Gamboa v. CA State Bd. of Equalization

Filed 9/27/07 Gamboa v. CA State Bd. of Equalization CA2/1

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

APPEAL from an order of the Superior Court of Los Angeles County, Robert A. Dukes, Judge. Reversed with directions.

Marc A. Zimmerman for Plaintiff and Appellant.

Edmund G. Brown, Jr., Attorney General, W. Dean Freeman and Donald R. Currier, Deputy Attorneys General, for Defendant and Respondent.

____________________

INTRODUCTION

In this action by plaintiff Luz Abigal Gamboa for quiet title against defendant California State Board of Equalization, plaintiff appeals from an order of dismissal entered after the court sustained the demurrer of defendant without leave to amend. We reverse the order.

BACKGROUND

This lawsuit involves a dispute between plaintiff and defendant concerning a notice of tax lien on a parcel of real property for taxes assessed against taxpayer Jose Manual Gamboa, father of plaintiff. Defendant made a determination that the transfer of the real property by a taxpayer with a pending tax liability (Jose Manuel Gamboa) to his daughter (plaintiff) was made to avoid the collection of the tax. Defendant determined that the transfer was not a bona fide sale of real property and that the property was given to a nominee to hold for the taxpayers benefit. Defendant placed a nominee tax lien on the property in an effort to preserve its ability to collect the tax liability from the taxpayer.

On December 30, 2005, plaintiff filed a complaint to quiet title to real property. The trial court sustained defendants demurrer with leave to amend on March 30, 2006. On March 31, 2006, plaintiff filed a first amended complaint and on April 6, 2006, plaintiff filed a second amended complaint. The second amended complaint essentially alleged that plaintiff was the sole owner of the property and was not the taxpayers nominee. The amended complaint alleged that plaintiff is informed and believes that Jose Manuel Gamboa and Teresa Gamboa claim some interest of some nature in the property. It did not address the basis of the issuance of the nominee lien or that the property was transferred to her without consideration or that the Gamboas were her parents. She alleged that a nominee lien was wrongfully record ed against the real property.

Defendant demurred to the second amended complaint, contending that to the extent the instant action seeks to remove a tax lien imposed on the subject property, the court was without jurisdiction to adjudicate the validity, propriety or correctness of the disputed tax or to prevent or enjoin the assessment or collection of any disputed tax, because the disputed taxes had not been paid and administrative remedies had not been exhausted. The opposition to the demurrer did not address the familial relationship between plaintiff and the taxpayer or the lack of consideration for the transfer of the property. The opposition alleged that plaintiff was the sole owner of the real property. She attempted to challenge the factual basis for the nominee designation. She asserted that she was not the taxpayer who owed the money and had no way to challenge the lien other than a quiet title action.

DISCUSSION

When reviewing a judgment dismissing a complaint after the granting of a demurrer without leave to amend, courts must assume the truth of the complaints properly pleaded or implied factual allegations. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 . . . .) Courts must also consider judicially noticed matters. (Ibid.) . . . If the trial court has sustained the demurrer, we determine whether the complaint states facts sufficient to state a cause of action. If the court sustained the demurrer without leave to amend, . . . we must decide whether there is a reasonable possibility the plaintiff could cure the defect with an amendment. (Ibid.) If we find that an amendment could cure the defect, we conclude that the trial court abused its discretion and we reverse; if not, no abuse of discretion has occurred. (Ibid.) The plaintiff has the burden of proving that an amendment would cure the defect. (Ibid.) (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)

The grant deeds attached as exhibits to the complaint indicate that the real property was transferred from the taxpayer to plaintiff as a gift to a child for no consideration. In issuing the nominee lien against plaintiff, defendant made a determination that a taxpayer had fraudulently transferred property to hold the property for the taxpayers benefit and to place the property out of the reach of the taxing agency. Nominee liens are authorized by the California Revenue and Taxation Code. (Rev. & Tax. Code,  19071 et seq., 19221; see also Gov. Code,  7170.)

