Opinion
For Opinion on Hearing see, 124 Cal.Rptr. 900, 541 P.2d. 540.
Opinion on pages 23-39 omitted. [*]
Michael Korn and Kaufman & Rothman, Sherman Oaks, for petitioner.
No appearance for Respondent.
Evelle J. Younger, Atty. Gen., Philip C. Griffin and Lawrence K. Keethe, Deputy Attys. Gen., for real parties in interest.
McCOMB, Justice.
Petitioner seeks a writ of mandate to compel respondent court to rule on the merits of his request for a preliminary injunction against the Franchise Tax Board [123 Cal.Rptr. 274] [538 P.2d 730] (hereinafter referred to as 'the board'), one of the real parties in interest.
Facts: On or about December 11, 1973, the board sent petitioner a notice informing him that he owed for the taxable year 1972 additional income taxes (including interest) of $40,569.27. The board's claim was based on its determination that petitioner's income exceeded by $390,000 the amount he had declared on his income tax return. At the same time, the board sent petitioner another notice terminating as of December 7, 1973, his current tax period, determining that his taxable income for such period was $367,500, and assessing a tax of $39,525 by reason thereof. In the notices, the board gave no indication from what source petitioner's alleged additional income was purportedly derived. The notices declared that the collection of the assessments would be jeopardized by delay and notified petitioner that in accordance with section 18643 the assessments were immediately due and payable. The notices further informed petitioner that he could stay collection of the tax by filing a petition for reassessment with the board within 60 days of the date of the notices, accompanied by a bond in the amount of $88,104. Petitioner was in Mexico at the time the notices were mailed to him.
Petitioner's 1972 tax return shows a taxable income of $33,897.
Hereafter, unless otherwise indicated, all section references are to the Revenue and Taxation Code.
Section 18642 of the Revenue and Taxation Code provides, in part: 'In the case of a tax for a current period, the Franchise Tax Board may declare the taxable period of the taxpayer immediately terminated.'
California Constitution, article XIII, section 32, formerly article XIII, section 15.
Section 18643, subdivision (a) provides: 'A jeopardy assessment is immediately due and payable, and proceedings for collection may be commenced at once.'
United States Constitution, Fourteenth Amendment.
The notice respecting the 1972 jeopardy tax assessment indicated that the amount of bond to stay collection thereof was $44,626, while the notice respecting the 1973 jeopardy tax assessment indicated that the amount of bond to stay collection of that assessment was $43,478. Thus, the total required to stay collection for the two assessments was $88,104.
26 United States Code, section 7421(a), provides in pertinent part that 'no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person . . ..'
The record herein consists of petitioner's complaint and supporting affidavits, on the basis of which he sought to restrain collection of the tax. The board did not attempt to make any factual showing by way of an answer or affidavits, but, rather, resisted issuance of the preliminary injunction solely on the ground that respondent court lacked jurisdiction to enjoin collection of the tax by virtue of the anti-injunction provision of former article XIII, section [123 Cal.Rptr. 275] [538 P.2d 731] 15, of the California Constitution. Under the circumstances, the facts before us are of necessity limited to the uncontroverted allegations of petitioner's complaint and the assertions in his supporting affidavits. (See People v. St. Martin, 1 Cal.3d 524, 537-538, 83 Cal.Rptr. 166, 463 P.2d 390; Sequoia Pine Mills, Inc. v. Superior Court, 258 Cal.App.2d 65, 69-70, 65 Cal.Rptr. 353.)
Article XIII, section 15, provided, in part: 'No injunction or writ of mandate or other legal or equitable process shall ever issue in any suit, action or proceeding in any court against this State, or any officer thereof, to prevent or enjoin the collection of any tax levied under the provisions of this article; but after payment thereof action may be maintained to recover, with interest, in such manner as may be provided by law, any tas claimed to have been illegally collected.'
In addition to the facts hereinabove set forth, the complaint alleges that petitioner, 38 years old, is a citizen of the United States and of the State of California, has been a resident of the San Fernando Valley area of Los Angeles County all of his life, is employed as the general manager of Kolbe Cycle Sales, in Reseda, California, has never been convicted of a crime under the laws of the State of California or the United States, and has never sought to flee from the United States or to transfer any of his assets outside of the State of California.
