Armstrong v. County of San Mateo

Decision Date26 August 1983
Citation146 Cal.App.3d 597,194 Cal.Rptr. 294
CourtCalifornia Court of Appeals Court of Appeals
PartiesFred W. ARMSTRONG, Plaintiff and Respondent, v. COUNTY OF SAN MATEO, et al., California State Board of Equalization, Defendants and Appellants. Robert E. BARRETT, et al., Plaintiffs and Respondents, v. COUNTY OF SANTA CLARA, et al., California State Board of Equalization, Defendants and Appellants. AO15543.

[146 Cal.App.3d 604] John K. Van De Kamp, Atty. Gen., Timothy G. Laddish, Deputy Atty. Gen., San Francisco, for defendant and appellant State Bd. of Equalization.

Byron D. Athan, Deputy County Counsel, San Jose, for defendant and appellant Santa Clara County.

James P. Fox, Dist. Atty., David L. Martin, Deputy Dist. Atty., Redwood City, for defendant and appellant San Mateo County.

Howard S. Burnside, Palo Alto, for plaintiffs and respondents Robert E. Barrett, et al.

Lloyd M. Harmon, Jr., Chief Deputy Counsel, Bruce W. Beach, Deputy County Counsel, San Diego, for amicus curiae San Diego County.

Donald L. Clark, County Counsel, San Diego, for defendant and appellant Santa Clara County, and amicus curiae San Diego County.

KLINE, Presiding Justice.

This is a taxpayer challenge to the legislative and administrative interpretation of the two percent inflation factor provision of article XIII A, section 2, subdivision (b), of the California Constitution, which may be applied each year to increase the taxable value of real property in California.

Article XIII A, which is set forth in the appendix hereto, was enacted as a property tax reform and limitation initiative, commonly known as Proposition 13, that was adopted by the voters on June 6, 1978, and became effective on July 1, 1978. 1 The taxable value of real property is referred to in the article as "full cash value," which is defined in section 2, subdivision (a), as "the county assessor's valuation of real property as shown on the 1975-76 tax bill under 'full cash value' or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment." Section 2, subdivision (b), limits annual increases in the full cash value by providing that "[t]he full cash value base may reflect from year to year the inflationary rate not to exceed 2 percent for any given year ..." (hereinafter sometimes referred to as the "inflation factor").

The State Board of Equalization (Board) and thereafter the Legislature each independently interpreted section 2, subdivision (b), to permit the 1978-79 tax year assessment of property that had not been newly constructed[146 Cal.App.3d 605] or experienced a change of ownership since 1975 by taking the full cash value of property as it appeared on the 1975 roll as increased by two percent per year compounded for each of the three years between 1975 and 1978. In other words, the Legislature and the Board authorized the 1978-79 assessment of property at a figure 6.12 percent higher than the full cash value designated in the 1975-76 tax bill. Respondent taxpayers challenged this interpretation in separate but consolidated actions seeking tax refunds and other relief. The trial court declared that the legislative and administrative interpretation of section 2, subdivision (b), permitting adjustment for the three tax years immediately preceding the effective date of the article, is contrary to its plain meaning and thus represents an invalid attempt to amend a constitutional provision. For the reasons hereafter set forth, we find, first, that the constitutional provisions are intrinsically ambiguous as to when application of the inflation factor commences; second, that the effects of the legislative interpretation are not manifestly inimical to the constitutional design; third, that the uncertain language of the constitution is not clarified by extrinsic evidence of the intent of the voters; and, fourth, that in these circumstances the applicable canons of construction compel us to defer to the legislative interpretation. Accordingly, we reverse.

I.

The major conceptual change effectuated by article XIII A, which results from section 2, subdivision (a), is that "except for property acquired prior to 1975, henceforth all real property will be assessed and taxed at its value at date of acquisition rather

than at current value (subject, of course, to the 2 percent maximum annual inflationary increase provided for in subdivision (b))." (Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208, 235, 149 Cal.Rptr. 239, 583 P.2d 1281). Additionally, the article alters the basic system of ad valorem property taxation in two main respects. The first section restricts the amount of ad valorem taxes to one percent of the full cash value of property. 2 The second section restricts increases in the full cash value base to an inflation factor not to exceed two percent per year and allows reductions in full cash value if the property has been damaged or destroyed or has otherwise declined in value. 3 In other words, the first section limits the ability of local [146 Cal.App.3d 606] governments to tax full cash value while the second section, which is at issue here, limits the growth in full cash value

On June 8, 1978, two days after the election, the Board issued an analysis of Proposition 13 to county assessors in order to clarify ambiguous portions of the initiative. The Board advised assessors that "[w]hen preparing the 1978-79 assessment, the assessor will add 2 percent to the 1975-76 value base for each of the lien dates 1976, 1977, and 1978." (Emphasis in original.)

