Raja Development Co. v. Napa Sanitary Dist. ( 2022 )

Filed 11/8/22
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FOUR
RAJA DEVELOPMENT CO., INC.,
et al.,
Plaintiffs and Appellants, A162256
v. (Napa County
NAPA SANITARY DISTRICT, Super. Ct. No. 19CV000682)
Defendant and Respondent;
COUNTY OF NAPA,
Real Party in Interest.
Plaintiffs Raja Development Co., Inc., Cashel, Inc., and Carter Randall
Callahan (plaintiffs) are condominium owners who allege, in their third
amended complaint, that a sewer service charge collected by defendant Napa
Sanitation District (the District) consists of two distinct components—a
“capacity fee” and a “use fee”—and that the latter is an unlawful tax. The
trial court sustained the District’s demurrer without leave to amend,
agreeing with the District that the action is untimely. For the purposes of
this appeal, the parties agree that, at least in principle, different statutes of
limitations govern challenges to the capacity-fee and use-fee components of
the sewer service charge, and that a challenge to the capacity fee is now time-
barred. Although the operative complaint expressly does not attack the
capacity fee, the District argues that the ordinances authorizing the sewer
service charge are inseverable, so the court would have to invalidate the
1
entire charge if plaintiffs prevail. If the only available remedy would
invalidate the capacity fee along with the use fee, the District reasons, the
lawsuit is untimely even though plaintiffs’ claim challenges only the latter.
We are not persuaded. As discussed below, to identify the applicable
statute of limitations, we must look to the gravamen of plaintiffs’ claim. The
purpose of the severability doctrine is simply to determine the scope of the
remedy after a legal infirmity in the ordinance has been established; a
finding of inseverability would not alter the nature of plaintiffs’ claim or the
rights upon which they sue. Thus, even if the District were correct that
severability principles would require the invalidation of the entire sewer
service charge—an issue we do not decide—we conclude that the District,
rather than plaintiffs, would bear the consequence of its decision to draft the
ordinances that way. Accordingly, we reverse and remand to the trial court
for further proceedings.
BACKGROUND
The District operates a wastewater utility through which it provides
wastewater collection and treatment services to its residents.1 Plaintiffs own
condominium units located within the District’s jurisdiction.
As alleged in plaintiffs’ original complaint, the District has imposed an
annual sewer service charge of “1.0 Equivalent Dwelling Unit” (EDU) on
townhomes and condominiums since at least 1975, despite failing to
demonstrate a “direct and reasonable correlation” between the charge and
the actual costs of providing services to townhomes and condominiums.
According to the complaint, failing to demonstrate such a correlation converts
the charge into an illegally collected special tax in violation of Proposition 13,
1 The operative complaint names the District as the defendant but
identifies Napa County as the real party in interest.
2
62, and 218.2 The complaint further alleged that the service charge is an
illegal tax because it was not approved by two-thirds of voters, as required by
the California Constitution. Plaintiffs sought a refund of the service charges
paid and injunctive and declaratory relief to preclude future collection of the
charges.
After the trial court sustained the District’s demurrers to the first two
iterations of the complaint with leave to amend, plaintiffs filed a second
amended complaint, again asserting that the sewer service charge constitutes
an illegal tax. The District demurred, arguing in part that plaintiffs’
declaratory and injunctive relief claim was subject to the 120-day limitations
period under Government Code section 660223 because the second amended
complaint alleged that a portion of the service charge is for costs related to
“capital improvements.” Section 66022 provides that “[a]ny judicial action or
proceeding to attack, review, set aside, void, or annul an ordinance” adopting
or modifying a capacity charge subject to section 66013 “shall be commenced
within 120 days of the effective date of the ordinance . . . .” (Gov. Code,
§ 66022, subd. (a).) Because section 66013 defines a “capacity charge” as “a
charge for public facilities in existence at the time a charge is imposed or
charges for new public facilities to be acquired or constructed in the future
that are of proportional benefit to the person or property being charged,” the
District argued that the reference to capital improvements brought the
charge within this definition. In response, plaintiffs contended that they
were not challenging the capacity-fee portion of the sewer service charge, and
argued that their claim against the use-fee portion should not be subject to
2 Later iterations of the complaint allege that the charge also violates
Proposition 26 as an illegal tax.
3 All further references are to the Government Code, unless otherwise
indicated.
3
the shorter statute of limitations applicable to challenges to capacity fees
simply because the District chose to collect capacity fees and use fees
simultaneously in a single hybrid fee.