The complaint further alleges that on or about December 11, 1973, the board seized a promissory note and similar items of personal property belonging to petitioner and that about two days after the date of the notices it directed the Marshal of Los Angeles County to levy and sell certain additional personal property belonging to petitioner. The marshal's sale was scheduled for January 11, 1974, and petitioner received notice thereof. His complaint was filed on January 10, 1974, the day before the sale was to take place.
The complaint also states that the amounts claimed by the board to represent petitioner's income and deficiency were arbitrary and without basis in fact and did not reflect his income for any of the claimed periods. In the complaint, petitioner contended that the procedure employed by the board in seizing his property was unconstitutional; and he sought declaratory and injunctive relief, asking that respondent court enjoin the scheduled sale of his property by the marshal and declare that the procedure utilized by the bard was unconstitutional and violative of the Fourteenth Amendment of the United States Constitution. He further sought return of the property seized by the board and the marshal. The affidavits filed by petitioner substantiated certain of the facts hereinabove set forth.
On the day petitioner's complaint was filed, respondent court issued an ex parte temporary restraining order enjoining the sale, together with an order to show cause thereon. After a hearing on the order to show cause, respondent court indicated that it was favorably disposed to granting injunctive relief to petitioner, but that it had concluded that it lacked jurisdiction to do so, in view of the anti-injunction provision of former article XIII, section 15, of the California Constitution. No showing was made by the board that there was any foundation for the jeopardy assessments against petitioner, the attorney representing the board indicating to respondent court at the hearing on the order to show cause that in his opinion the law did not require an evidentiary hearing on the facts at that time. Moreover, the attorney [123 Cal.Rptr. 276] [538 P.2d 732] frankly stated, 'I personally don't have the facts behind the jeopardy assessment.'
From an affidavit filed by the board in this court, it appears that the jeopardy assessments were based on a claim that petitioner had derived the alleged unreported income from the sale of narcotics. As hereinabove pointed out, the board was represented at the order to show cause hearing by an attorney who allegedly had no knowledge of the basis for the assessments. That hearing was held on January 24, 1974, more than six weeks after the jeopardy assessments were made and, as will hereinafter appear, almost seven months before respondent court entered its order herein denying a preliminary injunction on the ground of lack of jurisdiction. There is no evidence in the record that either petitioner or respondent court was given notice of the basis for the board's action either before or after the hearing on the order to show cause.
At the conclusion of the hearing, respondent court continued the temporary restraining order in effect for 30 days to give the parties time to obtain a determination of the issue in the appellate courts. On August 20, 1974, respondent court made an order denying a preliminary injunction and further continuing the restraining order in effect pending final determination of proceedings in the appellate court to be instituted by petitioner. Thereafter, petitioner sought a writ of mandate in the Court of Appeal to compel respondent court to rule on the merits of his claim. The Court of Appeal denied the writ without opinion, and we granted a hearing.
Respondent court's extraordinary action was apparently based on a belief that the anti-injunction rule would work a great injustice in this case. Thus, among other things, the court stated: 'I am just saying that you have taken his assets and are threatening to sell them without any disclosure to him as to the fraud or without a hearing, without anything. You know, all I can say is that it appears to be tyrannical. You may have every equity in the world on your side, but you haven't disclosed them, and this is the worst type of tyranny. . . . [Y]ou are retreating behind the Revenue Code and say that the king can do no wrong because it is the king.'
Questions: First. Does the jeopardy tax assessment and collection procedure authorized by sections 18641-18653 of the Revenue and Taxation Code, permitting seizure and sale of a taxpayer's property without affording him a prior hearing, deprive him of due process?
As will hereinafter be explained, the answer is a negative one insofar as the procedure relates to seizure of the taxpayer's property but a positive one insofar as it relates to the sale of his property.
Under the Revenue and Taxation Code, the administrative remedies afforded a taxpayer differ widely according to whether the board makes a 'deficiency assessment' under section 18583 or, as here, a 'jeopardy assessment' under section 18641. In the former case, the taxpayer, by filing a written protest with the board within 60 days after the mailing of the notice of deficiency (§ 18590), becomes entitled to a hearing before the board to contest the validity of the proposed assessment (§ 18592). If the board determines the matter adversely to the taxpayer, he may appeal to the Board of Equalization (§ 18593), in which event he becomes entitled to a hearing before that body (§ 18595). If the Board of Equalization finds in favor of the board, the taxpayer may petition for a rehearing. If such a petition is denied, the deficiency assessment becomes final upon the expiration of 30 days from the time the Board of Equalization issues its opinion (§ 18596), and the amount assessed is then due and payable. Thus, simply by availing himself of the administrative remedies outlined above, a taxpayer against whom a deficiency tax assessment has been made is able to stay collection of the tax for a substantial period of time.
