Court Opinion

ID: 8488402
Source: CourtListenerOpinion
Date Created: 2022-11-21 23:01:38.718193+00
Date Added: 2024-06-11T16:50:10.961510
License: Public Domain

Filed 11/21/22 (unmodified opinion attached)
                           CERTIFIED FOR PUBLICATION

             COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                       DIVISION ONE

                                 STATE OF CALIFORNIA

 BARBARA MORGAN et al.,                         D079364
                                                (Super. Ct. No. 37-2019-00052045-
        Plaintiffs and Appellants,              CU-OR-CTL)

        v.                                      ORDER MODIFYING OPINION
                                                AND DENYING REHEARING
 YGRENE ENERGY FUND, INC. et al.,

        Defendants and Respondents.             NO CHANGE IN JUDGMENT

 JANET ROBERTS et al.,                          D079369
                                                (Super. Ct. No. 37-2019-00059601-
        Plaintiffs and Appellants,              CU-OR-CTL)

        v.

 RENEW FINANCIAL GROUP, LLC
 et al.,

        Defendants and Respondents.

THE COURT:
       It is ordered that the opinion filed November 1, 2022 be modified as
follows:
      1. On page 10, at the end of the top paragraph, after the words “ ‘and
possibly the entire balance if the violation is found to have been “willful,” ’ ”
add the following sentence:

         In what plaintiffs have styled as their “fourth cause of
         action” alleging violations of Financial Code section 22750,
         and the “fifth cause of action” invoking Business and
         Professions Code section 7159.2, plaintiffs seek “public
         injunctive relief”—that is, an order (1) prohibiting
         defendants from “engaging in the business of making
         consumer loans unless and until each is property licensed
         as a Finance Lender,” and (2) requiring each program
         administrator to include a joint check requirement in any
         future agreement.

      2. The last paragraph on page 14 and ending on page 15, after the
words “ ‘No other persons may bring such an action . . . .’ (Ibid.)”—insert the
following paragraph:

             This same analysis applies to what plaintiffs have
         labeled as their fourth and fifth causes of action for public
         injunctive relief. The underlying premise of each is that
         defendants are either sellers of home improvement services
         or are engaged in the business of making loans. Public
         injunctive relief is, as its name suggests, a remedy, not a
         theory of liability. These remedial requests are based on
         the same legal theories, arise from the same alleged
         operative facts, and involve the same alleged primary
         rights as the first three causes of action. The only
         difference is the nature of the remedy sought. (See McGill
         v. Citibank, N.A. (2017) 2 Cal.5th 945, 961 [public
         injunctive relief is a remedy under the Unfair Competition
         Law].) “Injunctive relief is a remedy, not a cause of action.
         [Citations.] A cause of action must exist before a court may
         grant a request for injunctive relief.” (Allen v. City of
         Sacramento (2015) 234 Cal.App.4th 41, 65.) Here, because
         the first three causes of action fail as a matter of law, the
         fourth and fifth, seeking additional remedies, necessarily
         fail as well.

                                         2
      The petition for rehearing is denied.
      There is no change in judgment.

                                              McCONNELL, P. J.

Copies to: All parties

                                        3
Filed 11/1/22 (unmodified opinion)
                           CERTIFIED FOR PUBLICATION

             COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                     DIVISION ONE

                                 STATE OF CALIFORNIA

 BARBARA MORGAN et al.,                       D079364

        Plaintiffs and Appellants,

        v.                                    (Super. Ct. No. 37-2019-00052045-
                                              CU-OR-CTL)
 YGRENE ENERGY FUND, INC., et al.,

        Defendants and Respondents.

 JANET ROBERTS et al.,                        D079369

        Plaintiffs and Appellants,

        v.                                    (Super. Ct. No. 37-2019-00059601-
                                              CU-OR-CTL)
 RENEW FINANCIAL GROUP, LLC,
 et al.,

        Defendants and Respondents.

