Board of Supervisors v. Lonergan

• Decision Date: 14 August 1980
• Citation: 616 P.2d 802,167 Cal.Rptr. 820,27 Cal.3d 855
• Court: California Supreme Court
• Parties: , 616 P.2d 802 BOARD OF SUPERVISORS OF SAN DIEGO COUNTY, Plaintiff and Respondent, v. Gerald J. LONERGAN, as Auditor and Controller, etc., Defendant and Appellant. L.A. 31244.

Page 820

167 Cal.Rptr. 820

27 Cal.3d 855, 616 P.2d 802

BOARD OF SUPERVISORS OF SAN DIEGO COUNTY, Plaintiff and Respondent, v. Gerald J. LONERGAN, as Auditor and Controller, etc., Defendant and Appellant.

L.A. 31244.

Supreme Court of California, In Bank.

Aug. 14, 1980.

Rehearing Denied Sept. 17, 1980.

Donald L. Clark, County Counsel, Lloyd M. Harmon, Jr., Chief Deputy County Counsel, and Jack Limber, Deputy County Counsel, San Diego, for defendant and appellant.

Gray, Cary, Ames & Frye, Peter G. Aylward, William S. Boggs, Paul J. Dostart and Mark L. Mann, San Diego, for plaintiff and respondent.

O'Melveny & Myers, Bennett W. Priest, Frederick A. Richman, Glen L. Kulik, Evans, Manpearl & Harter, Gerald T. Manpearl and Kent Ten Brink, Los Angeles, as amici curiae on behalf of plaintiff and respondent.

MOSK, Justice.

In Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208, 149 Cal.Rptr. 239, 583 P.2d 1281 (hereinafter Amador), we upheld the validity of article XIII A of the California Constitution against multiple constitutional challenges. Adopted in June 1978 as an initiative measure designated and popularly known as Proposition 13, article XIII A significantly altered the system of real property taxation in this state.

In considering the substantial attacks mounted against the measure, we restricted our inquiry to the "principal, fundamental challenges to the validity of article XIII A as a whole." (Id. at p. 219, 149 Cal.Rptr. at p. 241, 583 P.2d at p. 1283.) Thus we expressly acknowledged the enactment was not wholly free from uncertainties, but reserved judgment as to their proper resolution: " 'Analysis of the problems which may arise respecting the interpretation or application of particular provisions of the act should be deferred for future cases in which those provisions are more directly challenged.' (Citation.)" (Ibid.) We have before us such a case, and the question presented is whether the real property tax rate and valuation limitations mandated by article XIII A are applicable to property taxed on the unsecured portion of the assessment roll for the tax year 1978-1979.

Shortly after Proposition 13 was adopted, the Board of Supervisors of San Diego County (board) filed this action seeking a writ of mandate and declaratory and injunctive relief against Gerald J. Lonergan, the San Diego County Auditor and Controller (auditor), and James E. Jones, the San Diego County Treasurer-Tax Collector (tax collector). Alleging that a genuine controversy existed as to whether taxes assessed on the unsecured roll are within the coverage of article XIII A, the board sought to compel the auditor and tax collector to compute, bill, and collect taxes in accordance with the limitations set forth in the new constitutional provision. The court issued declaratory relief and held that the auditor and tax collector were required to comply with article XIII A in taxing property on the unsecured roll. ¹ The auditor appeals. As will appear, we conclude that Proposition 13, when adopted, was not intended to apply to the 1978-1979 unsecured roll. Accordingly, the judgment granting declaratory relief is reversed.

I

No factual issues are in dispute, as the question before us is essentially a matter of constitutional construction. We begin our analysis with a review of the fundamental concepts of California property tax law.

A

Unless otherwise provided by the state Constitution or federal law, all property in California is taxable "in proportion to its full value." (Cal. Const., art. XIII, § 1; Rev. & Tax.Code, § 201.) ² "Property" is defined comprehensively to include "all matters and things, real, personal, and mixed, capable of private ownership." (§ 103.) Real property, or real estate, is in turn defined to include: "(a) The possession of, claim to, ownership of, or right to the possession of land. (P) (b) All mines, minerals, and quarries in the land, all standing timber whether or not belonging to the owner of the land, and all rights and privileges appertaining thereto. (P) (c) Improvements." (§ 104.) Personal property comprises the residue, i. e., all other property. (§ 106.)

Exemptions from taxation for real property are provided in article XIII. Additionally, the Legislature is empowered to exempt personal property by a vote of two-thirds of the membership of each house (art. XIII, § 2), and has done so in sections 202-233 of the Revenue and Taxation Code. The Legislature may classify personal property for differential taxation, but "the tax per dollar of full value shall not be higher on personal property than on real property in the same taxing jurisdiction." (Art. XIII, § 2.)

