Sea-Land Service, Inc. v. County of Alameda, SEA-LAND

• Decision Date: 22 January 1974
• Docket Number: SEA-LAND
• Citation: 112 Cal.Rptr. 113,36 Cal.App.3d 837
• Court: California Court of Appeals Court of Appeals
• Parties: SERVICE, INC., etc., Plaintiff and Respondent, v. The COUNTY OF ALAMEDA et al., Defendants and Appellants. Civ. 30759.

Page 113

112 Cal.Rptr. 113

36 Cal.App.3d 837

SEA-LAND SERVICE, INC., etc., Plaintiff and Respondent, v. The COUNTY OF ALAMEDA et al., Defendants and Appellants.

Civ. 30759.

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

Jan. 22, 1974.

As Amended on Denial of Rehearing Feb. 21, 1974.

Hearing Denied March 20, 1974.

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

Graham & James, Francis L. Tetreault, San Francisco, for plaintiff and respondent.

TAYLOR, Presiding Justice.

The County of Alameda (County) and City of Oakland (City) appeal from a judgment concluding that the taxpayer, respondent, Sea-Land Service, Inc. (Sea-Land), did not acquire a taxable possessory interest under its 'Preferential Assignment Agreement,' and directing the refund of 1967--68 personal property taxes levied and collected by the City for the County. As we have concluded that the agreement created a taxable possessory interest, the judgment must be reversed and remanded for a determination of whether the effective term of the agreement for purposes of property tax assessment is 5 years or 20 years.

The facts are as follows: On February 5, 1965, Sea-Land's predecessor entered into a 'Preferential Assignment Agreement' with the City for use of marine terminals, including Berths 8 and 9, owned by the City. The agreement became effective on January 10, 1966, on approval by the Federal Maritime Commission, for a 20-year term commencing April 1, 1966. As of the 1967 and 1968 lien dates, Sea-Land was also the lessee of adjoining premises, including an office building and truck station, from the Port, under another 20-year agreement. All of the real property assigned to Sea-Land under the agreement was deeded to the City by the State pursuant to the Tidelands Act. The compensation for Sea-Land's use of the premises is governed by a Port tariff that can be redetermined by the Port at 5-year intervals. Sea-Land's compensation to the Port under the agreement is limited for any 12-month period to a minimum of $450,000 and a maximum of $550,000. During the tax years here in issue, 1967 and 1968, the maximum was exceeded by Sea-Land's charges to its customers, whose cargo it carried.

In 1967, Sea-Land filed a timely application for reduction in assessment contesting the right of the assessor to assess a possessory interest or, in the alternative, the value assigned by the assessor to Sea-Land's possessory interest.

On January 15, 1968, the County Assessment Appeals Board met as a County Board of Equalization, and after considering Sea-Land's petition, reduced the assessment and established the fair market value of Sea-Land's interest at $2,056.000, yielding an assessed value of $514,150, and a tax of $60,566.87. The reduction was based upon the use of a 17-year term in calculating the fee value and the possessory interest, together with an allowance of 25 percent (rather than the original allowance of 20 percent) from the fee value, used by the assessor in consideration of the Port's ability to redetermine the rental to be charged at each 5-year interval.

Sea-Land timely filed its complaints for recovery of taxes paid under protest and for reduction in assessment. On January 20, 1969, the County Board of Equalization heard and rejected Sea-Land's petition for reduction in assessment and affirmed the assessor's use of the longer term of occupancy less an allowance of 25 percent from the fee value, for various restrictions, including the ability of the Port of Oakland to review and adjust the rental to be charged to Sea-Land at each 5-year interval. The board ordered a refund in taxes based upon the application of a ratio of assessed value to full cash value of 24.84 percent rather than the ratio of assessed value to full cash value of 25 percent, used by the assessor.

