Filed 1/19/16 Ventura Realty & Investment Co. v. City of Buenaventura CA2/6
               NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
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publication or ordered published for purposes of rule 8.1115.


           IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                  SECOND APPELLATE DISTRICT

                                                DIVISION SIX


VENTURA REALTY & INVESTMENT                                                    2d Civil No. B262285
COMPANY,                                                                      (Super. Ct. No. 56-2013-
                                                                              00442398-CU-MC-VTA)
     Plaintiff and Appellant,                                                    (Ventura County)

v.

CITY OF SAN BUENAVENTURA,

     Defendant and Respondent.



                   The City of San Buenaventura (the City) assesses a 10 percent
transient occupancy tax (TOT) on hotel room rates. Ventura Realty & Investment
Company, a California Corporation doing business as the Bella Maggiore Inn (the
Inn), requires its guests to pay a 10 percent tax on the entire room rate, which
includes a fixed charge for food and beverages. In paying the TOT, however, the
Inn deducts the portion of tax attributed to the fixed food and beverage charge.
After the City demanded the entire amount collected, the Inn paid and brought an
action for declaratory relief. The trial court entered judgment for the City on the
ground that the Inn had failed to exhaust its administrative remedies under the TOT
ordinance. The Inn appeals, and we affirm.
                        FACTS AND PROCEDURAL HISTORY
               The Inn is a small hotel in downtown Ventura. It is subject to the
City's TOT ordinance, which requires all "transients" (defined as hotel guests
staying 30 consecutive days or less) to pay a tax equal to 10 percent of the "rent,"
i.e., the charged nightly room rate. (San Buenaventura Municipal Code,1
§ 4.115.030.) When a hotel operator collects the TOT, "[t]he amount of the tax
shall be separately stated from the amount of the rent charged, and each transient
shall receive a receipt for payment from the operator." (Id. at (C).) The operator
shall "remit the full amount of the tax collected to the [City's] tax collector" with a
return reflecting "the total rents charged and received and the amount of the tax
collected for transient occupants." (Id. at (C)(5) & (C)(6).)
               If a hotel operator fails to collect, report and remit the TOT or any
portion thereof, the City's tax collector shall assess the unpaid amounts against the
operator along with any interest and any applicable penalties. (§ 4.115.030 (J).)
Within 10 days after being served with notice of an assessment, "such operator may
apply in writing to the tax collector for a hearing on the amount assessed. If
application by the operator for a hearing is not made within the time prescribed, the
tax, interest and penalties, if any, determined by the tax collector shall become final
and conclusive and immediately due and payable." (Id. at (J)(2).) Within 15 days
after being served with notice of the tax collector's post-hearing determination, the
hotel operator may appeal to the city council by filing a notice of appeal with the
city clerk. (Id. at (J)(4).) After an appeal has been perfected, the city council shall
conduct a hearing to "hear and consider all evidence produced by the appellant and
other witnesses" and shall thereafter serve the appellant with its "written
findings . . . which shall be final . . . ." (Id. at (J)(6).)




