E. Gottschalk & Co. v. County of Merced

Decision Date15 December 1987
Docket NumberNo. F007762,F007762
Citation196 Cal.App.3d 1378,242 Cal.Rptr. 526
PartiesE. GOTTSCHALK & CO., INC., Plaintiff and Respondent, v. COUNTY OF MERCED et al, Defendants and Appellants.
CourtCalifornia Court of Appeals

William E. Gnass, County Counsel, Richard C. Burton, Deputy County Counsel, Merced, for defendants and appellants.

Thomas, Snell, Jamison, Russell & Asperger, E. Robert Wright, Fresno, for plaintiff and respondent.

BALLANTYNE, Associate Justice.

In December of 1980 E. Gottschalk & Co., Inc., plaintiff, petitioner and respondent, entered into a shopping center lease for certain property located in Merced. The lease was for a 30-year term with 2 successive 10-year options to renew. The lessors and owners of the property were the Kolligians. A large building was constructed on the property. Gottschalk opened a department store on the premises and began doing business in 1984. In 1984 the county assessor reappraised the value of the land from $41,770 to $346,000. 1

Gottschalk challenged the appraisal. The appeal was denied by the assessor. Because Merced County's Assessment Appeals Board does not hear appeals based on legal contentions only, it was stipulated that Gottschalk had exhausted its administrative remedies and they filed a complaint and petition for writ of mandate against the County of Merced in superior court. The court held that Revenue and Taxation Code section 61 was unconstitutional as being in conflict with the provisions of the California Constitution, article XIII A, section 2. The county appeals.

I.

"On June 6, 1978, the voters of the State of California adopted the initiative measure, popularly known as Proposition 13 of the Tax Limitation Initiative, which amended the California Constitution by adding article XIII A." (Dreyer's Grand Ice Cream, Inc. v. County of Alameda (1986) 178 Cal.App.3d 1174, 1177, 224 Cal.Rptr. 285.) Prior to Proposition 13, real property was appraised for taxation purposes every year. (Id. at p. 1179, 224 Cal.Rptr. 285.)

Article XIII A, section 1, provides:

"(a) The maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to law to the districts within the counties.

"(b) The limitation provided for in subdivision (a) shall not apply to ad valorem taxes or special assessments to pay the interest and redemption charges on (1) any indebtedness approved by the voters prior to July 1, 1978, or (2) any bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on the proposition."

Section 2, subdivision (a), provides:

"The 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. All real property not already assessed up to the 1975-76 full cash value may be reassessed to reflect that valuation. For purposes of this section, the term 'newly constructed' shall not include real property which is reconstructed after a disaster, as declared by the Governor, where the fair market value of the real property, as reconstructed, is comparable to its fair market value prior to the disaster. Also, the term 'newly constructed' shall not include the portion of reconstruction or improvement to a structure, constructed of unreinforced masonry bearing wall construction, necessary to comply with any local ordinance relating to seismic safety during the first 15 years following that reconstruction or improvement." (Emphasis added.)

Subsequent to this the Legislature adopted Revenue and Taxation Code section 61, which provides in pertinent part:

"Except as otherwise provided in Section 62, change in ownership, as defined in Section 60, includes, but is not limited to:

"...

"(c)(1) The creation of a leasehold interest in taxable real property for a term of 35 years or more (including renewal options), the termination of a leasehold interest in taxable real property which had an original term of 35 years or more (including renewal options), and any transfer of a leasehold interest having a remaining term of 35 years or more (including renewal options); or (2) any transfer of a lessor's interest in taxable real property subject to a lease with a remaining term (including renewal options) of less than 35 years.

"Only that portion of a property subject to such lease or transfer shall be considered to have undergone a change of ownership."

The county assessed the tax under Revenue and Taxation Code section 61 asserting that the lease entered into by Gottschalk resulted in a change of ownership. Gottschalk contends that Revenue and Taxation Code section 61 is unconstitutional because a change in ownership does not occur in a lease regardless of the length of the lease.

The instant action presents a pure question of law. This court is guided by the following concepts when construing statutes within the context of a provision of the Constitution.

