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By: Martin A. Schainbaum and Bryant W.H. Smith

The California Franchise Tax Board has consistently asserted that there is no right to a jury trial in a suit for a tax refund. Many taxpayers fail to challenge this view, resulting in taxpayers being denied this vital right. (See, e.g., Superior Court of California, Sacramento County, Case number 07AS04091, March 20, 2008)

The FTB relies on a 1958 California appellate court decision, Sonleitner v. Superior Court (1958) 158 Cal.App.2d 258, for its argument that taxpayers do not have the right to a jury trial in a suit for a tax refund. However, the Superior Court of California in San Francisco recently found that taxpayers do have the have the right to a jury trial in a suit for a tax refund. Persuaded by the pleadings filed by Martin A. Schainbaum, PLC, and citing United States v. New Mexico (10th Cir. 1981) 642 F.2d 397, the Court denied the FTB’s motion to strike the taxpayer’s jury demand in the San Francisco case of The Estate of Thomas J. Gonzales, II v. FTB, Docket Number CGC-06-454297. What follows is an abridgement of the taxpayer’s winning arguments:


Article I, section 16 of the California Constitution provides, in relevant part: “Trial by jury is an inviolate right and shall be secured to all.” This inviolate right preserves the right that Americans had under the old common law to a jury trial in certain types of cases. (People v. One 1941 Chevrolet Coupe (1951) 37 Cal. 2d 283, 286; Farrell v. City of Ontario (2d App. Dist. 1919) 39 Cal.App. 351, 356.) Constitutional guarantees of jury trials are not “inapplicable to all causes of action that were unrecognized at common law in 1791. The historical test we apply is flexible and may require a jury in a new cause of action, not in existence in 1791, if it involves rights and remedies of the sort traditionally enforced in an action at law or if its nearest historical analogue is an action at common law.” (Goar v. Compania Peruana de Vapores (5th Cir. 1982) 688 F.2d 417, 427 (citations omitted).)


The common law actions could be at law or in equity. Whether a cause of action is a legal action or an equitable action is normally determined by the nature of the relief sought: actions for money were generally at law, actions for specific relief were at equity. (Philpott v. Superior Court of Los Angeles County (1934), 1 Cal. 2d 512, 516.; Benach v. County of Los Angeles (2d App Dist. March 15, 2007) 149 Cal. App. 4th 836, 845; see also 3 Witkin Cal. Proc. §113, p. 180.)

Despite the fact that the distinctions between legal and equitable actions have been abolished, the difference is important because “‘jury trial is a matter of right in a civil action at law, but not in equity.’” (Crouchman v. Superior Court (1988) 45 Cal. 3d 1167 (quoting C & K Engineering Contractors v. Amber Steel Co (1978) 23 Cal.3d 1, 8.) One way to make the determination of whether a case is one at law or one in equity is to consider if “the extraordinary powers of a court of equity are required in order to give plaintiff the relief that he seeks.” If a “court of law can afford complete relief” then the “action is one at law.” (Interactive Multimedia Artists v. Superior Court (2nd App. Dist. 1998) 62 Cal. App. 4th 1546, 1554 (citing Mortimer v. Loynes (1946) 74 Cal. App. 2d 160, 167-168.)) In the case at bar, the taxpayer has sought no equitable relief, and legal relief would be complete relief, so this action is one that would have been tried at law.

A. Tax Refund Suits are Causes of Action at Law, Not in Equity.

California courts have never had to grapple with whether there is a right to a jury in a refund suit, but they have consistently held that a tax refund suit is an action at law, not an action in equity. California courts have repeatedly referred to tax refund actions as providing a “remedy at law.” (County of Sacramento v. Assessment Appeals Board. No. 2 (3d App. Dist. 1973), 32 Cal. App. 3d 654, 661 (holding “the refund suit is an adequate remedy at law”).

The FTB’s erroneous contention that California courts have held tax refund suits to be actions in equity betrays a careless reading of the case law. One statement by the California Supreme Court appears to suggest that a refund suit is one that would have been tried in equity: “Actions to recover taxes paid under protest are equitable in nature.” (Simms v. County of Los Angeles (1950), 35 Cal. 2d 303, 316.) However, a careful reading of the Simms case demonstrates that the Court was in no way shedding light on the issue of whether a refund suit is an action in equity. The cases cited by the court in Simms do not refer to equity in the sense of law or equity, but rather use the term in the sense of fairness. They deal with situations where a taxpayer seeks to recover taxes paid based on a technicality that allegedly excuses him from tax collection or on disputes about valuation of property to be taxed. These cases deal with requests for injunctive relief or recovery of taxes paid based on improper valuations. Those actions are equitable in nature, unlike a refund suit, which is legal. (citations omitted)

B. This Case is Fundamentally Different from a Tax Collection Action.

While solid California precedent unequivocally states that tax refund suits are legal, and hence that the taxpayer’s right to a trial by jury is preserved by the California Constitution, analogies to other causes of action reinforce the fact that tax refund suits are causes of action at law.

California courts have held that a “jury trial is … not a matter of right in an action to collect taxes” because allowing a jury trial in these cases “would cause interference and delay in tax collection.” (Sonleitner v. Superior Court, supra,158 Cal.App.2d 258, 260, 262.) As the Court of Appeal understood, at common law taxes were not collected through a judicial proceeding, so an action to collect taxes cannot be the type of case for which the right to a jury trial attached at common law. In sharp contrast, actions to recover taxes paid do not involve any delay in tax collection. Such actions can only be brought once the tax has been paid.

C. This case resembles a debt collection case, which was a legal case to which the right to jury trial attached at common law.

A more apt analogy to a refund suit is a suit for the collection of debt, in which there is also a right to a jury trial.

