Dreyer's Grand Ice Cream, Inc. v. County of Alameda

• Decision Date: 20 March 1986
• Citation: 178 Cal.App.3d 1174,224 Cal.Rptr. 285
• Court: California Court of Appeals Court of Appeals
• Parties: DREYER'S GRAND ICE CREAM, INC., etc., Plaintiff and Respondent, v. COUNTY OF ALAMEDA, Defendant and Appellant. A029687.

Page 285

224 Cal.Rptr. 285

178 Cal.App.3d 1174

DREYER'S GRAND ICE CREAM, INC., etc., Plaintiff and Respondent, v. COUNTY OF ALAMEDA, Defendant and Appellant.

A029687.

Court of Appeal, First District, Division 4, California.

March 20, 1986.

Review Denied June 26, 1986.

Richard J. Moore, County Counsel, James F. May, Sr. Deputy County Counsel, Oakland, for defendant and appellant.

Cooper, White & Cooper, David W. Tucker, John Mahoney, San Francisco, for plaintiff and respondent.

ANDERSON, Presiding Justice.

This is an appeal from the trial court's judgment ordering a refund of property tax paid under protest.

The parties to the appeal are plaintiff Dreyer's Grand Ice Cream, a California corporation (hereafter respondent or Dreyer) and defendant County of Alameda (hereafter appellant or county). The stipulated facts reveal that from some time before March 1, 1975, until approximately May 4, 1983, Associated Food Stores, Inc., respondent's predecessor (hereafter Associated) owned a piece of real property at 1260 Whipple Road, Union City, Alameda County. Prior to March 1, 1975, Associated began to construct a cold storage warehouse on the property which was completed in December 1975. In April 1976 the county assessor physically inspected and appraised the completed warehouse as of March 1, 1976, the lien date for the 1976-1977 assessment year. This value was also used for the 1977-1978 assessment year.

On June 6, 1978, the voters of the State of California adopted the initiative measure, popularly known as Proposition 13 or the Tax Limitation Initiative, which amended the California Constitution by adding article XIII A. The latter, together with the implementing legislation, redefined the base year values of both the pre-1975 and post-1975 properties. (Cal. Const., art. XIII A, § 2; REV. & TAX.CODE, § 110.1¹; see discussion, infra.) Based upon these new enactments, the county assessor reassessed the warehouse improvements for the 1978-1979 taxable year by adopting the value shown on the 1976-1977 assessment roll and adding a 2 percent inflation increase. The base year value increased by the 2 percent inflation factor, was also used to determine the value of the improvements for the 1979-1980 and 1980-1981 taxable years.

In the fall of 1980 the county assessor audited the books and records of Associated and discovered that the improvements had been substantially underassessed for both 1976-1977 and all subsequent years. On February 26, 1981, the assessor, based upon the 1980 audit, revised the base year value of the warehouse and made escape assessments for the years of 1977-1978, 1978-1979, 1979-1980 and 1980-1981.

Associated paid the increased taxes resulting from the escape assessments under protest in April 1981. Then it filed a timely notice of appeal to the County Assessment Appeals Board (Appeals Board) contending that the assessor did not have power to make escape assessments at all and in the alternative that the 1980 revaluation of the warehouse was not accurate. While the Appeals Board refused to grant relief on the first issue on jurisdictional grounds, it reduced the taxes payable on account of the escape assessments from the original $44,428.09 to $31,545.98. Thereafter Associated filed a claim for a refund of taxes with the Board of Supervisors which was denied on August 17, 1982.

After exhausting all of its administrative remedies, Associated commenced a court action for a refund of tax paid under protest. During the pendency of the proceeding Dreyer, the new owner of the warehouse, was substituted as plaintiff. Dreyer first moved for summary judgment which was denied. The case then proceeded to trial at the conclusion of which the court, sitting without a jury, ruled in favor of Dreyer by holding in essence that the escape assessments in dispute were barred by the four-year statute of limitations. ( § 532.)

The principal issue on appeal is whether the four-year statutory bar prescribed for escape assessments begins to run from the time when the base year value of the property was originally determined under Proposition 13 (Cal. Const., art. XIII A, § 2) and its implementing legislation ( § 110.1), or whether it commences to run from the assessment year in which the property, in whole or in part, escaped taxation.

