County of Sacramento v. Assessment Appeals Bd. No. 2

• Decision Date: 29 May 1973
• Court: California Court of Appeals Court of Appeals
• Parties: COUNTY OF SACRAMENTO, a political subdivision of the State of California, and the Board of Supervisors thereof, Plaintiffs and Appellants, v. ASSESSMENT APPEALS BOARD NUMBER 2 OF SACRAMENTO COUNTY et al., Defendants and Respondents; RCA CORPORATION, Real Party in Interest, Respondent. COUNTY OF SACRAMENTO, a political subdivision of the State of California, and the Board of Supervisors thereof, Plaintiffs and Respondents, v. ASSESSMENT APPEALS BOARD NO. 2 OF SACRAMENTO COUNTY et al., Defendants; RCA CORPORATION, Real Party in Interest, Appellant. RCA CORPORATION, Plaintiff and Appellant, v. ASSESSMENT APPEALS BOARD NO. 2, SACRAMENTO COUNTY, et al., Defendants and Respondents. Civ. 13800, 13523 and 13732.

Page 434

108 Cal.Rptr. 434

32 Cal.App.3d 654

COUNTY OF SACRAMENTO, a political subdivision of the State of California, and the Board of Supervisors thereof, Plaintiffs and Appellants, v. ASSESSMENT APPEALS BOARD NUMBER 2 OF SACRAMENTO COUNTY et al., Defendants and Respondents;

RCA CORPORATION, Real Party in Interest, Respondent.

COUNTY OF SACRAMENTO, a political subdivision of the State of California, and the Board of Supervisors thereof, Plaintiffs and Respondents, v. ASSESSMENT APPEALS BOARD NO. 2 OF SACRAMENTO COUNTY et al., Defendants;

RCA CORPORATION, Real Party in Interest, Appellant.

RCA CORPORATION, Plaintiff and Appellant, v. ASSESSMENT APPEALS BOARD NO. 2, SACRAMENTO COUNTY, et al., Defendants and Respondents.

Civ. 13800, 13523 and 13732.

Court of Appeal, Third District, California.

May 29, 1973.

Hearing Denied July 25, 1973.

John B. Heinrich, County Counsel, by Monte L. Fuller, Deputy County Counsel, Sacramento, for County of Sacramento.

Downey, Brand, Seymour & Rohwer by Robert Harlan, Sacramento, for Real Party in Interest, Appellant Respondents.

Joseph E. Burke, Sacramento, for respondent Appeals Board.

DAVID, ^* Associate Justice.

These three consolidated appeals have surfaced out of a procedural morass, involving the assessment and taxation of data processing equipment and systems furnished by contract to the State of California, by RCA Corporation. The State of California, being exempt from taxation (Cal.Const., art. XIII, § 1), ¹ the county assessor turned his guns on RCA, asserting that it was liable for personal property taxes upon the systems. (Rev. & Tax.Code, § 405.) After a year's conferences with the company, including inspection of the company's records, locally and in New York, the assessor made an assessment for 'escaped property,' upon which taxes were levied against RCA in the sum of $546,326.87, and were paid under protest.

Thereafter, application was made by RCA before Assessments Appeals Board No. 2 ('board') for reduction of assessments, asserting that although RCA was legal owner, the transactions with the state were actually conditional sales, though denominated 'leases,' and hence, under accepted principles, the owner had a taxable interest of zero. Factors of valuation and methods of valuation were the subject of testimony and of discussions at the hearing. At the conclusion of the proceeding, the board filed its opinion on May 8, 1970, determining that the contentions of RCA were correct, that its interest had a zero valuation. Thus, the taxes paid for the tax years 1967--1968, 1968--1969 and 1969--1970 were refunded to RCA. The county counsel advised RCA that no appeal of this ruling would be taken.

Commencing eleven months later, the county in a variety of proceedings, has sought to relitigate the issues, and recover the refund and to block any consideration of like protests of assessments made for the tax years 1970--1971 and 1971--1972 by the assessment appeals board. Since the county anticipated that upon any such hearing the ruling made in reference to the first three years might be repeated, its legal contentions are consonant with its fears. ² Thus, when the assessor repeated the assessment of RCA Corporation for the tax year 1970--1971, RCA again sought equalization, resulting in the action of the county successfully seeking a writ of prohibition. This was appealed by RCA and is before us as 3 Civil No. 13523.

Again assessed for the tax year 1971--1972, RCA Corporation made application for reduction of the assessment, which the board refused to hear on advice of the county counsel that it had no jurisdiction. RCA sought a writ of mandate to compel the board to proceed. The general demurrer of the county to the petition was sustained and the proceeding dismissed, which is the basis of RCA Corporation's appeal before us (3 Civil No. 13732).

Our discussion will reveal other legal skirmishes.

It will be helpful to consider the appeals chronologically in reference to the tax years for which assessments were made.

I.

Appeal 3 Civil No. 13800 arises from a judgment of the superior court, dismissing the county's petition for a writ of mandate, to compel Assessment Appeals Board No. 2: (1) to set aside its decision of May 8, 1970; (2) to determine that RCA is the fully-assessable owner of the data processing equipment; and (3) for general relief. (Sacramento County Superior Court No. 224045.)