The court in Sonleitner explained that tax collection is not analogous to debt collection because it is a sovereign right to collect taxes. (Sonleitner v. Superior Court, supra, 158 Cal.App.2d 258, 261-262.) The taxpayer does not have a sovereign right to collect a tax refund, but, like with debt collection, he has a legal right to be paid. Applying the court’s reasoning to a refund suit reveals that actions for the collection of a tax refund are nearly equivalent to actions for the collection of debt. The gist of a tax refund suit is like a common law debt suit, and a jury trial must be granted.

D. This Case Resembles a Seizure or Forfeiture Case, Which was a Legal Case to which the Right to Jury Trial Attached at Common Law.

In addition to the analogy to actions for collection of debt, the case law suggests another a propos analogy to tax refund suits—forfeiture or seizure actions. Courts have extensively examined common law authorities and found that individuals were entitled to a jury trial in forfeiture actions against the sovereign. (People v. One 1941 Chevrolet Coupe, supra, 37 Cal. 2d 283, 290-291.) These actions normally resulted from forfeiture to the government by an individual of some property, and the California Supreme Court has found many reports of cases of forfeited individual property and articles and cases involving penalties to the Crown, “in all of which the cause was tried by a jury.” (People v. One 1941 Chevrolet Coupe, supra, 37 Cal. 2d 283, 293, 295)

A tax refund action resembles closely the type of case to which the California Supreme Court was referring. For example, in the Gonzales case, the taxpayer had to forfeit over $15 million for an alleged violation of a revenue or tax law. Blackstone’s reasoning on forfeiture cases could easily have been written for the tax issue presented in the Gonzales case: “‘For it is a part of the liberties of England, and greatly for the safety of the subject, that the king may not enter upon or seise any man's possessions upon bare surmises without the intervention of a jury.’” (People v. One 1941 Chevrolet Coupe, supra, 37 Cal. 2d 283, 296 (citing 3 Bl. Com. 259.))

E. California Civil Cases in which There is No Right to Trial by Jury are Very

Different from the Present Action.

In addition to providing the closely analogous situations described above, California case law indicates that courts deny the right to trial by jury in situations where the common law specifically provided that there was no right to a jury trial. Crouchman v. Superior Court, supra, and County of Butte v. Superior Court, supra, are representative of those types of cases. In Crouchman, the defendant wanted his small claim tried to a jury, but the court found that at common law there was an exception to the right to a jury trial for small claims. Finding that the common law specifically denied the right to a jury trial in small claims, the court denied the defendant a jury trial. Similarly, in County of Butte, the county brought a paternity action against defendant putative father, to be reimbursed for child support expenses, but the court found that paternity actions exited at common law and were not tried to juries. (County of Butte v. Superior Court, supra, 210 Cal. App. 3d 555.)


Though not dispositive in this California case, the treatment of refund suits in the federal court system is instructive. As it is the only case to address whether a refund suit is legal or equitable in nature, the Tenth Circuit’s decision in United States v. New Mexico, is particularly persuasive. (United States v. New Mexico (10th Cir. 1981) 642 F.2d 397) In that case, the Tenth Circuit applied the traditional historic issue test in a federal tax suit against New Mexico and found that the right to trial by jury attached in a refund suit. The court analyzed whether the tax refund suit was legal or equitable in nature and concluded that the issue presented was legal in nature. The court then determined that tax refund suits instituted by individual taxpayers are the sort of actions that would have been tried to English juries in 1791.

Rather than recite the Tenth Circuit’s lengthy discussion of whether the gist of a refund suit is legal or equitable, it is sufficient to note that the court found that “[e]arly American cases indicate that juries were used when a taxpayer sued to recover taxes illegally exacted.” (United States v. New Mexico, supra, 642 F.2d at 401.) After considering the issue and the common law cases, the Tenth Circuit concluded: “We are persuaded that the right of a taxpayer to a jury trial in refund cases is rooted in the common law and was preserved by the Seventh Amendment.” (United States v. New Mexico, supra, 642 F.2d at 401.

As the Tenth Circuit recognized, the fact that federal statute provide for a jury trial in “civil claims against the United States for the recovery of taxes wrongfully collected,” i.e. refund suits, reaffirms the importance of the preservation of the right to a trial by jury in refund suits. (United States v. New Mexico, supra, 642 F.2d at 401.) The court examined the legislative history surrounding the addition of the jury trial provision to the statute authorizing refund suits and found that “jury trials had always been permitted in actions brought against appropriate revenue collectors by taxpayers seeking to recover taxes wrongfully collected.” (United States v. New Mexico, supra, 642 F.2d at 401. (citing Conf.Rep.No. 2276, 83rd Cong. 2d Sess., 1954 U.S.Code Cong. & Adm.News 2716, 2717.)

Recognizing the fundamental difference between tax refund suits and suits related to the collection of taxes, several courts, including the Ninth Circuit, have consistently held that if a taxpayer wants a right to trial by jury he must file a refund suit because there is no right to a jury trial in tax court in an action about the collection of taxes. (Funk v. Commissioner (8th Cir. 1982) 687 F.2d 264, 266; Blackburn v. Commissioner (6th Cir. 1982) 681 F.2d 461, 462; Mathes v. Commissioner (5th Cir. 1978) 576 F.2d 70, 71; McCoy v. Commissioner (9th Cir. 1983) 696 F.2d 1234, 1237)


At the time a tax refund complaint against the Franchise Tax Board is filed in the appropriate Superior Court, demand for trial by jury should be requested. Plaintiff taxpayer is entitled to a jury trial based on the analysis in United States v. New Mexico (10th Cir. 1981) 642 F.2d 397, finding that a jury trial in tax refund cases is rooted in the common law prior to 1791.