Reid v. City of San Diego

Yvonne Reid and Serena Wong (collectively Plaintiffs) sued the City of San Diego (City) and the San Diego Tourism Marketing District (TMD) (together, Defendants) in a putative class action complaint, challenging what they allege is "an illegal hotel tax." The trial court sustained Defendants' demurrer without leave to amend on statute of limitations and other grounds. We affirm, concluding some of the causes of action are time-barred and the remainder fail to state facts constituting a cause of action.

collected and disbursed to the San Diego Convention & Visitors Bureau and other organizations promoting San Diego tourism and "hotel room night consumption."

B. Proposition 26

In November 2010 California voters approved Proposition 26. Proposition 26 sought to tighten existing restrictions on local revenue-generating measures by defining "tax" broadly to mean "any levy, charge, or exaction of any kind imposed by a local government" that did not fall within one of seven enumerated exceptions. It also required the electorate to approve laws increasing taxes, and shifted to the government the burden of demonstrating that any charge, levy, or assessment is not a tax. ( Cal. Const., art. XIII C, § 1, subd. (e); see Schmeer v. County of Los Angeles (2013) 213 Cal.App.4th 1310 , 1322, 153 Cal.Rptr.3d 352 .)

C. 2012 Renewal Assessment

In 2012 San Diego hotel operators petitioned the City to renew the TMD for another 39.5 years. On November 26, 2012, the City Council adopted a resolution (R-307843) approving a renewed TMD Plan and levied assessments for 39.5 years (the renewal assessment). Under the renewal assessment, the City assessed all hotels in the district, not just those with 70 or more rooms.

D. The SDOG Lawsuit

On December 19, 2012, San Diegans for Open Government (SDOG) filed an action challenging the renewal assessment as being an unconstitutional tax in violation of Proposition 26, San Diegans for Open Government v. City of San Diego (Super. Ct. San Diego County, 2017, No. 37-2012-00088065-CU-MC-CTL) (the SDOG litigation). SDOG alleged it is a "non-profit taxpayer and voter organization" and asserted that one of its members owned a single unit subject to the renewal assessment.

Defendants contend the judgment in the SDOG litigation bars Plaintiffs' action here under claim preclusion (res judicata) principles. To place those arguments in context, we briefly describe the SDOG litigation.

The SDOG lawsuit named as defendants "City of San Diego; and all persons interested in the matter of the renewal of the [TMD], the levying of assessments upon the assessed businesses for a period of thirty-nine and one-half years, and the prescribing of a method for collection of assessments." Subsequently, the TMD Corporation also appeared as a defendant.

the electorate for a vote. Plaintiffs allege that the City "uses the [TMD] as a ruse to raise revenue for the general fund without having to seek voter approval to impose a new tax." Plaintiffs allege that Reid was charged TMD assessments for hotel stays in December 2015 and March 2016, and Wong was charged such assessments in December 2013, September 2014, and "on other occasions during the [c]lass [p]eriod." The complaint alleges that Plaintiffs and the class members "paid this illegal 'hidden hotel tax' that Defendants have disguised as a Tourism Marketing District Assessment" by staying at one or more of the assessed hotels during the period between January 1, 2013 and August 31, 2016. The complaint alleges the TMD assessment is "really a 'tax' " within the meaning of article XIII C, section 1, subdivision (e) of the California Constitution and, because the TMD was formed without voter approval as required by law, the City's imposition of the TMD assessment is unlawful. The complaint challenges "the legality of the TMD Procedural Ordinance" and seeks a declaration of the parties' rights "with respect to the TMD Operating Agreement dated November 26, 2012" [TMD Agreement] and the "TMD Management Plan dated September 11, 2012 [TMD Plan]."

DISCUSSION

A

. The Standard of Review

"The standards for reviewing a judgment of dismissal following the sustaining of a demurrer without leave to amend are well settled. ' " 'We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.' [Citation.] Further, we give the [complaint] a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the [complaint] states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff." ' " ( Finch Aerospace Corp. v. City of San Diego (2017) 8 Cal.App.5th 1248 , 1251-1252, 214 Cal.Rptr.3d 628 .)

We will affirm " 'if proper on any grounds stated in the demurrer, whether or not the trial court acted on that ground.' " ( Melton v. Boustred (2010) 183 Cal.App.4th 521 , 528, 107 Cal.Rptr.3d 481 .) "Thus, 'we do not review the validity of the trial court's reasoning but only the propriety of the ruling itself.' " ( Popescu v. Apple, Inc. (2016) 1 Cal.App.5th 39 , 50, 204 Cal.Rptr.3d 302 .)

B. The First, Fourth, and Fifth Causes of Action Are Barred by the 30-Day Statute of Limitations

1. The 30-day limitation period in Municipal Code section 61.2517

The Procedural Ordinance contains two separate 30-day statutes of limitations for actions contesting assessments and related actions.

Municipal Code section 61.2517 provides in part: "The validity of an assessment levied ... shall not be contested in any action or proceeding unless the action or proceeding is commenced within 30 days after the resolution establishing the district and levying the assessment is adopted." (Italics omitted.)

Municipal Code section 61.2526 provides a 30-day limitation period for actions challenging assessments as well as other related challenges by providing in part: "An action to determine the validity of assessments, contracts, improvements, or activities, or the amendment or approval of a district management plan, including but not limited to an amendment that changes, clarifies, or disestablishes a benefit zone or

Moreover, Plaintiffs are also incorrect in asserting that such challenges would be time-barred before the cause of action accrued. The November 27, 2012 City Council resolution provides that the assessments "are hereby levied"-i.e., they were levied on November 27, 2012. Municipal Code section 61.2517 contains express language stating when the statute of limitations begins, identifying it as the date the assessment is levied. Its express language is controlling as to the accrual of a cause of action challenging the assessment. ( Barratt American, Inc. v. City of San Diego (2004) 117 Cal.App.4th 809 , 820, 12 Cal.Rptr.3d 132 ( Barratt American ) [applying similarly worded statute of limitations as to public improvement assessments under Code Civ. Proc., § 329.5 ]; Fahey v. City Council (1962) 208 Cal.App.2d 667 , 677, 25 Cal.Rptr. 314 [assessment is levied when it is adopted by city council and statute of limitations begins then, not when city tax collector records the assessment or when it becomes a lien].)