Observing that the prayer for relief in the second amended complaint
sought the invalidation of the entire sewer service charge, the trial court
found that the 120-day statute of limitations set forth in section 66022 barred
plaintiffs’ claim for declaratory and injunctive relief because more than 120
days had passed since 2010, the year the second amended complaint alleged
the District last set the sewer service charge at 1.0 EDU. For that reason, it
sustained the District’s demurrer to that claim but granted plaintiffs leave to
amend.
Plaintiffs then filed a third amended complaint (TAC) asserting a
single cause of action for declaratory and injunctive relief. It alleges that the
sewer service charges are collected “to pay for the cost of providing
wastewater collection, treatment and disposal services, but are mixed with
elements relating to capital improvements.” The sewer service charge thus
has “two identifiable and ascertainable components—a use fee (for general
operations, general revenue purposes and other non-capacity related
purposes . . . .) and a capacity fee (for maintenance and improvement of
capital facilities, among other things . . .).” According to the TAC, the two
fees are imposed through a single collected service charge, but plaintiffs
challenge only the use-fee portion of it. The TAC alleges that the use fee is
an invalid tax because it exceeds the reasonable cost of providing the service
for which it is charged, the District has not justified the fee with a nexus
study, and the fee has not been approved by two-thirds of voters. Plaintiffs
seek a declaration that the use-fee portion of the service charge imposed by
the District is unconstitutional or otherwise illegal, and an injunction
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enjoining the District from further imposing or collecting the use-fee portion
of the service charge.
The District again demurred. Requesting judicial notice of the original
pair of ordinances authorizing the service charge, adopted in 1977 by the
District’s board of directors, the District argued that an invalid part of an
ordinance can be severed from the remainder only if it is “grammatically,
functionally and volitionally separable[,]” and that the use-fee component of
the service charge did not meet those requirements. Therefore, according to
the District, plaintiffs’ claim necessarily challenged the capacity fee, bringing
it within the 120-day statute of limitations in section 66022.
The trial court sustained the District’s demurrer to the TAC without
leave to amend. It first inferred from the allegations in the TAC that the text
of the current ordinance did not differ in any meaningful way from that in the
earlier ordinances, and it concluded that the earlier ordinances were
therefore relevant to the demurrer. It also agreed with the District that the
use-fee and capacity-fee components of the sewer service charge were
inseverable, and therefore that plaintiffs’ attack on the use-fee portion of the
ordinance would necessarily invalidate the entire sewer service charge,
including the capacity fee. As a result, the court concluded that the 120-day
limitations period in section 66022 applied to bar plaintiffs’ attack on part of
the service charge.
Plaintiffs appealed from the resulting judgment.
DISCUSSION
“This appeal follows the sustaining of a demurrer. The application of
the statute of limitations on undisputed facts is a purely legal question
[citation]; accordingly, we review the lower courts’ rulings de novo. We must
take the allegations of the operative complaint as true and consider whether
5
the facts alleged establish [plaintiff’s] claim is barred as a matter of law.”
(Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191.)
“ ‘ “ ‘A demurrer based on a statute of limitations will not lie where the action
may be, but is not necessarily, barred. [Citation.] In order for the bar ... to be
raised by demurrer, the defect must clearly and affirmatively appear on the
face of the complaint; it is not enough that the complaint shows that the
action may be barred.’ ” ’ ” (Lee v. Hanley (2015) 61 Cal.4th 1225, 1232.)
“To determine the statute of limitations which applies to a cause of
action it is necessary to identify the nature of the cause of action, i.e., the
‘gravamen’ of the cause of action.” (Hensler v. City of Glendale (1994)
8 Cal.4th 1, 22 (Hensler).) “ ‘[T]he nature of the right sued upon and not the
form of action nor the relief demanded determines the applicability of the
statute of limitations under our code.’ ” (Id. at p. 23.) “What is significant for
statute of limitations purposes is the primary interest invaded by defendant’s
wrongful conduct.” (Barton v. New United Motor Manufacturing, Inc. (1996)
43 Cal.App.4th 1200, 1207.)
Relying on Howard Jarvis Taxpayers Assn. v. City of La Habra (2001)
25 Cal.4th 809 (Howard Jarvis), plaintiffs contend that, because their claim
is based on alleged violations of Propositions 13, 26, 62, and 218, it is subject
to the three-year statute of limitations in Code of Civil Procedure section 338,
subdivision (a), for liability created by statute, and that it runs anew each
month when the District collects the allegedly illegal tax. In Howard Jarvis,
taxpayers brought an action against the city for declaratory relief from a
utility users tax imposed without the voter approval mandated by
Proposition 62. (Id. at pp. 812–814.) The court concluded that the
continuous accrual doctrine applied to the plaintiffs’ claim because
Proposition 62 precludes not only the enactment of a tax ordinance without
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voter approval, but also continued imposition or collection of such a tax. (Id.
