Morgan v. Ygrene Energy Fund, Inc.Annotate this Case
In 2008, California enacted a Property Assessed Clean Energy program (PACE) as a method for homeowners to finance energy and water conservation improvements. A PACE debt was created by contract and secured by the improved property. But like a tax, the installment payments were billed and paid as a special assessment on the improved property, resulting in a first-priority tax lien in the event of default. The named plaintiffs in these putative class actions were over 65 years old and entered into PACE contracts. The defendants were private companies who either made PACE loans to plaintiffs, were assigned rights to payment, and/or administered PACE programs for municipalities. The gravamen of the complaint in each case was that PACE financing was actually, and should have been treated as, a secured home improvement loan. Plaintiffs alleged that defendants engaged in unfair and deceptive business practices by violating consumer protection laws, including Civil Code section 1804.1(j), which prohibited taking a security interest in a senior citizen’s residence to secure a home improvement loan. Generally, a taxpayer could not pursue a court action for a refund of property taxes without first applying to the local board of equalization for a reduction and then filing an administrative claim for a refund. Here, defendants demurred to the complaints on the sole ground that plaintiffs failed to allege they first exhausted administrative remedies. The trial court agreed, sustained the demurrers without leave to amend, and entered a judgment of dismissal in each case. On appeal, plaintiffs primarily contend they were not required to pursue administrative remedies because they have sued only private companies and do not challenge “any aspect of the municipal tax process involved.” The Court of Appeal found that despite their assertions to the contrary, plaintiffs did challenge their property tax assessments. And although they did not sue any government entity, the “consumer protection statutes under which plaintiffs brought their action cannot be employed to avoid the limitations and procedures set out by the Revenue and Taxation Code.” Thus, the Court concluded plaintiffs were required to submit their claims through the administrative appeals process in the first instance. "Their failure to do so requires the judgments to be affirmed."