Court Opinion

ID: 5125960
Source: CourtListenerOpinion
Date Created: 2021-11-15 20:03:06.667764+00
Date Added: 2024-06-11T08:22:53.535618
License: Public Domain

Filed 11/15/21 Main Street Taxpayer Assn. v. Town of Mammoth Lakes CA3
                                           NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                                      THIRD APPELLATE DISTRICT
                                                         (Mono)
                                                            ----

    MAIN STREET TAXPAYER ASSOCIATION,                                                          C091546

                    Plaintiff and Appellant,                                      (Super. Ct. No. CV190092 )

           v.

    TOWN OF MAMMOTH LAKES et al.,

                    Defendants and Respondents.

         In this case we address the limitations for filing challenges to a business
improvement district created pursuant to the Property and Business Improvement District
Law of 1994 (the District Law). (Sts. & Hy. Code, §§ 36600-36671.)1
         The District Law “authorizes cities to establish property and business
improvement districts (BID’s) in order to levy assessments on real property for certain

1   Undesignated statutory references are to the Streets and Highway Code.

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purposes.” (Epstein v. Hollywood Entertainment Dist. II Bus. Improvement Dist. (2001)
87 Cal.App.4th 862, 865.) Among those purposes is “[m]arketing and economic
development, including retail retention and recruitment.” (§ 36606, subd. (d).) A
petition may be adopted in whole or as revised by the city council; following a hearing
held in conformance with the notice and protest and hearing provisions of Government
Code sections 53753 and 54954.6. (§§ 36623-36625.) The BID’s management plan may
designate a private owner’s association to implement the plan. (§§ 36651, 36612.) If the
plan is implemented by an owner’s association, the city retains control of the assessment
proceeds through the terms of its contract with the owner’s association. (§ 36622.) A
new district shall last no more than five years (§ 36622, subd. (h)) but can be renewed
following the creation of a new management plan (§ 36630). “The validity of an
assessment levied under this part shall not be contested in an action or proceeding unless
the action or proceeding is commenced within 30 days after the resolution levying the
assessment is adopted pursuant to Section 36625.” (§ 36633.)
       In 2013, respondent, Town of Mammoth Lakes, formed such a district, the
Mammoth Lakes Business and Improvement District (the District). Plaintiffs and
appellants, Main Street Taxpayers Association, filed a class action complaint against the
Town of Mammoth Lakes, the District and various other individuals and organizations,
asserting numerous causes of action related to the formation of the District in 2013 and
its renewal in 2018. The trial court sustained respondents’ demurrers to the first amended
complaint without leave to amend and dismissed the action as time-barred by section
36633’s statute of limitations.
       Appellant contends section 36633 does not bar its claims of corruption, unlawful
behavior, and lack of jurisdiction, the continuous malfeasance it alleges has no limitation
period, and trial courts have consistently ignored limitations periods as a bar to
malfeasance claims. It also asserts the trial court had jurisdiction to rule on its claims and
appellant had standing to raise them, it is entitled to a writ of mandate ordering the

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District dissolved, and the District law must conform to the limitations on taxation in
Propositions 26 and 218.
       We find the gravamen of appellant’s first 12 causes of action is an attack on the
District’s formation in 2013 or its renewal in 2018. Since the action was commenced
more than 30 days after these two events, we conclude the trial court was correct in
dismissing the action as time-barred. In so doing, we reject appellant’s various attempts
to find exceptions to section 36633. The gravamen of the thirteenth cause is the alleged
invalidity of the transient occupancy tax from its 1986 inception, which is time-barred
pursuant to the three-year limitation of Code of Civil Procedure section 338, subdivision
(a). We shall affirm.
                  FACTUAL AND PROCEDURAL BACKGROUND
       On July 24, 2013, respondent Town of Mammoth Lakes adopted the resolution
forming the District, with an initial term of September 1, 2013 to August 31, 2016.2
Assessments imposed are levied solely on the assessed tourism businesses, and the owner
of the assessed business is solely responsible for payment of the assessment. If a
business chose to collect the assessment from customers, it must identify the “MLTBID
Assessment” in the bill. Prior to the District’s expiration, it was renewed for a five-year
term from September 1, 2018 to August 31, 2023. The owner’s association administering
the District is respondent Mammoth Lakes Tourism (ML Tourism). Respondent, John
Urdi, is ML Tourism’s Executive Director.
       Appellant filed the action in this case on August 5, 2019. Following a meet and
confer with respondents’ counsel, appellant filed the first amended complaint that is the
subject of this appeal on September 16, 2019. Appellant summarized the central issues of
their complaint thusly: “(1) the fraudulent creation of a Tourism Business Independent

2 Among the businesses sponsoring the petition was Mammoth Mountain Ski Area
LLC., which was subsequently purchased by respondent Alterra Mountain Company, Inc.