The City's November 27, 2012 resolution levying the assessments also provides that hotel operators were not obligated to make such payments until January 2013. Citing

( Delta Air ), and Scol Corp. v. City of Los Angeles (1970) 12 Cal.App.3d 805 , 91 Cal.Rptr. 67 ( Scol Corp .), Plaintiffs contend "California courts have also repeatedly held that taxpayers must be entitled to some form or [ sic ] relief to prevent the unjust enrichment of the taxing authority" and that a 30-day statute of limitations is too short to be consistent with these cases.

However, these cases do not support Plaintiffs' assertion. The primary issue in Sipple , supra , 225 Cal.App.4th 349 , 170 Cal.Rptr.3d 199 was whether an internet service provider had standing to sue for a tax refund where its customers had paid the tax. ( Id . at p. 358, 170 Cal.Rptr.3d 199 .) Tracfone , supra , 163 Cal.App.4th 1359 , 78 Cal.Rptr.3d 466 is not helpful for the same reason; it too involved standing, not the statute of limitations. ( Id. at p. 1361, 78 Cal.Rptr.3d 466 .)

Decorative Carpets , supra , 58 Cal.2d 252 , 23 Cal.Rptr. 589 , 373 P.2d 637 is also off point. There, a carpet retailer sought a refund of sales tax. The retailer intended to keep the refund and not return it to its customers, even though the retailer had charged them a sales tax reimbursement. ( Id . at pp. 253-254, 23 Cal.Rptr. 589 , 373 P.2d 637 .) The California Supreme Court held that the taxing authority could "insist as a condition of refunding overpayments to [the retailer] that [the retailer] discharge its trust obligations to its customers" by refunding to them the sales tax reimbursement they had paid. ( Id. at p. 255, 23 Cal.Rptr. 589 , 373 P.2d 637 .)

Delta Air , supra , 214 Cal.App.3d 518 , 262 Cal.Rptr. 803 is similarly inapposite. There, the airline brought an action to recover sales and use taxes. ( Id. at p. 520, 262 Cal.Rptr. 803 .) The case has no statute of limitations issue. Nor does Scol Corp ., supra , 12 Cal.App.3d 805 , 91 Cal.Rptr. 67 , which is a standing case.

Plaintiffs cite no case holding or suggesting that the 30-day limitation period in Municipal Code section 61.2517 is unlawful. Indeed, the 30-day limitation period provided in that ordinance is nearly verbatim of the 30-day statute of limitations in section 36633 in the PBID of 1994, upon which the Procedural Ordinance is modeled:

Municipal Code section 61.2517 Section 36633, PBID of 1994 "The validity of an assessment levied under "The validity of an assessment levied this Division shall not be contested in under this part shall not be contested in any action or proceeding unless the action any action or proceeding unless the or proceeding is commenced within 30 action or proceeding is commenced days after the resolution establishing the within 30 days after the resolution levying district and levying the assessment is adopted the assessment is adopted...." ...." (Italics omitted.)

"What constitutes a reasonable time [to bring suit] is a question ordinarily left to the Legislature, whose decision a court will not overrule except where palpable error has been committed." ( Friedland v. City of Long Beach (1998) 62 Cal.App.4th 835 , 846, 73 Cal.Rptr.2d 427 .) Here, the 30-day limit to commence an action challenging the renewal assessment is reasonable given the City's interest in promptly resolving any questions about the validity of the assessment and implementing the TMD's goals. (See The Inland Oversight Committee v. City of Ontario (2015) 240 Cal.App.4th 1140 , 193 Cal.Rptr.3d 55 [applying 30-day limit to appeal in section 36633 ].)

Indeed, California law provides numerous 30-day statutes of limitations. (See 3 Witkin, Cal. Procedure (5th ed. 2008) Actions, § 475, pp. 606-607 [listing several 30-day statutes of limitations]; see also Bus. & Prof. Code, § 19463 [30 days to contest action suspending or revoking a license (horse racing) ]; Gov. Code, § 11523 [30 days to challenge certain administrative decisions of the Fair Employment and Housing Commission]; Pub. Resources Code, § 21167, subd. (b) & (c) [30 days to contest certain governmental action under the California Environmental Quality Act]; Sts. & Hy. Code, § 10400 [30 days to challenge an assessment levied under the Municipal Improvement Act of 1913]; Rev. & Tax Code, § 4808 [30 days to challenge alleged illegal or unconstitutional property tax assessment].)

3. No basis for equitable tolling

Plaintiffs contend that if a 30-day statute of limitations applies, the court erred in failing to equitably toll the limitation period. Citing McDonald v. Antelope Valley Community College Dist. (2008) 45 Cal.4th 88 , 84 Cal.Rptr.3d 734 , 194 P.3d 1026 ( McDonald ), Plaintiffs assert that when " ' "an injured person has several legal remedies and, reasonably and in good faith, pursues one," ' " the limitation period is tolled because the defendant has timely received notice of the first of two proceedings. Plaintiffs' theory is that the SDOG litigation, which also challenged the renewal assessment, was timely filed and "Defendants were therefore put on timely notice of the first of two lawsuits." Plaintiffs contend that because the SDOG litigation was dismissed as moot, Defendants "will not be unfairly prejudiced if this action is allowed to proceed."

Equitable tolling of the statute of limitations has been recognized in California only where (1) the plaintiff is pursuing an alternative remedy in another forum; (2) under narrow circumstances, while plaintiff is pursuing the same remedy in the same forum; (3) where a defendant fraudulently conceals the cause of action; and (4) in certain actions against an insurer. (Banke & Segal, Cal. Practice Guide: Civil Procedure Before Trial, Statutes of Limitations (The Rutter Group 2018) § 6:5, p. 6-1.)