       APPEALS from judgments of the Superior Court of San Diego County,
Richard S. Whitney, Judge. Judgments affirmed. Requests for judicial notice
denied.
     James Swiderski for Plaintiffs and Appellants.
     Buckley, Fredrick S. Levin and Ali M. Abugheida for Defendants and
Respondents Ygrene Energy Fund, Inc., GoodGreen 2016-1, GoodGreen 2017-
1, GoodGreen 2017-2, GoodGreen 2018-1, GoodGreen 2019-1, GoodGreen
2015 LLC, GoodGreen 2016-1 LLC, GoodGreen 2016-1 Trust, GoodGreen
Holdings 2016-A Trust, GoodGreen 2017-1 Trust, GoodGreen Funding 2016-1
LLC, GoodGreen Funding 2017-1 LLC, GoodGreen 2017-2 LLC, GoodGreen
Funding 2017-R1 LLC, GoodGreen Funding 2018-1 LLC, GoodGreen
Holdings 2016-A Trust, Renew Financial Group LLC, Renew 2017-1, Renew
2017-2, and Renew 2018-1.
     Reed Smith, Jesse L. Miller, David J. de Jesus and Emily F. Lynch for
Defendants and Respondents Wilmington Trust, N.A., as Trustee of Hero
Funding Trust 2015-2, Hero Funding Trust 2015-3, Hero Funding Trust
2016-1, Hero Funding Trust 2016-2, Hero Funding Trust 2017-1, Hero
Funding Trust 2017-3, and Hero Funding Trust 2018-1.
     Akin Gump Strauss Hauer Feld and Neal R. Marder for Defendants
and Respondents Golden Bear 2016-1, LLC, Golden Bear 2016-2, LLC, and
Golden Bear 2016-R, LLC.

                                    2
      The issue in these consolidated appeals is not an unfamiliar one—
whether plaintiffs were required to first exhaust administrative tax remedies
before filing this lawsuit. But it arises in a novel context where property tax
and home improvement financing intersect.
      In 2008, California enacted a Property Assessed Clean Energy program
(PACE) as a method for homeowners to finance energy and water
conservation improvements. Like an ordinary home equity loan, a PACE
debt is created by contract and secured by the improved property. But like a
tax, the installment payments are billed and paid as a special assessment on
the improved property, resulting in a first-priority tax lien in the event of
default.
      The named plaintiffs in these putative class actions are over 65 years
old and entered into PACE contracts. Barbara Morgan, for example,
borrowed over $100,000 for “reflective coating” and “energy efficient”
windows. Her resulting 20-year special tax assessment bears 8.49 percent
interest, increasing her property taxes by nearly $15,000 annually.
Similarly, plaintiff John Brown borrowed over $100,000 for a new air
conditioner, a “cool roof,” and “permeable ground cover,” a fancy name for
concrete pavers. The annual percentage rate on his PACE loan is 9.29
percent. His property taxes increased by over $11,400 annually for 20 years.
      The defendants are private companies who either made PACE loans to
the plaintiffs, were assigned rights to payment, and/or administered PACE
programs for municipalities. The gravamen of the complaint in each case is
that PACE financing is actually, and should be treated as, a secured home
improvement loan. Plaintiffs allege that defendants engaged in unfair and
deceptive business practices by violating consumer protection laws, including

                                        3
Civil Code section 1804.1 subdivision (j), which prohibits taking a security
interest in a senior citizen’s residence to secure a home improvement loan.
      The liability theories are intriguing, but we need not and do not
address them here. The appeals turn instead on a procedural issue.
Generally, a taxpayer may not pursue a court action for a refund of property
taxes without first applying to the local board of equalization for a reduction

and then filing an administrative claim for a refund. (Rev. and Tax. Code, 1
§§ 1603, 5097; see Steinhart v. County of Los Angeles (2010) 47 Cal.4th 1298,
1307‒1308 (Steinhart).) “[S]trict legislative control over the manner in which
tax refunds may be sought is necessary so that government entities may
engage in fiscal planning based on expected tax revenues.” (Woosley v. State
of California (1992) 3 Cal.4th 758, 789.)
      Here, defendants demurred to the complaints on the sole ground that
plaintiffs failed to allege they first exhausted administrative remedies. The
trial court agreed, sustained the demurrers without leave to amend, and
entered a judgment of dismissal in each case.
      On appeal, plaintiffs primarily contend they were not required to
pursue administrative remedies because they have sued only private
companies and do not challenge “any aspect of the municipal tax process
involved.” (Italics omitted.) But as we will explain, the complaints seek tax
refunds, an injunction against future tax assessments, and removal of tax
liens. Despite their assertions to the contrary, plaintiffs do challenge their
property tax assessments. And although they have not sued any government
entity, the “consumer protection statutes under which plaintiffs brought their
action cannot be employed to avoid the limitations and procedures set out by