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District to cause new public fund money to be pilfered by the named Defendants for non-
public purposes while these Defendants were holding financial conflicts of interest; and
(2) the collection of transient occupant taxes by the Town of Mammoth Lakes without
voter approval.” The named defendants were respondents Rusty Gregory, Chief
Executive Officer of defendant and respondent Mammoth Mountain Ski Area, Alterra
Mountain Company, Inc., John Urdi, Chief Executive Officer of defendant ML Tourism,
Town of Mountain Lakes, Michael Raimondo, a town council member who voted for the
resolution creating the District, the Mammoth Lakes Chamber of Commerce, and Terri
Stehlk, who allegedly conspired with the Mammoth Lakes Chamber of Commerce to
create ML Tourism for the purposes of using a transient occupancy taxes public funds for
the nonpublic purpose expenses of ML Tourism and the Mammoth Lakes Chamber of
Commerce.
       Appellant alleged Gregory “fraudulently used the protocol of a Tourism Business
improvement District (TBID) to create new public fund money to be pilfered by named
Defendants for non-public purposes while each identified Defendant was holding
financial conflicts of interest” in violation of the Government Code section 1090, and that
Urdi assisted him in the conspiracy. According to appellant, before July 24, 2013,
Gregory and Urdi conspired to use the District Law to pay corporate expenses of the
Mammoth Mountain Ski Area, the Mammoth Lakes Chamber of Commerce, and ML
Tourism by funds collected through the District. The conspiracy was formed between
2010 and 2013, when Gregory represented to the local business community, a TBID plan
to enhance marketing for the assessed businesses, when in fact it was no more than a
scheme to increase the income of the Mammoth Lakes Ski Area by transferring the ski
area’s airline subsidy and marketing costs to funds assessed through the District.
       According to appellant, marketing for the Town of Mammoth Lakes had been
performed by city staff using transient occupancy tax funds enacted by “Measure A.”
After ML Tourism was created in 2010 by Stehlik, Town of Mammoth, the Mammoth

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Lakes Chamber of Commerce, and Mammoth Mountain Ski area, the town’s marketing
department was fired and ML Tourism took over the marketing, funded with Measure A
revenue. Appellant claimed the District was formed and the TBID assessment was
imposed to avoid going to the voters for the approval of a tax.
       Appellant alleged that the conspiracy was discovered within one year of the
complaint’s filing. At least one member of appellant’s group has paid and is liable to pay
the District’s assessment. Appellant further alleges class action claims on behalf of it, its
similarly situated consumers and property owners who have paid assessments levied by
the District.
       The First Amended Complaint set forth 13 causes of action.
       The first cause of action alleged deceit and intentional fraud by Gregory and Urdi,
alleging that Gregory planned to form a TBID to pay expenses of Mammoth Lakes Ski
Area without having to go to the voters to impose a tax. During 2012, Gregory and Urdi
falsely represented to businesses that the TBID plan would create new money that would
provide a special benefit to the assessed businesses, and never disclosed Gregory’s
intended purpose of paying expenses of Mammoth Lakes Ski Area. The statements were
a fraudulent inducement to obtain signatures for the TBID petition. This led to the
formation of the District and ML Tourism, which annually receives $5 million in
assessments and $2.5 million in Mammoth Lakes transient occupancy tax. Those funds
are then spent to enrich certain entities, such as paying over $1 million for airline
subsidies and $2 million for Mammoth Lakes Ski Area marketing. This fraud voided the
2013 resolution establishing the District and the 2018 resolution renewing it. Appellant
claimed the $5 million annual assessment must be returned to the class.
       The second cause of action was for conflict of interest in violation of Government
Code section 1090 and the Political Reform Act of 1974 (Gov. Code, § 87100, et seq.) ,
alleging Michael Raimondo, as a town council member, voted in favor of the resolution
establishing the District while owning one of the businesses listed as having a special