     1 Unless otherwise noted, all statutory references are to the San
Buenaventura Municipal Code.

                                               2
              The Inn's nightly room rate includes a mandatory charge for food and
beverages that are provided by Nona's Courtyard Cafe (Nona's), which is located on
the premises. During the relevant period, the nightly food and beverage charge for
each guest varied from $9.50 to $14.50. The charge is included in the room rate
and no deduction is made for guests who decline any portion of the food and
beverages offered to them.
              In February 2012, the City conducted an audit of the Inn's TOT
returns for the period of June 2008 through January 2012. The audit revealed that
the Inn was imposing a 10 percent tax on the entire "rent," which includes the
nightly food and beverage charge for each guest. Instead of remitting the entire 10
percent to the City, however, the Inn had exempted the amount attributable to the
nightly food and beverage charge, resulting in a deficiency of $37,248.86.
              On June 20, 2012, Janey Dunn, the City's treasury supervisor, sent a
letter to the Inn's CEO and manager, Thomas J. Wood. Dunn stated "the City's
position that since the amount of Tax charged the guest is the TOT Ordinance rate
of 10% and is disclosed as such to the guest, the amount of Tax collected is the
amount of Tax due the City." The letter also noted that the issue had been
"discussed at length with Travis Campbell of Ventura Realty Company, on behalf
of the Inn." Dunn informed Wood that "[s]hould you wish to offer matters in
extenuation or mitigation of this deficiency determination, you may do so in writing
directed to me. Please include copies of any documentation that you believe may
substantiate a reconsideration of the amount of the deficiency determination."
              After receiving no response, Dunn sent another letter to Wood on
September 14, 2012. The letter formally demanded that the Inn remit the deficiency
of $37,248.86 and included an invoice for payment.
              The Inn did not pursue its administrative remedies under section
4.115.030. On October 4, 2012, the Inn's attorney sent a letter "disput[ing] . . . the
City's ability to collect any sales or use taxes regarding the consumption of food and
beverages in regards to hotel occupancy because that field of taxation is preempted

                                           3
by, inter alia, California Revenue and Taxation Code section 7203.5." Counsel
asserted that "neither [the Inn] nor Mr. Wood will respond to the City's
unconstitutional demand for payment. If further demand is made, it will be my
recommendation that our clients pursue all available legal remedies including, but
not limited to, an action to have SBMC chapter 4.115 stricken in its entirety."
              On December 6, 2012, the City responded: "If the Inn was itemizing
the food and beverage charges on its guest receipts and not charging its guests the
10% TOT on the . . . daily charge, this would probably be appropriate (see Revenue
and Taxation Code § 7282.3). Because the Inn is not differentiating on its guest
receipts that portion of the guest payment which is attributable to rent as opposed to
food and beverage, however, the TOT is applicable to the entire amount." The City
reiterated is demand for payment of the $37,248.86 deficiency and added, "[I]t is
our understanding that the Inn has continued charging the TOT on each entire guest
charge since January, 2012; we therefore expect payment of the amount which has
been withheld for that time period as well. If the City does not receive these funds
immediately, it will consider taking appropriate legal action against the Inn." The
City subsequently determined that the Inn owed an additional $11,101.60 for TOT it
had collected between February 2012 and May 2013.
              On July 30, 2013, the Inn remitted $37,248.86 to the City. 2 On
September 19, 2013, the Inn filed a complaint against the City for declaratory relief.
The complaint sought declarations that (1) the Inn was entitled to a refund of the
$37,248.86 it paid the City; (2) the City is prohibited from collecting TOT on food
and beverage charges that are subjected to state sales taxes; and (3) the City's
attempt to collect TOT on those charges is preempted by the California Revenue
and Taxation Code. The City's answer included as an affirmative defense that the
action was barred by the Inn's failure to exhaust its administrative remedies under

        2 The Inn paid pursuant to section 4.115.100, which compels payment of a
tax assessment "as a condition precedent to seeking judicial review of any tax
liability."