1     Undesignated statutory references are to the Revenue and Taxation
Code.
                                        4
the Revenue and Taxation Code.” (Loeffler v. Target Corp. (2014) 58 Cal.4th
1081, 1092 (Loeffler).)
      Plaintiffs also contend that the exhaustion rule should not apply
because their liability theories involve legal issues that an assessor’s board
lacks expertise to resolve. The Legislature, however, has given such boards
“ ‘jurisdiction over nonvaluation issues.’ ” (Williams & Fickett v. County of
Fresno (2017) 2 Cal.5th 1258, 1271 (Williams & Fickett).) Thus, we conclude
that plaintiffs were required to submit their claims through the
administrative appeals process in the first instance. Their failure to do so
requires the judgments to be affirmed.

              FACTUAL AND PROCEDURAL BACKGROUND

      Because the appeals challenge a judgment of dismissal entered upon
the sustaining of a demurrer without leave to amend, we draw the operative
facts from the complaints. (Steinhart, supra, 47 Cal.4th at p. 1304, fn. 1.)

A.   PACE Programs

      In 2008, the Legislature determined that promoting energy efficient
improvements to real property was “necessary to address the issue of global
climate change.” (Stats. 2008, ch. 159 (Assem. Bill No. 811) § 2; Former Sts.
& Hy. Code, § 5898.14, subd. (a)(1).) Recognizing that the cost “prevents
many property owners from making these improvements,” it authorized “the
legislative body of any city” to “finance” the installation of energy efficiency
improvements that are permanently affixed to real property. (Former Sts. &
Hy. Code, § 5898.14 (Stats. 2008, ch. 159, § 2).) The Legislature envisioned
that municipalities would borrow money by selling bonds to private investors.
In turn, local government would lend the money to homeowners, who would
use it to pay contractors for installing energy and/or water conservation

                                        5
upgrades. (Sts. & Hy. Code, § 5898.22, subd. (d).) The PACE loan would be
repaid by an assessment added to the homeowner’s annual property tax bill,
and thus secured by a priority tax lien that runs with the land.
      As enacted in 2008, PACE seemingly offered many benefits for
homeowners. Expensive improvements, such as solar energy panels could be
purchased with no down payment. And because the maximum amount
financed would be based on the property’s value—not the borrower’s net
income or ability to repay—there was no need to verify employment or
require good credit. PACE offered other benefits too. Anticipated energy
savings were expected to at least in part offset the increase in property tax,
and the improvements were expected to increase the property’s market value.
      When it first enacted PACE, the Legislature anticipated that local
governments would operate their own programs, as they did with other
aspects of municipal finance. This may explain why the 2008 legislation “did
not provide any mechanism for disclosure of loan terms or regulation of the
conduct of lenders.”
      But despite the public financing envisioned, private companies (with
profit motives) soon offered turn-key solutions to local governments
interested in establishing a PACE program. These companies, known as
PACE program administrators (Administrators), contracted with local
governments to handle the program on their behalf. Administrators screen
contractors to work under the program, ensure construction permits are
obtained, spot check the work, set price guidelines and, working through the
contractors, solicit homeowners to borrow. In short order, Administrators
were running almost all of the PACE programs throughout the state.

                                       6
      Administrators market municipal bonds to third parties, the proceeds
of which fund the home improvements. Alternatively, Administrators buy
the municipal bonds themselves—in effect becoming the PACE lender too.
      The complaints allege that each of the Administrator/defendants “chose
the more lucrative option of buying all of the bonds itself.” Plaintiffs
maintain that in economic substance, this is a two-party transaction
consisting of the homeowner/borrower and the Administrator/lender.
According to the complaints, the only difference between this type of
financing and an ordinary home improvement loan is that the PACE debt is

in the form of a municipal bond instead of a promissory note. 2 The economic
reality is that government does not fund the project or otherwise provide any
financial subsidy. It is involved solely to provide tax exempt interest for
investors who purchase the bonds and thereby fund the private work.
Essentially, the government’s issuance of bonds provides a “ ‘conduit’ ” for
private financing to “ ‘pass through’ ” to the recipient of the bond proceeds.
(See California Statewide Communities Development Authority v. All Persons
Interested etc. (2007) 40 Cal.4th 788, 794.) According to the complaints, “In
bond parlance, this has long been recognized to be indistinguishable, in
substance, from a two-party loan, one lender, one borrower.” Plaintiffs insist

