Cnty. of Santa Clara v. Superior Court of Santa Clara Cnty.
| Decision Date | 06 January 2023 |
| Docket Number | H049161 |
| Citation | 87 Cal.App.5th 347,303 Cal.Rptr.3d 516 |
| Parties | COUNTY OF SANTA CLARA, Petitioner, v. SUPERIOR COURT OF SANTA CLARA COUNTY, Respondent; AT&T Mobility LLC et al., Real Parties in Interest. |
| Court | California Court of Appeals Court of Appeals |
James R. Williams, County Counsel, Douglas M. Press Assistant County Counsel, Steve Mitra Assistant County Counsel, Mark F. Bernal Deputy County Counsel, Ward A. Penfold Deputy County Counsel, Laura S. Trice Deputy County Counsel, for Counsel for Petitioner.
California Appellate Law Group Rex S. Heinke Jessica M. Weisel, Boersch & Illovsky Martha A. Boersch Matthew C. Dirkes, Capitol Law and Policy Eric J. Miethke, for Counsel for Real Parties in Interest.
Munger, Tolles & Olson Benjamin J. Horwich, for Counsel for Amicus Curiae BNSF Railway Company, In Support of Real Parties in Interest.
Wilson, J. Revenue and Taxation Code section 100, subdivision (b) (hereafter, section 100(b) ),1 establishes formulas for calculating the debt-service component of certain property taxes. Pursuant to that statute, petitioner County of Santa Clara (County) has imposed taxes on the property of plaintiffs and real parties in interest, various privately owned public utility companies (hereafter utilities), at rates higher than those imposed on non-utility property. Although section 100(b) was enacted in 1986, the utilities now assert that imposition of a higher debt-service tax rate on their property, pursuant to the formulas set forth in the statute, violates article XIII, section 19, of the California Constitution (hereafter, article XIII, section 19 ).
That section provides that the state-assessed property of certain regulated utility companies "shall be subject to taxation to the same extent and in the same manner as other property." ( Art. XIII, § 19.) The utilities contend this provision mandates application of equal tax rates to utility property and to locally assessed non-utility property. Accordingly, they sought a refund from the County for fiscal years 2014-2015 and 2015-2016. The County denied the refund, and the utilities filed these lawsuits.
The County demurred, arguing that article XIII, section 19, does not mandate equal tax rates. The trial court overruled the demurrers, holding that it could not determine the legislative intent of article XIII, section 19, and the County had not carried its burden of establishing that the utilities cannot state a claim.
This petition for writ of mandate followed.
We now reverse. After considering the question presented and the parties’ arguments, we conclude that article XIII, section 19, does not mandate that utility property be taxed at the same rate as other property. Instead, it provides that, after utility property is assessed by the State Board of Equalization, it shall be subject to ad valorem taxation at its full market value by local jurisdictions.
Accordingly, we grant the County's petition for writ of mandate.
This writ petition comes to us from three related superior court actions involving substantively identical pleadings and legal issues for which the trial court issued a single order.
In each action, a group of privately held public utilities sued the County for property tax refunds for fiscal years 2014-2015 and 2015-2016, following the County's denial of refund claims submitted pursuant to section 5097. The utilities in the three respective actions are: AT&T Mobility LLC, Pacific Bell Telephone Company, AT&T Corp. (AT&T); Sprint Communications Company, L.P., Sprint Telephony PCS, L.P. (Sprint); and T-Mobile West LLC (T-Mobile).
The utilities filed substantively identical operative first amended complaints in September 2020. Each complaint alleges a single cause of action against the County for a "claim for refund of state-assessed property tax under Rev. & Tax. Code § 5140."3
Specifically, the complaints allege that the property tax rates calculated and applied by the County pursuant to section 100(b) were "in excess" of the separately calculated rates applied by the County in the same years to other non-utility property. The debt-service component tax rates applied to the utilities’ property in the County in 2014-2015 and 2015-2016 were 1.04 percent and 1.092 percent, respectively.4 By contrast, the debt-service component tax rate applied to other property in the County those years was 0.202 percent.
The complaints further allege that the higher property tax rate for the utilities’ property "violates Article XIII, section 19 of the California Constitution," which provides in part that utility property "shall be subject to taxation to the same extent and in the same manner as other property." ( Art. XIII, § 19.)
