Court Opinion

ID: 4532648
Source: CourtListenerOpinion
Date Created: 2020-05-07 19:02:16.141009+00
Date Added: 2024-06-11T09:27:14.635607
License: Public Domain

Filed 5/7/20
                CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                 SECOND APPELLATE DISTRICT

                           DIVISION TWO

 CALIFORNIA DEPARTMENT                 B294400
 OF TAX AND FEE
 ADMINISTRATION et al.,                (Los Angeles County
                                       Super. Ct. No. BC684614)
         Petitioner,

         v.

 SUPERIOR COURT,

       Respondent.
 _____________________________

 JEREMY DANIEL KINTNER,

         Real Party in Interest.

     WRIT PETITION from an order of the Superior Court of
Los Angeles County, Robert S. Draper, Judge. Petition granted.

      Xavier Becerra, Attorney General, Diane S. Shaw,
Assistant Attorney General, Lisa W. Chao, Deputy Attorney
General, Laura E. Robbins, Deputy Attorney General for
Petitioner.

       Mark Bernsley for Real Party in Interest.
      No appearance for Respondent.

                               ******
       Article XIII, section 32 of the California Constitution
(section 32) requires taxpayers to pay a tax before they can
challenge its assessment. (Cal. Const., art. XIII, § 32; Loeffler v.
Target Corp. (2014) 58 Cal. 4th 1081, 1107 (Loeffler).)
Government Code section 11350 (section 11350) provides that
“[a]ny interested person” may sue for declaratory relief “as to the
validity of any regulation.” (Gov. Code, § 11350.) Can a taxpayer
avoid section 32’s “pay first” rule by alleging, in a claim for
declaratory relief invoking section 11350, that the tax regulation
giving rise to his unpaid tax assessment is invalid? We hold that
the answer is “no.” What is more, to the extent language in
Pacific Motor Transport Co. v. State Bd. of Equalization (1972) 28
Cal. App. 3d 230 (Pacific Motor) can be read to suggest a contrary
answer, we respectfully disagree with Pacific Motor. In light of
our holding, we grant the writ petition challenging the trial
court’s order overruling the demurrer in this case, and direct the
trial court to enter a new and different order sustaining the
demurrer without leave to amend.
         FACTS AND PROCEDURAL BACKGROUND
I.     Facts1
       Back in 2009, HK Architectural Supply, Inc. (“HK

1     These facts are drawn from the original complaint, the
operative first amended complaint, and documents subject to
judicial notice. (Centinela Freeman Emergency Medical
Associates v. Health Net of California, Inc. (2016) 1 Cal. 5th 994,
1010 (Centinela Freeman).)

                                 2
Architectural”) was a closely held corporation. Jeremy Daniel
Kintner (plaintiff) was an officer and shareholder in HK
Architectural, and in that capacity controlled its operations.
       On May 28, 2009, the California Franchise Tax Board
suspended HK Architectural’s corporate status. Despite being
suspended, HK Architectural continued to do business but did
not pay any sales tax.
       In February 2012, the Board of Equalization (the Board)
assessed plaintiff for the amount of sales tax that HK
Architectural owed but never remitted to the Board for the last
three quarters of 2009. The Board initially assessed plaintiff
$71,408 in unpaid taxes and penalties, but subsequently reduced
the assessment to $67,389.53 (exclusive of interest).2 The Board
assessed plaintiff pursuant to (1) a 1980 “policy” of holding the
“officers and shareholders controlling a closely held corporation”
liable for unpaid sales tax during “any period” in which the
corporation’s “powers were suspended . . . for failure to pay
franchise taxes” (“the Policy”), and (2) a 2000 regulation that
codified the Policy (“the Regulation”) (18 Cal. Code Reg.,
§ 1702.6).

      As did the trial court, we grant the California Department
of Fee and Tax Administration’s request for judicial notice.
(Evid. Code, §§ 452, subd. (c), 459.)

2     The writ petition alleges that plaintiff originally owed
$51,006 in taxes and $20,402 in penalties, but we cannot decipher
the penalty amount from the exhibits accompanying the petition.
The precise amount of the original assessment of taxes and
penalties is ultimately irrelevant, however, because that
assessment was subsequently reduced.

