County of Los Angeles v. County of Los Angeles Assessment Appeals Bd.

• Decision Date: 10 February 1993
• Docket Number: No. B,B
• Citation: 16 Cal.Rptr.2d 479,13 Cal.App.4th 102
• Court: California Court of Appeals Court of Appeals
• Parties: COUNTY OF LOS ANGELES, Plaintiff, Cross-defendant and Appellant, v. COUNTY OF LOS ANGELES ASSESSMENT APPEALS BOARD NO. 1, Defendant and Respondent; DOLLAR RENT A CAR SYSTEMS, INC., Real Party in Interest and Respondent; Grand Rent A Car Corporation et al., Real Parties in Interest, Cross-complainants and Respondents. 065128.

Page 479

16 Cal.Rptr.2d 479

13 Cal.App.4th 102

COUNTY OF LOS ANGELES, Plaintiff, Cross-defendant and Appellant, v. COUNTY OF LOS ANGELES ASSESSMENT APPEALS BOARD NO. 1, Defendant and Respondent DOLLAR RENT A CAR SYSTEMS, INC., Real Party in Interest and Respondent Grand Rent A Car Corporation et al., Real Parties in Interest, Cross-complainants and Respondents.

No. B 065128.

Court of Appeal, Second District, Division 2, California.

Feb. 10, 1993.

Review Denied April 29, 1993.

De Witt W. Clinton, County Counsel, Albert Ramseyer and Paul I. Yoshinaga, Deputy County Counsel, for plaintiff, cross-defendant and appellant.

Kelvin H. Booty, Jr., County Counsel, James F. May, Asst. County Counsel, Alameda, Thomas F. Casey III, County Counsel, Mary K. Raftery, Deputy County Counsel, San Mateo, Steven Woodside, County Counsel, and Karen Heggie, Deputy County Counsel, Santa Clara, as amici curiae on behalf of plaintiff, cross-defendant and appellant.

No appearance for defendant and respondent.

Rintala, Smoot, Jaenicke & Brunswick, Peter C. Smoot and Robert W. Hodges, Los Angeles, for real party in interest and respondent.

Munger, Tolles & Olson, Gregory P. Stone, Latham & Watkins, Robert D. Crockett, Jayne Fan, O'Melveny & Myers, Thomas M. McCoy, Marcy Jo Mandel, Rintala, Smoot, Jaenicke & Brunswick, Peter C. Smoot and Robert W. Hodges, for real parties in interest, cross-complainants and respondents.

FUKUTO, Associate Justice.

The County of Los Angeles (County) seeks reversal of a judgment which denied its petition for writ of mandate against the County's assessment appeals board (Board) and awarded possessory interest tax refunds to car rental companies that operate at the three major airports within the County. The Board and the trial court rejected the County's contention that the rent-a-cars' possessory interests extend to the use of each airport generally, not simply the areas the companies occupy (principally service counters), and also disapproved the County's method of valuing the interests, by capitalizing concession fees which were based on and included enterprise income. We conclude that the trial court correctly resolved these issues, which to some extent had already been conclusively determined by another superior

court judgment in 1986. The judgment consequently will be affirmed.

FACTS

This case concerns ad valorem property tax assessments of possessory interests of four car rental companies (Dollar Rent A Car Systems, Inc. (Dollar), Grand Rent A Car Corporation (Avis), The Hertz Corporation (Hertz), and National Car Rental System, Inc. (National), hereafter collectively the rent-a-cars) at Los Angeles International Airport (LAX), Burbank-Glendale-Pasadena Airport (Burbank), and Long Beach Municipal Airport (Long Beach), for tax years 1985-1987 with respect to LAX and 1983-1987 with respect to Burbank and Long Beach. Except for Dollar with respect to Long Beach, each of the rent-a-cars has operated under "concession agreements" or (in the case of Burbank) "leases and concession agreements" (hereafter collectively "the agreements") with the airports' respective owners, the City of Los Angeles, the Burbank-Glendale-Pasadena Airport Authority, and the City of Long Beach.

The agreements grant both the right to conduct a car rental business at the particular airport and the right to occupy and use certain limited portions of it, namely designated counters or booths, and, in the case of Burbank and more recently Long Beach, spaces in a "ready/return" parking lot. The Burbank agreements also grant a nonexclusive right to use common areas to be designated, as well as terminal public areas such as restrooms and waiting areas; the Long Beach agreements authorize joint use of walkways surrounding the rental booths, as well as "the use ... on [sic] the Airport" to conduct the car rental concession. In exchange for these rights, the rent-a-cars have agreed to pay the airport authorities, subject to guaranteed minimums, 10 percent of gross receipts from all car rentals delivered in the airports' areas, whether or not arranged through the booths. Burbank separately charges specified "rent" for the booths and lot spaces.