" ' "[W]here a constitutional provision may well have either of two meanings, it is a fundamental rule of constitutional construction that, if the Legislature has by statute adopted one, its action in this respect is well nigh, if not completely, controlling.... and the courts shall not and must not annul, as contrary to the constitution, a statute passed by the Legislature, unless it can be said of the statute that it positively and certainly is opposed to the constitution." ' " (Schoderbek v. Carlson (1984) 152 Cal.App.3d 1027, 1035.)

"It is blackletter law that the Constitution and statutes must receive practical, common sense construction [citation] and that an interpretation which would lead to an unreasonable result or absurdity must be avoided." (Dreyer's Grand Ice Cream, Inc. v. County of Alameda, supra, 178 Cal.App.3d 1174, 1181-1182, 224 Cal.Rptr. 285.) "It is, of course, well settled that in case of doubt statutes levying taxes are constructed most strongly against the government and in favor of the taxpayer." (Id. at p. 1182, 224 Cal.Rptr. 285.)

"Generally the Legislature is supreme in the field of taxation, and the provisions on taxation in the state Constitution are a limitation on the power of the Legislature rather than a grant to it. [Citations.] Its power in the field of taxation is limited only by constitutional restrictions. [Citations.] Those principles are a part of the broader concept that '... Our Constitution is not a grant of power but rather a limitation or restriction upon the powers of the Legislature....' [Citation.] As a result constitutional restrictions on the power of the Legislature must be strictly construed against the limitation. [Citations.] We said in Collins v. Riley, supra, at 910 [ (916) 152 P.2d 169]: [p] 'If there is any doubt as to the Legislature's power to act in any given case, the doubt should be resolved in favor of the Legislature's action. Such restrictions and limitations are to be construed strictly, and are not to be extended to include matters not covered by the language used.' That rule is a corollary of the strong presumption of the constitutionality of an act of the Legislature." (Delaney v. Lowery (1944) 25 Cal.2d 561, 568-569, 154 P.2d 674.)

Bearing in mind all of the above, this initiative and the construction given it is governed by the following rule:

"It is a fundamental precept of our law that, although the legislative power under our constitutional framework is firmly vested in the Legislature, 'the people reserve to themselves the powers of initiative and referendum.' (Cal.Const., art. IV, § 1.) It follows from this that ' " '[t]he power of initiative must be liberally construed ... to promote the democratic process.' " ' [Citations.] Courts will therefore interpret a measure adopted by a vote of the people in such a manner as to give effect to the intent of the electorate. [Citation.]

" ' " 'The words must be read in a sense which harmonizes with the subject-matter and the general purpose and object of the amendment, consistent of course with the language itself. The words must be understood, not as the words of the civil service commission, or the city council, or the mayor, or the city attorney, but as the words of the voters who adopted the amendment. They are to be understood in the common popular way, and, in the absence of some strong and convincing reason to the contrary, not found here, they are not entitled to be considered in a technical sense inconsistent with their popular meaning.' " ...' [Citation.]" (Arvin Union School Dist. v. Ross (1985) 176 Cal.App.3d 189, 198, 221 Cal.Rptr. 720.)

Article XIII, section 33, empowers the Legislature to pass laws regarding the taxation of property.

"... [A]bsent some constitutional limitation on the taxation power of the Legislature, its power to tax is supreme. [Citations.] Article II, section 8 of the California Constitution, however, reserves to the people the power of the initiative, defined as the power 'to propose statutes and amendments to the Constitution' without limitation. Our state Constitution clearly indicates that the power of the initiative is the separate and distinct power of the people to legislate: 'The legislative power of this State is vested in the California Legislature ..., but the people reserve to themselves the power of initiative and referendum.' [Citations.] This reservation of power by the people is, in the sense that it gives them the final legislative word, a limitation upon the power of the Legislature." (Carlson v. Cory (1983) 139 Cal.App.3d 724, 728, 189 Cal.Rptr. 185.)

Thus, the Legislature cannot implement statutes which limit or expand the common sense meaning of a term...

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