                                3
II.    Procedural Background
       A.    Original complaint
       In November 2017, plaintiff sued the Board and its
successor entity, the California Department of Tax and Fee
Administration (the Department).3 Plaintiff alleged three claims
for declaratory relief—two seeking declarations that the Policy
and the Regulation, respectively, constituted an “illegal and
unconstitutional exercise of legislative power,” and one seeking a
declaration that the Board’s refusal to consider challenges to the
Policy or Regulation during administrative proceedings violated
due process. As relief, plaintiff prayed for declarations that the
Policy and Regulation “may not be implemented, enforced or
otherwise relied upon” and that the assessment against plaintiff
“was illegal, unconstitutional and void.”
       The trial court granted judgment on the pleadings to the
Board and the Department. Because plaintiff had not paid the
sales tax he was challenging, the court reasoned, the “pay-first,
litigate-second rule” set forth in the “text” of the “California
Constitution” barred plaintiff’s lawsuit “challeng[ing]” the sales
tax as “illegal.” The dismissal was without leave to amend as to
the Board (because it was largely defunct); as to the Department,
however, the court granted plaintiff leave to “amend his
Complaint to make it a refund action.”
       B.    First amended complaint
             1.    Allegations
       In June 2018, plaintiff filed a first amended complaint.
Contrary to the conditions of the trial court’s grant of leave to

3     The Legislature created the Department in 2017 and, in so
doing, transferred most of the Board’s tax-related duties and
powers. (Assem. Bill. No. 102 (2017-2018 Reg. Sess.) § 1.)

                                4
amend, the first amended complaint was not a refund action
because plaintiff had yet to pay—or file an administrative refund
claim for—the vast majority of the outstanding tax assessment.
Indeed, it was not until after he filed his original complaint that
plaintiff paid—and filed an administrative refund claim for—just
11 percent of the assessed amount (that is, $7,450.98 of the
$67,389.53 assessed tax liability).
        Instead, plaintiff re-alleged two of the declaratory relief
claims from his original complaint—namely, that the Policy and
the Regulation were “illegal” and “unconstitutional.”
        Plaintiff also alleged that he had standing to bring these
claims for declaratory relief due to three distinct “interests and
controversies”: (1) as a person against whom a tax had been
assessed based on the Policy and the Regulation, (2) as a
“responsible officer” of a different “closely held corporation” called
JK Supply Corp. (“JK Supply”), against whom the Policy and
Regulation could be applied in the future, and (3) as a “member[]
of the public” and “citizen” of California interested in “hav[ing] all
branches of government . . . act within the bounds of their
constitutional authority.” Throughout the first amended
complaint, plaintiff repeatedly cited section 11350.
        As relief, plaintiff prayed for a declaration that (1) the
Policy and the Regulation are “illegal” and “violate[] the
. . . Constitution,” and (2) “[a]ny purported liability based on the
Policy” or the Regulation “is not a ‘tax’ or liability for a ‘tax’ for
purposes of the Constitution and laws of California.” Plaintiff
alleged that he did “not seek . . . to prevent or enjoin the
collection of any tax.”

                                  5
             2.    Demurrer
      The Department demurred to the first amended complaint.
After briefing and a hearing, the trial court overruled the
demurrer. In its order, the court rejected plaintiff’s argument
that the 2012 assessments were not “taxes.” However, because
plaintiff “omitted [from the first amended complaint] the prayer
[from his original complaint] that [the Department’s] assessment
against him be absolved,” the court viewed plaintiff’s lawsuit as
“an action to determine the validity of a particular regulation.”
This meant, the court continued, that plaintiff’s lawsuit was
“separate from any claim related to an individual’s assessment”
and “not one ‘maintained to recover the tax paid,’” such that the
pay-first rule did not apply. For support, the court cited section
11350 and Pacific Motor, supra, 28 Cal. App. 3d 230.
      C.     Writ petition
      In December 2018, the Department filed a petition for a
writ of mandate seeking an order overturning the trial court’s
ruling. In December 2019, we issued an alternative writ of
mandate ordering the trial court to enter a new order sustaining
the demurrer with leave to amend “to allege payment of the tax
due and a claim for refund.” After the trial court declined to
vacate its order, plaintiff filed a return and the Department filed
a traverse.
                            DISCUSSION
      The Department argues that the trial court erred in
overruling its demurrer to plaintiff’s first amended complaint
because, in its view, the two declaratory relief claims alleged in
that pleading are barred by the “pay-first, litigate-later” rule
embodied in section 32. As a threshold matter, plaintiff argues
that we should dismiss the Department’s petition as

