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Property Purchasers Must Pay Assessments Before Bringing Legal Challenge in Court—C.A.
Opinion Says Statute Authorizing Suit to Quiet Title Does Not Conflict With Other Law Providing for ‘Pay First, Litigate Later’ Rule Governing Payment of Property Taxes
By a MetNews Staff Writer
The Fifth District Court of Appeal has held that purchasers of properties at a municipal tax sale who challenged the validity of nuisance abatement assessments that had been imposed prior to the sale could not withhold those amount pending litigation, but had to pay first, and sue later.
Appealing the dismissal of their lawsuit were siblings Bryce and Lindsay Hovannisian, who purchased several properties at a tax sale in 2020 from the City of Fresno.
After the purchase, the County of Fresno—which collects taxes on behalf of the city—issued bills to the Hovannisians for the 2020-21 tax period that included certain pre-sale special assessments for nuisance and abatement costs, as well as unpaid penalties, which were secured by liens on the properties.
Paying everything but the assessments and associated charges, the Hovannisians argued that the tax sale had removed any liens from the properties and any continuing responsibility for the challenged charges. After their partial payment was rejected, the Hovannisians filed a complaint against the city and county, seeking to quiet title to the properties.
Statutory Bar Asserted
Three separate demurrers were filed by the city and county, each asserting that the plaintiffs action was barred by Revenue and Taxation Code §4807 which provides that “[n]o injunction or writ of mandate or other legal or equitable process shall issue in any suit, action, or proceeding…against any county, municipality, or district…to prevent or enjoin the collection of property taxes sought to be collected.”
The Hovannisians maintain that §3727—which says that “[w]henever property has been purchased at tax sale, the purchaser or any other person claiming through the purchaser may bring suit to quiet title to all or any portion of the property and prosecute it to final judgment”—gives them the right to file their complaint challenging the assessments pre-payment.
Fresno Superior Court Judge Jonathan M. Skiles sustained the third demurrer, without leave to amend.
Justice Rosendo Peña Jr. wrote the opinion, filed Monday, affirming the ensuing judgment in favor of the city and county. Acting Presiding Justice Donald R. Franson Jr. and Justice Thomas DeSantos joined in the opinion.
Peña said:
“This appeal…does not concern the validity of the underlying tax liens, but rather a procedural issue: whether appellants can sue the City and the County prior to payment of the assessments, or whether they must bring their complaints in an action for a refund.
“We affirm the trial court’s ruling because appellants’ suit, brought prior to payment, is barred by…section 4807….Appellants must pay their tax bills and seek a refund in order to raise any legal issues related to the validity of the special assessments.”
Peña said that “[t]he primary question posed in this appeal is whether the special assessments at issue fall within the statutory definition of taxes subject to section 4807.” Noting that the section codifies the general rule in tax jurisprudence that a party must “pay first, litigate later,” he looked to the definition of “taxes” provided in §4801, which expressly includes “assessments collected at the same time and in the same manner as county taxes.” The Hovannisians argue that the assessment in question is not covered because it is collected in the time and manner of municipal, not county, taxes.
They acknowledge that Government Code §51553 provides that “[t]he taxes…levied” under legislation allowing cities to transfer tax collection duties to the county “shall be collected at the time and in the manner of county taxes,” but contend that the use of the word “levied” indicates that only taxes and not special assessments are covered by the section.
Unpersuaded, the jurist remarked:
“[W]e conclude that section 4801 encompasses assessments that, as a factual matter, are collected at the same time and in the same manner as county taxes. Here, as both a matter of fact and a matter of law, the assessments are being collected at the same time and in the same manner as county taxes. Because of this, section 4807 bars this suit, which seeks to challenge the assessments as void and would therefore impede the collection of these taxes. Appellants’ remedy is to simply pay the taxes and challenge the validity of them in a refund action if the City is not forthcoming with any refund that may be required by law.”
Alleged Statutory Conflict
The Hovannisians also claim that §§4807 and 3727 conflict and that the latter must be given full effect as the more specific statute.
Rejecting that argument, Peña commented:
“We disagree. The most straightforward and harmonious reading of the statutes is that while purchasers at a tax sale may generally bring quiet title actions, they may not do so if the relief sought is a prepayment challenge to the validity of a tax.”
He continued:
“We see no difficulty in reconciling these statutes. Section 3727 is the more general and earlier enacted statute. It permits a litigant who has purchased property at a tax sale to institute an action to quiet title to that property. Section 4807 limits the reach of section 3727, preventing it from being used against a county or municipality when the effect of it is to ‘prevent or enjoin the collection of property taxes.’ Section 3727 could not have impliedly repealed section 4807, which was enacted some 40 years later. These statutes are easily read and understood together: section 4807 limits section 3727 only to the extent a suit under section 3727 attempts to quiet title against a county, municipality, or district by challenging the validity of a tax prior to payment.”
Noting that the property owners seek only equitable relief, the justice said:
“Courts do not sanction equitable remedies where adequate remedies at law exist. Since appellants seek only equitable relief here, in the form of a declaration that the City has no interest in their properties and the special assessment liens should be canceled, and they have an adequate remedy at law, their action is barred. We express no opinion, of course, on the merit of any action for refund that may be brought in the future after appellants have paid their taxes.”
The case is Hovannisian v. City of Fresno, 2024 S.O.S. 3846.
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