In this case, there is no basis for equitable tolling because the plaintiff in the SDOG litigation and the Plaintiffs here are different. Plaintiffs cite no authority, and we are aware of none, that would allow a plaintiff in one case to equitably toll the limitation period based on the filing of a stranger's lawsuit.

In each of the cases cited by Plaintiffs in support of equitable tolling, the plaintiff asserting equitable tolling was also plaintiff in the prior proceeding. ( McDonald , supra , 45 Cal.4th 88 , 84 Cal.Rptr.3d 734 , 194 P.3d 1026 [time to file administrative claim by Sylvia Brown equitably tolled by her pursuit of an internal grievance procedure]; Collier v. City of Pasadena (1983) 142 Cal.App.3d 917 , 191 Cal.Rptr. 681 [filing of workers' compensation claim by Collier

apply where the applicable statute of limitations states the limitation period began on the date the assessment is levied. Like the statute of limitations at issue in Barratt American ( Code Civ. Proc., § 329.5 ), here Municipal Code section 61.2517 expressly provides that an action challenging the validity of an assessment must be commenced within 30 days "after the resolution establishing the district and levying the assessment is adopted ...." The continuous accrual theory does not apply because it would impermissibly read the date-of-levy requirement out of the applicable limitation period. ( Barratt American , supra , 117 Cal.App.4th at p. 820, 12 Cal.Rptr.3d 132 .)

5. No basis for applying laches in lieu of the statute of limitations

Asserting they primarily seek "equitable" relief (declaratory judgment and restitution), Plaintiffs contend the court should not have applied the 30-day statute of limitations, but instead should have applied the equitable doctrine of laches. However, "[a]lthough declaratory relief is an equitable proceeding, whether laches is available in a declaratory relief proceeding depends on the nature of the underlying claim." ( Wells Fargo Bank v. Bank of America (1995) 32 Cal.App.4th 424 , 439, 38 Cal.Rptr.2d 521 .) Accordingly, laches does not apply as a defense to causes of action seeking money judgments, even where joined with claims in equity. ( Ibid. ) Here, Plaintiffs' underlying claim is the City imposed an unlawful tax that raises approximately

The United States Supreme Court reached an identical result in Ball v. James (1981) 451 U.S. 355 , 101 S.Ct. 1811 , 68 L.Ed.2d 150 ( Ball ), ruling that Reynolds , supra , 377 U.S. 533 , 84 S.Ct. 1362 did not apply to an election for the directors of a water reclamation district in Arizona whose governing board was elected by those owning land within the district, voting power being apportioned according to the number of acres owned. The district, which had constructed dams and other public works to generate hydroelectric power, was one of the largest public utilities in Arizona. Despite recognizing that these activities were "more diverse and affect[ed] far more people" ( id. at p. 365, 101 S.Ct. 1811 ) than those in Salyer , supra , 410 U.S. 719 , 93 S.Ct. 1224 , the court held that "these distinctions do not amount to a constitutional difference" ( Ball, at p. 366, 101 S.Ct. 1811 ) because the district's powers did not run the gamut of those typical of a general government, and it served the relatively narrow mission of storing, conserving, and distributing water to its landowner members. ( Id. at pp. 366-367, 101 S.Ct. 1811 .)

Against this background, in Bolen, supra, 1 Cal.4th 654 , 3 Cal.Rptr.2d 843 , 822 P.2d 875 , the California Supreme Court upheld statutes limiting the vote, in referenda on proposed metro rail beneficial assessment districts, to owners of commercial property who would be subject to the assessment. Analyzing Salyer , supra , 410 U.S. 719 , 93 S.Ct. 1224 and Ball , supra , 451 U.S. 355 , 101 S.Ct. 1811 , the court in Bolen noted that the right to vote is "not fundamental" where " 'a special-purpose unit of government [is] assigned the performance of functions affecting definable groups of constituents more than other[s].' " ( Bolen , supra , 1 Cal.4th at p. 665, 3 Cal.Rptr.2d 843 , 822 P.2d 875 .) "Where these two conditions jointly occur, ... voting power 'may be apportioned in ways which give greater influence to the citizens most affected by the organization's functions' [citation] without violating the guarantee of equal protection provided that the resulting classification is reasonably related to the statutory objective." ( Ibid . ) Applying these principles, the Bolen court determined that the districts were special purpose entities lacking virtually any indicia of government. Next, the court concluded that the eligible voters were disproportionately impacted by the election issue while the disenfranchised were not as substantially affected. With these two conditions established, the court held the referenda was constitutional under the rational basis test. ( Id. at pp. 669-670, 675-676, 3 Cal.Rptr.2d 843 , 822 P.2d 875 .)

Summarizing applicable law, in Greene v. Marin County Flood Control & Water Conservation Dist. (2010) 49 Cal.4th 277 , 109 Cal.Rptr.3d 620 , 231 P.3d 350 the California Supreme Court stated, "It is ... well established the ... one-person, one-vote requirement rooted in the state and federal equal protection provisions do not apply to fee and assessment elections conducted by limited purpose government agencies that disproportionately affect certain property owners." ( Id. at p. 297, fn. 8, 109 Cal.Rptr.3d 620 , 231 P.3d 350 .)

Here, the TMD is not vested with, and does not exercise, general governmental powers. The district promotes tourism and seeks to "retain and expand the lodging industry." (Mun. Code, § 61.2501, subd. (a).) The TMD comprises an area within which certain lodging businesses pay assessments to fund business promotion activities. (Mun. Code, § 61.2504.) As such, it is legally indistinguishable from the benefit districts in Bolen , supra , 1 Cal.4th 654 , 3 Cal.Rptr.2d 843 , 822 P.2d 875 , which also "lack[ed] virtually any of the incidents of government." ( Id. at p. 669, 3 Cal.Rptr.2d 843 , 822 P.2d 875 .)