                                 6
inappropriate for writ review. We will examine the threshold
issue first.
I.     Propriety of Writ Review
       Even though a trial court’s order overruling a demurrer is
subject to review on appeal from the final judgment, an appellate
court has the option to review such an order prior to final
judgment through a writ of mandate. (San Diego Gas & Electric
Co. v. Superior Court (1996) 13 Cal. 4th 893, 912-913). However,
writ review is appropriate only when (1) “the remedy by appeal
would be inadequate” (Powers v. City of Richmond (1995) 10
Cal. 4th 85, 113) or (2) the writ presents a “significant issue of
law” or an issue of “widespread” or “public interest” (Brandt v.
Superior Court (1985) 37 Cal. 3d 813, 816; Fogarty v. Superior
Court (1981) 117 Cal. App. 3d 316, 321; Cryolife, Inc. v. Superior
Court (2003) 110 Cal. App. 4th 1145, 1151). Writ review is
appropriate in this case because the Department’s petition
presents a significant issue of law (that is, whether a taxpayer
may avoid the pay-first rule by challenging an unpaid assessment
via a declaratory relief claim), and this is an issue of great public
interest (because, as noted below, the pay-first rule is necessary
to keep government running).
II.    The Demurrer
       In reviewing an order overruling a demurrer, we ask
whether the operative complaint “‘states facts sufficient to
constitute a cause of action’” (Zelig v. County of Los Angeles
(2002) 27 Cal. 4th 1112, 1126) and, if it does, whether that
complaint nevertheless “‘disclose[s] some defense or bar to
recovery’ [citation]” (Casterson v. Superior Court (2002) 101
Cal. App. 4th 177, 183). In undertaking the inquiry, we accept as
true all “‘“‘material facts properly pleaded’”’” and consider any

                                 7
materials properly subject to judicial notice. (Centinela Freeman,
supra, 1 Cal.5th at p. 1010.) We independently review a trial
court’s order overruling a demurrer (Apple Inc. v. Superior Court
(2017) 18 Cal. App. 5th 222, 240), including its analysis
interpreting constitutional and statutory provisions (California
Advocates for Nursing Home Reform v. Smith (2019) 38
Cal. App. 5th 838, 864).
       The propriety of the trial court’s order overruling the
demurrer in this case boils down to two questions: (1) Does the
“pay first, litigate second” rule embodied in section 32 apply to
plaintiff’s operative complaint and, if so, (2) Does section 11350 or
the nature of plaintiff’s challenges exempt that complaint from
the operation of section 32?
       A.     Does section 32 apply to—and bar—plaintiff’s
declaratory relief claims?
       California requires retailers to pay sales tax on the
“tangible personal property” they sell at “retail.” (Rev. & Tax
Code, § 6051; Loeffler, supra, 58 Cal.4th at pp. 1093, 1104.) If a
retailer-taxpayer wishes to challenge its duty to pay sales tax or
the amount thereof as “erroneous[] or illegal[],” it may file an
administrative claim for a refund (Rev. & Tax Code, § 6901) and,
within 90 days after resolution of that claim, file a lawsuit for a
tax refund (id., §§ 6932, 6933). Before the retailer-taxpayer may
pursue either avenue, however, it must first pay the disputed
sales tax. (Loeffler, at p. 1107 [“Taxpayers seeking a refund must
first pay the tax.”]; McClain v. Sav-On Drugs (2019) 6 Cal. 5th
951, 957 (McClain) [same].)
       The origin of this “pay first, litigate second” rule is section
32, which provides:
       “No legal or equitable process shall issue in any
       proceeding in any court against this State or any