[123 Cal.Rptr. 277] [538 P.2d 733] On the other hand, under the Revenue and Taxation Code a taxpayer against whom a jeopardy tax assessment has been made may stay seizure and sale of his property only if he posts a bond, or other security, in the amount set by the board or shows that jeopardy does not exist; and he is not entitled to an administrative hearing before seizure and sale of his property unless he does so. Furthermore, the anti-injunction provision of former article XIII, section 15, of the California Constitution precludes judicial review of the board's assessment prior to collection of the tax. (Horack v. Franchise Tax Board, 18 Cal.App.3d 363, 370, 95 Cal.Rptr. 717.)
Procedural due process does not require judicial determination of tax liability before collection of a tax (Phillips v. Commissioner of Internal Revenue, 283 U.S. 589, 597-599, 51 S.Ct. 608, 75 L.Ed. 1289; Aronoff v. Franchise Tax Board, 60 Cal.2d 177, 179, 32 Cal.Rptr. 1, 383 P.2d 409); and, as pointed out in Phillips, it is established that the goverment may effect collection of taxes by summary administrative proceedings (p. 595 of 283 U.S., 51 S.Ct. 608, 75 L.Ed. 1289). Since a taxpayer might conceivably, after receiving notice of a tax assessment against him, dissipate his assets and thus make it impossible for the government to collect the tax owed, the rationale of both Phillips and Aronoff suggests that the government may properly require that before being entitled to a preseizure administrative hearing the taxpayer must post a bond or other security; and we so hold.
The 'need of the government promptly to secure its revenues,' as expressed by the Phillips court (p. 596 of 283 U.S., p. 611 of 51 S.Ct.), has long been recognized. This is one of the types of extraordinary situations to which the Supreme Court undoubtedly had reference when it stated in Sniadach v. Family Finance Corp., 395 U.S. 337, 339, 89 S.Ct. 1820, 1821, 23 L.Ed.2d 349, 'Such summary procedure may well meet the requirements of due process in extraordinary situations.' (See Fuentes v. Shevin, 407 U.S. 67, 90-92, 92 S.Ct. 1983, 32 L.Ed.2d 556.)
Although the requirement that a bond or other security be posted is justified insofar as it stays seizure of the taxpayer's property, no legitimate government function is served by such a requirement with respect to staying a sale of the property, because the seizure of the property has effectively prevented the taxpayer from defeating collection of the tax. Technically, the taxpayer is entitled to stay both seizure and sale of the property by posting the required bond or other security, but such remedy may be largely illusory. For example, where the taxpayer has no other property and would have used the seized property as collateral to obtain a bond, he is not in a position to post one.
The only remedy provided by the statutory scheme is a suit for a refund under section 19082 after seizure and sale of the property. However, the fair market value is rarely realized at a forced sale, and the amount which the taxpayer would be entitled to recover if he succeeds in having the assessment declared invalid is limited to the amount obtained at the sale.
Section 19082 provides: 'Except as provided in Section 19085, after payment of the tax and denial by the Franchise Tax Board of a claim for refund, any taxpayer claiming that the tax computed and assessed against him under this part is void in whole or in part may bring an action, upon the grounds set forth in his claim for refund, against the Franchise Tax Board for the recovery of the whole or any part of the amount paid.'
Since no legitimate interest of the state would be prejudiced by affording the taxpayer an administrative hearing prior to the sale of his property, and the disruption in the revenue collection precedures would be minimal, we hold that, although no hearing is required prior to seizure of the property, due process requires that the taxpayer be afforded, if desired, an administrative hearing prior to sale of his property. Such protection is given to the [123 Cal.Rptr. 278] [538 P.2d 734] taxpayer by the federal jeopardy tax assessment procedure, under which a sale of the taxpayer's property is prohibited until 90 days (150 if the taxpayer is out of the country) after the notice of deficiency has been sent or, if the taxpayer petitions the Tax Court for a redetermination, until after the decision of that body has become final. (26 U.S.C. § 6863(b)(3); see Federal Tax Procedure for General Practitioners (Cont.Ed.Bar 1968) § 4.5, p. 137.)