Regarding Bolen's second prong, the TMD assessment primarily affects the voters, the assessed hotels. The hotels alone bear the obligation to pay the assessment. (Mun. Code, § 2510, subd. (a)(8) ["[A]ny assessment imposed pursuant to this Division is levied solely upon the business owner within the district [who is] solely responsible for payment of the assessment." (Italics omitted.) ].) Accordingly, the equal protection analysis of the voting scheme is not subject to strict scrutiny review.

Disagreeing with this result, Plaintiffs primarily rely on Hellebust v. Brownback (10th Cir. 1994) 42 F.3d 1331 ( Hellebust ), which involved the constitutionality of electing members to the Kansas State Board of Agriculture (Board). There, delegates from agricultural organizations elected the Board's members. The plaintiffs asserted this violated the principle of one person, one vote because the Board exercises broad governmental authority. ( Id. at p. 1332.) The federal district court held this voting system violated equal protection, and the court of appeals agreed.

However, "[c]entral" to the Hellebust court's holding was a finding that "the Board's reach far extends the fields of agriculture and agribusiness." ( Hellebust , supra , 42 F.3d at p. 1332.) The Board's authority extended to any commercial pump used in Kansas, including gasoline pumps at filling stations. The Board also conducted all meat and dairy inspections, had authority to enter any business premises, conduct inspections, issue subpoenas, and otherwise enforce state regulations on dairy and meat products. ( Id. at p. 1333.) The Board also regulated the use of pesticides, and controlled all water rights on both agricultural and nonagricultural lands. ( Ibid . ) The court found the Board "has broad regulatory powers which affect all residents of Kansas daily." ( Ibid . )

Affirming the district court's judgment in Hellebust , the Tenth Circuit explained, "Once a state agency has the authority to affect every resident in matters arising in their daily lives, its powers are not disproportionate to those who vote for its officials. The quality of meat and dairy products consumed by everyone in the state; the accuracy of the scales upon which people are charged for consumer goods; the right to divert and use

water; the use of pesticides on residential lawns, city parks, and farmlands are not services disproportionate to those who attend the annual meeting of the Board. Those matters unremittingly influence every person within the State of Kansas. Moreover, as correctly determined by the district court, those matters fall within the state's police powers and comprise part of the normal functions of state government. Thus, although the Board exercises powers that uniquely benefit the agricultural industry, its core governmental powers deprive the Board of the umbra of Ball [, supra , 451 U.S. 355 , 101 S.Ct. 1811 ] and Salyer [, supra , 410 U.S. 719 , 93 S.Ct. 1224 ]." ( Hellebust , supra , 42 F.3d at p. 1335.)

Here, Plaintiffs contend that "[s]imilar to the facts in Hellebust [, supra , 42 F.3d 1331 ], TMD claims to serve only a limited purpose" but instead has "broad regulatory

obtain from the TMD paying for tourism promotional activities that the City might otherwise fund, that does not transform the TMD into an entity with broad governmental powers. The TMD does not provide public services such as schools, transportation, utilities, roads, or anything else of the type ordinarily financed by a municipal entity. (See Salyer , supra , 410 U.S. at pp. 728-729, 93 S.Ct. 1224 .)

Plaintiffs also contend the TMD's activities do not primarily affect the assessed hotel owners because " '[v]irtually all hotels in the City of San Diego pass the TMD Assessment onto their guests who actually bear the burden of paying for the Assessment' " and the City knew and approved of this practice.

However, in Bolen , supra , 1 Cal.4th 654 , 3 Cal.Rptr.2d 843 , 822 P.2d 875 , the California Supreme Court rejected a similar contention. There, only the affected business property owners were entitled to vote on assessments to finance a public transit project. ( Id. at p. 660, 3 Cal.Rptr.2d 843 , 822 P.2d 875 .) The California Supreme Court rejected the equal protection challenge, although some who were not permitted to vote would be affected "secondarily" because the added costs would be " 'pass[ed] through' " to them and "consumers of goods and services" would also be affected "as the financial consequences of the assessment are presumably distributed throughout the region." ( Id . at p. 674, 3 Cal.Rptr.2d 843 , 822 P.2d 875 .)

Citing Ponderosa Homes, Inc. v. City of San Ramon (1994) 23 Cal.App.4th 1761 , 29 Cal.Rptr.2d 26 ( Ponderosa Homes ), Plaintiffs also contend to "impose" a tax means to "establish" and, therefore, the Procedural Ordinance imposes a tax by creating a mechanism by which the charge can be imposed. Plaintiffs conclude that the Procedural Ordinance created the tax "which the 2012 Renewal Resolution complied with by specifying the terms of the tax." This argument fails because (1) Ponderosa Homes relates not to an assessment invoking Proposition 26, but rather the 180-day statute of limitations under Government Code section 66020 for challenges to fees on development ( Ponderosa Homes , supra , 23 Cal.App.4th at pp. 1764-1766, 29 Cal.Rptr.2d 26 ); and (2) even assuming that "impose" means to "establish," it was not the Procedural Ordinance, but rather the City Council's resolution (R-307843), that established (levied) the assessments Plaintiffs challenge here.

E. No Leave to Amend

In the reply brief, Plaintiffs contend the trial court abused its discretion in not granting leave to amend. However, Plaintiffs did not make this argument in their opening brief and, therefore, the issue is forfeited. ( People v. Roscoe (2008) 169 Cal.App.4th 829 , 840, 87 Cal.Rptr.3d 187 [issues not raised in the opening brief are forfeited].)

Moreover, even if we were to consider the argument, we would find no abuse of discretion in denying leave to amend. To meet their appellate burden here, Plaintiffs must submit a proposed amended complaint (which they have not done) or "enumerate the facts and demonstrate how those facts establish a cause of action." ( Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857 , 890, 6 Cal.Rptr.2d 151 .) Plaintiffs failed to do so both in the trial court and here on appeal. Even in their reply brief, Plaintiffs do not state what additional facts they could allege that would cure the legal deficiencies in their complaint.