                                  8
       officer thereof to prevent or enjoin the collection of
       any tax. After payment of a tax claimed to be illegal,
       an action may be maintained to recover the tax paid,
       with interest, in such manner as may be provided by
       the Legislature.”
(Cal. Const., art. XIII, § 32.) By barring any “legal or equitable
process” until “[a]fter payment of [the] tax claimed to be illegal,”
section 32 erects what is commonly known as the “pay first,
litigate later” rule (Flying Dutchman Park, Inc. v. City and
County of San Francisco (2001) 93 Cal. App. 4th 1129, 1132
(Flying Dutchman)), or more colorfully known as the “pay up or
shut up” rule (Andal v. City of Stockton (2006) 137 Cal. App. 4th
86, 90 (Andal)). Although its location within the California
Constitution has changed from time to time, the language now
contained in section 32 has been a part of the Constitution since
at least 1913. (Former Cal. Const., art. XIII, § 14 (1913); Former
Cal. Const., art. XIII, § 15 (1933); see generally Pacific Gas &
Electric Co. v. State Board. of Equalization (1980) 27 Cal. 3d 277,
281 & fn. 5 (Pacific Gas) [detailing history].) Our Legislature has
also cut and pasted the key parts of section 32’s language into
various statutes. (Rev. & Tax Code, § 6931; Modern Barber Col.
v. Cal. Emp. Stab. Com. (1948) 31 Cal. 2d 720, 723 (Modern
Barber) [discussing former Unemployment Insurance Act,
§ 45.11, subd. (d) (1935)].)
       Section 32 has been a bedrock principle of tax law for over a
century because the public policy it effectuates is fundamental to
the continued operation of our state. “[M]oney is the lifeblood of
modern government.” (Chiatello v. City & County of San
Francisco (2010) 189 Cal. App. 4th 472, 475.) By requiring
taxpayers to pay disputed taxes up front (rather than allowing

                                 9
taxpayers to withhold the payment of taxes until disputes over
taxation are resolved in litigation), section 32 ensures that the
blood of the body politic keeps pumping because it “ensure[s] that
the state may continue to collect tax revenue during litigation,”
thereby “avoid[ing] unnecessary disruption of public services
. . . dependent on that revenue” and the attendant “‘serious
detriment to the public.’” (Loeffler, supra, 58 Cal.4th at p. 1101;
Pacific Gas, supra, 27 Cal.3d at p. 283; State Bd. of Equalization
v. Superior Court (O’Hara & Kendall Aviation, Inc.) (1985) 39
Cal. 3d 633, 638-639 (O’Hara); Modern Barber, supra, 31 Cal.2d
at pp. 731-732.)
        Although section 32’s plain language purports to preclude
only “legal or equitable process . . . to prevent or enjoin the
collection of any tax” until “[a]fter payment of [the disputed] tax”
(Cal. Const., art. XIII, § 32, italics added), “a taxpayer may not
circumvent [section 32’s] restraints on prepayment tax litigation
by seeking only declaratory relief” when the “net result” or
“effect” of granting that declaratory relief is to absolve the
taxpayer of liability for the disputed tax. (O’Hara, supra, 39
Cal.3d at p. 640; Modern Barber, supra, 31 Cal.2d at p. 723;
Pacific Gas, supra, 27 Cal.3d at p. 280; Estate of Schneider (1944)
62 Cal. App. 2d 463, 465.) Because adjudication of such
declaratory relief claims would be binding on the state in any
further proceedings regarding the taxpayer’s liability (O’Hara, at
p. 640, fn. 8 [“Public officials must respect the court’s declaration
and follow its interpretation of the law.”]; Louis Eckert Brewing
Co. v. Unemployment Reserves Co. (1941) 47 Cal. App. 2d 844, 846
[“A declaratory judgment is an adjudication, not an
abstraction.”]; see also, O’Hara, at pp. 641-642 [State is required
to raise all issues related to taxes owed in any given year under

                                 10
res judicata]; see generally, Boeken v. Philip Morris USA, Inc.
(2010) 48 Cal. 4th 788, 797 [collateral estoppel bars second action
on issues “‘“actually litigated and determined in the first
action”’”]), the judgment resolving such claims would effectively
prevent or enjoin the state from collecting the disputed tax.
Thus, as our Supreme Court has noted time and again,
declaratory relief claims that have the “net result” or “effect”—by
virtue of collateral estoppel—of resolving a disputed tax claim are
subject to section 32’s “pay first, litigate later” rule. (Loeffler,
supra, 58 Cal.4th at pp. 1101, 1128; Woosley v. State of California
(1992) 3 Cal. 4th 758, 785 (Woosley); Calfarm Ins. Co. v.
Deukmejian (1989) 48 Cal. 3d 805, 838 (Calfarm); Pacific Gas, at
p. 280; O’Hara, at pp. 638-640; Modern Barber, at p. 723; see also
Honeywell, Inc. v. State Board. of Equalization (1975) 48
Cal. App. 3d 907, 912 (Honeywell); Casey v. Bonelli (1949) 93
Cal. App. 2d 253, 254-255; Flying Dutchman, supra, 93
Cal.App.4th at p. 1135.)
       Because plaintiff has not paid the full amount of the sales
tax he disputes, his declaratory relief claims are barred by
section 32. Through his declaratory relief claims, plaintiff seeks
a declaration that the Policy and the Regulation are “illegal” and
“unconstitutional.” Because, as plaintiff elsewhere alleges, the
outstanding tax assessment against him rests exclusively upon
the validity of the Policy and the Regulation, a declaration that
the Policy and the Regulation are “illegal” and “unconstitutional”
would invalidate them and negate the sole basis of his
outstanding and unpaid tax assessment. In short, the net result
or effect of plaintiff’s declaratory relief claims is to absolve him of
tax liability.