1. The Prior Litigation.

The present case is the second to review the propriety of the County's assessments of the rent-a-cars' airport possessory interests. In 1982 the County Assessor began assessing these interests by capitalizing the rent-a-cars' guaranteed or projected payments to the airports under the agreements, on the premise that these payments constituted "rent" for possessory interests in the airports as business premises. This change, from previous assessment of the rent-a-cars' possessory interests as comprising only their exclusive counter spaces, increased the appraised value of the interests, in the case of LAX, by roughly 5,000 to 10,000 percent.

The rent-a-cars sought redetermination of the 1982 LAX assessments before one of the County's assessment appeals boards. That board rejected the County's assertion that the taxable possessory interests extended further than the airport counters (and related telephone reservation boards), and reduced the appraisals, although not as much as the rent-a-cars had requested.

The parties then commenced a series of actions and proceedings in Los Angeles Superior Court, to review the administrative decision. The cases were ordered consolidated and tried before a single judge. (Hertz Corporation v. County of Los Angeles, No. C537445.) The court rendered a statement of decision and judgment in favor of the rent-a-cars, embracing the following principal determinations.

(1) The rent-a-cars' possessory interests at LAX included only their counters, telephone boards, and signs, the latter two not having significant value.

(2) The taxable value of these interests was fair market rent, which would be no greater than the assessed value of airline counter space at the airport, then $15 per square foot. However, the rent-a-cars having sought reduction only to $45 per foot, they would receive that measure.

(3) The County's contrary method of valuation, based on capitalized concession fees, was invalid for two further reasons. First, it produced valuations of similarly situated, like-kind-and-character properties The judgment, rendered August 27, 1986, ordered reduction of the LAX assessments accordingly, together with refunds.

that widely differed between the rent-a-cars, in violation of constitutional requirements of uniform, equal taxation. Second, it improperly included income and value derived not from the property but from the rent-a-cars' [13 Cal.App.4th 107] overall enterprises--i.e., business produced not by the airport counters but through advertising, goodwill, national reservation systems, and the like. ¹

2. The Present Case.

The County did not appeal from the 1986 judgment, and it became final. Nevertheless, the County continued to assess the rent-a-cars' possessory interests, at all three airports, using the same concepts and formulas the superior court had rejected. The County did so under the premise, as stated by its counsel at administrative hearings, that "The superior court decision is not binding authority.... And the assessor does not have to follow a superior court decision...."

The rent-a-cars again sought reduction of their assessments, this time at all three airports, for various years including and following 1983. After an extended hearing, the Board ruled that the prior judgment controlled and preclusively determined, by collateral estoppel, the extent of the possessory interests, as well as the invalidity of the assessments because they attributed unequal values and included enterprise value. After resolving adversely to the rent-a-cars a separate issue concerning the projected duration of their interests, the Board reassessed the various values at levels amounting to only a few percent of those the County had advanced.

The County then commenced this litigation, by petition for writ of mandate (Code Civ.Proc., § 1094.5) against the Board. As real parties in interest, the rent-a-cars answered, alleging collateral estoppel by the prior judgment as a defense. All but Dollar also filed cross-complaints seeking tax refunds.

At the hearing on its motion for peremptory writ, the County argued, "[A]t some point ... the County of Los Angeles has to be able to go to court and get review of what we consider a patently erroneous decision.... We're appealing the 1986 decision here today, your Honor." The court denied the County's petition, holding that the prior judgment controlled the case, and rejecting the County's contention that there had been a subsequent change in the law of possessory interests, justifying a different result.

The County moved for reconsideration, based on a new appellate decision, announced two weeks after the court's tentative decision. (United Air Lines, Inc. v. County of San Diego (1991) 1 Cal.App.4th 418, 2 Cal.Rptr.2d 212 [hereafter United Air Lines ].) The court granted reconsideration, but adhered to its ruling denying the petition. The subsequent judgment also awarded Hertz, Avis, and National refunds, as sought by their cross-complaints, but denied, without prejudice to other tax years, their further claims that the Board had improperly judged their remaining terms of possession. ²

DISCUSSION ³

As reflected above, the primary basis for both the judgment below and the Board's Collateral estoppel forecloses relitigation of an issue that (1) is identical to one decided in a prior case (2) involving the same party or parties or those in privity with them and (3) which resulted in a final judgment on the merits. (E.g., Bernhard v. Bank of America (1942) 19 Cal.2d 807, 813, 122 P.2d 892.) In the present case the second and third criteria plainly appear: the County and the rent-a-cars all were parties to the prior litigation, which ended in a final judgment on the merits that the...