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privilege under the District’s plan that was not given to other businesses. It also claimed
the 2013 resolution establishing the District was void because it contained the association
contract with ML Tourism, allowing Urdi to carry out the pilfering scheme of Gregory.
It asserted that all public funds, whether assessments by the District or Measure A funds
transferred to any defendant should be “imposed with a constructive trust” and then
returned to the original payors of the assessment.
       The third cause of action alleged violations of Government Code section 1090 and
the Political Reform Act of 1974 with respect to the 2018 resolution renewing the District
and alleging similar conflicts of interests as with the 2013 resolution.
       The fourth cause of action asserted a conspiracy designed to avoid voter approval
of a tax increase, alleging that during 2012 to 2013, Urdi, ML Tourism, Mammoth
Mountain Ski Area, the Mammoth Lakes Chamber of Commerce, and the Town of
Mammoth Lakes and others conspired to obtain additional public money through the
District Law, thereby, increasing taxes while bypassing statutory and state constitutional
requirements for voter approval of new taxes. It claimed all defendants were jointly and
severally liable for all funds collected through the District assessments, which must be
returned to the original payors.
       The fifth cause of action alleged Alterra Mountain Company, Inc. was liable as a
result of Gregory’s fraud because Alterra Mountain Company, Inc. purchased Mammoth
Mountain Ski Area, after determining Mammoth Mountain Ski Area was benefitting from
the unlawful use of public funds for marketing and airline subsidies through ML
Tourism, and Alterra Mountain Company, Inc. continued to accept these unlawful public
funds after the purchase.
       The sixth cause of action sought declaratory relief against all defendants seeking a
determination that the 2013 petition initiating the District was fraudulently obtained and
void, the resolutions establishing and renewing the District are void, all assessments by
the District and transient occupancy taxes transferred to ML Tourism must be disgorged

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and returned to payors, and that all transient occupancy taxes collected by the Town of
Mammoth Lakes since its inception are void and must be returned to the original payors.
       The seventh cause of action sought injunctive relief pursuant to Code of Civil
Procedure section 526a, seeking an injunction ordering Town of Mammoth Lakes to
deposit the District’s assessments and all transient occupancy tax revenues into a general
account fund that would not be disbursed to any defendant unless otherwise ordered by
the trial court. The justification for the injunction was the improper transfer of public
money as previously described in the complaint.
       Appellant’s eighth cause of action was for a writ of mandamus pursuant to Code
of Civil Procedure section 1085 directing the Town of Mammoth Lakes to comply with
Article XVI, section 6 of the California Constitution and cease the transfer of public
money to ML Tourism. In support of this claim, appellant alleged a conspiracy amongst
various respondents to outsource marketing from city employees to be a function of the
Mammoth Lakes Chamber of Commerce, using the newly created ML Tourism as the
vehicle to achieve this end. Appellant alleged the California Constitution gave no police
powers to ML Tourism, and the contract between Town of Mammoth Lakes and
Mammoth Lakes Tourism for marketing does not erase the prohibition against gifting
public funds.
       The ninth cause of action asserted the Town of Mountain Lakes lacked jurisdiction
“to claim any validation to the town meeting.” Appellant alleged the 2013 and 2018
resolutions establishing and renewing the District were void for failing to comply with
the requirements of sections 36632 (by imposing the assessment on residentially zoned
property), section 36624 (notice requirements) and section 36633 (failure of the 20189
resolution to contain an assessment formula).
       Appellant’s tenth cause of action cause was “Fraud Intended To Circumvent
Propositions 128 and 26 Also Defeats The Resolutions Because They Are Simply

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Unlawful.” It claimed the 2013 and 2018 resolutions were void as they were intended to
unlawfully circumvent the limitations on taxation in both propositions.
         In the eleventh cause of action, appellant claimed the Town of Mammoth Lakes’
elected officials violated their fiduciary duty to appellant’s class, the general public, by
unlawfully imposing taxes on appellant and those similarly situated, and transferring the
fund to an entity, ML Tourism, the town did not control.
         Appellant’s twelfth cause of action requested imposition of a constructive trust on
all public assets and moneys of all respondents, obliging each respondent to return the
funds with interest to a common fund managed by appellant as determined by the trial
court.
         The thirteenth and last cause of action was a separate class action challenging the
transient occupancy tax, claiming it was collected without voter approval through vague
and ambiguous ballot measures designed to deceive voters, as well as resolutions and
ordinance that violate statutory and state constitutional provisions. According to
appellant, when the initial transient occupancy tax, Measure A, was adopted on August 6,
1986, government officials failed to comply with Government Code section 53724’s
requirements regarding submitting local taxes to voters, failure to submit this Measure to
voters by November 15, 1988 rendered it void under Government Code section 53727,
and subsequent measures ratifying or amending the transient occupancy tax were void for
failing to comply with Government Code section 53724 or variances between the
proposed ordinance and the ballot language. Appellant sought certification of the class
claiming fraud and conflicts of interest causing the imposition of the District’s
assessment and challenging the transient occupancy tax.
         Respondents demurred on several grounds, including the statute of limitations.
At the hearing on the demurrers, the trial court offered a tentative ruling that the action
was time-barred under section 36633’s 30-day statute of limitations. The trial court
offered appellant the opportunity to amend the first cause of action to allow it to allege a