2     Why finance through a municipal bond and not a promissory note from
homeowner to lender? Because interest payments on municipal bonds are
generally tax exempt, making it an attractive investment (as well as giving
borrowers the benefit of a lower interest rate). Moreover, because the debt is
secured by a property tax lien, “the PACE bondholders are able to default the
homeowner on their missing a single payment and commence foreclosure
proceedings promptly thereafter.”
                                        7
that, in substance, “the PACE loans were privately funded home

improvement loans, consumer loans in every sense of the word.” 3

B.   The Morgan and Roberts Complaints

      In 2020, Barbara Morgan, Marcia Bordine, and Arlene Hill filed a first
amended putative class action complaint against Renovate America, Inc.,
Ygrene Energy Fund, LLC, and Renew Financial Group, LLC (collectively
Lenders), which they allege are “engage[d] in the business of lending money
for the purpose of financing home improvement loans” and acted as
Administrators (the Morgan Complaint). Plaintiffs further state they are
each over the age of 65, and were “solicited and signed up for home
improvement services” with financing provided by Lenders. They maintain
that “[e]ach was confused by the process, and did not comprehend that they
would be putting their homes in jeopardy by agreeing to unaffordable loan
obligations that they had no hope of being able to pay off according to the

terms of repayment.” 4 In a separate action and represented by the same

3      The Complaint acknowledges that since PACE’s inception in 2008,
“efforts were made to reform the program.” Most recently in 2019, for
example, the Legislature prohibited PACE program administrators from
approving an assessment contract without first making a “reasonable good
faith determination that the property owner has a reasonable ability to pay
the annual payment obligations for the PACE assessment.” (Fin. Code,
§ 22686.)
4    The Morgan Complaint also names as defendants: Ygrene Energy
Fund, Inc., GoodGreen 2016-1, GoodGreen 2017-1, GoodGreen 2017-2,
GoodGreen 2018-1, GoodGreen 2019-1, GoodGreen 2015 LLC, GoodGreen
2016-1 LLC, GoodGreen 2016-1 Trust, GoodGreen Holdings 2016-A Trust,
GoodGreen 2017-1 Trust, GoodGreen Funding 2016-1 LLC, GoodGreen
Funding 2017-1 LLC, GoodGreen Funding 2017-2 LLC, GoodGreen Funding
2017-R1 LLC, GoodGreen Funding 2018-1 LLC, and GoodGreen Holdings
2016-A Trust. Morgan and Bordine allege that their repayment obligations
                                       8
lawyer who filed the Morgan Complaint, another group of plaintiffs, Janet
Roberts, Alfonso Robinson, John Brown, Joan Banks, Lyn Ramskill, and
Evigildo Lamitar, filed a virtually identical lawsuit against Renew Financial
Group, LLC and several “Renew” and “Golden Bear” entities they allege

“came to own security interests” in plaintiffs’ homes. 5
      The complaints do not allege fraud. Nor do plaintiffs challenge the
quality of the improvements their PACE loans purchased. Rather, plaintiffs
allege they were “confused about the terms of the loans they were being
solicited for” and did not appreciate “the financial burden that would result”
and the risk of foreclosure.
      Plaintiffs assert causes of action under the Unfair Competition Law
based on alleged violations of (1) Civil Code section 1804.1, subdivision (j)
[prohibiting taking a security interest in a senior citizen’s home under a
home improvement contract]; (2) Civil Code section 1803.2 [failing to
admonish, “IF YOU SIGN THIS CONTRACT, YOU WILL BE PUTTING UP
YOUR HOME AS SECURITY”]; (3) Financial Code section 22750 [requiring a
finance lender license]; and (4) Business and Professions Code section 7159.2
[requiring contractors to be paid by joint check]. They claim that as a result
of these violations, Lenders are prohibited from collecting interest, finance