Appellant presses the point that the limitations period is to be measured from assessment years, rather than base years, and that we should give effect to the statute which speaks in terms of assessment year instead of base year. ( § 532.)² Respondent, in turn, argues that Proposition 13 brought about radical changes in our property taxation system which, of necessity, impacted the whole statutory scheme relating to property taxes. One of the most important changes is that Proposition 13 made the base year value of the property the cornerstone of taxation which cannot be revised or altered under the guise of escape assessments. While escape assessments are still available to the taxing authority in case the property was underassessed or escaped taxation altogether, this power of the assessor must be exercised in harmony with Proposition 13. It follows that the four-year limit prescribed by the statute must commence from the base year and may not depend on the happenstance when the assessor discovers the error in assessment. For the reasons which follow, we agree with respondent and affirm the judgment.

First, prior to Proposition 13, real property was appraised for taxation purposes every year at its "fair market value" or "full cash value" on the lien date (i.e., March 1 of the taxable year). ( §§ 110, 401.3, 405, 405.5, 2192.) Proposition 13 changed this method in several respects. In the first place, the tax rate was limited to 1 percent of the "full cash value" of the property. (Cal. Const., art. XIII A, § 1.) In the second place, the determination of "full cash value" is no longer made yearly on the lien date, but is ascertained on a one-time, fixed basis which is called the base year value of the property. Thus, California Constitution, article XIII A, section 2, subdivision (a), spells out in part that "[t]he full cash value means the county assessor's valuation of real property as shown on the 1975-76 tax bill under 'full cash value' or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment." (Emphasis added.) Section 110.1, the implementing legislation, further clarifies that "(a) For purposes of subdivision (a) of Section 2 of Article XIII A of the California Constitution, 'full cash value' of real property, including possessory interests in real property, means the fair market value as determined pursuant to Section 110 for either of the following: [p] (1) The 1975 lien date. [p] (2) For property which is purchased, is newly constructed, or changes ownership after the 1975 lien date, either of the following: [p] (A) The date on which a purchase or change in ownership occurs. [p] (B) The date on which new construction is completed, and if uncompleted, on the lien date. [p] (b) The value determined under subdivision (a) shall be known as the base year value for the property." (Emphasis added.)

The case law in interpreting the above enactments emphasizes that Proposition 13 legislation has fundamentally affected our property taxation scheme by substituting for annual appraisal a system of assessment and value based on the date of acquisition. (Los Angeles Country Club v. Pope (1985) 175 Cal.App.3d 278, 283, 220 Cal.Rptr. 584.) As observed in Ama Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208, 149 Cal.Rptr. 239, 583 P.2d 1281: "article XIII A to the California Constitution ... 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" (at p. 218, emphasis added, 149 Cal.Rptr. 239, 583 P.2d 1281) and "[b]y reason of section 2, subdivision (a), of the article, except for property acquired prior to 1975, henceforth all real property will be assessed and taxed at its value at date of acquisition rather than at current value (subject, of course, to the 2 percent maximum annual inflationary increase provided for in subdivision (b))." (Id. at p. 235, original emphasis, 149 Cal.Rptr. 239, 583 P.2d 1281.)

Thus, it is obvious that there is a noticeable discrepancy between the Proposition 13 enactments which determine the base year value of property at a fixed time and the escape assessment provisions of the Revenue and Taxation Code which, in contradistinction to the Proposition 13 legislation, appear to still provide for revaluation of properties on a yearly lien date basis for the purpose of capturing escape assessments. ( §§ 531, 532, see fn. 2, ante.) The legal solution to this situation is equally obvious. It is well settled that where, as in the instant case, there is a conflict between several statutory provisions, they should be harmonized (Armstrong v. County of San Mateo (1983) 146 Cal.App.3d 597, 611, 194 Cal.Rptr. 294; Kehrlein v. City of Oakland (1981) 116 Cal.App.3d 332, 337, 172 Cal.Rptr. 111); and the courts should construe conflicting statutes so as to uphold their constitutional validity inasmuch as it is possible (People v. Smith (1983) 34 Cal.3d 251, 259, 193 Cal.Rptr. 692, 667 P.2d 149; Palermo v. Stockton Theaters, Inc. (1948) 32 Cal.2d 53, 60, 195 P.2d 1). As stated in Welton v. City of Los Angeles (1976) 18 Cal.3d 497, 505, 134 Cal.Rptr. 668, 556 P.2d 1119: "Two principles of statutory construction govern whether a statute ... may be construed so as to avoid conflict with the Constitution. First, the enactment may be validated if its terms are reasonably susceptible to an interpretation consistent with the Constitution. [Citations.] Second, the court should construe the enactment so as to limit...