D

efendants seek $25,149 in appellate sanctions against Plaintiffs' lawyers for pursuing what Defendants contend is a frivolous appeal. We notified counsel that we would consider the sanctions issue concurrently with the appeal, and Plaintiffs filed opposition.

A. Legal Standards

Code of Civil Procedure section 907 provides: "When it appears to the reviewing court that the appeal was frivolous or taken solely for delay, it

may add to the costs on appeal such damages as may be just." Sanctions may be imposed

Code of Civil Procedure section 863 provides that if no validation proceeding is brought by the public agency, "any interested person" may do so within the 60-day period. An action brought by "any interested person" to contest the validity of governmental action under Code of Civil Procedure section 860 is "commonly known as a reverse validation action." ( City of San Buenaventura v. United Water Conservation Dist. (2017) 3 Cal.5th 1191 , 1201, 226 Cal.Rptr.3d 51 , 406 P.3d 733 .)

If the public agency does not bring a validation proceeding, its action will "become immune from attack if no interested person brings a proceeding to establish the act's validity or invalidity within 60 days." ( Kaatz v. City of Seaside (2006) 143 Cal.App.4th 13 , 30, 49 Cal.Rptr.3d 95 ( Kaatz ).)

Whether an action is subject to the validation procedures is an important

assert that assessment funding is a municipal affair, and they contend Municipal Code section 61.2526, subdivision (a) "mimics statutory provision for validation of other financing mechanisms ...."

Defendants also point out that under Code of Civil Procedure section 860, validation is triggered when provided by "any other law"-a phrase that is broader than "any other 'statute.' " From that, Defendants conclude the Legislature in Code of Civil Procedure section 860 intended to include ordinances along with state statutes as being a potential gateway to validation proceedings.

DISPOSITION

The judgment is affirmed. The motion for sanctions is denied.

WE CONCUR:

HUFFMAN, Acting P. J.

GUERRERO, J.

(Mun. Code, § 61.2501, subds. (a) & (b), italics omitted.)

Under the Procedural Ordinance, in December 2007, the San Diego City Council (City Council) passed a five-year resolution levying assessments at the rate of 2 percent of gross room revenue from transient stays for lodging businesses operating in the City with 70 or more sleeping rooms.

With the City's knowledge and approval, virtually all hotels in the City pass the TMD assessment onto their guests. The City oversees collecting the TMD assessment and ensures the funds are spent consistent with the TMD Plan. During fiscal year 2010, more than $22 million in assessments was

dismissed one cause of action and another was summarily adjudicated in the City's favor, by 2016 " '[t]he gravamen of SDOG's claim [was] that the TMD assessment is an illegal tax that was euphemistically labeled an "assessment" to get around the voter-approval requirements' " in Proposition 26.

E. August 2016 Amendment

In August 2016, while the SDOG litigation was pending, the City Council adopted a resolution (R-310664) eliminating hotels with fewer than 70 rooms from the TMD assessment (the 2016 amendment). The City believed the 2016 amendment was more compliant with Proposition 26 because "[a]rguably, only the larger hotels receive a direct benefit from the marketing expenditures such that only the larger hotel operations should be assessed."

F. Judgment in the SDOG Litigation

After the 2016 amendment, the defendants in the SDOG litigation moved for judgment on the pleadings, asserting (1) SDOG lost standing because it claimed only one owner of one rental property as a member, which was no longer subject to the assessment; and (2) the action was moot because the 2012 renewal assessment was superseded by the 2016 amendment.

On September 30, 2016, the trial court entered judgment for the defendants in the SDOG litigation, ruling the action was "moot."

G. Reid's Action

Approximately two months after the SDOG judgment, Reid filed the instant action. The following month, Plaintiffs filed a first amended complaint (complaint) "individually and on behalf of all others similarly situated and the general public." The class period is January 1, 2013 to August 31, 2016. Unlike the SDOG litigation, Plaintiffs are alleged to be hotel guests who paid the assessment as part of their hotel bill.

The gravamen of Plaintiffs' claim is that the 2012 renewal assessment is a disguised tax that violates Proposition 26 because it was never submitted to

The complaint contains five causes of action: (1) declaratory relief that the TMD Plan and TMD Agreement are invalid because the City lacked the legal capacity to authorize the levy of the TMD assessment without first obtaining voter approval as required by Proposition 26; (2) declaratory relief challenging the TMD Procedural Ordinance as unconstitutional because it "has imposed an illegal tax"; (3) declaratory relief challenging the TMD Procedural Ordinance as unconstitutional because it denies equal protection by making classifications between business owners with respect to the fundamental right to vote; (4) waste of taxpayer funds; and (5) a petition for a writ of mandate seeking a constructive trust and restitution of "the amounts in which the [City] has been unjustly enriched through its unlawful imposition of the TMD Assessment."

H. Demurrer

Defendants demurred to the complaint, asserting the first (declaratory relief Proposition 26 violation), fourth (taxpayer waste), and fifth causes of action (writ of mandate) were barred by (1) the res judicata effect of the judgment of dismissal in the SDOG litigation and (2) either the 30-day statute of limitations in Municipal Code sections 61.2517 and 62.2526, subdivision (b) or the 60-day period for bringing a reverse validation proceeding under Municipal Code section 61.2526, subdivision (a) and Code of Civil Procedure section 860 et seq. Defendants also asserted that the first cause of action was moot because the 2012 renewal assessment had been superseded by the August 2016 amendment.

the grounds the claims are barred by the [60-day] statute of limitations" in Municipal Code section 61.2526, subdivision (a) and Code of Civil Procedure section 860 [validation statutes]. The court also held such claims were precluded by the SDOG judgment. The court sustained the demurrer to the second cause of action on the grounds the Procedural Ordinance does not impose or assess tax. Citing Salyer Land Co. v. Tulare Lake Basin Water Storage Dist. (1973) 410 U.S. 719 , 93 S.Ct. 1224 , 35 L.Ed.2d 659 ( Salyer ), the court sustained the demurrer to the third cause of action (equal protection) on the grounds a public entity may limit approval of an assessment to those entities that pay it. Plaintiffs timely appealed from the judgment of dismissal.

category of businesses" ( id. , subd. (a), italics omitted) must be brought within "30 days after the matter is deemed to be in existence" ( id. , subd. (b) ), which is defined as "upon its authorization by the City Council" ( id. , subd. (a) ).

