Lake Forest Community Assn. v. County of Orange

• Decision Date: 16 November 1978
• Citation: 86 Cal.App.3d 394,150 Cal.Rptr. 286
• Parties: LAKE FOREST COMMUNITY ASSOCIATION, a California Nonprofit Corporation, Plaintiff and Appellant, v. COUNTY OF ORANGE, Defendant and Respondent. Civ. 19204.
• Court: California Court of Appeals Court of Appeals

Page 286

150 Cal.Rptr. 286

86 Cal.App.3d 394

LAKE FOREST COMMUNITY ASSOCIATION, a California Nonprofit Corporation, Plaintiff and Appellant, v. COUNTY OF ORANGE, Defendant and Respondent.

Civ. 19204.

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

Nov. 16, 1978.

Hickey & Neuland and William P. Hickey, El Toro, for plaintiff and appellant.

Adrian Kuyper, County Counsel, and Laurence M. Watson, Deputy County Counsel, Santa Ana, for defendant and respondent.

OPINION

KAUFMAN, Acting Presiding Justice.

Lake Forest Community Association (Association) instituted this action against County of Orange (County) to recover ad valorem property taxes paid under protest. From judgment in favor of County, Association appeals.

Lake Forest is a planned residential community development (see Bus. & Prof.Code, § 11003) located in an unincorporated portion of southern Orange County. The homes and the lots on which they are built are individually owned. Recreational and common-use areas are commonly owned. Many of the homes do not have traditional backyards or recreational areas.

Association is an "owners association" (see Bus. & Prof.Code, § 11003.1) organized as a nonprofit California corporation to operate and maintain for the benefit of its members the recreational facilities and common areas and to enforce a recorded declaration of covenants, conditions and restrictions within Lake Forest.

Its membership consists exclusively of homeowners within Lake Forest, and homeowner membership in the Association is mandatory. Association's income is derived solely from annual assessment of the membership and fees charged for the use of certain of the facilities to defray the expenses involved. All of Association's income is expended solely for the operation of the Association and the maintenance and care of its property for the benefit of its members. Association is tax exempt under both the Internal Revenue Code and the California Revenue and Taxation Code.

One of the common-use facilities in Lake Forest is a clubhouse, and title to the clubhouse is held by Association. The clubhouse is located on a separate assessor's parcel. However, pursuant to Revenue and Taxation Code section 2188.5, the real property taxes levied against the clubhouse and the parcel of land on which it is located are assessed to the separately-owned residential properties owned by Association's members. No natural person nor family resides within the clubhouse or on the parcel of land on which the clubhouse is located.

Association also holds title to certain personal property which was located in and around the clubhouse on March 1, 1975, the lien date for 1975-1976 property taxes. Illustrative of the nature of this property are the following items described on Exhibit "B" attached to the stipulation of facts submitted to the trial court: Teen room equipment, billiard table, pool umbrellas, outside chairs and lounges, pool furniture, typewriter, pool table, television, card table and chairs, lounge furniture, bookcase, and folding chairs.

County's assessor assessed this property (hereafter the property or the assessed property) for fiscal year 1975-1976, and taxes were levied against Association in the amount of $2,126.50. Association paid the tax under written protest. After unsuccessfully seeking relief from County's Assessment Appeals Board and seeking a refund, Association filed this action for refund contending the property was exempt from taxation under the provisions of either California Constitution article XIII section 3(m), or Revenue and Taxation Code section 224 or both. (All further statutory references will be to the Revenue and Taxation Code unless otherwise specified.) The trial court apparently found the assessed property was not held or used by Association in connection with a trade, profession or business. It concluded, however, the property was not exempt ¹ and rendered judgment for County.

California Constitution article XIII section 3(m) (hereafter art. XIII, § 3(m)), added November 5, 1974, provides: "The following are exempt from property taxation: (P) (m) Household furnishings and personal effects not held or used in connection with a trade, profession, or business."

Omitting its final paragraph which is not pertinent, section 224 as last amended in 1974 (Stats.1974, ch. 311, § 25, p. 598) reads: "The personal effects, household furnishings, and pets of any person shall be exempt from taxation. (P) The phrase 'personal effects, household furnishings, and pets' does not include boats, aircraft, vehicles, or personalty held or used in connection with a trade, profession or business or pets so held or used."

