City of Torrance v. Southern California Edison Co.Annotate this Case
Under section 225.1.4 of the Torrance Municipal Code, consumers of electricity must pay Torrance a tax on the charges for electricity and ancillary services they use. Edison is required to collect this tax from consumers and remit it to Torrance. Torrance filed suit against Edison after it discovered that Edison had calculated the electricity users' tax as a percentage of the net amount Edison was billing its consumers. However, Torrance contends that the electricity tax ordinance does not permit Edison to apply the IA credit to reduce electricity consumers' tax base, thereby reducing Torrance's tax revenue. The trial court sustained Edison's demurrer to Torrance's original complaint without leave to amend and entered a judgment of dismissal.
The Court of Appeal agreed with Torrance that the electricity tax ordinance cannot reasonably be construed in the manner proposed by Edison and adopted by the trial court. However, the court agreed with Edison that Torrance cannot recover unpaid taxes from Edison and must instead amend its complaint to include electricity consumers as defendants. In this case, electricity consumers are liable to Torrance with respect to the taxes owed but not collected by Edison in the past. Therefore, the court explained that Torrance should be allowed to amend its complaint to include as defendants the electricity consumers at issue. Accordingly, the court reversed and remanded for further proceedings.