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timely tort not barred by section 36633, but appellant declined. The trial court sustained
the demurrers without leave to amend and entered a judgment of dismissal.
                                       DISCUSSION
                                              I
                          Causes of Action One Through Twelve
       Appellant contends the trial court erred in granting the demurrer and ordering the
dismissal based on section 36633’s statute of limitations due to the nature of the claims it
raises. It finds the trial court erred by failing to recognize the gravamen of the complaint
determines the relevant limitation period, and the gravamen here is “does a local
government agency act within the authority of laws when adopting a resolution or
contract created for unlawful purposes? If not, what are the consequences?” According
to appellant, the claims of corruption and unlawful behavior in the first amended
complaint are exempt from the 30-day limitation period because they address the
government’s authority to act. These claims address the town’s jurisdiction to act,
exempting them from the statute of limitations.
       “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. [Citations.] ‘[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.’ [Citation.]” (Hensler v. City of Glendale (1994) 8 Cal.4th 1, 22-23.) Thus,
“[w]hat is significant for statute of limitations purposes is the primary interest invaded by
defendant's wrongful conduct. [Citation.]” (Barton v. New United Motor Manufacturing,
Inc. (1996) 43 Cal.App.4th 1200, 1207.)
       The gravamen of the first twelve causes of action is manifest. Each of the first
twelve causes of action centers on the alleged illegality of the District’s creation in 2013

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and its renewal in 2018. 3 The allegations of fraud center on the petition establishing the
District and resolutions enacting and renewing it, while the conflict of interest allegations
center on who receives the benefits of the assessment. The allegations in all of these
twelve causes of action in the end center on the District’s formation, its legality, and how
it operates.
       Such claims are governed by section 36633, which prevents the “validity of an
assessment levied under this part” from being “contested in an action or proceeding
unless the action or proceeding is commenced within 30 days after the resolution levying
the assessment is adopted pursuant to Section 36625.” In the one published case
addressing section 36633, the Fourth District Court of Appeal held that its 30-day limit
for filing a notice of appeal for an action challenging an assessment4 applied to bar an
untimely appeal of the dismissal of an action contending an assessment was an invalid tax
not approved by the voters, as required by article XIII C of the California Constitution.5
(The Inland Oversight Committee v. City of Ontario (2015) 240 Cal.App.4th 1140, 1142-
1143, 1145.) The appellant claimed its action was not subject to the 30-day limitation
because it “did not allege that the assessments were invalid because the City failed to
comply with the District Law (§§ 36600-36671), but because the assessments were a
general or a special ‘tax’ not approved by the cities’ voters pursuant to article XIII C of

3 Since we are holding these causes are time-barred, we do not address other potential
problems with these causes, like the sixth and seventh causes of action for declaratory
and injunctive relief being remedies rather than causes of action. (See McDowell v.
Watson (1997) 59 Cal.App.4th 1155, 1159 [injunctive relief is a remedy, not a cause of
action].)
4 “An appeal from a final judgment in an action or proceeding shall be perfected within
30 days after the entry of judgment.” (§ 36633.)
5 (Cal. Const., art. XIII C, §§ 1, subd. (e), par. (2), 2, subds. (b)) [majority voter approval
required for general taxes], (d) [supermajority voter approval required for special taxes].