Association's primary contentions are that the assessed property qualifies as household furnishings and personal effects within the meaning of both article XIII section 3(m) and section 224 and that Association is a "person" within the meaning of section 224 so that the property is both constitutionally and statutorily exempt.

County concedes the property is of the type that would be exempt if it were owned by a "householder" and used in a "household." ² It contends, however, that (1) article XIII section 3(m) and section 224 apply only to the property of "householders" and Association, being a corporation, is not a "householder" and (2) in order to qualify for the exemption property must be physically part of a "household" and kept for household use or purposes and since the assessed property is owned by a corporation which is incapable of maintaining a household, the assessed property was not physically a part of a household or kept for household use or purposes and was, therefore, not exempt.

We have concluded the property was exempt under section 224; the statutory language "any person" is sufficiently broad to include Association and is not restricted to "householders"; to constitute "household furnishings" it is not necessary that property be physically a part of a "household," at least in the traditional sense of the word; and, while County is correct that property must be held for household use or purposes to qualify as "household furnishings," Association does hold the assessed property for household use or purposes as those terms are properly construed. Accordingly, we make no attempt to determine whether the property might also have been exempt under article XIII section 3(m) and we discuss that constitutional provision and its predecessor only to the extent required to explain the legislative history of section 224. Neither do we find it necessary to consider as a separate contention Association's argument that the property was exempt because its beneficial interest is equitably owned by members of the Association, all of whom are "householders," or to pass upon Association's contention that the property must be held exempt to avoid double taxation inasmuch as the right to use the assessed property has enhanced the assessed value of the homes of Association's members for purposes of real property taxation.

County's contention that both article XIII section 3(m) and section 224 apply only to "householders" is based on the legislative history of those provisions and two related sections of the Revenue and Taxation Code. With respect to section 224, at least, County's analysis of the legislative history is faulty.

The predecessor of article XIII section 3(m) was article XIII section 101/2 added to the California Constitution November 8, 1904. Commonly referred to as the "householder's exemption," it provided: "The personal property of every householder to the amount of $100, the articles to be selected by each householder, shall be exempt from taxation." (Emphasis added.)

Following the grant of authority to the Legislature in 1933 to prescribe personal property tax exemptions by statute, ³ Revenue and Taxation Code section 210 was enacted, providing: "The householder's exemption is as specified in section 101/2 of Article XIII of the Constitution." (Stats.1939, ch. 154, § 210, p. 1282.) In 1968, section 210 was amended by the addition of the language, "If a householder fails to select the personal property to be exempted, the assessor shall apply the one-hundred-dollar ($100) exemption to household furnishings and personal effects not otherwise exempted by law." (Stats.1968, 1st Ex.Sess., ch. 1, § 2, p. 7.)

In the same act (Stats.1968, 1st Ex.Sess., ch. 1, § 5, pp. 8-9) section 224 was enacted, reading: "The personal effects and household furnishings in excess of one hundred dollars ($100) of Every householder shall be exempt from taxation. (P) The word 'Householder ' means any person owning, purchasing or renting real property which he is using regularly, if not continuously, as a residence or residences. (P) The phrase 'personal effects and household furnishings' does not include boats, aircraft, vehicles, or personalty held or used in connection with a trade, profession or business.'' (Emphasis added.)

Thus, it is apparent, as County asserts, that in 1968 article XIII section 101/2, section 224 and section 210 all applied only to property of a "householder." Additionally, it is noteworthy that the exemption prescribed in section 224 was not merely coextensive with, but was in addition to, the exemption set forth in article XIII section 101/2. Article XIII section 101/2 exempted all personal property of every householder up to the amount of $100; section 224 exempted all personal effects and household furnishings of every householder in excess of $100. ⁴

In 1969, section 224 was again amended to eliminate all references to "householder" and the definition of "householder" found in the section as amended in 1968. The amended section read: "The personal effects and household furnishings of Any person in excess of the amount of any exemption allowed to The person on any property pursuant to Section 101/2 of Article XIII of the State Constitution shall be exempt from taxation. (P) The...