This action ensued and the trial court entered its judgment in favor of Sea-Land. The trial court set forth its reasoning in a succinct memorandum opinion, dated April 6, 1971, as follows: 'The first issue raised by plaintiff is that it does not have a taxable possessory interest in the premises described in the Preferential Assignment Agreement. If this contention is sound, as a matter of law, the second issue relating to the term of the assignment of use need not be decided in this case.

'The assignment agreement recites that it is:

'1. 'a non-exclusive preferential assignment to use' the described premises.

'2. 'for the receiving and delivery of freight in assignee's vehicles prior or subsequent to the loading and discharging of Sea-Land vessels and for assignee's operations incidental thereto, including parking of assignee's vehicles while awaiting shipment, and (assignee) shall not use the premises for any other purpose without prior written consent of the Port.'

'3. 'The Port reserves the right . . . to use all or any part of the areas and properties . . . for the berthing of vessels and loading or discharging of cargoes and operations incidental thereto, Provided, only, that Such use by the Port Shall not unreasonably interfere with the operations of assignee as herein authorized. In the event of any such secondary use by the Port, All . . . charges . . . shall accrue to and Be billed by the Port."

'It is the conclusion of the Court that the agreement in question falls far short of a taxable possessory interest under pertinent definitions and authorities. It does not provide for 'exclusive possession of the premises against all the world, including the owner,' as prescribed in Kaiser Co. v. Reid, 30 C. (Cal.)2d 610, 619 (184 P.2d 879) quoting from Von Goerlitz vs. Turner, 6 (65) Cal.App.2d 425, 429 (150 P.2d 278).' (Emphasis added.)

The trial court did not then have the benefit of Board of Supervisors v. Archer, 18 Cal.App.3d 717, 96 Cal.Rptr. 379 (decided July 1971, hg. den. September 8, 1971), relating to the substantially similar question of a taxpayer's possessory interest in the right to pasture cattle on government land. Justice Bray's language and reasoning (at 724--725, 96 Cal.Rptr. at 385) is totally apt here. 'As the board purported to decide a question of law, we are now faced with the question of whether the board acted properly in holding, in effect, that the permits and leases were not taxable.

'Section 201 of the Revenue and Taxation Code provides: 'All property in this State, not exempt under the laws of the United States or of this State, is subject to taxation under this code.' Section 103 of the Revenue and Taxation Code defines property: "Property' includes all matters and things, real, personal, and mixed, capable of private ownership.' 'Possessory interests' in 'land or improvements' are taxable under Section 107 of the Revenue and Taxation Code in pursuance of the constitutional mandate that "all property . . . shall be taxed.' (Const., art. XIII, § 1.) Illustration of this class of taxable estate is found in cases involving possessory interests in property which is tax exempt by virtue of ownership in the federal government (citations).' (Kaiser Co. v. Reid (1947) 30 Cal.2d 610, 618 (184 P.2d 879).) Quoting from People v. Shearer (1866) 30 Cal. 645, 655--657, the court in Kaiser said, 30 Cal.2d at page 618, 184 P.2d 879, concerning possession of agricultural claims upon public lands, "These possessions, then, are recognized as a Species of property subsisting in the hands of the citizens. It is not the land itself, nor the title to the land, nor is it the identical estate held by the United States. It is not the pre-emption right, but is the possession and valuable use of the lang subsisting in the citizen. Why should it not contribute its proper share, according to the value of the interest, whatever it may be, of the taxes necessary to sustain the Government which recognizes and protects it?' . . .' (Emphasis partially added.)

'While the grazing permits are temporary and recoverable and several permits may be issued by the government to graze cattle on the public lands, and while appellants claim that the federal government remits to the county of the site of the permit 25 percent of the fees collected by the government, nevertheless, the permittees have possession and valuable use of the land that must be deemed sufficient to amount to a possessory interest within the meaning of Revenue and Taxation Code section 107. During the term of the permit and until revocation, the permittees are able to graze their cattle on federal tax-exempt land, and thereby contribute to the growth and profit of their...