                                  11
      What is more, the net result or effect of plaintiff’s lawsuit
does not go away just because he has also alleged that he is a
member of the public with a general interest in making sure that
the government stays within the lines of its constitutional
authority and that he is an officer of a different closely held
corporation to which the Policy or Regulation might be applied in
the future should both he and that corporation refuse to pay sales
tax. Were we to conclude otherwise, taxpayers with outstanding
tax assessments could effortlessly evade section 32’s “pay first”
rule by alleging that they are also members of the public. Given
that this would be true in nearly every case, section 32 would
become a dead letter.
      B.      Does section 11350 operate to exempt plaintiff’s
declaratory relief claims from section 32?
      Section 11350 provides, in pertinent part, that “[a]ny
interested person may obtain a judicial declaration as to the
validity of any regulation . . . by bringing an action for
declaratory relief in the superior court in accordance with the
Code of Civil Procedure.” (Gov. Code, § 11350, subd. (a).)
      By its plain text, section 11350 would appear to apply to
plaintiff’s declaratory relief claims. Both the Policy and the
Regulation are “regulations.” (Gov. Code, § 11342.600
[“regulation” includes “every rule, regulation, order, or standard
of general application . . . adopted by any state agency to
implement, interpret, or make specific the law enforced or
administered by it”].) And plaintiff is seeking a “judicial
declaration” as to the “validity” of both.
      Thus, we are squarely presented with the question: Is a
declaratory relief claim authorized by section 11350 exempt from
the “pay first” mandate of section 32, such that a taxpayer who
has not paid an outstanding tax assessment can sue for a binding

                                12
declaration of his rights which, if successful, would invalidate
that assessment?
       We conclude that declaratory relief claims brought by
taxpayers with outstanding tax assessments are not exempt from
section 32’s “pay first” rule, even if brought pursuant to section
11350. We reach this conclusion for three reasons.
       First, this is the result dictated by the canons of statutory
construction. One of the principal canons requires us to look first
to the plain language of the provision at issue. (Jarrow
Formulas, Inc. v. LaMarche (2003) 31 Cal. 4th 728, 735). Section
11350 authorizes declaratory relief claims challenging the
validity of regulations, but says nothing about exempting such
claims from section 32’s “pay first” requirement. Two other
canons preclude us from reading into section 11350 what our
Legislature left out. We cannot construe section 11350’s silence
on this point as an implied partial repeal of section 32 due to the
canon that “implied repeal[s]” are “disfavored” unless the
conflicting statutes are “irreconcilable.” (Richmond
Compassionate Care Collective v. 7 Stars Holistic Foundation
(2019) 33 Cal. App. 5th 38, 48.) Here, they are not because section
32 and section 11350 can peaceably co-exist: Section 32’s “pay
first” rule governs those declaratory relief claims that have the
net result or effect of invalidating an outstanding tax assessment,
while section 11350 governs those declaratory relief claims that
have no such result or effect, such as claims by (1) persons
attacking non-tax regulations or persons attacking tax
regulations but having no outstanding tax assessments, such as
persons who are not the taxpayer (e.g., McClain, supra, 6 Cal.5th
at pp. 959-960 [retail customers may seek declaratory relief as to
validity of regulation affecting the taxpayer-retailers]) or (2)