were assigned to one of more of these defendants “as part of a common plan of
sequential securitization of the loan receivable.”
      Hill also sued Renovate America, Inc. and named as additional
defendants: Wilmington Trust, NA, as Trustee of Hero Funding Trust 2015-
2; Hero Funding Trust 2015-3; Hero Funding Trust 2016-1; Hero Funding
Trust 2016-2; Hero Funding Trust 2016-3, 2016-4, 2017-1; Hero Funding
Trust 2017-2; Hero Funding Trust 2017-3; Hero Funding Trust 2018-1.
5    Specifically, these defendants are Renew 2017-1, Renew 2017-2, Renew
2018-1, Golden Bear 2015-1, LLC , Golden Bear 2016-1, LLC, Golden Bear
2016-2, LLC, and Golden Bear 2016-R, LLC.
                                        9
charges, “and possibly the entire balance if the violation is found to have been
‘willful.’ ”

C.    The Demurrers and Ruling

       In December 2020 the defendants demurred to both the Morgan and
Roberts complaints on the grounds that plaintiffs failed to “exhaust

administrative remedies.” 6 The trial court sustained the demurrers without
leave to amend and entered a judgment of dismissal in each of the actions.
On defendants’ unopposed motions, we consolidated the two appeals for
argument and decision.

                                 DISCUSSION

A.    Plaintiffs Were Required to Exhaust Administrative Remedies

       Generally, “ ‘a party must exhaust administrative remedies before
resorting to the courts.’ ” (Plantier v. Ramona Municipal Water Dist. (2019)
7 Cal.5th 372, 383.) This rule advances two policies. It allows an agency to
decide matters within its expertise without court interference. (Ibid.)
Second, administrative proceedings “aid[ ] judicial review by allowing the
agency to draw upon its expertise and develop a factual record for the court’s
consideration.” (Ibid.) Even where the administrative remedy “ ‘may not
resolve all issues or provide the precise relief requested by a plaintiff, the
exhaustion doctrine is still viewed with favor ‘because it facilitates the
development of a complete record that draws on administrative expertise and
promotes judicial efficiency.” ’ ” (Sierra Club v. San Joaquin Local Agency
Formation Commission (1999) 21 Cal.4th 489, 501.)

6    Defendants sued by Hill and those sued by Morgan and Bordine filed
separate demurrers raising the same issues. The court resolved both
demurrers in a single minute order.
                                        10
      The California Constitution gives the Legislature exclusive control over
the procedure under which a taxpayer may recover certain tax payments.
Article XIII, section 32 provides: “After payment of a tax claimed to be
illegal, an action may be maintained to recover the tax paid, with interest, in

such manner as may be provided by the Legislature.” 7 It also specifies that
“[t]he Legislature shall pass all laws necessary to carry out [its] provisions.”
(Cal. Const., art. XIII, § 33.)
      The county assessor is responsible for preparing the local tax roll and
assessing all taxable property in the county. (§ 401.) Taxpayers have the
right to challenge an inaccurate or illegal tax assessment and to claim a
refund of taxes. The county board of supervisors meeting as a board of
equalization, or an assessment appeals board (board) hears those challenges.
(§§ 1601, subd. (a), 1603.)
      The process is initiated by an application for assessment reduction
under section 1603, subdivision (a), which provides: “A reduction in an
assessment on the local roll shall not be made unless the party affected
. . . files with the county board a verified, written application showing the
facts claimed to require the reduction and the applicant’s opinion of the full
value of the property.” Under section 1610.8, the board may “cancel[ ]
improper assessments.” An order for refund cannot be made unless a verified
claim is filed under section 5097. The taxpayer may file an action in the

