Scol Corp. v. City of Los Angeles , 91 Cal. Rptr. 67 ( 1970 )

Opinion

COBEY, Acting P. J.

Scol Corporation appeals from an order dismissing its action against the City of Los Angeles pursuant to Code of Civil Procedure section 581, subdivision 3, following the sustaining without leave to amend of the city’s general demurrer to its complaint. Scol’s action was for a refund of tax monies, for declarations of constructive trusts, and for other declaratory relief.

The decisive question presented by this appeal is whether Scol had standing to sue—that is, whether any cause of action existed in Scol against the city on the basis of the facts pled by Scol in its complaint. (See Parker v. Bowron, 40 Cal.2d 344, 351 [254 P.2d 6]; Klopstock v. Superior Court, 17 Cal.2d 13, 19 [108 P.2d 906, 135 A.L.R. 318].)

According to Scol’s complaint, Scol was a retailer of alcoholic beverages within the meaning of section 21.5.03.1 of the Los Angeles Municipal Code (Ordinance No. 136,900). In the first cause of action of its complaint Scol, on behalf of itself and all others similarly situated, sought a refund from the city of $320 of so-called tipplers’ tax monies it paid on behalf of its customers on sales of alcoholic beverages Scol made to them in February 1969. The basis for the refund sought was the claim that the tax was unconstitutional and otherwise illegal. In its second cause of action Scol asked that it and all others similarly situated (retailers of alcoholic beverages) be declared constructive trustees of the tipplers’ tax monies they collected under the compulsion of this allegedly illegal ordinance. In its third cause of action Scol asked that the city be declared a constructive trustee of the monies it obtained by means of this allegedly illegal tax for the benefit of Scol and all others similarly situated, or alternatively, for the benefit of all of their customers. In its fourth and final cause of action Scol asked that the ordinance be declared unconstitutional and void and its enforcement enjoined.

Since this appeal was taken, another division of this court has held, in a decision now final, that the ordinance in question was illegal because the state has preempted the field of alcoholic beverage taxation. (Century Plaza Hotel Co. v. City of Los Angeles, 1 Cal.App.3d 616, 622-626 [87 Cal.Rptr. 166].) The relief sought by means of the fourth cause of action has, therefore, become moot.

The issue remains whether the illegality of this tax has created any cause of action in Scol or others similarly situated for any of the further relief sought in Scol’s complaint. We hold, for reasons which we will now set forth, that no cause of action was created in these retailers because Scol had no standing to sue either for itself, all others similarly situated, or on behalf of its customers. Its role was not that of a taxpayer, but that of a tax collector of this special use tax.¹ Further, the $320 payment that Scol made of its own funds in lieu of an equivalent amount in taxes collected from its customers was a voluntary payment. Likewise, Scol’s payment to the city of the taxes collected by it from its customers was voluntary. Such voluntary payments do not give rise to a right of recovery.

Scol Was Not A Taxpayer

Scol contends that it has demonstrated an interest in the monies collected by it sufficient to give it standing to sue because as a retailer under the ordinance it was secondarily liable for the tax. Section 21.5.03.1, subsection (e) makes the purchaser the taxpayer, but this subsection imposes upon the retailer the duty of collecting the tax.²

In connection with this tax collection duty Scol calls our attention to the fact that section 21.5.04 of the Los Angeles Municipal Code incorporates therein the portion of the Revenue and Taxation Code entitled State Sales and Use Tax Law. (See Rev. & Tax. Code, § 6001.) Scol has neglected, however, to advise us that this incorporation expressly excludes section 6204 upon which Scol relies. This section states that the tax to be collected by the retailer constitutes debts owed by the retailer to the state, while Los Angeles Municipal Code section 21.5.09 provides instead that “The tax so collected by the retailer constitutes a debt owed by the retailer to the City.”³ (Italics added.)

In making the payment of $320 in March 1969, Scol did not pay taxes collected by it; rather, Scol paid the monetary equivalent of those taxes in order to avoid possible further liability for its default in the performance of its duty to collect those taxes. Moreover, the language of the aforementioned Los Angeles Municipal Code section 21.5.09 itself forecloses Scol’s argument. This section reads in relevant part “[If] the tax is not collected by the retailer as aforesaid, the person upon whom such tax is imposed shall pay the same when due to the City Clerk. . .

Accordingly, we hold that Scol was not a “taxpayer” under this ordinance and, therefore, has no interest in the tax monies collected under the ordinance.

Scol’s Payments Were Voluntary

Scol paid to the city both its own money ($320) and the taxes that it collected from its customers pursuant to the ordinance. Scol contends that both of these types of payment were involuntary and are, therefore, subject to refund.

We will consider first the payment by Scol to the city of $320. This was the amount of taxes Scol should have collected under the ordinance from its customers during the month of February 1969. Initially Scol claims that this payment to the city was an involuntary payment because it was made under protest and demand for refund. But, as noted in Southern Service Co., Ltd. v. County of Los Angeles, 15 Cal.2d 1, 8 [97 P.2d 963], “[T]he filing of a protest with a payment of illegal taxes otherwise voluntarily made does not deprive the payment of its voluntary character.”