Under the circumstances, since the antiinjunction provision of the California Constitution must yield to the paramount provisions of the United States Constitution (Cal.Const., art. III, § 1), petitioner is entitled to enjoin the marshal's sale of his property pending an administrative hearing on the right of the board to direct that the property be sold.
Our decision herein, that the taxpayer cannot require that he be given a hearing before his property is seized under a jeopardy tax assessment but may require that, without posting a bond or other security, he be afforded a hearing before such property is sold, comports with our recent holding in Adams v. Department of Motor Vehicles, 11 Cal.3d 146, 113 Cal.Rptr. 145, 520 P.2d 961.
Second. When the state has made a jeopardy tax assessment against a taxpayer, may a trial court enjoin the seizure of the taxpayer's property by the state upon a showing (1) that enforcement of the anti-injunction provision of the California Constitution will result in irreparable injury to him and (2) that the state cannot establish its claim against him, and he therefore would certainly succeed on the merits?
Yes. Although our constitutional provision would appear to prohibit the issuance of an injunction restraining the seizure of a taxpayer's property, it has been held that if the above requirements are met, a provision of the federal law substantially similar to our constitutional provision will not bar the trial court from enjoining seizure of the taxpayer's property by the government. Thus, in Enochs v. Williams Packing Co., 370 U.S. 1, 7, 82 S.Ct. 1125, 1129, 8 L.Ed.2d 292, it was said: '[I]f it is clear that under no circumstances could the Government ultimately prevail . . . the attempted collection [of taxes] may be enjoined if equity jurisdiction otherwise exists. In such a situation the exaction is merely in 'the guise of a tax.' . . .
26 United States Code section 7421(a) provides, in part: '[N]o suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person . . ..'
'We believe that the question of whether the Government has a chance of ultimately prevailing is to be determined on the basis of the information available to it at the time of suit. Only if it is then apparent that, under the most liberal view of the law and the facts, the United States cannot establish its claim, may the suit for an injunction be maintained. Otherwise, the [trial court] is without jurisdiction, and the complaint must be dismissed.' (See also Bob Jones University v. Simon, 416 U.S. 725, 94 S.Ct. 2038, 40 L.Ed.2d 496, 509.)
In view of the great similarity between the federal anti-injunction provision and that of California, the reasoning of the federal courts is extremely persuasive; and we hold that the limited exception hereinabove stated is applicable to our own anti-injunction provision.
As will be seen from the above, however, the taxpayer has the burden of showing not only that he has no adequate remedy at law, but also that he is certain to succeed on the merits. In order for him to do so, there should be some kind of showing of the foundation for the government's claim, and he must present evidence refuting the claim. Likewise, the government must show good faith in order to be entitled to a dismissal; and to do so, it [123 Cal.Rptr. 279] [538 P.2d 735] is required to reveal the foundation for its claim as of the time of the suit.
The following statement from Shapiro v. Secretary of State, 162 U.S.App.D.C. 391, 499 F.2d 527, 535, is apropos here: '[A]t the very least the [trial court] must obtain some evidence by which to judge whether the asserted deficiency was a tax or was so arbitrary and excessive as to be 'an exaction in the guise of a tax.' While it is not probable that the Government created the deficiency out of whole cloth, it is equally true that '[the Government's] burden [to show good faith] is not met by mere 'protestations of good faith and conclusory statements of plaintiff's tax liability. . . .''' (See also Monsky v. Fitzgerald (E.D.N.Y.1968) 297 F.Supp. 943, 944; Iraci v. Scanlon (E.D.N.Y.1963) 219 F.Supp. 796, 798.)
In Lucia v. United States (5th Cir. 1973) 474 F.2d 565, although the trial court knew that the taxpayer owned an illegal gambling establishment and knew the method by which the Internal Revenue Service had calculated the asserted deficiency, it was held that a fuller record was necessary for a proper determination whether the asserted deficiency was arbitrary and excessive. The court therefore remanded the record to the trial court for further development. (See also Pizzarello v. United States (2d Cir. 1969) 408 Fl.2d 579.)