7     Although by its terms, the California Constitution, article XIII, section
32 applies to state-imposed taxes (see Conolly v. County of Orange (1992)
1 Cal.4th 1105, 1114; but see Neecke v. City of Mill Valley (1995) 39
Cal.App.4th 946, 962), it has been held to also apply to local taxes as a matter
of public policy. (California State University, Fresno Assn., Inc. v. County of
Fresno (2017) 9 Cal.App.5th 250, 262.)
                                       11
superior court to recover a tax that the board has refused to refund after a
duly filed claim. (§ 5140.)
      Here, the complaints do not allege (and apparently cannot be amended
to allege) compliance with these statutes. Plaintiffs contend, however, that
they were not required to do so because they have sued private entities and
“do[ ] not . . . challenge any aspect of the municipal tax process involved . . . .”
Relying on Oakland v. California Construction Co. (1940) 15 Cal.2d 573
(Oakland), plaintiffs assert that a “request by private party property owners
for the return of money paid out on a void contractual obligation [is] not a
challenge to an assessment lien” and, therefore, does not require that they
first exhaust administrative remedies.
      These arguments fail because they mischaracterize the complaints. For
purposes of applying the exhaustion rule, the PACE assessments can only be
treated as taxes. This is because PACE assessments are collected “in the
same manner as ordinary ad valorem property taxes are collected.” (Gov.
Code, § 53340, subd. (e).) Under Revenue and Taxation Code section 4801,
“taxes” include “assessments collected at the same time and in the same
manner as county taxes.” (§ 4801; see Kahan v. City of Richmond (2019) 35
Cal.App.5th 721, 737 [administrative procedure for seeking a tax refund
applies to garbage collection fees that are collected at the same time and
manner as county property taxes].)
      Moreover, plaintiffs seek injunctive relief (1) requiring “property tax
payments” to “municipal taxing authorities” as “PACE tax assessments” to be
“released back” to each property owner; and (2) prohibiting defendants from
initiating collection procedures on delinquent accounts. Plaintiffs ask that
these orders remain in place until defendants successfully “request[ ] that the
local governments remove the voluntary tax assessments on the properties.”

                                         12
      Using “released back” instead of “refund” does not change the objective
reality that plaintiffs seek court orders to cancel property tax obligations and
obtain a refund of taxes they have already paid.
      We also find the Supreme Court’s decision in Oakland to be materially
distinguishable. That case did not involve a challenge to any tax. Rather,
the city of Oakland sought to void street improvement contracts based on a
contractor’s alleged fraud during the bidding process. (Oakland, supra, 15
Cal.2d at pp. 574‒575.) The work was financed by a special assessment on
the properties benefited by the improvement. The defendants in Oakland
asserted that the action was time-barred under a 30 day period for
challenging special property tax assessments. (Id. at p. 578.) The Supreme
Court rejected that argument because the city was not seeking to void any
tax assessment, but rather the contract for the work of improvement. (Ibid.)
      Thus, Oakland holds that a government entity can seek to void a public
works contract between itself and a contractor without challenging the tax
assessments that were made to pay for it. But here, plaintiffs are not
governmental entities. And they are challenging their tax assessments—they
want the assessment cancelled and tax payments refunded. Indeed, they
allege that defendants’ statutory violations render “void any security
interest” in plaintiffs’ homes—i.e., the property tax liens.
      In a related argument, plaintiffs contend that the exhaustion rule only
applies to lawsuits against government. Because they seek restitution of tax
payments remitted to private entities, plaintiffs maintain there are simply no
administrative remedies to exhaust. They find support for this view in
section 5140, which provides that the “person who paid the tax” is authorized
to bring a refund action against “a county or a city” to recover tax the county
or city has refused to refund. By negative implication, they argue that since

                                       13
they are not suing “a county or a city,” the administrative refund process does
not apply.
      This argument is undermined if not foreclosed by the Supreme Court’s
decision in Loeffler. In that case, the court held that consumers had to first
exhaust administrative tax remedies before bringing an action under the
Unfair Competition Law to challenge a retailer’s alleged misrepresentation
about whether a sale of hot coffee was subject to sales tax. (Loeffler, 58
Cal.4th at pp. 1092, 1134.) The Loeffler plaintiffs asserted they were not
required to exhaust administrative remedies because they were not suing the

government, nor were they seeking a tax refund. 8 (Loeffler, at p. 1102.) The
Supreme Court disagreed, explaining that the question of taxability had to be
first decided administratively, followed by judicial review of the agency’s
decision. (Id. at p. 1127.) An injunction prohibiting retailers from collecting
sales tax “could indirectly reduce the flow of tax revenue in the future” and
thus involved policies the exhaustion rule was intended to address. (Id. at
p. 1131.)
      Similarly here, plaintiffs’ PACE assessments undoubtedly would be
affected by the adjudication of the complaints. They allege that the PACE
loans are “void at inception for illegality” and the resulting security interest
(i.e., a property tax lien) is also unlawful and “void.” Because the tax rests
exclusively upon the validity of the PACE financing, a judgment that the debt
and security interest are illegal and void would seem to negate the sole basis
of the tax assessment. Under Loeffler, it is the nature of the relief sought and
the availability of an administrative remedy to achieve it—not whether the