at pp. 818–821, 824.) Accordingly, the court held that where the statute of
limitations in Code of Civil Procedure section 338, subdivision (a) applies,
“and no other statute or constitutional rule provides differently, the validity
of a tax measure may be challenged within the statutory period after any
collection of the tax, regardless of whether more than three years have passed
since the tax measure was adopted.” (Id. at p. 825.)
The District does not argue against a conclusion that plaintiffs’ claim
would be subject to the three-year statute of limitations in Code of Civil
Procedure section 338, subdivision (a) and timely under Howard Jarvis if the
ordinances were severable.4 As alleged in the TAC, the District’s collection of
a use fee that exceeds the reasonable costs of providing its services violates
plaintiffs’ primary rights under the relevant tax propositions because it was
not approved by the voters. (Cal. Const., art. XIII C, § 1, subd. (e)(1) [a
charge imposed for services provided to the payor is a tax if it exceeds the
4 In KCSFV I, LLC v. Florin County Water Dist. (2021) 64 Cal.App.5th
1015, the defendant argued that any rate increase that includes a charge for
capital improvements is a capacity charge under section 66013, but the court
declined to decide that issue because it found that the defendant had failed to
prove that the rate increase did include funding for capital projects. (Id. at
p. 1032.) In that case, however, the plaintiffs were challenging the entire
rate increase. (Id. at pp. 1025–1026.) We note here that the District has not
offered any argument, other than the claimed inseverability of the
authorizing ordinances, for treating plaintiffs’ claim in the TAC as an attack
on the entire sewer service charge, nor has it offered any other basis for
treating the claim as one subject to section 66022. (Cf. Webb v. City of
Riverside (2018) 23 Cal.App.5th 244, 256–257 [amendments to petition were
a “sham” to plead around the statute of limitations].) We also point out that,
because the parties have all treated the capacity-fee portion of the sewer
service charge as a “capacity charge” under section 66013, we have had no
occasion to resolve a dispute about that issue and nothing in this opinion
should be construed as necessarily endorsing the parties’ position.
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reasonable costs of providing the service]; Cal. Const., art. XIII A, § 4 [special
taxes must be approved by two-thirds of the qualified electors]; see also
Howard Jarvis, supra, 25 Cal.4th at p. 819 [finding that plaintiffs were
“seeking redress for two types of injury: the violation of their right to vote on
new taxes, and the City’s continued collection of the tax without legal
authority,” italics omitted].) The question, then, is whether the putative
inseverability of the ordinances authorizing the sewer service charge alters
the gravamen of plaintiffs’ claim or the “nature of the right sued upon”
(Hensler, supra, 8 Cal.4th at p. 23) such as to transform the claim into one
subject to the 120-day statute of limitations in section 66022. We think the
answer is no. Regardless of whether the ordinances authorizing the charge
are severable, the TAC does not allege any wrongful conduct by the District
with respect to the capacity fee, the invasion of any right or interest plaintiffs
possess related to the capacity fee, or any legal injury from the capacity fee.
It does not concern the capacity fee at all, and there is no contention that the
use fee plaintiffs do challenge is covered by section 66013. (Cf. Utility Cost
Management v. Indian Wells Valley Water Dist. (2001) 26 Cal.4th 1185, 1192–
1193 [section 66022 applied where plaintiff sought to recoup fees that were
“described in and subject to” section 66013].)