In the present case, respondent court invited the board's attorney to make a factual showing; but the attorney declined to do so, stating, as hereinabove pointed out, that, in his opinion, no factual showing was required and, further, that he did not know the basis for the assessments. Instead of denying the injunction on the ground of lack of jurisdiction, however, respondent court should have continued the matter and required that the board reveal the foundation for the assessments. If the board failed to do so, petitioner's claim that the assessments were arbitrary and without basis in fact and did not reveal his income for either of the periods set forth in the notices would not have been refuted; and the board would not have shown the required good faith. Under such circumstances, respondent court, in view of our conclusions hereinabove stated, could properly have granted the injunction prayed for. On the other hand, if the board made a showing that its claim that petitioner was liable for further taxes was not without foundation (as was the situation in Enochs), respondent court would have lacked jurisdiction and should have dismissed the complaint.
Let a peremptory writ of mandate issue directing respondent court to vacate its order denying the preliminary injunction and instructing the court to proceed in accordance with the views expressed herein.
TOBRINER, MOSK, CLARK and RICHARDSON, JJ., concur.
SULLIVAN, Justice (concurring and dissenting).
I concur and dissent. I agree with the first portion of the majority opinion which holds that California's jeopardy tax assessment and collection procedure (Rev. & Tax.Code, §§ 18641-18653) 1 deprives a taxpayer of his property without due process of law insofar as such procedure relates to the sale of a taxpayer's property but not insofar as it relates to its seizure. Therefore I am in accord with the majority's views that under the mandate of due process the taxpayer must be afforded the opportunity, without the requirement of filing a bond or other security (§ 18643), of an administrative hearing prior to the sale of his property and that since to such extent the anti-injunction provisions of the California Constitution 2 must yield to the mandate of the United States Constitution, 3 [538 P.2d 736][123 Cal.Rptr. 280] respondent superior court has jurisdiction to issue an injunction in respect to such sale. Consequently I agree that in the instant case the writ should issue directing respondent court to exercise such jurisdiction.
However, I must express my strong disagreement with the majority's interpretation of the anti-injunction provision of the California Constitution (both the former provision and the present one; see fn. 2, ante) and their conclusion that under certain circumstances a court has jurisdiction to enjoin the seizure of the taxpayer's property as well, notwithstanding such constitutional provision. In my opinion, these views of the majority not only manifest a grave distortion of the clear meaning of the pertinent provision but also result in an unnecessary and inappropriate holding in the matter before us. I must therefore dissent from the second portion of the majority opinion and the implication therein that such portion may also serve as a basis for the issuance of the writ.
Former article XIII, section 15, of the California Constitution, which was in effect at the time the instant action was commenced and is substantially reinstated in article XIII, section 32, as amended November 5, 1974, provided in part: 'No injunction or writ of mandate or other legal or equitable process shall ever issue in any suit, action or proceeding in any court against this State, or any officer thereof, to prevent or enjoin the collection of any tax levied under the provisions of this article . . ..' In similar fashion, section 19081 reads in pertinent part: 'No injunction or writ of mandate or other legal or equitable process shall issue in any suit, action, or proceeding in any court against this State or against any officer of this State to prevent or enjoin the assessment or collection of any tax under this part . . ..'
It is important to note at the outset that insofar as they relate to the state's seizure of a taxpayer's property, these constitutional and statutory restrictions are not in turn interdicted by federal constitutional mandates of due process. Having thus passed constitutional muster, they clearly and plainly provide that the court shall have no authority to prevent through legal process the collection of any tax by the state. (See Aronoff v. Franchise Tax Board (1963) 60 Cal.2d 177, 179, 32 Cal.Rptr. 1, 383 P.2d 409.)
The majority do not hold otherwise. Indeed the majority seem content to accept the above constitutional and statutory antiinjunction provisions at their face value, conceding that 'out constitutional provision would appear to prohibit the issuance of an injunction restraining the seizure of a taxpayer's property . . ..' ( Ante, p. 278 of 123 Cal.Rptr., p. 734 of 538 P.2d, italics added.) Ignoring these clear restrictions of the California Constitution, the majority point to a 'substantially similar' provision in the Internal Revenue Code 4 and to the case of Enochs v. Williams Packing Co. (1962) 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292, which holds that an injunction may lie in certain circumstances nonetheless. Without further ado, the majority take the position that '[i]n view of the great similarity between the federal anti-injunction provision and that of California, the reasoning of the federal courts is extremely persuasive; and we hold that the limited exception hereinabove stated is applicable to our own ante-injunction provision.' ( Ante, p. 278 of 123 Cal.Rptr., p. 734 of 538 P.2d.) They offer neither analysis nor authority for such a presumptuous holding.