8     The legal incidence of sales tax is on the seller, not the consumer. (See
First American Title Ins. Co. v. California Dept. of Tax & Fee Administration
(2021) 71 Cal.App.5th 603, 611.)
                                       14
defendant is a private or public entity—that triggers the exhaustion rule.
Here, the net result or effect of the liability theories in the complaints would

be to absolve plaintiffs of a tax liability (although not a contractual liability). 9
Because an administrative procedure exists to resolve that issue in the first
instance, plaintiffs were required to invoke it. Moreover, contrary to
plaintiffs’ contention, section 5140 addresses standing, not exhaustion. It
provides in part: “The person who paid the tax . . . may bring an action only
in the superior court . . . against a county or a city to recover a tax which the
board of supervisors . . . has refused to refund on a claim . . . . No other
person may bring such an action . . . .” (Ibid.)

B.   Plaintiffs Have Not Alleged Facts Triggering An Exception 10

      Even if exhaustion of administrative remedies is generally required, a
second question is whether the facts alleged in the complaints, deemed true
on demurrer, trigger an exception to the exhaustion requirement. Plaintiffs
ask us to apply a broad exception to exhaustion on the grounds that “no
purpose would be served” by requiring the board to consider a pure legal
issue—whether consumer protection statutes apply to these PACE loans.
      A limited exception to the exhaustion rule has generally been
recognized where “ ‘the administrative agency cannot provide an adequate
remedy’ and ‘when the subject of a controversy lies outside the agency’s

9      Whether a judgment in this case would have claim or issue preclusion
effect in some other action is not before us and we express no opinion on it.
We merely acknowledge the practical reality of a potential final judgment
determining the tax liens are illegal and void.
10    After oral argument, we asked the parties to file additional briefs,
which we have considered, on whether the complaints allege facts triggering
any exception to the exhaustion rule.
                                         15
jurisdiction.’ ” (Williams & Fickett, supra, 2 Cal.5th at p. 1274.) But in this
case, an adequate remedy does exist. By statute, the board “shall” refund
property tax that is erroneously or illegally assessed. (§ 5096, subds. (b), (c).)
      Plaintiffs are correct that “the central responsibility of county boards is
to decide questions of valuation.” (Williams & Fickett, supra, 2 Cal.5th at
p. 1269.) But the board’s jurisdiction extends to nonvaluation issues as well.
(Id. at p. 1270.) This authority is manifest in section 5142, which provides
that a taxpayer may avoid the assessment appeal process if they and the
assessor stipulate that “only nonvaluation issues” are involved. If the board
accepts this stipulation, it “shall be deemed compliance” with the
requirement to exhaust administrative remedies. (§ 5142, subd. (b).) This
stipulation process “would be meaningless . . . if an exhaustion requirement
did not apply to nonvaluation issues.” (Williams & Fickett, at p. 1271.)
      Another exception to the exhaustion rule—the so-called nullity
exception—has been recognized “specific to tax disputes.” (Williams &
Fickett, supra, 2 Cal.5th at p. 1275.) Exhaustion is not required where the
assessment “ ‘is a nullity as a matter of law because, for example, the
property is tax exempt, nonexistent or outside the jurisdiction [citations], and
no factual questions exist regarding the valuation of the property which,
upon review by the board of equalization, might be resolved in the taxpayer’s
favor, thereby making further litigation unnecessary.’ ” (Ibid., italics added.)
      In supplemental briefing, Plaintiffs concede that the nullity exception
does not apply in this case. That concession is likely compelled by prior
validation judgments that plaintiffs admit “approved the PACE bonds and

