Hunt-Wesson Foods, Inc. v. County of Alameda, HUNT-WESSON

• Decision Date: 19 August 1974
• Docket Number: HUNT-WESSON
• Citation: 116 Cal.Rptr. 160,41 Cal.App.3d 163
• Court: California Court of Appeals Court of Appeals
• Parties: FOODS, INC., Plaintiff and Respondent, v. COUNTY OF ALAMEDA and City of Hayward, Defendants and Appellants. Civ. 30182.

Page 160

116 Cal.Rptr. 160

41 Cal.App.3d 163

HUNT-WESSON FOODS, INC., Plaintiff and Respondent, v. COUNTY OF ALAMEDA and City of Hayward, Defendants and Appellants.

Civ. 30182.

Court of Appeal, First District, Division 1, California.

Aug. 19, 1974.

Hearing Denied Oct. 17, 1974.

V. Judson Klein, Paul W. Baker, Johnston, Klein, Horton, Solomon & Baker, Oakland, for plaintiff-respondent.

Richard J. Moore, County Counsel, Joseph P. Bingaman, Deputy County Counsel, County of Alameda, Oakland, for defendants-appellants.

KONGSGAARD, ^* Justice.

This is an appeal from a judgment of the superior court which reviewed and reversed a decision of the Alameda County Assessment Appeals Board which in turn had denied the plaintiff taxpayer a reduction in its 1967 property tax assessment. ¹ Plaintiff protested the assessment but paid the tax and filed suit to recover the taxes paid under protest pursuant to section 5103 et seq. of the Revenue and Taxation Code. The superior court in reviewing the proceedings before the Alameda County Assessment Appeals Board independently weighed the evidence and rendered a money judgment in favor of the taxpayer and in effect overruled the decision of the County Assessment Appeals Board.

The pivotal issue in this appeal is whether the superior court, sitting in review of a determination of valuation by a local board of equalization, can exercise its independent judgment on the evidence presented to the local administrative agency. To state the issue in a different way, what is the proper scope of judicial review of the decision of a local board of assessment appeals. For the reasons expressed hereafter we conclude the lower court erred in applying the independent judgment test in reaching its decision.

Factual Background

As of the first Monday in March 1967, the taxpayer was the owner of business property in Alameda County, including inventories, machinery and equipment. In January of 1967, the new assessor of Alameda County suggested to his staff that henceforth property in Alameda County should be valued for assessment purposes according to methods prescribed by the State Board of Equalization. In the past the Alameda County Assessor had not followed the State Board of Equalization methods for valuing machinery and equipment. Pursuant to these directions the staff of the county assessor was instructed to prepare a new schedule for valuing machinery and equipment which attempted to reflect the methods utilized by the State Board of Equalization. The method of evaluation utilized by the State Board of Equalization was a replacement cost less normal depreciation. Under this method the market value of equipment was calculated by (a) 'trending up' the equipment's original cost to an estimated replacement cost by using a scale of price index factors, and then (b) depreciating this factor according to the age of the equipment by the application of 'percent good' factors measuring loss in value from physical wear and tear and obsolescence. The price index factors and the percent good factors to be used for this purpose have been published annually by the State Board of Equalization.

In accordance with the new directive the staff of the assessor's office prepared a new depreciation schedule which purported to reflect both the index factors and the percent good factors into a single schedule. At the hearing before the assessment appeals board there was evidence presented by the respondent indicating that the new schedule of percent good factors was shifted one year from the schedule published by the state board so that no depreciation would be allowed for the particular year in which the machinery was acquired. There was testimony that the members of the assessor's staff discussed this with the assessor and that he approved it. In this manner the assessor's newly prepared tables for depreciation of machinery used percent good factors that each year allowed one year less depreciation than the applicable percent good factors published by the State Board of Equalization. This would result in less depreciation and thus a higher assessment to the taxpayer. Respondent submitted the tables of the State Board of Equalization at the equalization hearing and contended these tables should have been used by the assessor in assessing respondent's machinery.

There was a conflict in the testimony at the assessment appeals board hearing as to how the new schedule resulted in this shift of one year. A witness called by respondent suggested that it was done mistakenly, however, a witness from the assessor's office testified that the schedule was prepared to intentionally eliminate any depreciation for the year in which the machinery was acquired.

