Coso Energy Developers v. County of Inyo

• Decision Date: 13 October 2004
• Docket Number: No. E034051.,E034051.
• Citation: 122 Cal.App.4th 1512,19 Cal.Rptr.3d 669
• Court: California Court of Appeals Court of Appeals
• Parties: COSO ENERGY DEVELOPERS et al., Plaintiffs and Appellants, v. COUNTY OF INYO, Defendant and Respondent.

19 Cal.Rptr.3d 669

122 Cal.App.4th 1512

COSO ENERGY DEVELOPERS et al., Plaintiffs and Appellants, v. COUNTY OF INYO, Defendant and Respondent.

No. E034051.

Court of Appeal, Fourth District, Division 2.

October 13, 2004.

McDonough Holland & Allen, Robert R. Rubin and Ann Taylor Schwing, Sacramento, for Plaintiffs and Appellants.

Paul N. Bruce, County Counsel, and Allen R. Berrey, Assistant County Counsel, for Defendant and Respondent.

Bill Lockyer, Attorney General, William Brieger, Acting Chief Assistant Attorney General, J. Matthew Rodriguez, Senior Assistant Attorney General, Alan V. Hager and Michael L. Crow, Deputy Attorneys

General, for State Lands Commission and California Board of Equalization as Amici Curiae on behalf of Defendant and Respondent.

OPINION

KING, J.

INTRODUCTION

Coso Energy Developers, Coso Finance Partners, and Coso Power Developers (the Coso entities) appeal from a judgment denying their claims for refunds of property taxes paid to the County of Inyo (Inyo). The Coso entities contend that Statutes 1891, chapter 181, section 1, page 262 (1891 Statute) precludes Inyo from taxing a portion of their geothermal energy operations located on land within the China Lake Naval Weapons Center (NWC). We disagree and affirm.

STATEMENT OF FACTS AND PROCEDURAL HISTORY

The essential facts were stipulated to by the parties or are undisputed. The Coso entities operate geothermal energy projects located within the NWC in Inyo County. The Coso entities operate their projects pursuant to certain contracts and leases with the United States Navy. Under these agreements, the Coso entities own the right to explore, develop, and take geothermal steam and related minerals from a portion of the land. They also own power plants, facilities, equipment, and personalty related to the projects.

The land on which the Coso entities operate their projects was ceded to the United States by Mexico pursuant to the Treaty of Guadalupe Hidalgo in 1848. (Feb. 2, 1848, 9 Stat. 922.) Some portions of this land have been continuously owned by the United States since that time, while other portions were conveyed by the United States to private parties or to the State of California in or after 1891. The Coso entities do not dispute that Inyo may tax its operations situated on land that has not been continuously owned by the United States. Their claims are limited to the taxation of their operations on land that has been continuously owned by the United States since 1848.

Inyo levied taxes against the Coso entities based upon the value of their possessory interests in the projects as determined by the Inyo County Assessor. In 2000 and 2001, the Coso entities filed refund claims with Inyo for taxes paid for the years 1996 through 2000,¹ which Inyo denied. The Coso entities then commenced this action to recover the disputed amounts. They asserted that the land on which their improvements are located has been continuously owned by the United States, and that, by way of the 1891 Statute, California ceded exclusive jurisdiction to the United States. The Coso entities argue that because exclusive jurisdiction was ceded to the federal government, Inyo could not tax their possessory interests.

Inyo denied the Coso entities' claims and argued that "the 1891 Statute is meant to include land which has been or may be ceded by the State of California to the United States and does not include the cession from Mexico to the United States in 1848." Inyo further asserted affirmative defenses, including waiver, equitable estoppel, laches, and the failure to exhaust administrative remedies. The State of California, acting by and through the State Lands Commission, appeared at trial as amicus curiae in support of Inyo.²

The matter was tried and the court found in favor of Inyo. The court explained: "To hold that [the 1891 Statute] was intended to cede exclusive jurisdiction to the federal government over all public domain lands then within California because said lands had been ceded to the United States by the Treaty of Guadalupe Hidalgo results in an absurdity of monumental magnitude." The court also concluded that "the presumption of acceptance [of jurisdiction by the United States] has been rebutted and that ... jurisdiction has not been accepted." The court did not rule on the merits of Inyo's defenses. Judgment was entered for Inyo and the Coso entities appealed.

ANALYSIS

The parties agree that if the State of California ceded exclusive jurisdiction over the subject land, and the United States accepted such jurisdiction, Inyo cannot tax the Coso entities' interests on such land. The primary issues before us are whether the 1891 Statute was intended to constitute a cession of exclusive jurisdiction over the subject land and, if so, whether the United States accepted such jurisdiction. Because the meaning and construction of a statute is a pure question of law, we review the statutory interpretation issue de novo and make our determination independently of the trial court's construction. (People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 432, 101 Cal.Rptr.2d 200, 11 P.3d 956; Ventura County Dept. of Child Support Services v. Brown (2004) 117 Cal.App.4th 144, 149-150, 11 Cal.Rptr.3d 489.) To the extent the trial court's conclusion that the United States did not accept jurisdiction was based upon factual findings, we will accept such findings if they are supported by substantial evidence. (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881, 92 Cal.Rptr. 162, 479 P.2d 362.)