On June 14, 1978, the Board instructed county tax assessors that the 1975-76 full cash value base should be adjusted by two percent per year for each of the lien dates subsequent to 1975 in order to determine 1978 values. Rule 460 of the Board's rules (Cal.Admin.Code, tit. 18, § 460) embodies that concept. 4

On June 15, 1978, the Board instructed county assessors that "[t]he 1975-76 base values are to be adjusted by 2 percent compounded for each of the three subsequent lien dates (1976, 1977, 1978) to determine 1978 values. This factor is 1.0612 [ (1.02 3) ]." 5

[146 Cal.App.3d 607] On June 24, 1978, the Governor signed urgency legislation that went into immediate effect as Revenue and Taxation Code section 110.1. Section 110.1, subdivision (f), provides that:

"For each lien date after the lien date in which the full cash value is determined pursuant to this section, the full cash value of real property, including possessory interests in real property, shall reflect the percentage change in cost of living, as defined in section 2212; provided, that such value shall not reflect an increase in excess of 2 percent of the full cash value of the preceding lien date." (Emphasis added.)

On July 10, 1979, the Governor signed another immediately effective urgency measure enacting Revenue and Taxation Code section 51. 6 This statute provides in pertinent part that:

"For purposes of subdivision (b), of Section 2 of article XIII A of the California Constitution, for each lien date after the lien date in which the base year value is determined pursuant to section 110.1, the taxable value of real property shall be the lesser of: [p] (a) Its base year value, compounded annually since the base year by an inflation factor, which shall be the percentage change in the cost of living, as defined in Section 2212; provided, that any percentage increase shall not exceed 2 percent of the prior year's value, ...." (Emphasis added.)

Respondent taxpayers, asserting that the Board's rule and the two statutes just described are inconsistent with article XIII A, section 2, subdivision (b), filed suit against the Board and local taxing authorities seeking a refund of taxes, an injunction or writ of mandate directing the taxing authorities to utilize the unadjusted 1975-76 full cash value base as the 1978-79 full cash value and a declaration that the inflation factor shall only commence application thereafter.

The principal witnesses at trial were Howard Jarvis and Paul Gann, the drafters and principal proponents of Proposition 13. The essence of their testimony was that although the commencement date of the inflation factor was [146 Cal.App.3d 608] never discussed by them or to their knowledge by anyone else during the election campaign, each contemplated that application of the inflation factor would not commence prior to the effective date of the amendment. As stated by Mr. Gann, "it just seemed natural to myself and to those that I worked with that it would become law and operative on July the 1st, 1978."

The trial court ruled in favor of respondents, finding that although the evidence produced by the parties provided little guidance, the language of the provision was clear that the inflation factor was not to be applied until after the effective date of article XIII A. Accordingly, the court declared the legislative and administrative application of section 2, subdivision (b), unconstitutional, and granted related relief. 7

Ordinarily, "[r]ules of construction and interpretation that are applicable when considering statutes are equally applicable in interpreting constitutional provisions." 8 (County of Fresno v. Malmstrom (1979) 94 Cal.App.3d 974, 979, 156 Cal.Rptr. 777.) "The interpretation of a statute ... is a question of law and we are not bound by evidence presented on the question in the trial court." (California Teachers Assn. v. San Diego Community College Dist. (1981) 28 Cal.3d 692, 699, 170 Cal.Rptr. 817, 621 P.2d 856.) Since this rule applies to interpretation of a constitutional amendment we thus proceed to analyze article XIII A, section 2, subdivision (b), as a matter of first impression, not bound by the trial court's interpretation.

II.

Respondents preliminarily maintain that article XIII A is self-executing with...

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