                                           4
the TOT ordinance. In its trial brief, the City reiterated this defense and added that
complaint was foreclosed by the Inn's failure to submit a claim under Government
Code section 910. The parties stipulated to various facts and the admissibility of
documentary evidence.
              The City's affirmative defenses were bifurcated and tried first. After
further briefing and argument, the court entered judgment in favor of the City on the
ground that the Inn had failed to exhaust its administrative remedies under section
4.115.030.
                                    DISCUSSION
              The Inn contends the court erred in finding the action was barred as a
result of the Inn's failure to exhaust its administrative remedies. We review the
ruling de novo (Wallich's Ranch Co. v. Kern County Citrus Pest Control Dist.
(2001) 87 Cal.App.4th 878, 883), and conclude there was no error.
              "Generally, where an adequate administrative remedy is provided by
statute or rule of an administrative agency, 'relief must be sought from the
administrative body and this remedy exhausted before the courts will act.'
[Citation.] The requirement of exhaustion of the administrative remedy is 'a
jurisdictional prerequisite to resort to the courts.' [Citations.]" (Williams v.
Housing Authority of City of Los Angeles (2004) 121 Cal.App.4th 708, 722.) ". . .
[T]he exhaustion doctrine serves several well-established functions. First, it allows
the administrative agency an opportunity to redress the alleged wrong without
resorting to costly litigation. [Citation.] Second, even where complete relief is not
obtained, it can serve to reduce the scope of the litigation or possibly avoid
litigation. [Citations.] Third, an administrative remedy ordinarily provides a more
economical and less formal forum to resolve disputes and provides an opportunity
to mitigate damages. [Citations.] Finally, the exhaustion requirement promotes the
development of a more complete factual record and allows the administrative
agency or entity implicated in the claim an opportunity to apply its expertise, both
of which assist later judicial review if necessary. [Citations.]" (Ibid.)

                                            5
              The Inn does not dispute that the tax assessment it challenges was
made pursuant to section 4.115.030, or that such challenges are generally subject to
the administrative remedies set forth in the ordinance. It is also undisputed that the
Inn did not pursue its remedies by requesting a hearing within 10 days after being
served with notice of the assessment, thereby rendering it "final and conclusive and
immediately due and payable." (§ 4.115.030 (J)(2).) The Inn nevertheless claims it
can maintain an action for declaratory relief on the ground that the City is applying
its TOT ordinance in an unconstitutional manner. The Inn further contends it
should be excused from the exhaustion requirement because the remedies provided
in section 4.115.030 are ineffective and pursuing them would have been futile.
None of these points has merit.
              "Ordinarily, an aggrieved taxpayer must exhaust available
administrative remedies before resorting to the courts for relief from an erroneous
assessment of property taxes. [Citations.]" (C.H.B. Foods, Inc. v. County of Los
Angeles (1987) 195 Cal.App.3d 821, 824.) The exhaustion rule applies even when
it is alleged that a tax has been imposed "in violation of constitutional or statutory
mandates." (Id. at pp. 824-825, quoting Security-First Nat. Bank v. County of Los
Angeles (1950) 35 Cal.2d 319, 321.) Moreover, "[i]t is the taxpayer's burden to
establish that administrative remedies have been exhausted, or that facts exist which
excuse that requirement. [Citation.]" (Park 'N Fly of San Francisco, Inc. v. City of
South San Francisco (1987) 188 Cal.App.3d 1201, 1208 (Park 'N Fly).)
              The Inn asserts that its action is not subject to the exhaustion of
administrative remedies because Code of Civil Procedure section 1062 states that
the right to declaratory relief is "cumulative." That declaratory relief is cumulative
to other legal remedies, however, is of no moment here. The Inn cannot circumvent
the exhaustion requirement simply by framing its action as a claim for declaratory
relief, and none of its cited authority indicated otherwise.
              In Agnew v. State Bd. Of Equalization (1999) 21 Cal.4th 310, the
taxpayer plaintiff sought "a declaration of the validity of the Board's policy of