Defendants demurred to the first (illegal tax in violation of Proposition 26), fourth (taxpayer waste claim), and fifth (writ of mandate) causes of action, asserting these claims were time-barred under these 30-day limitation periods.

Plaintiffs concede the City Council renewed the TMD and levied the renewal assessment by resolution on November 27, 2012. Thus, Plaintiffs' lawsuit, filed nearly four years later , is clearly time-barred unless the 30-day limitation period is unlawful, some tolling principle applies, or laches applies in lieu of the 30-day statute of limitations.

2. No due process violation

Citing McKesson Corp. v. Div. of Alcoholic Bevs. & Tobacco (1990) 496 U.S. 18 , 110 S.Ct. 2238 , 110 L.Ed.2d 17 , Plaintiffs contend the due process clause of the Fourteenth Amendment to the United States Constitution obligates the taxing authority to provide " 'meaningful backward-looking relief' " to rectify " 'any unconstitutional deprivation' " and the taxpayer must be provided a " 'clear and certain remedy.' " Plaintiffs assert the 30-day statute of limitations denies " 'meaningful backward-looking relief' " because the City Council's resolution provided the renewal assessment would not take effect until January 1, 2013, and thus the last day to challenge the assessment would have been December 27, 2012, "before the tax even took effect." Plaintiffs assert that, as a result, "no taxpayer" would ever be able to timely challenge the alleged unconstitutional tax.

A limitation period is consistent with due process if it provides a reasonable time to bring the action. ( Kupka v. Board of Administration (1981) 122 Cal.App.3d 791 , 797, 176 Cal.Rptr. 214 .) Here, it is unnecessary to speculate whether a taxpayer could timely challenge the renewal assessment within the 30-day limitation period-because it is a demonstrable reality that SDOG did exactly that. On December 19, 2012-i.e., within the 30-day limitation period-SDOG filed its lawsuit challenging the November 27, 2012 City Council resolution as imposing an unconstitutional tax.

Water Replenishment Dist. of Southern California v. City of Cerritos (2013) 220 Cal.App.4th 1450 , 163 Cal.Rptr.3d 754 and McKesson, supra, 496 U.S. 18 , 110 S.Ct. 2238 , Plaintiffs contend that if Municipal Code section 61.2517 is applied, they will be deprived of a postpayment remedy in violation of their due process rights. Specifically, Plaintiffs assert that by the time challengers were first entitled to bring an action under the "pay first, litigate later rule" in January 2013, the action would already be time-barred under the 30-day statute of limitations, which expires in December 2012. Plaintiffs argue that a person challenging the assessment is, therefore, deprived of the right to contest the imposition of the assessment before the assessment is even paid.

To begin, this argument is forfeited because Plaintiffs failed to raise or develop it in the trial court. ( Mattco Forge, Inc. v. Arthur Young & Co. (1997) 52 Cal.App.4th 820 , 847, 60 Cal.Rptr.2d 780 .) Moreover, even if not forfeited, the argument fails because the "pay first, litigate later" rule does not apply where, as here, the City has specifically provided a prepayment remedy.

The " ' "pay first, litigate later" ' " rule is intended to protect the stability of public funding by requiring litigants to pay a tax before filing an action to challenge its collection. ( California Logistics, Inc. v. State of California (2008) 161 Cal.App.4th 242 , 247, 73 Cal.Rptr.3d 825 .) The rule ensures that essential public services are not disrupted during the tax challenge. ( Andal v. City of Stockton (2006) 137 Cal.App.4th 86 , 90, 40 Cal.Rptr.3d 34 .) When this rule applies, to satisfy due process, the taxpayer must be provided with

a full and proper remedy to challenge the assessment, evidenced by the undisputed fact that SDOG filed its action against the City challenging the levying of such assessment on December 19, 2012-well within the 30-day limitation period in Municipal Code section 61.2517.

Citing Sipple v. City of Hayward (2014) 225 Cal.App.4th 349 , 170 Cal.Rptr.3d 199 ( Sipple ), Tracfone Wireless, Inc. v. County of Los Angeles (2008) 163 Cal.App.4th 1359 , 78 Cal.Rptr.3d 466 ( Tracfone ), Decorative Carpets, Inc. v. State Bd. of Equalization (1962) 58 Cal.2d 252 , 23 Cal.Rptr. 589 , 373 P.2d 637 ( Decorative Carpets ), Delta Air Lines, Inc. v. State Board of Equalization (1989) 214 Cal.App.3d 518 , 262 Cal.Rptr. 803

equitably tolled the limitation period for his filing a pension claim arising out of the same injury]; Elkins v. Derby (1974) 12 Cal.3d 410 , 115 Cal.Rptr. 641 , 525 P.2d 81 [filing of worker's compensation claim by Elkins (where it was determined he was not an employee) tolls the limitation period on his subsequent personal injury action against the same defendant for the same alleged injury].)

The rule Plaintiffs propose would result in potentially unlimited liability as one plaintiff would attempt to toll based on other plaintiffs' lawsuits against the same defendant. The doctrine of equitable tolling has been applied only in few "carefully considered situations." ( Lantzy v. Centex Homes (2003) 31 Cal.4th 363 , 370, 2 Cal.Rptr.3d 655 , 73 P.3d 517 .) Equitable tolling under the circumstances Plaintiffs propose here is not one such situation.