                                13
persons who are taxpayers facing tax assessments in the future
(e.g., Andal, supra, 137 Cal.App.4th at pp. 90-93 [taxpayers who
have paid all outstanding tax assessments but who wish to
challenge future assessments may seek declaratory relief as to
validity of regulation affecting them]; Howard Jarvis Taxpayers
Assn. v. City of La Habra (2001) 25 Cal. 4th 809, 822 [“a person
aggrieved by the required payment of a tax . . . may challenge the
validity of the taxing agency’s policy . . . by a claim for
declaratory relief”]; see generally, Chas L. Harney, Inc. v.
Contractors’ State License Bd. (1952) 39 Cal. 2d 561, 564-565
[plaintiff may seek declaratory relief before “violat[ing] the
administrative regulation”]; Code Civ. Proc., § 1060 [declaratory
relief available “before there has been any breach of the
obligation in respect to which said declaration is sought”]). We
also cannot construe section 11350 as impliedly repealing section
32 due to the canon that statutory provisions must yield to
constitutional provisions, not the other way around. (E.g.,
Citizens Assn. of Sunset Beach v. Orange County Local Agency
Formation Com. (2012) 209 Cal. App. 4th 1182, 1189
[“Constitutions trump conflicting statutes.”].)
       Second, the purpose underlying section 11350 does not
justify exempting declaratory relief otherwise subject to section
32’s “pay first” rule from its auspices. Section 11350’s
predecessor statute was enacted in 1947 to create a judicial
forum for “test[ing] . . . the validity or interpretative effect of a
regulation” where such a forum did not previously exist, and did
so by “extend[ing] the scope of declaratory relief . . . to include
regulations of state government agencies.” (Honeywell, supra, 48
Cal.App.3d at p. 912.) Because taxpayers with outstanding tax
assessments already have an administrative and judicial forum

                                 14
for testing the validity of tax regulations through the tax refund
procedures enacted by our Legislature (Rev. & Tax Code, § 6901
et seq.), reading section 11350 to create a parallel forum for such
taxpayers that is exempt from section 32’s “pay first” rule goes
far beyond our Legislature’s intent in enacting section 11350 in
the first place. (See Honeywell, at p. 912 [“When [a] taxpayer has
completed a transaction [giving rise to a tax assessment], resort
to declaratory relief is no longer necessary or appropriate . . .”];
see also, Flying Dutchman, supra, 93 Cal.App.4th at p. 1138
[“declaratory relief will not be granted where there is a plain,
complete, speedy, and adequate remedy at law” and the tax
refund procedures “constitute” such a remedy].)
       Third, our Supreme Court has already strongly suggested
that section 11350 must not be read as an exemption from section
32’s “pay first” rule. In Woosley, supra, 3 Cal.4th at p. 785, fn. 20,
the court noted that section 11350 is to be “strictly construed in
tax cases and may not be used to prevent the state from collecting
taxes or, by parity of reasoning, to compel the state to refund
taxes.” In conjunction with the Supreme Court precedent cited
above that holds that declaratory relief claims having the “net
result” or “effect” of invalidating a tax assessment operate to
enjoin the collection of taxes, Woosley seems to all but foreclose
treating section 11350 as a “get out of paying first” card.
       Plaintiff vehemently resists this conclusion and offers what
boils down to four arguments in opposition.
       First, he asserts that the weight of precedent is on his side.
Pacific Motor, supra, 28 Cal. App. 3d 230, he explains, expressly
“hold[s] that the validity of an administrative tax regulation
. . . may be determined by a declaratory relief action commenced
under” section 11350’s predecessor statute. (Id. at p. 236.)

                                 15
Further, plaintiff continues, our Supreme Court has cited Pacific
Motor favorably in Agnew v. State Bd. of Equalization (1999) 21
Cal. 4th 310, 320 (Agnew) and Pacific Gas, supra, 27 Cal.3d at p.
280, fn. 4.
       Although the language from Pacific Motor could be read
expansively to create an exemption from section 32’s “pay first”
requirement, there is good reason not to read it so broadly—
namely, (1) because Pacific Motor at no point indicated that the
plaintiff in that case had any outstanding and unpaid tax
assessment, and (2) because Pacific Motor itself narrowed the
scope of its holding when it elsewhere ruled that a “tax
regulation’s validity” may be “determined” in a declaratory relief
claim “so long as the tax collector is not hindered in his duties
thereby” (Pacific Motor, supra, 28 Cal.App.3d at p. 236, italics
added). In its proper context, it is difficult to read Pacific Motor
as authorizing declaratory relief claims—such as those with the
net result or effect of invalidating outstanding tax assessments—
that do hinder tax collection.
       Neither Agnew nor Pacific Gas lend Pacific Motor any
greater stature. Agnew cited Pacific Motor in the course of
finding that the declaratory relief action in that case was not
“barred by” section 32 (Agnew, supra, 21 Cal.4th at p. 320), but
the taxpayer-plaintiff in Agnew had complied with section 32 by
paying the outstanding tax prior to filing suit (id. at p. 314);
although he had not paid the interest on the assessment before
filing suit, our Supreme Court ultimately held in Agnew that
section 32’s “pay first” requirement applied only to the tax
liability itself and not the associated interest (id. at pp. 323, 327,
333). Because the taxpayer in Agnew did “pay first,” Agnew
cannot be read to endorse the failure to do so. Pacific Gas cited

