depression and the land values in the district shrank to a point where the total assessed valuation of all the taxable property within the district was at times less than the face value of the amounts outstanding on the bonded indebtedness. Taxes and assessments against a large percentage of the property in the district had been delinquent for five years and unless financial aid was made available, a considerable portion of the property would be stricken from the tax rolls.

Appropriate legislation had been enacted for the relief of districts in distress (Stats. 1935, p. 1250; Deering’s Gen. Laws, Act 3303 l; Sts. & Hy. Code, §§ 1625.5-1628 as amended by Stats. 1935, pp. 2178, 2199, Stats. 1937, p. 160). In 1938, acting pursuant to these provisions aiifi prior to the levy of any assessment for that year, the board of supervisors of Los Angeles County adopted a resolution which, after reciting that Acquisition and Improvement District No. 11 of the city of South Gate was in economic distress because of excessive and burdensome special assessments and eligible for relief under sections 1626, 1627 and 1628 of the Streets and Highways Code, ordered that the county should purchase all of the outstanding bonds and deliver them to the city for cancellation. Pursuant to the resolution, all of the outstanding bonds were purchased and delivered to the treasurer of the city of South Gate. By order of the board of trustees of the city, on July 13, 1938, all of the bonds were canceled.

The appellant’s demand thereafter made that the assessments for the years 1934-1937 be canceled was rejected by both the city and county. S. Siwel Co. then made payment under protest, and filed a timely claim for refund, followed by commencement of the present suit.

In challenging the ruling of the trial court that these facts do not state a cause of action entitling the Siwel Company to a refund of the amounts paid by it to discharge the assessments levied prior to the retirement of the bonds, the appellant takes the position that the assessments were collectible only for the purpose of meeting the obligation on the bonds, and the right to do so ceased to exist when the bonds were paid and canceled. Therefore, the argument continues, unless the amount paid to satisfy the assessments for the years 1934-1937 is refunded, the city will be unjustly enriched. And the appellant asserts that the procedure specified by the Revenue and Taxation Code may be used by a property owner to obtain a refund of assessments paid under the circumstances related in the complaint.

The city and the county contend that the cancellation of the bonds raised no bar to the collection of assessments theretofore levied. Under section 1626 of the Streets and Highways Code, it is said, the legislative body of the city was given discretionary power to direct the cancellation of any unpaid taxes and assessments, and in the exercise of that discretion decided not to cancel the assessments levied before 1938 against the property of the appellant and other property owners in the assessment district. If assessments levied prior to 1938 are canceled, the respondents assert, the landowners who defaulted in their obligations will obtain a benefit denied to those who paid the? assessments placed against their properties.

The Acquisition and Improvement Act, supra, pursuant to which the assessments now challenged by the appellant were levied, provided a method for the construction of street improvements and the acquisition of land therefor. The legislative body of any municipality was authorized by the statute to determine, after appropriate notice and hearing, the improvements which were to be made and the district which would be specially benefited by the improvements.

By the terms of the statute, the cost of an improvement was to be met by the issuance of bonds against the real property to be specially benefited by the improvements. Payment ' of the bonds was to be made out of a special fund to be constituted by the municipality for each district in which such bonds were issued. Bach year, at the time of levying taxes for general municipal purposes, the city was required to levy against all lands within the district, “a special assessment tax in an amount clearly sufficient, together with any moneys which are or may be in said fund, to pay all the principal which has become or will become due and all interest which has become or will become payable on the bonds . . . before the proceeds of another . . . levy of taxes to be collected for general municipal purposes . . . can be made available for the payment of said principal and interest.” These special assessment taxes, the statute read, should be “in addition to all other taxes levied for . . . municipal purposes” (§ 41).

The city of South Gate has delegated its functions relating to the collection of taxes to the county of Los Angeles. By the terms of the Acquisition and Improvement Act, levies for the payment of principal and interest requirements upon the bonds were to be “collected and enforced in the same manner and by the same persons and at the same time and with the same penalties and interest as are other taxes.” Also, the statute specifically adopted the procedure provided by general law for the collection of taxes for general municipal purposes. (§41.)

Act 33031 declares that city and county legislative bodies are “hereby fully and completely authorized and empowered, on the consent of the owners or holders of such bonds or indebtedness, to purchase, adjust, liquidate or cancel such bonds or indebtedness, or any part of them or it, and to carry out any plan or plans for the purchase, adjustment, liquidation, or cancellation of such bonds or indebtedness, or any part of them or it,” and to “adjust, waive or cancel in whole or in part, any tax or taxes, assessment or assessments, penalty or penalties and interest heretofore levied or taxed against any of the property or properties in such special assessment district which have been taxed or levied for the purpose of meeting the bonds or indebtedness of such special assessment districts.” (§1.) Such legislative bodies are also authorized ‘‘to appropriate and use any and all necessary funds, moneys, taxes, assessments and contributions, from whatsoever source derived, for the furtherance, consummation and conclusion of the purchase, adjustment, liquidation or cancellation of any bond or bonds ... in whole or in part of such districts, and to pay from such funds, moneys, taxes, assessments and contributions all expenses necessary to carry on the furtherance, consummation and conclusion of such plan or plans.” (§ 3.)

Section 1626 of the Streets and Highways Code provides that ‘‘boards of supervisors in their respective counties may purchase or redeem at a discount, and may at any time in their discretion cancel or retire, bonds of any special assessment district, for the payment of which special assessments . . . have been or are to be levied, if the proceeds of such bonds are or have been used exclusively for the acquisition of rights of way or easements for, or for the construction, maintenance, improvement or repair of highways, bridges or culverts within such county or any city therein. The board may also pay any portion of the principal or interest of, or transfer such amount as the board deems proper to the interest and sinking fund for the discharge and payment of, any of such bonds.”