The severability or inseverability of an ordinance simply determines
the scope of the remedy after a legal infirmity has been established. For
example, in County Sanitation Dist. No. 2 v. County of Kern (2005)
127 Cal.App.4th 1544, the plaintiff alleged that the county’s “biosolids impact
fee” violated the prohibition in Vehicle Code section 9400.8 against local fees
for the privilege of using roads. (Id. at pp. 1557–1558.) After examining how
the fee was calculated and how the funds it generated could be applied, the
court determined that it was, at least in part, a fee imposed on road use and
8
therefore in violation of the statute. (Id. at pp. 1622–1623.) Only then did
the court consider “what relief is appropriate when an ordinance imposes a
fee for more than one purpose and one of the purposes conflicts with a statute
and other purposes do not.” (Id. at p. 1623.) The court first rejected the
possibility that the existence of some potentially valid uses of the funds
would warrant upholding the entire fee, because “such a remedy would allow
public agencies to adopt fees with illegal purposes and save those fees from
invalidation by appending one valid purpose for which the fees could be
used.” (Ibid.) Conversely, the court concluded that it would be “unduly
harsh” to invalidate the entire fee when part of the funds would be used for
valid purposes and the formula by which it was calculated did not itself run
afoul of a statutory prohibition. (Ibid.) Finally, the court noted that the
ordinance contained a severability clause and that the rate used to determine
the fee and funds it generated were inherently divisible; it therefore
invalidated the fee only “to the extent it was or will be used for purposes that
violated Vehicle Code section 9400.8.” (Id. at p. 1624.)5 This discussion of
remedy, however, has no bearing on the nature or gravamen of the plaintiff’s
claim, which would have been the same even if the court had found that the
proper remedy was to strike the biosolids impact fee in its entirety.
The test for severability effectively allows a legislative body to decide,
at the time of drafting, whether the remainder of its law will survive a later
judicial determination that some aspect of it is invalid. By including a
severability clause, for example, the legislative body will receive “a
5 Although plaintiffs do not cite County Sanitation Dist. No. 2 v. County
of Kern, supra, 127 Cal.App.4th 1544, they argue that the District is legally
required to separate the use-fee and capacity-fee components of the sewer
service charge, that the District uses the two fees for different purposes, and
that the court could fashion relief that impacts only the use fee.
9
presumption in favor of severance.” (California Redevelopment Assn. v.
Matosantos (2011) 53 Cal.4th 231, 270.) The additional criteria that courts
examine—whether the invalid provision is “grammatically, functionally, and
volitionally separable” (ibid.)—are likewise matters within the legislative
body’s power to address during the drafting and legislative process. Indeed,
volitional separability refers to whether, “knowing that only part of its
enactment would be valid, [the legislature] would have preferred that part to
nothing, or would instead have declined to enact the valid without the
invalid.” (Id. at p. 273.) Of course, a legislative body will not always prefer
severability. But because the doctrine is rooted in legislative choice, when a
legislature drafts a law in such a way that a court will conclude it is
inseverable, it has at least assumed the risk that all of its law will fall if a
court determines that any part of it is invalid. (See In re Blaney (1947)
30 Cal.2d 643, 655 [“if the statute is not severable, then the void part taints
the remainder and the whole becomes a nullity”].) We see no reason why
that risk does not include the potential loss of a shorter statute of limitations
that would apply to some aspect of the law if it had been drafted in such a
way that it could be severed from the remainder, at least in the absence of
some other basis for allowing the shorter statute of limitations to control.6
6 We are not unmindful of the policy underlying the short statute of
limitations in section 66022—“so that local agencies can make spending
decisions confident in the knowledge that they are spending funds that are,
in fact, available.” (Util. Cost Management v. E. Bay Mun. Util. Dist. (2000)
79 Cal.App.4th 1242, 1252.) But it remains within the power of local
agencies to secure that benefit by drafting legislation in such a way that
funding for capital projects is not imperiled by an unrelated challenge to
some other aspect of the law. And again, because the District’s argument is
limited to the severability doctrine, we do not consider here any other
potential grounds for applying section 66022 to plaintiffs’ claim.
10
Moreover, courts have held that the nature of the relief the plaintiff
seeks does not determine the gravamen of the claim. (Hensler, supra,
8 Cal.4th at p. 23; Leeper v. Beltrami (1959) 53 Cal.2d 195, 214; Golden Gate
Hill Development Co., Inc. v. County of Alameda (2015) 242 Cal.App.4th 760,
768 [relief sought by plaintiff—a refund of taxes paid rather than
invalidation of the tax measure—did not change gravamen of claim, which
was based on alleged illegality of taxes enacted by county].) We think the
same is true when, as here, the defendant argues that the application of a
severability analysis would require the court to award relief broader than the
plaintiff seeks. (Cf. People ex rel. Department of Conservation v. Triplett
(1996) 48 Cal.App.4th 233, 249 [gravamen of the action was to compel
Assessor to assess resort parcel in manner required by the Williamson Act,
even if it might force the abandonment of the cancellation petition].) That
result is a function of the legislative body’s drafting decision, not a function of
the plaintiff’s claim.
