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Zc Real Estate Tax Solutions Limited v. Gordon B. Ford

December 29, 2010


Super. Ct. No. 644917 APPEAL from a judgment of the Superior Court of Stanislaus County. William A. Mayhew, Judge.

The opinion of the court was delivered by: Detjen, J.



Revenue and Taxation Code section 4985.2, subdivision (a), provides that a penalty resulting from failure to make a timely real estate tax payment may be canceled if the failure "is due to reasonable cause and circumstances beyond the taxpayer's control, and occurred notwithstanding the exercise of ordinary care in the absence of willful neglect, provided the principal payment for the proper amount of the tax due is made no later than June 30 of the fourth fiscal year following the fiscal year in which the tax became delinquent." (All further section references are to the Revenue and Taxation Code.) The issue in this appeal is whether appellant's actions causing the delinquency meet the requirements for cancellation of a delinquency penalty imposed by respondent.

By petition for writ of mandate, appellant ZC Real Estate Tax Solutions Limited sought refund of a penalty imposed upon it by respondent Gordon B. Ford, Treasurer and Tax Collector of Stanislaus County. This appeal is from a final order of the superior court denying the petition. We affirm.

Facts and Procedural History

A. The Relevant Facts

The relevant facts are simple and uncontested. Property owners often are required to (and sometimes do so voluntarily) pay a portion of their real estate taxes with each monthly mortgage payment. The lender holds these monthly tax payments in an escrow account until it is time to make tax payments to the local taxing authority. Appellant, asserting expertise in the myriad "unique processes, procedures, and requirements" of the various local governments, contracts with lenders to "monitor[] and issue[] the real property tax payments" held in escrow by the lenders.

California real estate taxes are payable to the tax collector of the county in which the property is located. (§§ 2601, 2602, 2613.) Taxes are paid for the fiscal year in semiannual installments due November 1 and the following February 1. (§§ 2605, 2606.) Although taxes are due on those dates, they do not become "delinquent" until a later date. Thus, the installment due on November 1 is not delinquent if it is paid by December 10. (§ 2617.)

By December 4, 2008, appellant had received eight checks from five of its lender clients, payable to Stanislaus County, covering the semiannual installment of property taxes for more than 4,400 properties in that county. The checks were in the aggregate amount of $5,510,118.76. On December 4, one of appellant's employees placed the eight checks, together with a computer disc containing supporting information required by the county, into a Federal Express mailing envelope addressed to the City and County of San Francisco Office of the Treasurer and Tax Collector. Federal Express delivered the envelope, as addressed, on December 5, 2008. San Francisco deposited the eight checks, payable to Stanislaus County, into its own bank accounts. San Francisco notified appellant on December 12, 2008, that it had received and deposited the checks.

B. The Aftermath

On the same day appellant was notified by San Francisco of its receipt of the Stanislaus County tax payments (December 12), appellant sent a wire transfer in the amount of $5,510,118.76 to respondent. Respondent refused this payment, on the basis the taxes were delinquent after December 10, a statutory penalty of 10 percent of the delinquency had attached, and respondent did not accept "partial payment" (i.e., the original sum without the penalty).

Meanwhile, San Francisco refused to remit the original payment, now in its own bank account, to appellant because respondent was not the payor on the eight checks. San Francisco required appellant to submit an authorization and release of liability from each of the five lenders in order to return the funds to appellant.

After further exchanges of correspondence and e-mail, San Francisco returned the money to appellant and respondent accepted payment of the tax installment, together with a penalty of 10 percent on each of the parcels for which payment was made, in the aggregate sum of $551,011.88. Respondent rejected ...

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