In the petition for mandamus, there were annexed and pleaded by reference the transcript of proceedings before Assessment Appeals Board No. 2, its order of May 8, 1970, and an examplar of the four contracts between RCA and the State of California (stipulated to be typical). The answer admitted that the complaint properly set forth the proceedings. They therefore are before us: (a) we take judicial notice thereof; (b) a demurrer confesses the facts well pleaded, which also places the documentation before us. ³

In the petition for mandate in 3 Civil No. 13800, the county and the board of supervisors assert that:

(1) The relief sought by the taxpayer before the assessment appeals board was the declaration of an 'exemption' and that the assessment appeals board has no jurisdiction to consider or grant an 'exemption.'

(2) That as a matter of law, the assessment appeals board erroneously decided that the contracts with the state were conditional sales contracts, and that RCA Corporation was only security owner, and had no taxable interest; that in law and fact, said agreements were for lease and hire of the data processing equipment, the lessor RCA being properly assessed for their value, no purchase option having been exercised.

(3) That the petitioners did not have a plain, speedy and adequate remedy in the ordinary course of law.

Since the legal advisor of Assessment Appeals Board No. 2, the county counsel, was seeking the writ of mandate against the board, it had no independent representation in this proceeding.

The legal determinations of the assessor and the assessment appeals board are subject to judicial review. (Flying Tiger Line, Inc. v. County of L.A. (1958) 51 Cal.2d 314, 320, 333 P.2d 323; A. F. Gilmore Co. v. County of Los Angeles (1960) 186 Cal.App.2d 471, 476, 9 Cal.Rptr. 67; Board of Supervisors v. Archer (1971) 18 Cal.App.3d 717, 724, 96 Cal.Rptr. 379; County of Amador v. State Board of Equalization (1966) 240 Cal.App.2d 205, 216, 49 Cal.Rptr. 448.)

The board's determination of facts cannot be set aside unless fraudulent, arbitrary, an abuse of discretion or unless the board failed to follow the standard prescribed by the Legislature. (McClelland v. Board of Supervisors (1947) 30 Cal.2d 124, 129, 180 P.2d 676; Eastern-Columbia, Inc v. County of L.A. (1945) 70 Cal.App.2d 497, 503, 161 P.2d 407; Bank of America v. Mundo (1951) 37 Cal.2d 1, 5, 229 P.2d 345; De Luz Homes, Inc. v. County of San Diego (1955) 45 Cal.2d 546, 564, 290 P.2d 544.)

A. This proceeding is not barred by the statute of limitations.

By definition of their scope, Government Code section 11523, and Rules on Appeal, rules 1 and 2, are not applicable. Since the taxpayer must file suit for refund within six months after paying under protest, it is contemplated that all proceedings for equalization shall have been concluded, since otherwise the bases of his claim would not have been determined. As developed, infra, the refund suit is an adequate remedy at law for both the taxpayer and the county to review the equalization board proceedings. In the unusual circumstances here, where the county made the tax refund and now seeks to challenge the assessment appeals board proceedings, there is some basis for holding that a four-year statute applies. (Allen v. Humboldt County Board of Supervisors (1963) 220 Cal.App.2d 877, 884--885, 34 Cal.Rptr. 232.) Since this mandate proceeding is in essence a tax collection suit, it is arguable that the three-year statute applies. (Code Civ.Proc. § 338, subd. (1); 2 Witkin (1970) Cal.Procedure, § 344, pp. 1184--1185.) In either event, the county's suit is not barred.

Although once officially declaring the determination of the assessment appeals board in ordering the cancellation of the 1967--1969 assessments would not be appealed, and thereafter making the refund sought by the taxpayer, the county is not estopped to proceed. (Outer Harbor Co. v. Los Angeles (1920) 49 Cal.App. 120, 132--133, 193 P. 137.)

B. Res judicata does not bar the county in 3 Civil 13800.

As indicated, infra, RCA Corporation filed action No. 209559 in the Superior Court of Sacramento County to recover the taxes paid under protest for 1970--1971. The county cross-complained, seeking to litigate the validity of the assessment appeals board action and to recover the amount refunded for the 1967--1969 levies. The demurrer of RCA Corporation was sustained without leave to amend, but no judgment was entered on the cross-complaint. This court and the Supreme Court denied writs of mandate, sought to compel such an entry. There is only one judgment in such an action, and the principal action remains to be tried. The trial court correctly withheld judgment. (De la Beckwith v. Superior Court (1905) 146 Cal. 496, 500, 80 P. 717; Sjoberg v. Hastorf (1948) 33 Cal.2d 116, 199 P.2d 668.) Hence, such ruling upon demurrer is not res judicata; the trial court still retains the power to reconsider the ruling on demurrer, if it is deemed proper to do so, in the light of the subsequent litigation of the parties.

C. The assessment appeals board has jurisdiction.

The county's claim that the board had no jurisdiction to consider RCA's application grasps at a wisp of wishful thinking.

The constitutional jurisdiction of an assessment appeals board is stated: '. . . Each board shall have the power to equalize the valuation of the taxable property in the county for the purpose of taxation in the manner provided for in Section 9 of this Article. All general laws pertaining to county boards of...