Our research has revealed, and the parties have identified, no cases in
which severability was used to determine the applicable statute of
limitations, and we have identified only a few federal cases in which
severability was even examined prior to any consideration of the merits of the
claim of invalidity. In those cases, the court conducted a threshold
examination of severability in order to determine whether the plaintiffs
possessed standing under Article III of the U.S. Constitution—specifically, to
determine whether a remedy was available that would redress the claimed
injury. (See, e.g., INS v. Chadha (1983) 462 U.S. 919, 931–935 (Chadha);
Gentry v. United States (Ct. Cl. 1976) 546 F.2d 343, 347; Doe v. Wilson
(N.D.Cal., Dec. 15, 1997, No. C 97-2427 SI) 1997 U.S.Dist. Lexis 21137, at
pp. *18–*21; but see, e.g., Mejia v. Time Warner Cable, Inc. (S.D.N.Y., Aug. 1,
11
2017, No. 15-CV-6445 (JPO)) 2017 U.S.Dist. Lexis 120445, at p. *38
[“Severability is a question of remedy, to be addressed once a constitutional
violation has been identified. It is not a threshold issue implicating a party’s
standing to challenge constitutionality in the first instance”].)7 In essence
these cases involved challenges to a statutory restriction on a benefit
conferred by the statute itself; if the statute was inseverable, then the
successful challenge would eliminate the benefit along with the restriction,
leaving the plaintiffs no better off.8 But severability was examined first in
those cases because it was essential to determining whether the court
possessed jurisdiction. (See Gentry v. United States, supra, 546 F.2d at p. 347
[“Because of the nature of this court’s jurisdiction, we must depart from the
7 We may cite unpublished federal cases without violating the
California Rules of Court. (Farm Raised Salmon Cases (2008) 42 Cal.4th
1077, 1096, fn. 18; Nungaray v. Litton Loan Servicing, LP (2011)
200 Cal.App.4th 1499, 1501, fn. 2.)
8 Chadha involved a challenge to the constitutionality of a provision
that allowed one house of Congress to invalidate a decision by the United
States Attorney General to allow a particular deportable alien to remain in
the country. (Chadha, supra, 462 U.S. at p. 923.) The Attorney General had
recommended that Chadha’s deportation be suspended, but the House of
Representatives vetoed the recommendation. (Id. at pp. 924–927.) The
Senate and House of Representatives, which were permitted to participate as
amici because the Immigration and Naturalization Service supported
Chadha’s position in the litigation, argued that Chadha lacked standing
because a determination that the one-House veto provision was
unconstitutional would require the invalidation of the entire statute,
including the provision that authorized the Attorney General to allow
Chadha to remain in the United States—meaning Chadha would receive no
relief from deportation if he prevailed in his constitutional challenge. (Id. at
p. 931.) The court stated that it found it “appropriate” to address questions of
severability first, while acknowledging that doing so was a departure from its
usual practice, and it ultimately concluded that the one-House veto was
severable. (Id. at pp. 931, fn. 7, 935.)
12
usual practice of inquiring first into constitutionality and then into
severability, and instead consider the latter first”]; cf. Petrella v. Brownback
(10th Cir. 2012) 697 F.3d 1285, 1296 [district court erred by considering
severability at early stage of litigation when not necessary to establish
standing].) No such issue is presented here, and there is no need to examine
the severability of the authorizing ordinances to determine the gravamen of
plaintiffs’ claim or the rights upon which they sue. The severability doctrine
is a shield by which a legislative body can preserve the parts of its law that
are not implicated by a valid legal claim, not a sword to wield against that
claim in the first place.
We emphasize that we do not decide severability here. Since it was
premature for the trial court to adjudicate that issue, we leave open the
possibility that it could later determine that it is possible to fashion relief
impacting only the use-fee component of the sewer service charge. We
conclude only that the District has not established that plaintiffs’ challenge
to the use fee must be dismissed as untimely based on the claimed
inseverability of the ordinances authorizing the charge.
DISPOSITION
The judgment of dismissal is reversed. On remand, the trial court shall
vacate its order sustaining the District’s demurrer without leave to amend
and enter a new order overruling the demurrer. Plaintiffs are awarded costs
on appeal.
GOLDMAN, J.
WE CONCUR:
POLLAK, P. J.
STREETER, J.
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Trial Court: Napa County Superior Court
Trial Judge: Victoria Wood
Counsel for Plaintiffs and LAW OFFICES OF GEOFFREY WILLIS
Appellants: Geoffrey Willis
Counsel for Defendants and MEYERS NAVE
Respondents and Real Party in John Bakker
Interest: Jenny L. Riggs
Kenneth W. Pritikin
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