Section 1626.5 of the Streets and Highways Code reads, in part, as follows: ‘‘In accordance with the provisions of sections 1627 and 1628, the boards of supervisors, in their respective counties, may appropriate money to refund, repay and adjust, by any method established by law, the principal, or any portion of the principal, of any special assessments or bonds issued to represent special assessments, which have become liens on lands and which have been levied under the direct or specific assessment method to pay for the acquisition of rights of way or easements for, or the construction, maintenance, improvement or repair of public highways, bridges, or culverts within such county or any city therein.”

In enacting legislation for the relief of the property owners in special assessment districts (Stats. 1935, chap. 354; Deering’s Gen. Laws, Act 3303 l) the Legislature declared: ‘‘During the fifteen years last past hundreds of districts have been organized throughout the State of California under the provisions of the Road District Improvement Act of 1907 and the Acquisition and Improvement Act of 1925. Many of these districts were created during times of great economic prosperity and high land values. In many of such districts, due to the optimism of the times, or other causes, bonds for public improvements were issued in amounts in excess of the ability of the lands of such districts to bear the assessments necessary to pay the principal and interest on such bonds. Millions of dollars in assessed land valuation are located within districts created under these acts. Due to the present economic depression land values throughout the State have shrunk to the point where, in many cases, the total assessed valuation of all lands within a given district is less than the face value of the bonds outstanding in such district. Annual assessments upon individual parcels of land within these districts amount in many instances to more than the assessed value of such-land.

“Under present economic conditions property owners are unable to meet these high assessments and hundreds of such districts throughout the State have reached a point of hopeless delinquency.

“Inasmuch as the property owners of these districts cannot, under the law, pay their county or municipal taxes without at the same time paying the district assessments many cities and counties are unable to collect large sums of money badly needed for the purposes of government.

“Many hundreds of properties in these districts are being deeded to the State for delinquent taxes and assessments and unless the financial aid of the counties is immediately made available to assist these overburdened districts thousands of parcels of lands will be stricken from the tax rolls this year; thousands of property owners will lose their homes, millions of dollars in governmental revenue will be uncollectible and at the same time thousands of bondholders will be unable to realize any return upon their investments.”

According to the allegations of the complaint, the economic situation of Acquisition and Improvement District No. 11 in the city of South Gate was exactly that which the relief statutes were enacted to remedy. Because of the inclusion of the levy for special assessments in the total amount of municipal taxes standing against a large portion of the property in the district and the sharp reduction in real estate values, the owners were unable to meet their tax obligations and delinquencies for five years were common.

Full relief was given by the board of supervisors which, by its resolution determined that this economic distress was occasioned by the excessive and burdensome special assessments. The county purchased all of the outstanding bonds and sent all of them to the city of South Gate for cancellation. Pursuant to the county’s request, all of the bonds were canceled and, as the city and county each declare, these acts were done with the intention of the county to retain no claim for the repayment of any portion of the $29,550 which it expended for the bonds.

Yet, under these circumstances, it is vigorously contended, the property owners who could not meet their taxes because of the excessive and burdensome bond requirements were left by the action of the county with a lien against their property which could neither be enforced nor removed. Such a result runs counter to every principle of equity and fair dealing and does not give the full relief which was given by the county.

Manifestly, the relief legislation was enacted to aid property owners whose taxes were delinquent; the fact of delinquency was stressed by the Legislature and recognized by the board of supervisors as the justification for extending, relief. Undoubtedly the county acted in part for the benefit of those property owners who had paid the assessments levied prior to the cancellation of the bonds, but the situation which the relief statutes were designed to remedy was the large number of tax delinquencies. For the county to purchase the bonds and cancel them but to leave the property owner with the same delinquent assessment which he had before would not meet the purpose of the legislation. If the assessments which the owner did not pay because of economic conditions could then be collected from him, the full relief intended by the statute, that is, to get the property back on the tax rolls, would not have been accomplished. For the land to be subject to the lien of delinquent assessments which could not be removed would also be contrary to the legislative purpose.

Under these circumstances, the amount paid by the Siwel Company under protest was either “erroneously or illegally collected” from it within the meaning of section 5096 of the Eevenue and Taxation Code. The word “taxes” as used in that statute “includes assessments collected at the same time and in the same manner as county taxes.” (§ 4801.) Moreover, section 5096 is not limited to the recovery of taxes erroneously or illegally levied but authorizes the refund of taxes ‘ ‘ erroneously or illegally collected. ’ ’ (Evans v. County of San Joaquin, 67 Cal.App.2d 452, 455 [154 P.2d 468].) The use of the word “collected” rather than the term “levied” or “assessed” is most significant. (Compare section 4986 authorizing a cancellation of taxes “levied or charged. . . . erroneously or illegally.”)

This conclusion does not allow a property owner to withhold payment of an assessment and escape liability for the amount levied against his land if and when the collections from other owners in the district provide sufficient money to meet the principal and interest requirements upon unpaid bonds. For it is only when the board of supervisors, acting pursuant to the authority granted by the relief legislation and for the purpose of meeting economic distress within an assessment district, purchases and cancels all of the outstanding bonds and authorizes their cancellation that the delinquencies of the property owner are forgiven.

The judgment is reversed with directions to the trial court to overrule the general demurrer to the complaint and to proceed in accordance with the views here expressed.

Shenk, J., and Spence, J., concurred.