The question before us is whether, based on the allegations of the amended complaint, the trial court was without jurisdiction to remove or interfere with the lien until the disputed lien had been paid and administrative remedies followed. We conclude that it was not.

Article XIII, section 32 of the California Constitution provides: No legal or equitable process shall issue in any proceeding in any court against this State or any officer thereof to prevent or enjoin the collection of any tax. After payment of a tax claimed to be illegal, an action may be maintained to recover the tax paid, with interest, in such manner as may be provided by the Legislature.

The law is clear that injunctive relief and declaratory relief are not proper when a taxpayer has failed to pay an assessed tax before filing a refund action. (Connolly v. County of Orange (1992) 1 Cal.4th 1105, 1113-1114; State Bd. of Equalization v. Superior Court (1985) 39 Cal.3d 633, 638.) The due process clause does not guarantee the right to judicial review of tax liability before payment. (Aronoff v. Franchise Tax Board (1963) 60 Cal.2d 177, 179.) This court has recognized that [t]he power of a state to provide the remedy of suit to recover alleged overpayments as the exclusive means of judicial review of tax proceedings has long been unquestioned. (Writers Guild of America, West, Inc. v. City of Los Angeles (2000) 77 Cal.App.4th 475,481, quoting Modern Barber Col. v. Cal. Emp. Stab. Com. (1948) 31 Cal.2d 720, 726.) Unless a disputed tax has been paid in full, a trial court lacks jurisdiction to adjudicate the merits of the dispute. (Garg v. People ex rel.State Bd. of Equalization (1997) 53 Cal.App.4th 199, 209.)

Plaintiff claims, however, that she is not a taxpayer, and the foregoing rules do not apply to her. Plaintiff relies on Baldassari v. United States (1978) 79 Cal.App.3d 267 for the proposition that a quiet title action is the means to challenge a nominee lien. Baldassari involved a federal lien imposed by the Internal Revenue Service for the collection of federal taxes. Federal statutory law (28 U.S.C.  2410) allows for a quiet title action to discharge a federal lien on property. There is no such statutory remedy available under California law.

At our request, the parties submitted supplemental briefs addressing the question whether there are any administrative remedies available to a person who is not a taxpayer who has failed to pay an assessed tax and against whose property a nominee lien has been placed. The People acknowledge that [t]here is no formal, statutory administrative process available to third-party transferees of taxpayer property against which a nominee lien has been recorded. They suggest, however, that any non-taxpayer against whose property a tax lien has been recorded may challenge the propriety of the lien by providing the [State Board of Equalization (Board)] with evidence that the lien is erroneous or otherwise improper. It is the established practice of the [Board] to investigate any such claim and review any evidence offered by the claimant. After reviewing any such evidence the [Board] will make a determination as to the validity of the lien.

With respect to exhaustion of administrative remedies, [t]he rule is that where a right is given and a remedy provided by statute, the remedy so provided must ordinarily be pursued. (Rojo v. Kliger (1990) 52 Cal.3d 65, 83, italics added; Mathew Zaheri Corp. v. Mitsubishi Motor Sales (1993) 17 Cal.App.4th 288, 293.) In this case, however, no statutory or even agency-created right to an administrative remedy is provided to a third-party transferee of taxpayer property against which a nominee lien has been recorded. The doctrine of exhaustion of administrative remedies therefore does not apply. The practice of an administrative agency is not a substitute for such a remedy.

Accordingly, plaintiffs quiet title action was not barred based on failure to exhaust administrative remedies. The trial court erred in sustaining defendants demurrer without leave to amend and dismissing the action on that basis.

DISPOSITION

The order is reversed. The trial court is directed to vacate its order sustaining defendants demurrer without leave to amend and to enter a new and different order overruling the demurrer. Plaintiff is to recover costs on appeal.

NOT TO BE PUBLISHED

JACKSON, J.*

We concur:

VOGEL, Acting P. J.

ROTHSCHILD, J.

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* Judge of the Los Angeles Superior Court assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.