Scol asserts, however, that, independent of the protest, this payment was involuntary for two reasons. First, Scol contends that its failure to collect this amount from its customers resulted from the economic necessity of meeting out-of-city competition. Our colleague in dissent finds in such competitive circumstances duress sufficient to eliminate the voluntariness of Scol’s payment. He cites two cases holding that taxes paid under duress are not paid voluntarily. (Flynn v. San Francisco, 18 Cal. 2d 210 [115 P.2d 3]; Newport Bldg. Corp. v. City of Santa Ana, 210 Cal.App.2d 771 [26 Cal.Rptr. 797].) But Scobs assertion fails, and the cases cited by our colleague are inapplicable precisely because Scol did not pay taxes in making this payment.

Scol was not a taxpayer who was compelled to pay illegal taxes. Rather, Scol was a tax collector who was compelled to collect illegal taxes and was subject to possible penalties for failure to collect these taxes. As already noted, Scobs liability to the city was for this failure to collect these taxes and not for the taxes themselves. (Cf. Brandtjen & Kluge v. Fincher, supra, and cases noted therein.) Further, while the use tax at issue has been declared illegal in Century Plaza Hotel Co. v. City of Los Angeles, supra, 7 Cal.App.3d 616, the statutory scheme requiring retailers like Scol not only to collect the tax, but also making them liable for their failure to collect the tax was many years ago upheld against constitutional challenge by the highest court in the land. (See Felt & Tarrant Mfg. Co. v. Gallagher, 306 U.S. 62 [83 L.Ed. 488, 59 S.Ct. 376].)

Finally, it has been held that one who, mistakenly believing that he owns certain property, pays the taxes due thereon is a volunteer. (McMillan v. O’Brien, 219 Cal. 775, 780 [29 P.2d 183]; Sierra Investment Corp. v. County of Sacramento, 252 Cal.App.2d 339, 342 [60 Cal.Rptr. 519].) Scol’s deliberate and intentional payment to the city of the tax obligations of its customers with full knowledge of the facts and law is an a fortiori situation to these cases of innocent mistake.

Scobs second reason for its contention that its payment of the $320 of its own money was involuntary, that is, under duress, is that it made this payment in order to avoid the imposition of the sanctions contained in the ordinance for noncollection of the tax. If this motivation determined the voluntariness of tax payments, or of payments in lieu of the taxes a tax collector failed to collect, practically all such payments would have to be deemed involuntary. This cannot be the law. (See Maxwell v. San Luis Obispo, 71 Cal. 466 [12 P. 484].) We hold that Scobs payment of $320 of its own money to the city was a voluntary act on its part.⁴

We now turn to the payments of collected taxes that Scol made to the city. The foregoing discussion should have made clear that these payments, required by the ordinance, likewise were voluntary payments.

Conclusion

Finally, Scol argues that denial of the pleas of itself and the remainder of the retailers for retention of and constructive trusteeship over the taxes collected by them will result in unjust enrichment of the city. It is true that these collections of an illegal tax may not in good conscience belong to the city. These monies may belong instead to the taxpayers, but this question is not before us. All that we decide herein-is that the tax collectors, Scol and others similarily situated, have no interest in these monies and are therefore not entitled to them as trustees or otherwise. (See Civ. Code, § 2223; Pen. Code, § 424; cf. Savage v. Mayer, 33 Cal.2d 548, 551 [203 P.2d 9].)

The order of dismissal is affirmed.

Schweitzer, J., concurred.

1 There is much authority in other jurisdictions, state and federal, holding that only the taxpayer has standing to sue for a refund of tax monies. (See, e.g., Kesbec, Inc. v. McGoldrick, 278 N.Y. 293 [16 N.E.2d 288, 119 A.L.R. 536]; Furman University v. Livingston, 244 S.C. 200 [136 S.E.2d 254]; Twentieth Century Sporting Club v. United States, 34 F.Supp. 1021 [92 Ct. Cl. 93].)

2 This subsection reads in relevant part: “(e) The tax imposed under this section shall be paid by the person purchasing the alcoholic beverage, and shall be collected from him by the retailer and remitted to the City Clerk . . . .”

3 Even if Revenue and Taxation Code section 6204 were applicable, it would not make Scol secondarily liable for the tax. As noted in Brandtjen & Kluge v. Fincher, 44 Cal.App.2d Supp. 939, 942-943 [111 P.2d 979], interpreting this section of the statute, “[These provisions] do not shift the direct burden of the tax from the purchaser to the retailer . . . [their] effect ... is merely to hold the collection agent liable for his default in the performance of his duty as such.” (Accord, Bank of America v. State Bd. of Equal., 209 Cal.App.2d 780, 799 [26 Cal.Rptr. 348]; see also, Beneficial Standard Life Ins. Co. v. State Board of Equalization, 199 Cal.App.2d 18, 20-22 [18 Cal.Rptr. 432].)

The state use tax referred to in Revenue and Taxation Code section 6204 is a tax levied upon the purchaser. It is not a tax upon the retailer. The retailer is merely the tax collector for the state. (Bank of America v. State Bd. of Equal., 209 Cal.App.2d 780, 793, 799 [26 Cal.Rptr. 348].)

4 Scol may possibly posses a right of reimbursement against some of its customers for the $320—a point we do not decide. (See Bank of America v. State Bd. of Equal., 209 Cal.App.2d 780, 793, 799-800 [26 Cal.Rptr. 348].)