                                  16
Pacific Motor, but only to distinguish it as dealing with “the
validity of a tax regulation.” (Pacific Gas, supra, 27 Cal.3d at p.
280, fn. 4.) Pacific Gas’s holding thus did not rest on the validity
of Pacific Motor; its seemingly favorable citation to Pacific Motor
is thus dicta and hence not binding (e.g., Fireman’s Fund Ins. Co.
v. Maryland Casualty Co. (1998) 65 Cal. App. 4th 1279, 1300-
1301).
       Properly read, Pacific Motor does not construe section
11350 in a way that renders it in conflict with section 32. To the
extent a broader reading of Pacific Motor suggests such a conflict
and resolves that conflict in favor of section 11350, we
respectfully disagree with Pacific Motor and decline to follow it.
       Second, plaintiff contends that his declaratory relief claims
should be permitted to proceed under section 11350 because they
do not implicate section 32’s “pay first” rule at all. That is
because, in plaintiff’s view, (1) section 32 only applies to refund
actions, and refund actions deal solely with “the proper amount of
the tax” (and not whether the tax was validly assessed), and (2)
section 32 only applies when a taxpayer is seeking to “prevent or
enjoin the collection of a tax,” and he is alleging that the Policy
and Regulation were improperly adopted, such that their
“illegality” and “unconstitutionality” preclude them from
resulting in a “tax” in the first place. We reject this contention in
its entirety. To begin, refund actions encompass both the
propriety of the tax imposed (the so-called “‘taxability’ question”)
as well as its amount. (Loeffler, supra, 58 Cal.4th at p. 1100.)
Further, a tax is not somehow “not a tax” just because a taxpayer
claims it was illegally or unconstitutionally assessed against him.
Indeed, the plain text of section 32 itself says its “pay first”
requirement applies when a “tax [is] claimed to be illegal.” (Cal.

                                 17
Const., art. XIII, § 32, italics added). If plaintiff were correct that
a challenge to the legality or constitutionality of a tax somehow
deprived that tax of its status as “tax,” thereby rendering section
32’s “pay first” rule inapplicable, we would be essentially giving
all delinquent taxpayers a blueprint for sidestepping the “pay
first” rule—namely, just allege that the tax is not a tax. We, like
most courts, take a dim view of such sophistry, particularly when
it would create an exception that would effectively negate the
rule and grind government to a halt by depriving it of tax
revenue. (O’Hara, supra, 39 Cal.3d at p. 642 [declining to allow a
taxpayer to sidestep section 32’s “pay first” rule by paying just a
small fraction of the outstanding tax and challenging that portion
in court because the “effect” of that narrower challenge would
impact the larger, unpaid balance]; see generally, Brosnahan v.
Eu (1982) 31 Cal. 3d 1, 15 [decrying statutory “end-run around a
clear mandate” of the Constitution]; Torres v. Parkhouse Tire
Service, Inc. (2001) 26 Cal. 4th 995, 1002 [decrying “end-run”
around exclusivity rule].)
       Third, plaintiff argues that he has carefully crafted the first
amended complaint to be “solely a declaratory relief action,” that
he has specifically disclaimed any request “to prevent or enjoin
the collection of any tax,” and that granting his requested relief
“would not compel [the Department] to take any specific action
with respect to the assessment” against him. He acknowledges
that his initial complaint sought a declaration that the Policy and
Regulation “not be implemented, enforced or otherwise relied
upon,” but now claims that his prior allegations regarding his
outstanding tax assessments were “excessive detail” that was
“unnecessary,” “distracting” and “[ir]relevant.”