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the California Constitution.” (The Inland Oversight Committee, at p. 1145.) Finding “the
basis of its invalidity claim is immaterial to the application of section 36633,” the Fourth
District Court of Appeal concluded, “[t]he 30-day time limits of section 36633 apply to
‘any action’ challenging ‘[t]he validity’ of an assessment levied pursuant to the District
Law, regardless of the basis of the validity challenge,” and “it is the gravamen of the
complaint (here, that the assessments were invalid), rather than the form of the action or
the specific relief demanded, that determines the applicable limitations period.
[Citations.]” (Ibid.)
       The same applies here. Although section 36633 has since been amended to
prohibit “an action” rather than “any action” filed after the 30-day period, this is a
distinction without a difference in the application of the 30-day limitation period.
Whether the statute refers to “an action” or “any action” the result is the same, actions
challenging an assessment under the District law filed more than 30 days after its
enactment are time-barred without regard to the basis of the claim or claims asserted.
Since the action was filed more than 30 days after the District was adopted in 2013 and
renewed in 2018, the first 12 causes of actions were time-barred under section 36633.
                                              II
                                 Thirteenth Cause of Action
       The thirteenth cause of action, while relying in part on the alleged invalidity of the
District, also challenges Town of Mammoth Lakes’ transient occupancy tax, a matter not
governed by section 36633.
       As appellant acknowledges, the statute of limitations for its claims against the
transient occupancy tax is three years, as appellant asserts the tax violates various
provisions of the Government Code. (Code Civ. Proc. § 338, subd. (a) [three-year
limitation period for “[a]n action upon a liability created by statute, other than a penalty
or forfeiture”].) Accordingly, a statutory challenge to a tax is limited to challenges to
those taxes paid within three years of the action; a timely action regarding those taxes

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does not relate back to taxes paid earlier. (Howard Jarvis Taxpayers Assn. v. City of La
Habra (2001) 25 Cal.4th 809, 821-822, 825 (Howard Jarvis Taxpayers Assn.)
Appellant’s argument under the common law theory of continuous accrual (see Aryeh v.
Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1199 [‘[t]he common law theory
of continuous accrual posits that a cause of action challenging a recurring wrong may
accrue not once but each time a new wrong is committed”]) does not allow appellant to
go back further. The thirteenth cause of action challenges 15 separate legislative acts
regarding the transient occupancy tax over a period of 27 years. Each of the legislative
acts challenged in the thirteenth cause of action are independent acts that stand or fall on
their own merits. Thus, appellant challenges a series of discrete, independent legislative
acts in enacting an amending the measure, rather than a single continuous wrong. Any
claim for taxes paid more than three years before the action is time-barred.
       The thirteenth cause of action sought invalidation of the transient occupancy tax
from its inception, with a return of all funds collected. As the tax was first enacted in
1986, this claim reaches much further back than three years from the filing of the
complaint, hence it is time-barred. In Howard Jarvis Taxpayers Assn., the Supreme
Court limited “injuries occurring in the statutory three‐year period before suit is brought”
and “only to plaintiffs injured by tax collections within the three‐year period.” (Howard
Jarvis Taxpayers Assn., supra, 25 Cal.4th at p. 825.)
       The gravamen of the thirteenth cause is that the transient occupancy tax has been
invalid since its inception in 1986, requiring a full refund of all transient occupancy taxes
ever paid. Appellant disclaimed the trial court’s invitation to amend its complaint as to
the first cause of action, and raises no claim on appeal regarding amending any part of its
complaint. Accordingly, any contention that leave should have been given to amend the
thirteenth cause of action to conform with the three-year limit is forfeited. (Reynolds v.
Bement (2005) 36 Cal.4th 1075, 1091, abrogated on another point by Martinez v. Combs
(2010) 49 Cal.4th 35, 62-66 [failure to ask for leave to amend forfeits such claim on

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appeal]; Christoff v. Union Pacific Railroad Co. (2005) 134 Cal.App.4th 118, 125
[failure to raise contention in opening brief forfeits claim on appeal].) Although the
thirteenth cause of action also sought declaratory relief that the occupancy tax was
invalid because it was never approved by the voters and mandamus directing the Town of
Mammoth Lakes not to collect it, this does not change the central focus of the cause,
which was that the tax has been invalid since its inception. As appellant never sought
leave to amend this complaint to address only the last three years of the tax, the trial court
correctly granted the demurrer on this cause and dismissed the complaint without leave to
amend.
                                       DISPOSITION
       The judgment is affirmed. Costs on appeal are awarded to respondents. (Cal.
Rules of Court, rule 8.278(a)(1) & (2).)

                                                      \s\                      ,
                                                  BLEASE, Acting P. J.

       We concur:

           \s\              ,
       HULL, J.

           \s\              ,
       KRAUSE, J.

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