In its decision denying plaintiff a reduction in its 1967 property tax assessment, the assessment appeals board was cognizant of the refusal of the assessor to allow depreciation for the year in which the machinery was acquired. In making this determination the assessor reasoned that in many cases machinery acquired late in a taxable year would be only two or three months old on the next tax lien date, viz., the first Monday in March. The assessor's determination that such machinery was to be treated as new was found by the board to be reasonable. The board further noted this would eliminate the necessity of attempting to develop complicated tables for depreciation that would reflect depreciation for a partial year. There was further testimony at the hearing before the board of assessment appeals tht the depreciation schedule was applied equally to all taxpayers in the county so that there was no discrimination against this particular taxpayer.

The trial court in arriving at its decision in favor of the taxpayer clearly noted it was applying the weight of the evidence test in reviewing the record of the assessment appeals board. In one of its conclusions of law the trial court stated: 'The scope of judicial review in the Superior Court is governed by the 'weight of the evidence' test, not by the 'substantial evidence' test. Under Revenue and Taxation Code section 1605.5, this court must review the equalization to determine whether the findings and conclusions of the Assessment Appeals Board are supported by the weight of the evidence.'

In applying the 'weight of the evidence' test to the equalization record the court made a further conclusion of law as follows: 'The Assessor arbitrarily misused the date in the State Board of Equalization 'percent good' schedule. The Assessment Appeals Board's determination that the Assessor's depreciation method was correct and fair is not supported by the weight of the evidence. Plaintiff's machinery and equipment ought to be valued by applying the State Board 'percent good' factors according to the instructions in AH--581, i.e., one year differently than the way in which the Assessor applied them.'

As a result of its independent review of the evidence and its determination that the assessor's depreciation method was incorrect, the trial court found the taxpayer was entitled to reductions in the sum of $416,776 in full cash value, $104,194 in assessed value, and $12,034.41 in taxes and ordered a refund to the taxpayer in the sum of $12,034.41.

The defendants contend the trial court erred in applying the weight of the evidence test in reviewing the record before the County Assessment Appeals Board. Defendant's position is that the trial court was required by law to review the entire record and to sustain the board's determination if there was substantial evidence in support of it.

General Principles

Article 13 section 9 of the California Constitution creates an administrative body known as the County Board of Equalization to equalize the valuation of taxable property within a county and to equalize disputed assessments. Under section 9 the board of supervisors of a particular county is the board of equalization. In 1962 section 9.5 was added to article 13 of the California Constitution to permit the board of supervisors of any county to create by ordinance an assessment appeals board for the county to act as a County Board of Equalization. The Alameda County Assessment Appeals Board has been created by the board of supervisors to perform this function for the County of Alameda.

The function of a County Board of Equalization is to determine the value of property for assessments by making all assessment as equal and fair as practicable and to apply the same ratio to market value uniformly within a county. (Glidden Company v. County of Alameda, 5 Cal.App.3d 371, 85 Cal.Rptr. 88, 86 Cal.Rptr. 464; Flying Tiger Line, Inc. v. County of L.A., 51 Cal.2d 314, 333 P.2d 323, cert. den. 359 U.S. 1001, 79 S.Ct. 1140, 3 L.Ed.2d 1031.)

The authorities uniformly hold a County Assessment Appeals Board created pursuant to article XIII section 9.5 of the Constitution serves the same function. 'Assessment appeals boards of a county have power to equalize the valuation of taxable property in the county. They are governed by the general laws pertaining to county boards of equalization and by rules adopted by the county board of supervisors to 'facilitate their work and to insure uniformity in the processing and decision of equalization petitions.' (Cal.Const. art. XIII, § 9.5.)' (Stevens v. Fox Realty Corp., 23 Cal.App.3d 199, 204, 100 Cal.Rptr. 63, 67. See also Griffith v. County of Los Angeles, 267 Cal.App.2d 837, 73 Cal.Rptr. 773, cert. den. 395 U.S. 945, 89 S.Ct. 2018, 23 L.Ed.2d 463; County of L.A. v. Tax Appeals Bd. No. 2, 267 Cal.App.2d 830, 73 Cal.Rptr. 469.)

Scope of Review

The scope of judicial review in such cases as this is explained in Bank of America v. Mundo, 37 Cal.2d 1, 5, 229 P.2d 345, 347: 'The duty of determining the value of the property and the fairness of the assessment is confided to the appropriate county board of equalization. Furthermore, in discharging this duty, the board's determination upon the merits...