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       We decline plaintiff’s invitation to ignore the practical
effect of his declaratory relief claims. As noted above, the
applicability of section 32’s “pay first” rule to declaratory relief
claims depends on whether those claims have the “net result” or
“effect” of adjudicating the plaintiff’s outstanding tax liability.
(Loeffler, supra, 58 Cal.4th at pp. 1101, 1128; Woosley, supra, 3
Cal.4th at p. 785; Calfarm, supra, 48 Cal.3d at p. 838; Pacific
Gas, supra, 27 Cal.3d at p. 280; O’Hara, supra, 39 Cal.3d at pp.
638-640; Modern Barber, supra, 31 Cal.2d at p. 723.) Whether
the existence of plaintiff’s outstanding tax assessment was
previously pled or is instead judicially noticed, that assessment
exists, it will be affected by the adjudication of his declaratory
relief claims, and that adjudication will bind the Department as
it seeks to collect the unpaid assessment. We must disregard
plaintiff’s conclusory allegations to the contrary (Loeffler, at p.
1100 [on demurrer, “the reviewing court ‘does not . . . assume the
truth of contentions, deductions or conclusions of law’”]), and
must look at the substance and effect of his claims rather than
the labels he uses for them (see Urick v. Urick (2017) 15
Cal. App. 5th 1182, 1197 [“[t]he effect of [a plaintiff’s] proposed
action . . . controls over the label that she gave to the remedy that
she sought”]). To be blunt, one cannot plead around reality.
       Lastly, plaintiff in passing suggests that denying him the
right to pursue a declaratory relief claim under section 11350
without paying first, while allowing others without outstanding
tax assessments to proceed, violates equal protection. Not only
has plaintiff waived this argument by not sufficiently developing
it (Cahill v. San Diego Gas & Electric Co. (2011) 194 Cal. App. 4th
939, 956), but the argument also lacks merit. In general, the
concept of equal protection requires the law to treat similarly

                                 19
situated persons similarly unless there is a reason to do
otherwise. (In re Lemanuel C. (2007) 41 Cal. 4th 33, 47.)
Plaintiff’s argument fails at the first step because persons who
have outstanding tax assessments are not similarly situated to
those who do not. But even if we overlook this threshold
deficiency, we would evaluate the constitutionality of section
11350 by asking only whether the state has a rational basis for
allowing persons without outstanding tax assessments to pursue
declaratory relief claims while not allowing persons with
outstanding tax assessments to do so without first paying those
assessments. We do not employ a higher level of scrutiny
because (1) the class of persons who wish to evade section 32’s
“pay first” requirement is not a “suspect class,” and (2) the
distinction at issue does not impinge upon a “fundamental right”
because the “pay first” requirement accords with due process by
granting a notice and a meaningful opportunity to be heard along
with the full recompense on the back end (as any refund includes
the tax plus interest) (Modern Barber, supra, 31 Cal.2d at pp.
725-726; Aronoff v. Franchise Tax Board. (1963) 60 Cal. 2d 177,
179-180). And what is the rational basis for requiring persons
with outstanding tax assessments to “pay first”? It is the very
same reason that has animated section 32 for over a century—
that is, the need to keep the “lifeblood” of tax revenue flowing to
the state. (Loeffler, supra, 58 Cal.4th at p. 1101; Pacific Gas,
supra, 27 Cal.3d at p. 283; O’Hara, supra, 39 Cal.3d at pp. 638-
639.)
                            *      *      *
       Where an “action is barred as a matter of law, the
demurrer is properly sustained without leave to amend.” (Cal.
Auto. Dismantlers Ass’n. v. Interinsurance Exch. (1986) 180

                                20
Cal. App. 3d 735, 742.) As discussed above, section 32 bars
plaintiff’s declaratory relief claims unless and until he pays the
full amount of the outstanding tax assessment. He admits he has
not done so, and has declined to do so even after the trial court
initially gave him leave to amend solely to allege a “refund
action.” Accordingly, his claim is barred as a matter of law and
the demurrer must be sustained without leave to amend. In light
of this outcome, we have no occasion to consider the merits of
plaintiff’s challenges to the Policy or the Regulation.
                           DISPOSITION
       The petition is granted. A writ of mandate hereby issues
directing the trial court to vacate its order overruling the
demurrer to the first amended complaint, and to enter a new and
different order sustaining the demurrer without leave to amend.
This court’s order staying the proceedings in the trial court is
vacated. The Department is entitled to its costs incurred in this
writ proceeding.
       CERTIFIED FOR PUBLICATION.

                                     ______________________, J.
                                     HOFFSTADT

We concur:

_________________________, P.J.
LUI

_________________________, J.
CHAVEZ

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