4. No basis for continuous accrual

Citing Howard Jarvis, supra (2001) 25 Cal.4th at p. 812, 107 Cal.Rptr.2d 369 , 23 P.3d 601 ( Howard Jarvis ), Plaintiffs contend the continued imposition and collection of tax is an "ongoing violation, upon which the limitations period begins anew with each collection." Under this theory, Plaintiffs' complaint would at least be viable as to assessments in the last 30 days before they filed suit.

However, the court in Howard Jarvis , supra , 25 Cal.4th 809 , 107 Cal.Rptr.2d 369 , 23 P.3d 601 limited its holding to cases "where the three-year limitations period for actions on a liability created by statute ( Code Civ. Proc., § 338, subd. (a) ) applies, and no other statute ... provides differently ." ( Howard Jarvis , supra , 25 Cal.4th at p. 825, 107 Cal.Rptr.2d 369 , 23 P.3d 601 , italics added.) In Utility Cost Management v. Indian Wells Valley Water Dist. (2001) 26 Cal.4th 1185 , 1195, 114 Cal.Rptr.2d 459 , 36 P.3d 2 , the California Supreme court held that if another statute provides a limitation period triggered by a specified event, the continuous accrual theory does not apply. This court reached the same conclusion in Barratt American, supra , 117 Cal.App.4th at p. 819-820, 12 Cal.Rptr.3d 132 ( Barratt American ), holding the continuous accrual doctrine did not

( Id. at p. 729, 93 S.Ct. 1224 .) Moreover, the district's actions disproportionately affected landowners because all costs of district projects were assessed against land in proportion to the benefits received and all charges for services were collectible from those receiving the benefit in proportion to services rendered. ( Id. at p. 729, 93 S.Ct. 1224 .) Employing minimal scrutiny, the Salyer court upheld the statute as rationally based and declined to apply the election requirements announced in Reynolds , supra , 377 U.S. 533 , 84 S.Ct. 1362 . ( Salyer , supra , 410 U.S. at p. 730, 93 S.Ct. 1224 .)

powers that affect many residents of San Diego." As an example of such "broad regulatory powers," Plaintiffs allege the "stated goals of the TMD Corp." are to raise approximately $25 million of annual assessments which would alleviate the need for the City to fund such tourism promotional activities, resulting in a $10.5 million savings to the City's general fund. Plaintiffs assert that as a result, the District "exercises the sort of governmental powers that invoke the strict demands of Reynolds [, supra , 377 U.S. 533 , 84 S.Ct. 1362 ] because it can impose taxes (as it did here) and affect public safety, parks, and libraries."

However, Hellebust , supra , 42 F.3d 1331 is materially distinguishable. As explained in Bolen , supra , 1 Cal.4th 654 , 3 Cal.Rptr.2d 843 , 822 P.2d 875 , "as far as the governmental function analysis is concerned, the constitutionally decisive fact is that the voting scheme at issue reflects the 'narrow primary purpose for which the [public entity] is created.' " ( Id. at p. 669, 3 Cal.Rptr.2d 843 , 822 P.2d 875 .) Here, that narrow purpose is set forth in the Procedural Ordinance and the City Council's resolution renewing and levying the TMD assessment. The Procedural Ordinance states the TMD is to "provide for tourism development ... in order to retain and expand the lodging industry which is one of the top revenue generators for the San Diego economy and a key employment sector." (Mun. Code, § 61.2501, subd. (a).) The City Council's resolution levying the 2012 renewal assessment provides such revenues "shall not be used to provide activities that directly benefit businesses outside the district or for any purpose other than the purposes specified in this Resolution, the Resolution of Intention, and the District Plan." Accordingly, unlike the entity in Hellebust , here the TMD is not affecting the daily activities of everyone in the geographical area.

Second, even if the assessment will result in a $10.5 million savings to the City's general fund, that does not make the TMD a government provider of police, parks, libraries, or other public services. Plaintiffs cite nothing showing the TMD has authority to direct or control how the City spends its general fund revenue. Whatever incidental financial benefits the City may

For the first time in their reply brief, Plaintiffs cite City of San Diego v. Shapiro (2014) 228 Cal.App.4th 756 , 175 Cal.Rptr.3d 670 ( Shapiro ) to support their equal protection argument. However, in Shapiro this court expressly declined to reach the equal protection issue. ( Id. at p. 780, fn. 23, 175 Cal.Rptr.3d 670 .) " ' "[C]ases are not authority for propositions not considered." ' " ( Ulloa v. McMillin Real Estate & Mortgage, Inc. (2007) 149 Cal.App.4th 333 , 340, 57 Cal.Rptr.3d 1 .)

Accordingly, the equal protection analysis in this case does not invoke strict scrutiny. (See Bolen , supra , 1 Cal.4th at p. 675, 3 Cal.Rptr.2d 843 , 822 P.2d 875 .) Instead, the equal protection requirement is that the voting scheme "not be ' "wholly irrelevant" ' to the ' "achievement of the [ordinance's] objectives." ' " ( Ibid . ) Plaintiffs' opening brief only analyzes the issue under strict scrutiny and, therefore, Plaintiffs have forfeited the issue of whether the voting scheme violates equal protection under the applicable reasonable basis standard. (See Roehl v. Ritchie (2007) 147 Cal.App.4th 338 , 352, 54 Cal.Rptr.3d 185 [failing to raise an issue in the opening brief waives the issue].)

D. Second Cause of Action

Plaintiffs' second cause of action seeks a declaratory judgment that the Procedural Ordinance is an unconstitutional tax because the City denied the

when an appeal is prosecuted for an improper motive, such as to harass the respondent or delay finality, or when the appeal indisputably has no merit-" 'when any reasonable attorney would agree that the appeal is totally and completely without merit.' " ( Kleveland v. Siegel & Wolensky, LLP (2013) 215 Cal.App.4th 534 , 556, 155 Cal.Rptr.3d 599 ( Kleveland ); see also Cal. Rules of Court, rule 8.276(a)(1).)