The assessor of each county has a duty to prepare an assessment roll listing all taxable property within the county. (§ 601.) For this purpose all property is classified as either secured or unsecured: "The 'secured roll' is that part of the roll containing State assessed property and property the taxes on which are a lien on real property sufficient, in the opinion of the assessor, to secure payment of the taxes. The remainder of the roll is the 'unsecured roll.' " (§ 109; see § 134.)

Whether a tax on property is a lien against real property is determined by statute. Section 2187 provides that "Every tax on real property is a lien against the property assessed." Further, a tax on personal property may be secured or "cross secured" by real property. ³ If either of these conditions exists, the personal property so secured will be assessed on the secured roll. All other personal property is assessed on the unsecured roll.

Although it is commonly assumed that "property on the unsecured roll consists almost exclusively of personal property" (McDougall v. County of Marin (1962) 208 Cal.App.2d 65, 71, 25 Cal.Rptr. 107, 110), possessory interests in land generally are assessed on the unsecured roll. Possessory interests are defined to include: "(a) Possession of, claim to, or right to the possession of land or improvements, except when coupled with ownership of the land or improvements in the same person. (P) (b) Taxable improvements on tax-exempt land." (§ 107.) As such, they fall within the definition of real property under section 104. Prior to the passage of Proposition 13, however, section 107 provided that possessory interests, with the exception of leasehold estates for the production of gas, petroleum, and other hydrocarbon substances, were deemed insufficient security for the payment of taxes and were assessed on the unsecured roll. (Stats. 1972, ch. 1308, § 1, p. 2608.) ⁴

As a practical matter, possessory interests are separately taxed only when the underlying land is tax exempt: "In practice, assessors usually enter the entire value of land and improvements on the tax roll without distinction between possessory and reversionary interest, . . .. (Citation.) As between reversioners and possessors payment of the tax is a private arrangement. (Citations.) When, however, the possessory interest is taxable and the reversion is exempt, only the possessory interest is subject to assessment and taxation. (Citations.)" (De Luz Homes, Inc. v. County of San Diego (1955) 45 Cal.2d 546, 563, 290 P.2d 544, 555.) ⁵

In short, although the property tax system distinguishes between real and personal property, and also between secured and unsecured property, the two classification systems overlap. As a result, the secured and unsecured rolls each contain both real and personal property.

Taxes on property assessed on the secured roll are payable in two equal installments, due November 1 and February 1 of each year. (§§ 2605, 2606, 2701, 2702.) ⁶ The first installment becomes delinquent on December 10 and the second installment on April 10. (§§ 2617, 2618, 2704, 2705.) Taxes on the unsecured roll, however, are due March 1 preceding the fiscal year for which the taxes are levied (§§ 2901, 2192) and, if included on the assessment roll as of July 31, become delinquent on August 31 (§ 2922).

In addition to the differences in due dates and delinquency dates, one of the fundamental distinctions between secured and unsecured taxes lies in the fixing of the tax rate. The tax rate for the secured roll is established by the board of supervisors of each county on or before September 1 of each year. (Gov.Code, § 29100.) Taxes on unsecured property, however, are levied at the rate fixed for the secured roll in the prior tax year, pursuant to article XIII, section 12: "(a) Except as provided in subdivision (b), taxes on personal property, possessory interests in land, and taxable improvements located on land exempt from taxation which are not a lien upon land sufficient in value to secure their payment shall be levied at the rates for the preceding tax year upon property of the same kind where the taxes were a lien upon land sufficient in value to secure their payment. (P) (b) In any year in which the assessment ratio is changed, the Legislature shall adjust the rate described in subdivision (a) to maintain equality between property on the secured and unsecured rolls." (Italics added.) ⁷

B

Against this setting, Proposition 13 was adopted by the voters on June 6, 1978. As we observed in Amador, the initiative measure "changes the previous system of real property taxation and tax procedure by imposing important limitations upon the assessment and taxing powers of state and local governments." (22 Cal.3d at p. 218, 149 Cal.Rptr. at p. 241, 583 P.2d at p. 1283.) Two of the proposition's four principal elements are pertinent here.

Section 1, subdivision (a), of article XIII A imposes a limitation on the tax rate applicable to real property: "The maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property. . . ." ⁸

Section 2, subdivision (a), imposes a limitation on the assessed value of real property, commonly referred to as the valuation "...