ITT Gilfillan, Inc. v. City of Los Angeles

Citations: 136 Cal. App. 3d 581; 185 Cal. Rptr. 848; 1982 Cal. App. LEXIS 2043Docket: Civ. 63729

Court: California Court of Appeal; September 22, 1982; California; State Appellate Court

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The Court of Appeals of California, in case 136 Cal.App.3d 581 (1982), addresses an appeal by the City of Los Angeles against a judgment favoring ITT Gilfillan, Inc. The dispute centers on the imposition of business license taxes for the years 1963 to 1975, with the City asserting claims under section 21.190 of its Business Tax Ordinance while ITT contended its claims fell under section 21.167. ITT's action for a tax refund initiated in 1964 was selected as a test case and initially decided in favor of the City in 1970, but the Court of Appeal reversed this decision in 1977.

Subsequently, the City refunded ITT for overpayments made in 1963-1968 and 1976-1978. In 1980, ITT filed a supplemental complaint for refunds covering 1969-1975 and sought prejudgment interest on these amounts, as well as on amounts already refunded.

The trial court ruled on four key issues: ITT was entitled to prejudgment interest starting from the date of overpayment; refunds should be applied first to accrued interest; and the amended complaint related back to the original filing, thereby bypassing the statute of limitations. The appeals court confirmed that the City must pay prejudgment interest but ruled that the refunded amounts should not first apply to the accrued interest and that the amended complaint did not relate back to avoid the limitations issue. The court referenced the Todd Shipyards Corp. case, which similarly held that the City was liable for prejudgment interest on tax refunds, affirming the applicability of Civil Code section 3287.

The Todd court establishes that to recover interest, a claimant must meet three criteria: 1) there must be an underlying monetary obligation; 2) the recovery must be certain or calculable; and 3) the right to recover must arise on a specific date. All criteria are satisfied in this case. Payments made were involuntary, distinguishing this case from Ball v. County of Los Angeles where payments were made voluntarily despite being erroneous. Interest accrues from the date of wrongful payment, aligning with the Todd case. 

Regarding the application of refunds, the City contends the trial court erred by applying refunds from 1963-1968 and 1976-1978 first to accrued interest rather than principal. The court found that the City communicated the refunds were for principal and asserted no obligation to pay prejudgment interest, which ITT Gilfillan accepted under this premise. Civil Code section 1479 allows debtors to designate how payments are applied, granting the City the right to apply refunds to principal amounts.

The original complaint was filed on November 24, 1964, for overpayments in 1963-1964. A supplemental complaint filed in October 1980 added claims for 1969-1975. The court ruled that the relation-back doctrine does not apply to supplemental complaints, which address matters occurring after the initial filing and do not relate back to the original complaint's date. Unlike amended complaints, supplemental complaints serve different purposes and do not benefit from the same liberal statute of limitations rules established in prior cases.

Different causes of action can relate back to the original pleading and bypass the statute of limitations if they arise from the same general facts, as established in Young v. Berry Equipment Rentals, Inc. and Schumacher v. Superior Court. Respondent references three California cases: Austin v. Massachusetts Bonding Insurance Co., Breceda v. Gamsby, and Bahten v. County of Merced. In Bahten, a premature complaint against the County of Merced was deemed sufficient after the county allowed the plaintiff to proceed without a government claim, despite the plaintiff filing an amended complaint 45 days after relief was granted. The court ruled that the original complaint remained valid. Breceda holds that amending a fictitiously named defendant does not invoke the statute of limitations as a bar. In Austin, an amended complaint naming a new party under a Doe allegation related back to the initial filing. However, cases like Spaulding v. Howard and Elling Corp. v. Superior Court indicate that new parties in a supplemental complaint do not relate back. In Hoffman v. City of Palm Springs, the court affirmed that an amended complaint with a verified claim did not relate back to the original unverified claim. Similarly, in Steed v. City of Long Beach, a supplemental claim filed after the statutory period could not relate back to the original claim. In Nolan v. Redevelopment Agency, a supplemental complaint was filed with court permission after the original complaint. The court reversed the dismissal, clarifying that Code of Civil Procedure section 1094.6 did not impose a 90-day limitation on the case, and section 526a defined parties eligible to bring the action rather than imposing a statute of limitations.

Had the supplemental complaint adhered to the requirements of Code of Civil Procedure section 1094.6, it and the associated 90-day period would be calculated from its filing date. It is established that new matters arising after the initial complaint, if properly included in a supplemental complaint, do not constitute a new cause of action, thus avoiding the statute of limitations. However, a supplemental pleading does not relate back to the original complaint if it introduces a new cause of action. A supplemental complaint leaves the original intact, indicating that both are treated as separate complaints despite being combined in one document. 

In this case, the original complaint was filed in 1964 for tax years 1963 and 1964, while the supplemental complaint was filed in 1980 concerning overpayments for the years 1969 to 1975. The causes of action for these overpayments accrued annually following payments made each year. Therefore, regardless of the nomenclature, the supplemental complaint could only be considered as such since the actions accrued yearly. The court concluded that supplemental complaints do not relate back to the original complaint’s filing date, affirming the statute of limitations barred claims for the years 1969 to 1975.

The court reversed the trial court's conclusions that ITT was entitled to a refund for 1969 through 1975 and that the refund should first apply to accrued interest. However, it upheld the trial court's decision that the City of Los Angeles must pay prejudgment interest on business tax refunds, which accrues from the date of overpayment. The case was remanded for judgment correction and further proceedings. A rehearing petition was denied on October 19, 1982, and the Supreme Court declined to hear the case on December 15, 1982.