A. Background

The State of California or its instrumentalities may not tax property interests held by the United States. (See S.R.A. v. Minnesota (1946) 327 U.S. 558, 561, 66 S.Ct. 749, 90 L.Ed. 851; West v. Oklahoma Tax Commission (1948) 334 U.S. 717, 723-724, 68 S.Ct. 1223, 92 L.Ed. 1676; People v. Shearer (1866) 30 Cal. 645, 655; Act for Admission of State of Cal. into Union, 9 Stat. 452, § 3.) Whether the state or a county can impose a tax upon private parties based upon property interests situated on land owned by the United States depends upon the nature of the federal government's jurisdiction over such property.

Where the United States has "exclusive jurisdiction" over an area within a state, "no other legislative power than that of Congress can be exercised over" such area. (Fort Leavenworth R.R. Co. v. Lowe (1885) 114 U.S. 525, 537-538, 5 S.Ct. 995, 29 L.Ed. 264 (Fort Leavenworth).) The state is barred "from exercising any legislative authority including its taxing and police power in relation to the property and activities of individuals and corporations within the territory." (Silas Mason Co. v. Tax Comm. of Washington (1937) 302 U.S. 186, 197, 58 S.Ct. 233, 82 L.Ed. 187 (Silas Mason); accord, Collins v. Yosemite Park & C. Co. (1938) 304 U.S. 518, 528, 58 S.Ct. 1009, 82 L.Ed. 1502 (Collins); Standard Oil Co. v. California (1934) 291 U.S. 242, 244-245, 54 S.Ct. 381, 78 L.Ed. 775.) The extent of the United States jurisdiction over its property is a question of federal law. (Silas Mason, supra, at p. 197, 58 S.Ct. 233; Paul v. United States (1963) 371 U.S. 245, 267, 83 S.Ct. 426, 9 L.Ed.2d 292 (Paul).)

In contrast to having exclusive jurisdiction, the United States may have only a proprietary interest in land. (Fort Leavenworth, supra, 114 U.S. at p. 531, 5 S.Ct. 995.) As the Supreme Court has stated: "It is not unusual for the United States to own within a state lands which are set apart and used for public purposes. Such ownership and use without more do not withdraw the lands from the jurisdiction of the state." (Surplus Trading Co. v. Cook (1930) 281 U.S. 647, 650, 50 S.Ct. 455, 74 L.Ed. 1091.) "The property in that case, unless used as a means to carry out the purposes of the government, is subject to the legislative authority and control of the States equally with the property of private individuals." (Fort Leavenworth, supra, at p. 531, 5 S.Ct. 995.) Thus, where the United States is the owner of land within a state and does not have exclusive jurisdiction over the land, the state may generally tax private possessory interests in, or private property situated on, such land. (Surplus Trading Co. v. Cook, supra, at p. 651, 50 S.Ct. 455; People v. Shearer, supra, 30 Cal. at pp. 655, 659-660; United States of America v. County of Fresno (1975) 50 Cal.App.3d 633, 638, 640, 123 Cal.Rptr. 548, affd. (1977) 429 U.S. 452, 97 S.Ct. 699, 50 L.Ed.2d 683.)

Exclusive jurisdiction can be acquired by the United States over land within a state in three ways: (1) by purchase or donation of property with the consent of the state as provided in the United States Constitution (U.S. Const., art. I, § 8, cl. 17;³ Humble Pipe Line Co. v. Waggonner (1964) 376 U.S. 369, 371, 84 S.Ct. 857, 11 L.Ed.2d 782); (2) by a reservation of jurisdiction by the United States upon the admission of the state into the union (Fort Leavenworth, supra, 114 U.S. at pp. 526-527, 5 S.Ct. 995); and (3) the state's cession, together with the United States acceptance, of such jurisdiction (id. at p. 539, 5 S.Ct. 995; Silas Mason, supra, 302 U.S. at pp. 207-208, 58 S.Ct. 233). It is only this third method which concerns us in this case.

The ability of a state to cede jurisdiction to the United States over federally-owned land was established in Fort Leavenworth. In that case, the Supreme Court considered whether a private railroad owner, whose railroad was situated on land owned by the United States and within the State of Kansas, could be taxed by the State of Kansas. The subject land, Fort Leavenworth Military Reservation, was a portion of the land that France ceded to the United States in 1803. Upon the cession by France and prior to the admission of Kansas into the union in 1861, the federal government "possessed the rights of a proprietor, and had political dominion and sovereignty over" the land. (Fort Leavenworth, supra, 114 U.S. at p. 526, 5 S.Ct. 995.) When the...