"In determining whether an appeal indisputably has no merit, California cases have applied both subjective and objective standards. The subjective standard looks to the motives of the appealing party and his or her attorney, while the objective standard looks at the merits of the appeal from a reasonable person's perspective." ( Kleveland , supra , 215 Cal.App.4th at p. 556, 155 Cal.Rptr.3d 599 .) Whether the party or attorney acted in an honest belief there were grounds for appeal is irrelevant "if any reasonable person would agree the grounds for appeal were totally and completely devoid of merit." ( Id. at pp. 556-557, 155 Cal.Rptr.3d 599 .) The objective and subjective standards "are often used together, with one providing evidence of the other. Thus, the total lack of merit of an appeal is viewed as evidence that appellant must have intended it only for delay." ( In re Marriage of Flaherty (1982) 31 Cal.3d 637 , 649, 183 Cal.Rptr. 508 , 646 P.2d 179 ( Flaherty ).)

In determining whether an appeal is frivolous, courts recognize that counsel and their clients have a right to present issues that are arguably correct, even if it is extremely unlikely that they will prevail on appeal. ( Flaherty , supra , 31 Cal.3d at p. 650, 183 Cal.Rptr. 508 , 646 P.2d 179 .) "An appeal that is simply without merit is not by definition frivolous and should not incur sanctions." ( Ibid ., italics omitted.)

B. Analysis

Defendants contend the appeal is completely devoid of merit because all challenges to the validity of the renewal assessment are barred by the 60-day statute of limitations under the validation statutes. To place the analysis of this issue in context, we briefly summarize validation procedure.

A validation action is one that permits a public agency to establish that certain actions it takes are valid and immune from further attack. Code of Civil Procedure section 860 provides: "A public agency may upon the existence of any matter which under any other law is authorized to be determined pursuant to this chapter, and for 60 days thereafter, bring an action in the superior court of the county in which the principal office of the public agency is located to determine the validity of such matter. The action shall be in the nature of a proceeding in rem." (Italics added.)

determination because validation proceedings result in an expedited and definitive ruling regarding the validity or invalidity of certain actions taken by public agencies. The ruling in a validation action is definitive because it is an in rem proceeding that, once proper constructive notice is given, results in a judgment that is binding against the world and cannot be collaterally attacked, even on constitutional grounds. ( Colonies Partners, L.P. v. Superior Court (2015) 239 Cal.App.4th 689 , 694, 191 Cal.Rptr.3d 45 .)

Code of Civil Procedure sections 860 and 863 do not specify the matters to which the validation procedure applies. Rather, a court must ascertain whether some "other law" has declared the particular claim or action to be subject to validation. In Kaatz , supra , 143 Cal.App.4th 13 , 49 Cal.Rptr.3d 95 , the court noted there were more than "200 statutes that provide for validating proceedings ...." ( Id . at p. 31, fn. 19, 49 Cal.Rptr.3d 95 .) For example, statutes provide for validation actions to determine the validity of redevelopment plans ( Health & Saf. Code, § 33501, subd. (a) ), certain bonds ( Gov. Code, § 53359 ), and the formation of special districts ( Gov. Code, § 58200 ).

Here, Defendants do not rely on any statute enacted by the Legislature to trigger Code of Civil Procedure section 860. Rather, they rely on Municipal Code section 61.2526 which provides:

"Action to Determine Validity; Action Contesting Validity

"(a) An action to determine the validity of assessments, contracts, improvements, or activities, or the amendment or approval of a district management plan, including but not limited to an amendment that changes, clarifies, or disestablishes a benefit zone or category of businesses, may be brought by the

law and avoid an interpretation that requires any part of the enactment to be ignored. (See Lopez v. Sony Electronics, Inc. (2016) 247 Cal.App.4th 444 , 449, 202 Cal.Rptr.3d 171 .) An interpretation that avoids inconsistency is that the validation procedure in subdivision (a), with its 60-day limitation period, applies only to actions to validate assessments brought by the City or the tourism marketing district association-whereas actions to contest assessments by others must be commenced within 30 days under subdivision (b) of the same ordinance. This interpretation is further bolstered by Municipal Code section 61.2517, which also provides a 30-day limitation period to actions contesting an

briefing, Defendants are unable to cite any case

In the context of this sanctions motion, it is unnecessary to decide the point, and we expressly decline to do so. Plaintiffs reasonably contend the complaint is not subject to validation proceedings under Code of Civil Procedure section 860. Accordingly, their appeal challenging the trial court's contrary conclusion is clearly not frivolous.

Defendants also contend the appeal is frivolous because the SDOG litigation was a reverse validation action, and the judgment there carries "res judicata" effects barring the complaint. However, although the entire SDOG litigation record is not before us, from the record here it is fairly debatable whether the SDOG litigation was a reverse validation action. The City tried to insert words to that effect in the SDOG judgment; however, the trial court struck that language when it entered judgment. Moreover, SDOG's attorney stated the action was not a reverse validation action, but was "characterized that way in the pleadings only in an abundance of caution." We do not decide whether the SDOG litigation was or was not a validation action. The salient fact here is that because the issue is unsettled and unclear, Plaintiffs' appeal on that point is not frivolous.

Moreover, claim preclusion only applies where there is a final judgment "on the merits." ( Association of Irritated Residents v. Department of Conservation (2017) 11 Cal.App.5th 1202 , 1220, 218 Cal.Rptr.3d 517 .) The SDOG judgment states the court determined the action was "moot." A judgment of dismissal based on mootness is not on the merits. "Quite the opposite, it is a decision that the merits need not be reached because there is no longer a live controversy." ( Robinson v. U-Haul Co. of California (2016) 4 Cal.App.5th 304 , 322, 209 Cal.Rptr.3d 81 .)

There is one additional reason this appeal is not frivolous. Although Plaintiffs' attempts to overcome the 30-day statute of limitations was weak, Defendants demurred only to the first, fourth, and fifth causes of action on statute of limitations grounds. As a result, to obtain a judgment of dismissal, Defendants were required to prevail on the equal protection issue. Plaintiffs' equal protection argument was unpersuasive, but certainly not frivolous.