their validity as tax assessments.” 11 Nevertheless, plaintiffs insist that the

11    A validation proceeding is used to secure a judicial determination that
proceedings by a local government entity, such as the issuance of municipal
                                        16
board lacks “any power or competence” to address the issues raised by their
complaints and, therefore, the same policies that underlie the nullity
exception dictate a similar exception should be applied here.
      We disagree. To be sure, the board has special competence in
determining the value of real property. (See Stenocord Corp. v. City and
County of San Francisco (1970) 2 Cal.3d 984, 988.) But the exhaustion
doctrine advances other policies too, such as “ ‘easing the burden on the court
system . . . and providing a more economical and less formal means of
resolving a dispute.’ ” (Williams & Fickett, supra, 2 Cal.5th at p. 1268.) It
also facilitates developing a complete record and affords a “ ‘sifting process
[citation], unearthing the relevant evidence and providing a record which the
court may review.’ ” (Ibid.) Here, for example, plaintiffs allege they “did not
comprehend that they would be putting their homes in jeopardy by agreeing”
to the PACE assessments and have “no hope of being able to pay off” the
taxes. They further allege being victimized by “high pressure sales efforts”
from persons acting on defendants’ behalf to “peddl[e] the loan products.”
There are other factual issues on causation, given that plaintiffs admit they
were not defrauded and they obtained financing for home improvements they
contracted for.
      The board, is a “constitutional agency exercising quasi-judicial powers.”
(See Notes to Decisions, Cal. Const., art. XIII, § 16; International Medical
Systems, Inc. v. Assessment Appeals Bd. (1997) 57 Cal.App.4th 761, 766.) It
is capable of addressing these questions in the first instance. (See Williams
& Fickett, supra, 2 Cal.5th at p. 1269, fn. 6 [county boards decide “a bevy of

bonds, are valid, legal, and binding. “ ‘ “Assurance as to the legality of the
proceedings surrounding the issuance of municipal bonds is essential before
underwriters will purchase bonds for resale to the public.” ’ ” (City of Grass
Valley v. Cohen (2017) 17 Cal.App.5th 567, 587.)
                                       17
threshold factual questions that are implicit in any assessment”].)
Accordingly, we conclude that the complaint does not allege facts triggering

any exception to the exhaustion rule. 12

C.   Not a Merits Determination

      Plaintiffs assert that while we “could” reverse the judgment “based on
administrative exhaustion” we “should” also rule on whether they have
“stated a valid claim” on the merits. But the demurrers were limited to
whether plaintiffs had failed to exhaust administrative remedies. So is the
order sustaining the demurrers. Any determination of merits would,
therefore, be an advisory opinion. (See Stockton Teachers Assn. CTA/NEA v.
Stockton Unified School Dist. (2012) 204 Cal.App.4th 446, 464, fn. 11 [“An
appellate court does not ‘inform the litigants what the opinion of the court is
upon a question that has not been raised in the action, or what its decision
would be if the question should be presented’ ”]; see also Crown Oil Corp. v.
Superior Court (1986) 177 Cal.App.3d 604, 613 [appellate review of demurrer
limited to issue(s) raised on demurrer].) Whether plaintiffs’ substantive
claims have merit is not before us, and we express no opinion on such

matters. 13

12    We also reject plaintiffs’ assertion that rather than involving the
exhaustion rule, their claims are more appropriately analyzed as “a primary
jurisdiction challenge.” That doctrine applies only in cases “ ‘ “originally
cognizable in the courts.” ’ ” (Jonathan Neil & Assoc., Inc. v. Jones (2004) 33
Cal.4th 917, 933.) For reasons explained in the body of this opinion,
plaintiffs’ claims are not originally cognizable in court.
13   Plaintiffs’ requests for judicial notice of legislative materials and
Department of Corporations documents pertains to the merits and are
denied. (See People v. Doane (2021) 66 Cal.App.5th 965, 969, fn. 1 [denying
request for judicial notice of documents as “unnecessary to our decision”].)
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                               DISPOSITION
      The judgments are affirmed. Respondents are entitled to costs on
appeal.

                                                                    DATO, J.
WE CONCUR:

McCONNELL, P. J.

AARON, J.

Defendants’ requests for judicial notice of a complaint and judgment in a
validation action and other documents are denied on the same grounds.
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