It is a fundamental rule that when a constitutional provision is plain and unambiguous and different meanings cannot reasonably be placed on the words employed, [123 Cal.Rptr. 281] [538 P.2d 737] it is mandatory and the courts are bound to obey it. (Anderson-Cottonwood I. Dist. v. Klukkert (1939) 13 Cal.2d 191, 196, 88 P.2d 685.) It should also be borne in mind that the Constitution furnishes a rule for its own construction: 'The provisions of this Constitution are mandatory and prohibitory, unless by express words they are declared to be otherwise.' (Cal.Const., art. I, § 28, formerly art. I, § 22; State Board of Education v. Levit (1959) 52 Cal.2d 441, 460-461, 343 P.2d 8; Santa Clara County v. Superior Court (1949) 33 Cal.2d 552, 554, 203 P.2d 1, 2. As we said in Santa Clara, 'this declaration applies to all sections of our Constitution alike, and every one subject to its mandate--county authorities as well as departments of the state government--must comply.' (See also People v. City of San Buenaventura (1931) 213 Cal. 637, 639-640, 3 P.2d 3.) The provisions of article I, section 28, 'are therefore binding upon this court in its construction of the provisions of the Constitution.' (State Board of Education v. Levit, supra, 52 Cal.2d at p. 461, 343 P.2d at p. 19.) Consequently, absent constitutional restraints on the seizure of the taxpayer's property, this court's mandatory duty is to comply, as we have in the past (Aronoff v. Franchise Tax Board, supra, 60 Cal.2d 177, 178-180, 32 Cal.Rptr. 1, 383 P.2d 409), with the unmistakable language of our anti-injunction provision. (See also Horack v. Franchise Tax Board (1971) 18 Cal.App.3d 363, 370-371, 95 Cal.Rptr. 717.)
The majority today ignore these rules of constitutional construction. Indeed their departure from the abundantly clear meaning of our anti-injunction provision is all the more startling in view of their stated justification for the announced exception. Rather than grounding their holding on the basis of statutory or constitutional interpretation, the majority merely assert their preference for an exception created by federal courts to section 7421(a) of title 26 of the United States Code. Undoubtedly, the genesis of the federal exception as well as the United States Supreme Court's most recent consideration of it in Bob Jones University v. Simon (1974) 416 U.S. 725, 94 S.Ct. 2038, 40 L.Ed.2d 496, compels the conclusion that the federal approach is not required by due process. I cannot therefore join the court in its assumption that we may in this instance choose between the applicable state provision and the federal approach. Since we deal here with a valid provision whose meaning is unmistakable, we are obligated to apply California law as written.
Given the plain meaning of article XIII, section 32, and of its predecessor provision article XIII, section 15, of the California Constitution, and its clear application to the case at bench, I would deny a taxpayer against whom the board has issued a jeopardy assessment, the right to obtain an injunction against the seizure of his property and would further deny him injunctive relief upon his showing the limited circumstances recognized by the federal courts in connection with the collection of federal taxes.
I would be content to let the matter rest here, were it not for the fact that the majority have attempted to engraft the so-called federal exemption on the principle governing the case at bench in such an illogical and precipitant manner that, I think, something more has to be said. Therefore, even assuming for the sake of argument that the federal exemption could be applied in California, I proceed to point out that its application to the case at bench could not be sustained anyway.
As set forth by the majority, the taxpayer is required to satisfy two conditions in order to be entitled to injunctive relief against a jeopardy tax assessment: (1) that enforcement of our anti-injunction provision would result in irreparable injury; and (2) that the state's claim is clearly without any foundation. The majority purport to meet the second condition by asserting that respondent court could have required the board to reveal the basis of the assessments, which the board [123 Cal.Rptr. 282] [538 P.2d 738] theretofore had refused to do, and that if the board failed to do so, 'respondent court . . . could properly have granted the injunction prayed for.' ( Ante, p. 279 of 123 Cal.Rptr., p. 735 of 538 P.2d.) However adequate such showing might have been to meet the second condition (on which I express no views), it is abundantly clear that the majority neglect to consider whether in respect to the seizure of his property, petitioner has made a showing of irreparable harm sufficient to satisfy the first condition.
