Defendant City of Newport Beach’s request for judicial notice is GRANTED as to items A, B, C, and E is DENIED as to D.

Defendant’s demurrer to plaintiff Sunstone MacArthur Lessee, Inc.’s complaint is OVERRULED. Defendant is to answer the complaint within 10 days.

A person who has erroneously paid taxes may bring a refund action in superior court when that person submitted a claim to the entity to which the taxes were paid and the claim was rejected within 6 months of commencement of the superior court action. Rev. & Tax Code Section 5096, 5140 et seq.; NBMC Section 3.16.120.

The City argues that Plaintiff has not stated a claim for refund for two reasons. First, Plaintiff has not alleged why or how it mistakenly paid the $81,400 in taxes. Second, to argue mistake, Plaintiff must point to NBMC Sections 3.16.030, 3.16.040, which – the City contends – by their terms clearly required the $81,400 in taxes to be paid so that there was no mistake and no refund is due.

As to the City’s first ground, Plaintiff has alleged it erroneously paid $81,400 in taxes, it submitted a claim to the City, and the City denied the claim less than 6 months before Plaintiff filed its complaint. It is not clear that more is required. The City cites Cochran v. Herzog Engraving Co. (1984) 155 Cal. App. 3d 405 for the proposition that in an action against a public entity every material fact for liability must be pleaded with specificity. Cochran v. Herzog Engraving was not a tax refund case but was a tort action for personal injuries. There, the court was addressing the issue of the sufficiency of the pleading to show a tort claim outside the scope of governmental immunity under Govt Code Section 815. Id. The case is not instructive here.

For its second ground, the City argues that by its phrasing, the municipal code, as it existed at the relevant time, clearly imposed the bed tax on occupied hotel room even when the occupier did not pay for them. The City charged a tax on the “rent charged by the [hotel] operator.” NBMC Section 3.16.030. “Rent” is “ . . . the consideration charged, whether or not received, for occupancy of space in a hotel valued in money, whether to be received in money, goods, labor or otherwise, including all receipts, cash, credits, and property and services of any kind or nature, without deduction.” NBMC Section 3.16.020. The exemptions to the rent imposed did not include complimentary hotel rooms – that is hotel rooms that the hotel allowed someone to occupy without paying. Pre-2013 NBMC Section 3.16.040. [RJN, Ex. A.]

The City also points to the 2013 amendment to the City’s Municipal Code that added “hotel room[s] provided without rent charged (complimentary)” to the list of exemptions to the bed tax. [Request for Judicial Notice, Ex. B at 5 (3.16.040).] This amended was adopted on 8/14/12 to be effective 30 days after publication. [Request for Judicial Notice, Ex. b at 20.] According to the preamble to the enactment of the amendments made at that time, the City Council “desire[d] to encourage and promote business activities by removing regulations that my burden local businesses . . . .” [Request for Judicial for Notice, Ex. B at 1 (5th “Whereas” clause) (emphasis added.] The City contends that the amendment reflects a change in the law and that the change was prospective, not retroactive.

For its part, Plaintiff argues that the amendment was not a change in the law but a clarification of existing law. According to Plaintiff’s interpretation of the pre-amendment Municipal code, no bed tax was imposed for complimentary rooms even under the old version of the Municipal Code. Plaintiff points to language that the tax on the “rent charged” was to be paid by the transient, to the hotel operator, “at that time the rent is paid.” NBMC Section 3.16.030. The operator’s collection duties are to collect the tax “as the rent is collected” from each transient. NBMC Section 3.16.050(A). Further, the operator is to report the “total rents charged and received” and remit “the tax collected.” NBMC Section 3.16.070(A). Plaintiff also interprets the City’s use of the word “charged” to refer to occasions when the occupier is in fact asked to pay, rather than as a reference to the room rate normally applied for the room.

The City contends that the issue of whether Plaintiff is entitled to the refund it seeks is thus a question of law – that is, a question of statutory interpretation. This may well prove to be so. Nonetheless, the determination is better made after the parties have had an opportunity to develop and present any relevant factual record.