                                           6
requiring payment of accrued interest on a tax deficiency before it will consider a
refund claim." (Id. at p. 320.) The plaintiffs in Howard Jarvis Taxpayers Assn. v.
City of Roseville (2002) 97 Cal.App.4th 637, sought a judicial determination that a
certain fee was being charged in violation of state law. (Id. at p. 638.) Neither of
these claims was subject to exhaustion requirements because they did "not involve
an issue subject to determination through the administrative refund remedy
available to plaintiff." (Ibid.; Agnew, at p. 320.)
              Here, every claim asserted in the Inn's complaint for declaratory relief
could have been raised during the administrative review process. Had the Inn
invoked its right to a hearing, it would have had the opportunity to "appear and
offer evidence why such specified tax, interest and penalties should not be so
fixed." (§ 4.115.030(J)(3).) For example, the Inn could have sought to demonstrate
that at least a portion of the "tax" it collected on the food and beverage charges was
for the payment of state sales tax, not the TOT.3 The Inn then would have had the
right to appeal any adverse decision to the city council, which would have been
required to "hear and consider all evidence produced by the appellant and other
witnesses." (Id. at (J)(6).) Moreover, nothing would have restricted the City's
authority to address and resolve the Inn's claims. The Inn's third case, Brown v.
County of Los Angeles (1999) 72 Cal.App.4th 665, does not involve any issue
regarding the exhaustion of administrative remedies. Indeed, the plaintiff in that
case filed suit after her administrative claims for refunds had been denied. (Id. at p.
667.) The Inn, by contrast, did not pursue its administrative remedies, much less
exhaust them.
              The Inn's claim that the pursuit of its administrative remedies under
4.115.030 would have been futile was not raised below and is thus forfeited. While
the Inn is correct in its assertion that new theories involving question of laws on

      3 Sales tax on the food and beverage charges at issue would have been 7.25
percent or 7.5 percent. The Inn, however, collected a 10 percent tax on those
charges, leading the City to characterize it as TOT rather than sales tax.

                                            7
undisputed facts can be raised for the first time on appeal (see, e.g., Marriage v.
Priem (2013) 214 Cal.App.4th 505, 510-511), that exception does not apply here.
As we have noted, evidence that the Inn had actually paid sales tax on the food and
beverage charges may have led the City to reconsider the assessment. Moreover,
this possibility fatally undermines the Inn's claim of futility. The City's' position
was not so "certain" that the Inn was excused from pursuing its administrative
remedies. (See Grossmont Union High School District v. California Department of
Education (2008) 169 Cal.App.4th 869, 875.) As the City notes, "there were two
levels of administrative appeal which the I[nn] never utilized – the tax collector and
the City Council. None of the [City's] three letters even remotely suggested how
either of them would rule on this matter."
               The cases the Inn offers in support of its futility claim are inapposite.
In Park 'N Fly, supra, 188 Cal.App.3d 1201, the administrative remedy only
provided the taxpayer a means of challenging its classification under a particular
ordinance as a commercial parking structure. The court thus held that the
exhaustion requirement did not apply to the taxpayer's claim that the ordinance was
unconstitutional. (Id. at pp. 1208-1209.) In Andal v. City of Stockton (2006) 137
Cal.App.4th 86, the court held that the "pay first, litigate later" doctrine did not
apply to a taxpayer challenge of a fee imposed by city ordinance on the ground that
the ordinance was unconstitutionally enacted without voter approval. The court
reasoned among other things that the plaintiffs were not seeking a refund and that
the ordinance provided "no mechanism for a constitutional challenge to the entire
structure under which [it] operates . . . ." (Id. at p. 93.)
               The Inn's entire complaint is premised upon its request for a refund.
The Inn does not claim that section 4.115.030 is unconstitutional, but rather that it is
being applied in a manner that conflicts with state law. Because the Inn did not
avail itself of the opportunity to litigate its dispute before the tax collector and city
council, it is not entitled to declaratory relief. (Id. at p. 91, citing Flying Dutchman
(2001) 93 Cal.App.4th 1129, 1137-1138 ["[D]eclaratory relief, which plaintiffs seek

                                             8
here, is in the nature of equitable relief, and equitable relief will not be granted it
there is a plain, complete, speedy, and adequate remedy at law"].)
              The judgment is affirmed. The City shall recover its costs on appeal.
              NOT TO BE PUBLISHED.




                                            PERREN, J.


We concur:



              GILBERT, P. J.



              YEGAN, J.




                                            9
                              Tari L. Cody, Judge

                       Superior Court County of Ventura
                      ______________________________


             James B. Devine, Law Offices of James B. Devine, APC, for Plaintiff
and Appellant.
             Gregory Diaz, City Attorney, Andy H. Viets, Senior Assistant City
Attorney, City of San Buenaventura, for Defendant and Respondent.