Under the cited precedents, the exception adopted by the majority requires petitioner to show the usual prerequisites for equitable relief. (Bob Jones University v. Simon, supra, 416 U.S. 725, 737, 94 S.Ct. 2038, 40 L.Ed.2d 496; Enochs v. Williams Packing Co., supra, 370 U.S. 1, 6, 82 S.Ct. 1125, 8 L.Ed.2d 292; Miller v. Standard Nut Margarine Co. (1932) 284 U.S. 498, 509-511, 52 S.Ct. 260, 76 L.Ed. 422.) In the instant case, the board pursuant to section 18643 commenced collection of the jeopardy assessment by the immediate seizure of petitioner's personal property. Apart from relief from the proposed sale, petitioner must show that the seizure has resulted in the threat of irreparable harm. As previously state, I conclude petitioner has not satisfied this requirement.
In the first place, although petitioner alleges in his complaint that the sale of his personal property would cases irreparable harm by effecting the permanent loss of property rights, he has failed to allege any facts whatsoever to support a finding of irreparable injury arising from the seizure of his property. Neither his complaint nor his declarations in support of the motion for a preliminary injunction disclose how the seizure, apart from the sale, works an irreparable injury.
Secondly, petitioner's request for equitable relief from the seizure is deficient for a more fundamental reason. Petitioner has made no showing that his administrative remedies were exhausted or that these precedures were inadequate. Apart from relief from the proposed sale, petitioner's administrative remedies were extensive. Following the jeopardy assessment, petitioner could have petitioned for a reassessment with the Franchise Tax Board. (Former § 18643, now existing § 18644.) If dissatisfied with the decision of the Franchise Tax Board, petitioner could have sought further review with the Board of Equalization. (§§ 18646, 18594.) While former section 18643 required the posting of a bond, petitioner has not alleged that he was unable to meet this requirement.
Although petitioner's administrative remedies were inadequate with respect to the proposed sale, which if held would have permanently divested petitioner of his property interest, these procedures were nevertheless affective to challenge the mere seizure of property. The usual delay inherent in administrative remedies is not sufficient to excuse the exhaustion of these procedures unless the delay would result in irreparable harm. When considering the instant seizure, there appears no basis for concluding that the delay would work a substantial hardship on petitioner. Thus, petitioner's failure to exhaust his administrative remedies deprives respondent superior court of jurisdiction to grant equitable relief on this basis. (Aronoff v. Franchise Tax Board, supra, 60 Cal.2d 177, 180-181, 32 Cal.Rptr. 1, 383 P.2d 409; Abelleira v. District Court of Appeal (1941) 17 Cal.2d 280, 292-295, 109 P.2d 942; Horack v. Franchise Tax Board, supra, 18 Cal.App.3d 363, 367-368, 95 Cal.Rptr. 717.) In sum, I conclude that due to the deficiencies in petitioner's application for equitable relief the court below would not be justified in granting injunctive relief in connection with the seizure of petitioner's property.
I add a final word. The majority seem to regard the federal exception as the creation of the United States Supreme Court in Enochs v. Williams Packing Co., supra, 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292. Long before Williams Packing Co., however, [123 Cal.Rptr. 283] [538 P.2d 739] federal courts struggled to carve out a narrow exception to the federal anti-injunction act. In its most recent consideration of the exception (see Bob Jones University v. Simon, supra, 416 U.S. 725, 94 S.Ct. 2038, 40 L.Ed.2d 496), the United States Supreme Court fully acknowledged its willingness in the past to indulge in varying interpretations of the federal act but nevertheless declared a strong-willed determination to stand fast with its formulation of the federal rule announced in Williams Packing Co. Writing for the court, Justice Powell resisted the taxpayer's invitation to offer yet another reading of the act by concluding that Williams Packing Co. 'was meant to be the capstone to judicial construction of the Act. It spells an end to a cyclical pattern of allegiance to the plain meaning of the Act, followed by periods of uncertainty caused by a judicial departure from that meaning, and followed in turn by the Court's rediscovery of the Act's purpose.' (Id. at p. 742, 94 S.Ct. at p. 2048.)