According to the complaints, the California Supreme Court, in ITT World Communications , Inc. v. City and County of San Francisco (1985) 37 Cal.3d 859, 210 Cal.Rptr. 226, 693 P.2d 811 ( ITT ), interpreted that section of the Constitution as requiring that state-assessed property such as that of the utilities be taxed at the same tax rate as other property.
The complaints pray for judgments awarding refunds in the following amounts: $4,952,002 for 2014-2015 and $5,696,648 for 2015-2016, plus interest, for the AT&T plaintiffs; $689,663 for 2014-2015 and $782,628.76 for 2015-2016, plus interest, for the Sprint plaintiffs; and $499,254 for 2014-2015 and $609,960 for 2015-2016, plus interest, for T-Mobile.
The County demurred to the complaints. It argued the complaints failed to state a claim because article XIII, section 19, "does not require utility property to be taxed at the exact same ad valorem[5 ] tax rate as all other locally assessed property."6 Instead, it requires that such property be assessed at full value by the State Board of Equalization (SBOE), "as opposed to being undervalued by local assessors; and ... placed on the local rolls for taxation purposes, as opposed to being subject to a State gross receipts tax."
In support, the County requested judicial notice of the previous version of article XIII, section 19, legislative analysis materials, and legislative history of section 100(b).
In opposition, the utilities argued that article XIII, section 19, prohibits higher tax rates on the utilities’ property. They relied chiefly on the California Supreme Court's decision in ITT , which they claim held that article XIII, section 19, mandates that public utility property "be levied on at the same rate as locally assessed property." In reply, the County argued that the cited language in ITT is dicta.
The trial court overruled the demurrers in April 2021. It noted that it could not divine the legislative intent of the relevant language in article XIII, section 19, from the materials the County submitted. It also explained that, "[a]lthough the Supreme Court in ITT did not undertake a statutory interpretation of Section 19, it read this second sentence to plainly mean that utility property would be taxed at the same rate as other property." The trial court did not directly address the County's argument that the relevant language in ITT is dicta, and instead concluded the County had not met its burden of establishing that the utilities could not state a claim as a matter of law.
The court included in its order, pursuant to a request by the County under Code of Civil Procedure section 166.1, a statement that "the court indicates a belief that there is a controlling question of law as to which there are substantial grounds for difference of opinion, appellate resolution of which may materially advance the conclusion of the litigation."
The County then filed a petition for writ of mandate in this court in June 2021. In February 2022, we issued an order to show cause, stayed the superior court proceedings, and requested briefing from the parties.
An order overruling a demurrer is not directly appealable and a writ will " ‘rarely [be] granted unless a significant issue of law is raised, or resolution of the issue would result in a final disposition as to the petitioner.’ " ( Apple , supra , 18 Cal.App.5th at pp. 238-239, 227 Cal.Rptr.3d 8, quoting Casterson v. Superior Court (2002) 101 Cal.App.4th 177, 182, 123 Cal.Rptr.2d 637.) Nevertheless, " ‘[a]lthough appellate courts are loath to exercise their discretion to review rulings at the pleading stage, they will do so where the circumstances are compelling and the issue is of widespread interest.’ " ( Apple , supra , at p. 239, 227 Cal.Rptr.3d 8, quoting County of Santa Clara v. Superior Court (2009) 171 Cal.App.4th 119, 126, 89 Cal.Rptr.3d 520.)
Although the parties disagree as to the resolution, they agree that writ review is warranted.
We agree that writ review is appropriate here to determine whether article XIII, section 19, requires that certain state-assessed property be taxed at the same rate as other property.
We review an order overruling a demurrer de novo, including in the context of a petition for writ of mandate. ( City of Stockton v. Superior Court (2007) 42 Cal.4th 730, 747, 68 Cal.Rptr.3d 295, 171 P.3d 20 [].) " ‘ " ’ " ( Apple , supra , 18 Cal.App.5th at p. 240, 227 Cal.Rptr.3d 8.)
The issue presented in this case is a question of law involving constitutional interpretation, which we review de novo. ( Rodriguez v. Superior Court of Santa Clara County (2021) 70 Cal.App.5th 628, 644, 285 Cal.Rptr.3d 592 ; People ex rel. Lockyer v. Sun Pacific Farming Co. (2000) 77 Cal.App.4th 619, 632, 92 Cal.Rptr.2d 115.)
The utilities concede that the County had the...
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