Russell City Energy Co. v. City of Hayward
Opinion
lead Opinion
Jones, J.
*56 The "Payments Clause" of an agreement between Russell City Energy Company, LLC (Russell) and the City of Hayward (City)
*57 prohibited the City from imposing any taxes on the "development, construction, ownership and operation" of Russell's power plant except taxes tethered to ownership of real property. The question in this case is whether Russell's interpretation of the Payments Clause violates article XIII, section 31 of the California Constitution (Section 31) which provides "[t]he power to tax may not be surrendered or suspended by grant or contract."
*167 The answer is yes. We conclude Russell's interpretation of the Payments Clause-that the City contractually promised not to impose any taxes other than real property related taxes-violates Section 31 because it surrenders and suspends the City's power to tax the power plant. Thus, the trial court properly determined the Payments Clause was unenforceable and sustained the City's demurrer to Russell's complaint alleging claims premised on a breach of the agreement.
We also conclude, however, that Russell must be permitted an opportunity to amend its complaint to allege a quasi-contractual restitution claim.