The majority disregard this significant language and as a result their treatment of the question is rife with potential difficulties. The federal cases to which they refer (Shapiro v. Secretary of State (1974) 162 U.S.App.D.C. 391, 499 F.2d 527; Lucia v. United States (5th Cir. 1973) 474 F.2d 565; Pizzarello v. United States (2d Cir. 1969) 408 F.2d 579) (see ante, p. 279 of 123 Cal.Rptr., p. 735 of 538 P.2d) disclose the web of litigation which may be spun out when courts deviate from the plain meaning of statutes aided by a judicially declared exception. Unless strictly adhered to, the rule declared by the majority will produce a volume of litigation aimed at delaying the state's collection of revenue. Indeed, the majority's persistence in demanding but minimal compliance with its announced rule indicates a cavalier attitude toward the state's legitimate interest in collecting tax revenue as well as toward the inevitable problems which will be presented to courts that are permitted to adjudicate these tax matters prematurely.
To recapitulate: First, there is simply no basis for the majority's holding that a trial court may enjoin the board's seizure of a taxpayer's property by applying the limited federal exception to the clear mandate of the anti-injunction provision of the California Constitution; and second, even if such exception were applicable, it would not justify the issuance of an injunction in the instant case. I am therefore convinced that the course charted by the majority in the second part of their opinion should be avoided. It exhibits an unwarranted deviation from the clear meaning of our anti-injunction provision. Its result will not be to provide a narrow and well-constructed remedy in addition to those afforded by administrative remedies (§§ 18644, 18646, 18594), and suits for refunds (§ 19081), but rather to foster continuous interference with the state's prompt collection of revenue.
WRIGHT, C. J., concurs.
[*] Vacated on direction of Supreme Court by order dated October 23, 1975. See post, page 410.
Unless otherwise indicated, all statutory references herein are to the Revenue and Taxation Code.
In the body of each notice, it is stated: 'You may stay collection, at any time before this notice becomes final [under section 18644 a jeopardy assessment becomes final within 60 days of the mailing of notice thereof], by filing with the Franchise Tax Board a bond in the amount indicated above or other security in such amount as the Franchise Tax Board may deem necessary, not exceeding double the amount (together with interest thereon to the date of payment) as to which the stay is desired.'
Section 18643, subdivision (b), provides, in part: 'The collection of the whole or any amount of a jeopardy assessment may be stayed, at any time before the assessment becomes final, by filing with the Franchise Tax Board: (1) a bond in an amount equal to the amount (together with interest thereon to the date of payment) as to which the stay is desired . . . or (2) other security in such amount as the Franchise Tax Board may deem necessary, not exceeding double the amount (together with interest thereon to the date of payment) as to which the stay is desired.'
Section 18643, subdivision (d), provides: 'The Franchise Tax Board may, prior to the time the assessment becomes final, stay collection of the whole or any amount of a jeopardy assessment if it finds that jeopardy does not exist.' From the record, however, it does not appear that petitioner was notified that if he could show that jeopardy did not exist, he could obtain a stay. In fact, the notices sent to him specifically stated, just prior to the paragraph, set forth in the second paragraph of this footnote, 'COLLECTION MAY BE STAYED ONLY AS EXPLAINED BELOW.' The only reference thereafter to a stay is that contained in the paragraph quoted above. Additionally, although petitioner's counsel requested in letters to the board that the matter be set down for hearing as soon as possible, the board responded on January 24, 1974, that 'an oral hearing would be premature at this time.'
By Proposition 8, passed by the voters of the State of California on November 5, 1974, article XIII of the California Constitution was extensively revised. Section 15 was repealed, and the provisions thereof are now covered by section 32, which reads, as follows: '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.'
'You would rather sell his stuff first, and then when he comes crawling to you, then you are going to say, 'Well, we are going to have a hearing now, and we sold all of your property at a distress sale, and you are bankrupt, but too bad.''
'So you are going to ruin him, and then after you have ruined him, then you are going to say, 'Too bad, old man, we made a mistake, but we are the State and you can't do anything about it.''